Iona Technologies

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document you should consult your stockbroker, bank manager, solicitor, accountant or other independent financial adviser (being in the case of shareholders in Ireland, an organisation or firm who is authorised or exempted pursuant to the Investment Intermediaries Act, 1995 of Ireland or the Irish Stock Exchange Act, 1995 of Ireland). If you have sold or transferred all your Ordinary Shares in IONA Technologies PLC, please forward this document at once to the stockbroker, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. If you have sold part of your holding, please consult the stockbroker, bank or other agent through whom the sale was effected.

Copies of this document, which comprises a circular to shareholders relating to the acquisition of Netfish Technologies, Inc. by IONA Technologies PLC (the ‘‘Company’’ or ‘‘IONA’’) prepared in accordance with the listing rules of The Irish Stock Exchange Limited (‘‘Irish Stock Exchange’’) and the European Communities (Stock Exchange) Regulations, 1984 (as amended) of Ireland (the ‘‘1984 Regulations’’), have been delivered for registration to the Registrar of Companies in Ireland as required by the 1984 Regulations. This document is being circulated to IONA shareholders to satisfy certain rules of the Nasdaq National Market (‘‘Nasdaq’’) applicable to IONA because of its primary listing thereon and copies of this document have been delivered to Nasdaq. American Depositary Receipts representing Ordinary Shares are trading on Nasdaq. Application has been made for the New Ordinary Shares to be admitted to trading on the Official List of the Irish Stock Exchange (the ‘‘Official List’’). It is expected that dealings in the New Ordinary Shares will commence on the Official List by 10 May, 2001.

This document does not constitute an offer or invitation to any person to subscribe for or purchase any securities in the Company. This document must not be distributed, forwarded or transmitted into Canada, Japan or Australia.

The Company has a secondary listing on the Irish Stock Exchange. For this reason, IONA is not subject to the same ongoing regulatory requirements as those which would apply to an Irish company with a primary listing on the Irish Stock Exchange including the requirement that certain transactions require the approval of shareholders. For further information, shareholders should consult their own financial adviser.

The Directors of IONA, whose names appear on page 3 of the Listing Particulars, a copy of which is set out in Part V of this document, accept responsibility for the information contained in this document other than the information contained in Appendix I comprising the Netfish 1998, 1999 and 2000 Audited Financial Statements and the information contained in Appendix II comprising Unaudited Pro Forma Condensed Combined Consolidated Financial Information. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.

IONA TECHNOLOGIES PLC

(Incorporated in the Republic of Ireland under the Companies Acts, 1963 to 1999. Registered No.171387) Circular to shareholders relating to the acquisition of Netfish Technologies, Inc.

The Consideration Shares will be issued pursuant to an exemption from registration under the U.S. Securities Act of 1933 (the ‘‘U.S. Securities Act’’), as amended and accordingly, have not been and will not be registered thereunder and the relevant clearances have not been, and will not be, obtained from the securities commission of any province of Canada. No prospectus in relation to the Consideration Shares has been, or will be, lodged with or registered by the Australian Securities Commission. Accordingly, the Consideration Shares may not be offered, sold, resold or delivered, directly or indirectly, in or into the United States of America (except in compliance with the U.S. Securities Act and the rules and regulations thereunder), Canada, Australia or any other jurisdiction in which the offer of Consideration Shares would constitute a violation of relevant laws or require registration thereof.

Notice of an Extraordinary General Meeting of IONA to be held at Herbert Park Hotel, Ballsbridge, Dublin 4, Ireland on Tuesday 8 May, 2001 at 10am (Irish time) is set out in Part II of this document and a proxy statement is set out at Part III of this document. Forms of proxy should be completed, signed and returned as soon as possible, but in any event so as to be received by the Registrars of IONA, Computershare Services (Ireland) Limited, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18, Ireland not later than Friday 4 May, 2001 at 10am (Irish time). The date of this document is 2 April, 2001 TABLE OF CONTENTS

Part I—Chairman’s Letter...... Part I–1

Part II—Notice of Extraordinary General Meeting and Form of Proxy...... Part II–1

Part III—Proxy Statement...... Part III–1

Part IV—Expected Timetable of Events...... Part IV–1

Part V—Listing Particulars...... Part V–1

Appendix I—Netfish Technologies, Inc. Audited Financial Statements...... Appendix I–1

Appendix II—Unaudited Pro Forma Condensed Consolidated Financial Information.... Appendix II–1

Appendix III—Consents of Independent Accountants...... Appendix III

PART I

IONA TECHNOLOGIES PLC The IONA Building Shelbourne Road, Ballsbridge Dublin 4, Ireland

2 April, 2001

To: The Shareholders of IONA Technologies PLC

Dear Shareholder:

1. Introduction

On 15 February 2001, IONA announced that it had signed an agreement to acquire Netfish Technologies, Inc. (‘‘Netfish’’) for a total consideration of up to 5.5 million Ordinary Shares. Under the Agreement and Plan of Reorganisation dated 14 February, 2001, between IONA, NV Acquisition Corporation and Netfish (the ‘‘Merger Agreement’’), NV Acquisition Corporation, a wholly owned subsidiary of IONA, will be merged with and into Netfish (the ‘‘Acquisition’’). Netfish will be the surviving corporation and will become a wholly owned subsidiary of IONA.

Upon consummation of the Acquisition, the shares outstanding in the capital of Netfish will be cancelled in exchange for Ordinary Shares and the outstanding options and warrants of Netfish will be assumed by IONA and will be exercisable for Ordinary Shares, all as are fully described in Part I of the Listing Particulars a copy of which is set out in Part V of this document. The potential 5.5 million Ordinary Shares issuable as consideration for such Netfish shares, options and warrants are subject to adjustment in respect of excess Netfish expenses in connection with the Acquisition, excess indebtedness incurred by Netfish and the issuance of additional Netfish options prior to Closing with the approval of IONA. A portion of these Consideration Shares will be issued on Closing to the holders of shares then outstanding in Netfish. The balance of the Consideration Shares will be issuable after Closing as and when approved Netfish options and warrants are exercised and as and when certain Consideration Shares being held to secure the indemnification obligations of the Netfish shareholders are released. Assuming the issuance of all 5.5 million Consideration Shares, this would increase the issued share capital IONA by 24% and will represent approximately 19% of the Enlarged Share Capital. For more details on the Acquisition, I refer you to Part I of the Listing Particulars, a copy of which is set out in Part V of this document.

The Acquisition is subject to the approval of the Shareholders of both IONA and Netfish, the qualification of the Consideration Shares that will be issued on Closing under Section 25121 of the California Corporate Securities Law of 1968, as amended and consequently the exemption from the registration requirements of the US Securities Act (or if not so qualified, registration under the US Securities Act) as well as customary regulatory and other closing conditions. The purpose of this letter and attachments is to provide you with information regarding the Acquisition and the other proposals described in this document, to explain why your Directors consider that they are in the interests of Shareholders as a whole and to seek your approval for their implementation at an Extraordinary General Meeting to be held at the Herbert Park Hotel, Ballsbridge, Dublin 4, Ireland on Tuesday 8 May, 2001 at 10am (Irish time). A formal notice of this meeting is included in Part II of this document. Directors: Chris Horn, Sean Baker, Dr. Ivor Kenny, Kevin Melia, Annrai O’Toole, Barry Morris Registered Office: The IONA Building, Shelbourne Road, Ballsbridge, Dublin 4, Ireland, Ireland Registered Number: 171387

2. Netfish

Netfish is a California based corporation and was incorporated in August 1997. Netfish is a provider of Java and XML-based business-to-business process collaboration solutions. Netfish’s products deliver complete end-to- end business-to-business process collaboration, support all major XML protocols and EDI messaging standards and provide back-end integration to best-of-breed and legacy applications. Netfish solutions enable complete automation of a wide spectrum of business processes ranging from procurement and order fulfilment to billing and payment.

Netfish has more than a dozen offices located in the US, London, Paris, Stockholm and Tokyo and has approximately 294 employees. Netfish’s products are used by companies worldwide, including Cisco, Intel, Sun Microsystems and NTT. In addition Netfish has alliances with a number of significant partners including Cap Gemini/Ernst & Young, JD Edwards, SAP, i2 and Commerce One.

In November 1999, Netfish was named by Oracle as one of the Most Innovative E-Business Solution Developers from the Top 50 E-Business Developers on the Oracle Platform. In addition, Netfish was recognised by Upside Magazine in its ‘‘Hot 100’’ Privately-Held Companies of 2000 list.

For further information about the activities of Netfish, I refer you to Part I of the Listing Particulars, a copy of which is set out in Part V of this document.

3. Reasons for the Acquisition

The Directors believe that the Acquisition will enable IONA to achieve its vision of one comprehensive e- business platform from a single vendor.

The Directors believe that because IONA and Netfish’s product offerings are complementary, a number of strategic benefits will accrue from the Acquisition. The potential benefits of the Acquisition include:

• enhanced market position and presence through an expanded product and services offering that allows companies to integrate their software applications with those of their customers and suppliers outside their enterprise;

• potential access to Netfish’s skilled employee base; and

• greater ability to service customers and expand products, services and markets.

For further information about the reasons for the Acquisition, I refer you to Part I of the Listing Particulars, a copy of which is set out in Part V of this document.

4. Directorships and Corporate Governance

Pursuant to the Merger Agreement, a person nominated by Netfish and acceptable to IONA shall be appointed to the Board as of the Closing Date to serve until the first annual general meeting of IONA after the Closing Date, at which time such person shall stand for election by the shareholders. To date, no such nomination has been made by Netfish. 5. Current Trading and Prospects of IONA

IONA’s most recent financial year ended on 31 December 2000. There is set out in Part II of the Listing Particulars, a copy of which is set out in Part V of this document, the financial statements of IONA for the financial year ended 31 December 2000 and the auditors report thereon. To date, revenues and operating income in 2001 have been in line with IONA management’s expectations. The management plan to announce financial results for the first quarter of 2001 on 25 April 2001.

Following the Acquisition, IONA will have a suite of products to address the complete e-business integration technology needs of its customers. The Directors expect IONA’s operations in 2001 to continue to perform in line with expectations and that the Acquisition will enhance the Company’s prospects. Based on information available to date, the Directors believe that the Company’s performance for the current financial year will be satisfactory.

Part III of the Listing Particulars, a copy of which is set out in Part V of this document, contains a pro-forma statement of net assets of IONA and its subsidiaries (together, the ‘‘Group’’) as of 31 December 2000, as adjusted for the Acquisition. I also refer you to Appendix I which comprises the Netfish 1998, 1999 and 2000 Audited Financial Statements and Appendix II which comprises Unaudited Pro Forma Condensed Combined Consolidated Financial Information.

6. Risk Factors

The factors set out in Part I of the Listing Particulars, a copy of which is set out in Part V of this document, should be considered in evaluating the proposals to be noted at the forthcoming Extraordinary General Meeting.

7. Extraordinary General Meeting and Action to be Taken

Notice convening an Extraordinary General Meeting of IONA to be held at the Herbert Park Hotel, Ballsbridge, Dublin 4, Ireland on Tuesday 8 May, 2001 at 10am (Irish time) is set out in Part II of this document. At the EGM, ordinary resolutions will be proposed to approve:

• the issuance of up to 5.5 million Ordinary Shares pursuant to the Merger Agreement; and

• the increase in the number of shares authorised for issuance under the 1997 Share Option Scheme from 8,900,000 to 12,900,000.

The reason for the second proposed resolution is to meet demands that the Board expect will be placed on the scheme by the additional employees gained by IONA through this Acquisition.

During the EGM, shareholders who are present at the meeting will have an opportunity to ask questions. It is important that your views be represented whether or not you are able to be present at the meeting. A form of proxy for use at the EGM is enclosed and whether or not you intend to attend the EGM you should complete and return this form so as to arrive not later than 10am on Friday, 4 May, 2001. Completion and return of the form of proxy will not preclude you from attending the meeting and voting in person if you so wish.

8. Voting Agreements

You should be aware that two executive officers of IONA, Dr. Sean Baker and I, have executed voting arrangements with Netfish, agreeing to vote in favour of the issuance of Ordinary Shares pursuant to the Merger Agreement.

9. Additional Information and Defined Terms

Your attention is drawn to the additional information relating to the Acquisition contained in Part IV of the Listing Particulars, a copy of which is set out in Part V of this document. Terms defined under the headings ‘‘Definitions’’ and ‘‘Glossary of Terms’’ in the Listing Particulars, a copy of which is set out in Part V of this document, shall have the same meaning throughout this document.

10. Recommendation

The Directors are of the opinion that the Acquisition and the proposed increase in the number of shares authorised for issuance pursuant to the 1997 Share Option Scheme are in the best interests of the Company and its shareholders as a whole and unanimously recommend that you vote in favour of the resolutions to be proposed at the EGM. The Directors intend to vote in favour of the resolutions in respect of their holdings amounting to 5,243,688 Ordinary Shares in aggregate, representing approximately 22.92% of the current issued ordinary share capital of the Company.

Yours sincerely

LOGO Dr. Christopher J. Horn Chairman PART II

IONA TECHNOLOGIES PLC

NOTICE OF EXTRAORDINARY GENERAL MEETING

Notice is hereby given that an Extraordinary General Meeting of the Company (the ‘‘Meeting’’) will be held at Herbert Park Hotel, Ballsbridge, Dublin 4, Ireland on Tuesday, 8 May, 2001 at 10am (Irish time) to consider and if thought fit, pass the following resolutions as ordinary resolutions of the Company:

1. That the issuance of up to 5.5 million Ordinary Shares in the capital of the Company of €0.0025 par value per share credited as fully paid to the holders of outstanding shares of capital stock of Netfish and/or of outstanding options or warrants to purchase such stock pursuant to the terms of Agreement and Plan of Reorganisation between the Company, NV Acquisition Corporation and Netfish Technologies, Inc and dated as of 14 February, 2001, be and is hereby approved.

2. Subject to the passing of Resolution 1, that the Company’s 1997 Share Option Scheme (the ‘‘Scheme’’) be amended to increase the number of Ordinary Shares in the capital of the Company of €0.0025 par value per share authorised for issuance pursuant to the Scheme from 8,900,000 Ordinary Shares to 12,900,000 Ordinary Shares.

The accompanying Proxy Statement contains further information with respect to these matters.

BY ORDER OF THE BOARD

LOGO Dr. Christopher J. Horn Chairman

Dated: 2 April, 2001

IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN ORDER THAT YOUR SHARES MAY BE VOTED. A RETURN ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.

Note:

1. The holders of Ordinary Shares are entitled to attend and vote at the Extraordinary General Meeting of the Company. A holder of Ordinary Shares may appoint a proxy or proxies to attend, speak and vote in his or her place. A proxy need not be a shareholder of the Company.

2. A Form of Proxy is enclosed for the use of shareholders unable to attend the Meeting. To be valid, proxies must lodged with the Secretary of the Company at the IONA Building, Shelbourne Road, Ballsbridge, Dublin 4, Ireland, Ireland or the Company’s Registrar for the Ordinary Shares at Computershare Services (Ireland) Limited, Heron House, Corrig Road, Sandyford, Dublin 18, Ireland not less than 48 hours before the time appointed for the Meeting. IONA TECHNOLOGIES PLC

FORM OF PROXY

I/We (See Note A below) of being a shareholder of the above-named Company, hereby appoint (See Note B below):

(a) the Chairman of the Meeting; or

(b) of

as my/our proxy to vote for me/us and on my/our behalf at the Extraordinary General Meeting of the Company to be held at the Herbert Park Hotel, Ballsbridge, Dublin 4, Ireland on Friday 4 May, 2001 at 10am (Irish time) and at any adjournment thereof.

Please indicate with an ‘‘x’’ in the space below how you wish your votes to be cast in respect of each of the ordinary resolutions detailed in the notice convening the Meeting. If no specific direction as to voting is given, the proxy will vote or abstain from voting at his discretion on any other business arising at the meeting a proxy may act at his discretion.

RESOLUTION FOR AGAINST

1.That the issuance of up to 5.5 million Ordinary Shares in the capital of the Company of €0.0025 par value per share credited as fully paid to the holders of outstanding shares of capital stock of Netfish and/or of outstanding options or warrants to purchase such stock pursuant to the terms of Agreement and Plan of Reorganisation between the Company, NV Acquisition Corporation and Netfish Technologies, Inc and dated as of 14 February, 2001 be and is hereby approved.

2.Subject to the passing of Resolution 1, that the Company’s 1997 Share Option Scheme (the ‘‘Scheme’’) be amended to increase the number of Ordinary Shares in the capital of the Company of €0.0025 par value per share authorised for issuance pursuant to the Scheme from 8,900,000 Ordinary Shares to 12,900,000 Ordinary Shares.

Dated this day of , 2001

Signature or other execution by the shareholder (See Note C) Notes: A. A shareholder must insert his, her or its full name and registered address in type or block letters. In the case of joint accounts, the names of all holders must be stated.

B. If you desire to appoint a proxy other than the Chairman of the Meeting, please insert his or her name and address and delete the words ‘‘the Chairman of the Meeting or’’ and initial the changes.

C. The proxy form must:

(i) in the case of an individual shareholder be signed by the shareholder or his or her attorney; and

(ii) in the case of a corporate shareholder be given either under its common seal or signed on its behalf by its duly authorised officer or attorney.

D. In the case of joint holders, the vote of the senior holder who tenders a vote whether in person or by proxy shall be accepted to the exclusion of the votes of the other joint holders and for this purpose seniority shall be determined by the order in which the names stand in the Register of Shareholders in respect of the joint holding.

E. To be valid, this proxy form and any power of attorney under which it is signed must reach the Company’s Registrar for Ordinary Shares at Computershare Services (Ireland) Limited, Heron House, Corrig Road, Sandyford, Dublin 18, Ireland or the Secretary of the Company at the registered office, not less than 48 hours before the time appointed for the Meeting.

F. A proxy need not be a shareholder of the Company but must attend the Meeting in person to represent you.

G. The return of a proxy form will not preclude any shareholder from attending the Meeting or from speaking and voting in person should he/she/it wish to do so. PART III

IONA TECHNOLOGIES PLC

The IONA Building Shelbourne Road, Ballsbridge Dublin 4, Ireland, Ireland

PROXY STATEMENT

EXTRAORDINARY GENERAL MEETING

2 April, 2001

This Proxy Statement is furnished in connection with the solicitation by the board of directors of IONA Technologies PLC (the ‘‘Company’’) of proxies in the form enclosed to be voted at the Company’s Extraordinary General Meeting (the ‘‘Meeting’’) to be held at the Herbert Park Hotel, Ballsbridge, Dublin 4, Ireland on Tuesday 8 May, 2001 at 10am (Irish time), and at any adjournments thereof.

Only shareholders of record, as of the close of business on Wednesday, 28 March, 2001, are receiving notice of the Meeting and any adjournments thereof. As of that date, the Company had outstanding 22,873,249 Ordinary Shares, par value 0.0025 per share (the ‘‘Ordinary Shares’’). Each share is entitled to one vote.

Morgan Guaranty Trust Company of New York, as depositary (the ‘‘Depositary’’) under the Deposit Agreement dated as of February 24, 1997 among the Company, the Depositary and the holders from time to time of American Depositary Receipts issued thereunder (‘‘ADRs’’) evidencing American Depositary Shares (‘‘ADSs’’) representing Ordinary Shares (the ‘‘Deposit Agreement’’), has fixed the close of business on Wednesday, 28 March, 2001 as the record date for the determination of holders of ADRs entitled to give instructions for the exercise of voting rights, in respect of the Ordinary Shares deposited under the Deposit Agreement, at the Meeting or any adjournment or postponement thereof. Subject to certain limitations set forth in the Deposit Agreement, the Depositary (or more specifically its nominee, Guaranty Nominees Limited) has the right to vote all Ordinary Shares deposited under the Deposit Agreement. The Depositary, however, is required by the Deposit Agreement to vote the Ordinary Shares deposited thereunder in accordance with the instructions of ADR holders and is prohibited from exercising voting discretion in respect of any such Ordinary Shares. See ‘‘Voting—Voting of Ordinary Shares Deposited under the Deposit Agreement.’’

Each form of proxy which is properly executed and duly returned to the Company will be voted in the manner directed by the shareholder executing it or, if no directions are given, will be voted at the discretion of the Chairman of the Meeting or other person duly appointed as proxy.

The mailing address of the Company’s Registrar for Ordinary Shares is Computershare Services (Ireland) Limited, Heron House, Corrig Road, Sandyford, Dublin 18, Ireland. The Company’s mailing address is the IONA Building, Shelbourne Road, Ballsbridge, Dublin 4, Ireland, Ireland, and its telephone number is +353 1-637-2000. Any shareholder who executes and delivers a proxy may revoke it at any time prior to its use by delivery of a written notice of such revocation, or a duly executed proxy bearing a later date, to the Secretary of the Company at the address of the Company set forth above, by appearing at the Meeting and requesting the return of the proxy, or by voting at the Meeting. In accordance with the provisions of the Company’s Articles of Association, all proxies must be received by the Company’s transfer agent or at the registered office of the Company at least 48 hours prior to the time appointed for the Meeting to be validly included in the tally of Ordinary Shares voted at the Meeting.

The ordinary resolutions presented at the Meeting will require approval by the holders of a majority of the votes present in person or by proxy and voting thereon.

VOTING

Voting Rights

Voting at any general meeting of shareholders is by a show of hands unless a poll (i.e. a written vote) is duly demanded. Votes may be given either personally or by proxy. Subject to the Company’s Articles of Association and to any rights or restrictions attaching to any class or classes of shares, on a show of hands each shareholder holding Ordinary Shares present in person and every proxy has one vote (but no individual can have more than one vote), and on a poll each shareholder holding Ordinary Shares shall have one vote for each share of which such shareholder is the holder. Where there is an equality of votes, whether on a show of hands or on a poll, the Chairman of the meeting is entitled to a casting vote in addition to any other vote the Chairman may have. A poll may be demanded by (i) the Chairman of the meeting, (ii) at least five shareholders present (in person or by proxy) entitled to vote at the meeting, (iii) any shareholder or shareholders present (in person or by proxy) representing not less than one-tenth of the total voting rights of all the shareholders entitled to vote at the meeting, or (iv) any shareholder or shareholders present (in person or by proxy) holding shares conferring the right to vote at the meeting being shares on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

A majority of votes cast is required to pass ordinary resolutions.

Shareholder Meetings

Irish law provides for two types of shareholder meetings, the annual general meeting and the extraordinary general meeting. An annual general meeting must be held once every calendar year within nine months of the fiscal year end, provided that no more than fifteen months may elapse between such meetings. Extraordinary general meetings of a company may be convened by the board of directors or at the request of shareholders holding not less than one-tenth of such of the paid-up capital as carries the right of voting at general meetings. Unless all shareholders of the Company and the Company’s auditors consent to shorter notice, shareholders must receive at least 21 clear days’ written notice of an annual general meeting and of an extraordinary general meeting convened for the passing of a special resolution and at least 17 clear days’ written notice of other extraordinary general meetings. The Company’s Articles of Association provide that a quorum for any general meeting is three persons entitled to vote at the meeting, each being a shareholder or proxy.

Voting of Ordinary Shares Deposited under the Deposit Agreement

As soon as practicable after receipt from the Company of notice of any meeting or solicitation of consents or proxies of holders of Ordinary Shares, the Depositary is required to mail to holders of ADRs a notice stating (a) such information as is contained in such notice and any solicitation materials, (b) that each ADR holder on the record date set by the Depositary therefor will be entitled to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the Ordinary Shares represented by the ADSs evidenced by such holder’s ADRs, and (c) the manner in which such instructions may be given, including instructions to give a discretionary proxy to a person designated by the Company. Upon receipt of instructions of an ADR holder on such record date in the manner and on or before the date established by the Depositary for such purpose, the Depositary shall endeavour insofar as practicable and permitted under the provisions of or governing the Ordinary Shares to vote or cause to be voted (or to grant a discretionary proxy to a person designated by the Company to vote in accordance with (c) above) the Ordinary Shares represented by the ADSs evidenced by such holder’s ADRs in accordance with such instructions. The Depositary will not itself exercise any voting discretion in respect of any Ordinary Shares deposited under the Deposit Agreement.

Solicitation of Proxies

The cost of preparing, assembling, printing and mailing the Proxy Statement, the Notice of Extraordinary General Meeting of Shareholders and the enclosed form of proxy, as well as the cost of soliciting proxies relating to the Meeting, if any, will be borne by the Company. The Company may request banks, brokers, dealers voting trustees or other nominees, including the Depositary in the case of the ADRs, to solicit their customers who are owners of shares listed of record and names of nominees, and will reimburse them for reasonable out-of-pocket expenses of such solicitation. The original solicitation of proxies by mail may be supplemented by telephone, telegram and personal solicitation by officers and other regular employees or agents of the Company.

1. APPROVE THE ISSUANCE OF UP TO 5.5 MILLION ORDINARY SHARES

On February 15, 2001, IONA announced that it had signed an agreement to acquire Netfish Technologies, Inc. (‘‘Netfish’’), a California based provider of Java and XML-based business-to-business process collaboration solutions. The terms of the acquisition provide for the issuance of up to 5.5 million Ordinary Shares in the capital of IONA to the holders of outstanding shares of capital stock of Netfish and/or of outstanding options or warrants to purchase such stock. The Consideration Shares will represent approximately 19% of the Enlarged Share Capital of IONA at the date of issue. There is no requirement for shareholder approval of the proposed issuance of Ordinary Shares under Irish law or the rules of the Irish Stock Exchange, on which the Company has a secondary listing. The Company’s Articles of Association provide that the Directors may allot, grant options over or otherwise dispose of all unissued shares in the capital of the Company to such persons, on such terms and conditions and at such times as they consider to be in the best interests of the Company and its shareholders. However, the Company has its primary listing on Nasdaq, which requires the Company to obtain shareholder approval for any issuance of shares representing (i) 20% or greater of the outstanding share capital, or (ii) 20% or greater of the voting power of the Company prior to such issuance.

The affirmative vote of the holders of the majority of the Ordinary Shares, represented at the Meeting and voting thereon will be necessary for shareholder approval of the issuance of up to 5.5 million New Ordinary Shares as set out above.

The Board of Directors recommends that the shareholders vote FOR the resolution approving the issuance of up to 5.5 million Ordinary Shares as set out above.

2. INCREASE NUMBER OF ORDINARY SHARES AUTHORISED FOR ISSUANCE UNDER THE 1997 SHARE OPTION SCHEME (‘‘THE SCHEME’’)

The Company’s 1997 Share Option Scheme was adopted by the Board and approved by the Company’s shareholders in January 1997 and February 1997, respectively. It was amended by the Board and by the Company’s shareholders in June 1998 and July 1998, respectively, to increase the number of Ordinary Shares authorised for issuance pursuant to the Scheme from 2,250,000 Ordinary Shares to 4,750,000 Ordinary Shares. It was further amended by the Board in early 2000 and by the Company’s shareholders in March 2000, to increase the number of Ordinary Shares authorised for issuance pursuant to the Scheme from 4,750,000 Ordinary Shares to 8,900,000 Ordinary Shares. It is now proposed to approve an additional amendment to increase the number of Ordinary Shares authorised for issuance pursuant to the Scheme from 8,900,000 Ordinary Shares to 12,900,000 Ordinary Shares.

Management believes that the latest proposed increase in the number of Ordinary Shares authorised for issuance under the Scheme is necessary to take account of the additional employees gained by the IONA Group as a result of the Acquisition of Netfish and the need to incentivize them by means of options. For this reason, Resolution 2 is subject to Resolution 1 being passed by the shareholders. Management believes that the Company’s future success depends, in part, upon its continuing ability to obtain employees talented in computer technology, sales, professional services, marketing, finance and administration, and to attract, motivate and retain qualified additional employees to continue to develop and enhance its product and service offerings and broaden its operations, product sales and marketing. Management of the Company also believes that this proposed increase is important to permit the board of directors to provide to present and future key long-term employees increased incentives and broader participation in equity ownership, especially with respect to key professionals who, in management’s experience, regard equity-based incentives as a standard component of total compensation.

The affirmative vote of the holders of the majority of the Ordinary Shares represented at the Meeting and voting thereon will be necessary for shareholder approval of the increase in the number of Ordinary Shares authorised for issuance under the Scheme.

The Board of Directors recommends that the shareholders vote FOR the increase in the number of Ordinary Shares authorised for issuance under the Scheme.

3. OTHER BUSINESS

Management knows of no other business to be transacted at the Meeting but if any other matters are properly presented to the Meeting, the person named in the enclosed form of proxy will vote upon such matters in accordance with their best judgment.

BY ORDER OF THE BOARD

LOGO Dr. Christopher J. Horn Chairman

Dated: 2 April, 2001 PART IV

EXPECTED TIMETABLE OF EVENTS

Latest time for receipt of forms of proxy Friday, 4 May, 2001 at 10am (Irish time)

Extraordinary General Meeting Tuesday, 8 May, 2001 at 10am (Irish time)

Closing Date During the second quarter of IONA’s current financial year

Admission and dealings expected to commence in Consideration Shares By 10 May, 2001 PART V

Copies of this document, which comprises listing particulars relating to IONA Technologies PLC (the ‘‘Company’’ or ‘‘IONA’’) prepared in accordance with the listing rules of The Irish Stock Exchange Limited (‘‘Irish Stock Exchange’’) and the European Communities (Stock Exchange) Regulations, 1984 (as amended) of Ireland (the ‘‘1984 Regulations’’), have been delivered for registration to the Registrar of Companies in Ireland as required by the 1984 Regulations. This document is being circulated to IONA shareholders to satisfy certain rules of Nasdaq applicable to IONA because of its primary listing thereon and copies of this document have been delivered to Nasdaq. American Depositary Receipts representing Ordinary Shares are trading on Nasdaq. Application has been made for the New Ordinary Shares to be admitted to trading on the Official List of the Irish Stock Exchange (the ‘‘Official List’’). It is expected that dealings in the New Ordinary Shares will commence on the Official List by 10 May 2001. This document does not constitute an offer or invitation to any person to subscribe for or purchase any securities in the Company. This document must not be distributed, forwarded or transmitted into Canada, Japan or Australia.

The Directors of IONA, whose names appear on page 3 of this document, accept responsibility for the information contained in this document. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.

IONA TECHNOLOGIES PLC

(Incorporated in the Republic of Ireland under the Companies Acts, 1963 to 1999. Registered No.171387) Listing Particulars in relation to the issue of up to 5.5 million New Ordinary Shares in connection with the acquisition of Netfish Technologies, Inc.

Share capital immediately following Admission Authorised Issued and fully paid*

Nominal value Number Nominal value Number

€ 150,000,000 Ordinary Shares of €0.0025 each €70,933.12 28,373,249 375,000 € 101,250,000 Redeemable preference shares of €0.0025 each — — 253,125

* The total number of issued Ordinary Shares following Admission assumes the issue of all of the 5.5 million New Ordinary Shares.

The New Ordinary Shares will rank equally in all respects with the existing issued Ordinary Shares and, in particular, will rank in full for all dividends and other distributions hereafter declared, paid or made on the Ordinary Shares of IONA.

The Consideration Shares will be issued pursuant to an exemption from registration under the US Securities Act of 1933 (the ‘‘US Securities Act’’), as amended and accordingly, have not been and will not be registered thereunder. The relevant clearances have not been, and will not be, obtained from the securities commission of any province of Canada. No prospectus in relation to the Consideration Shares has been, or will be, lodged with or registered by the Australian Securities Commission. Accordingly, the Consideration Shares may not be offered, sold, resold or delivered, directly or indirectly, in or into the US (except in compliance with the US Securities Act and the rules and regulations thereunder), Canada, Australia or any other jurisdiction in which the offer of Consideration Shares would constitute a violation of relevant laws or require registration thereof.

The date of this document is 2 April 2001 CONTENTS

Page Directors and Advisers 3 Definitions 5 Glossary of Terms 8 Part I General Information 9 Part II Financial Information relating to IONA for the three years ended 31 December 2000 28 Part III Pro Forma Statement of Net Assets for the Group 48 Part IV Additional Information 52

DIRECTORS AND ADVISERS

Directors: Dr. Christopher Horn, Chairman Mr. Barry Morris, Chief Executive Officer Dr. Sean Baker, Executive Vice President, Chief Technical Officer Mr. Annrai O’Toole, Non-Executive Director Dr. Ivor Kenny, Non-Executive Director Mr. Kevin Melia, Non-Executive Director

All of The IONA Building, Shelbourne Road, Ballsbridge, Dublin 4, Ireland

Company Secretary and Registered Office: Mr. Lindsey Kiang The IONA Building Shelbourne Road Ballsbridge Dublin 4 Ireland

Irish Sponsor: Goodbody Corporate Finance Ballsbridge Park Ballsbridge Dublin 4 Ireland

Stockbrokers: Goodbody Stockbrokers Ballsbridge Park Ballsbridge Dublin 4 Ireland

Legal advisers to the Company: As to Irish law: William Fry Fitzwilton House Wilton Place Dublin 2 Ireland

As to US Law: Testa, Hurwitz & Thibeault High Street Tower 125 High Street Boston, MA 02110 US

Auditors and Reporting Accountants: Ernst & Young Harcourt Centre Harcourt Street Dublin 2 Ireland Principal Bankers: Bank of Ireland St. Stephen’s Green Dublin 2 Ireland

Bank of America Russell Court St. Stephen’s Green Dublin 2 Ireland

Irish Registrars and Paying Agents: Ordinary Shares: Computershare Services (Ireland) Limited Heron House Corrig Road Sandyford Industrial Estate Dublin 18 Ireland

ADRs: Morgan Guaranty Trust Company of New York 60 Wall Street New York, New York 10260 US DEFINITIONS

The following definitions apply through this document unless the context otherwise requires:

‘‘Acts’’ the Companies Acts, 1963 to 1999, of Ireland

‘‘Admission’’ the admission of the New Ordinary Shares to be issued in consideration for the Acquisition to trading on the Official List

‘‘Acquisition’’ the proposed acquisition of Netfish by IONA pursuant to the Merger Agreement

‘‘ADR(s)’’ American Depositary Receipts, evidencing ADSs

‘‘ADS(s)’’ American Depositary Shares, each of which represents one Ordinary Share

‘‘Board’’ or ‘‘Directors’’ the board of directors of the Company

‘‘Closing’’ the closing of the Acquisition pursuant to the Merger Agreement

‘‘Closing Date’’ the date of Closing, which is expected to occur in the second quarter of IONA’s current financial year

‘‘Common Stock Conversion Ratio’’ the ratio at which one Outstanding Netfish Share will be cancelled in exchange for Ordinary Shares at the Effective Time, which ratio is described in more detail in paragraph 11(s) of Part IV

‘‘Company’’ or ‘‘IONA’’ IONA Technologies PLC

‘‘Consideration Shares’’ up to 5.5 million Ordinary Shares issuable pursuant to the Merger Agreement in exchange for the cancellation of all Outstanding Netfish Shares and the assumption of all Outstanding Netfish Options, subject to such adjustment in number as is provided in the Merger Agreement as summarised in paragraph 11(s) of Part IV

‘‘Effective Time’’ the time at which the Acquisition becomes effective, being such time as the statutory merger agreement and other required documents have been filed with the Secretary of State of California

‘‘Employee Share Option Schemes’’ the Executive Share Option Scheme, the 1997 Share Option Scheme, the 1997 Director Share Option Scheme and the 1999 Employee Share Purchase Plan, a summary of the principal terms of which are set out in paragraph 6 of Part IV of this document

‘‘Enlarged Share Capital’’ the Existing Ordinary Shares and the Consideration Shares

‘‘Estate Tax Convention’’ the convention between the Government of the US and the Government of Ireland for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on the estates of deceased persons

‘‘Existing Ordinary Shares’’ the 22,873,249 Ordinary Shares in issue in IONA, exclusive of the New Ordinary Shares, as at the date of this document

‘‘Fully Diluted Shares’’ all Outstanding Netfish Shares (calculated on an as converted to Netfish Common Stock basis) and all Outstanding Netfish Options

‘‘Group’’ or ‘‘IONA Group’’ the Company and its subsidiaries

‘‘Group company’’ a company which is a member of the Group

‘‘Holdback Shares’’ 10% of the Consideration Shares rounded up to the nearest whole share which will not be issued on Closing but will be held back by IONA as the sole source of indemnification payments that may become due to IONA pursuant to the Merger Agreement

‘‘Information Statement’’ the document to be furnished to the Netfish shareholders to provide full disclosure to such shareholders regarding the Merger and related transactions. The board of directors of Netfish will subsequently seek the written consent of the Netfish shareholders approving the Merger Agreement

‘‘Irish Stock Exchange’’ The Irish Stock Exchange Limited

‘‘Listing Particulars’’ this document

‘‘Merger Agreement’’ the Agreement and Plan of Reorganisation dated 14 February 2001 between IONA, NV Acquisition Corp. and Netfish relating to the Acquisition, further details of which are set out in paragraph 11(s) of Part IV

‘‘Nasdaq’’ The National Association of Securities Dealers Automated Quotation System

‘‘Netfish’’ Netfish Technologies, Inc.

‘‘Netfish Capital Stock’’ the Netfish Common Stock and Netfish Preferred Stock

‘‘Netfish Common Stock’’ all the shares of Netfish’s common stock, no par value, outstanding at the Effective Time

‘‘Netfish Preferred Stock’’ all the shares of Netfish Series A Preferred Stock, the Netfish Series B Preferred Stock, the Netfish Series C Preferred Stock, and the Netfish Series D Preferred Stock, all of no par value outstanding at the Effective Time

‘‘New Ordinary Shares’’ such of the Consideration Shares as are issued on Closing

‘‘Official List’’ the official list of the Irish Stock Exchange

‘‘Ordinary Shares’’ the Ordinary Shares of €0.0025 each in the share capital of the Company

‘‘Outstanding Netfish Options’’ all rights, warrants or options to acquire Netfish Common Stock and securities convertible into Netfish Common Stock that are outstanding immediately prior to the Effective Time and do not expire pursuant to their terms on or before the Closing Date

‘‘Outstanding Netfish Shares’’ shares of Netfish Common Stock and Netfish Preferred Stock that are actually issued and outstanding immediately prior to the Effective Time

‘‘Post-Liquidation Preference Merger Shares‘‘ the number of Consideration Shares minus the number of Preferred Merger Shares

‘‘Preferred Merger Shares’’ the number of New Ordinary Shares issuable in respect of all shares of Netfish Preferred Stock outstanding at the Effective Time pursuant to Sections 2.1(c)(i) and 2.1.(c)(ii) of the Merger Agreement, as summarised in paragraph 11(s)(iii) (I) and (II) of Part IV

‘‘Preferred Stock Conversion Ratio’’ a series of ratios at which one outstanding share of either Netfish Series A Preferred Stock, Netfish Series B Preferred Stock, Netfish Series C Preferred Stock or Netfish Series D Preferred Stock, as applicable, will be cancelled in exchange for Ordinary Shares at the Effective Time, which ratios are described in more detail in paragraph 11(s) of Part IV

‘‘Shareholder’’ a person holding Ordinary Shares

‘‘the 1963 Act’’ the Companies Act, 1963 of Ireland (as amended)

‘‘the 1983 Act’’ the Companies (Amendment) Act, 1983 of Ireland

‘‘the 1986 Act’’ the Companies (Amendment) Act, 1986 of Ireland

‘‘the 1990 Act’’ the Companies Act, 1990 of Ireland

‘‘UK’’ United Kingdom

‘‘US’’ The United States of America

‘‘US$’’ United States dollars

‘‘€ ’’ Euros

Any reference to any provision of any legislation shall include any amendment, modification, re-enactment or extension thereof. Any such reference, unless the context clearly indicates to the contrary, shall be a reference to legislation of Ireland.

The rate of exchange used for the purposes of this document, other than in respect of Part II and Part III, is €1:US$0.8807 being the mid market rate of exchange as at 6.00pm on 29 March 2001, the latest practicable date prior to the date of publication of this document. GLOSSARY OF TERMS

‘‘B2Bi’’ Business-to-business integration

‘‘CICS’’ Customer Information Control System

‘‘CORBA’’ Common Object Request Broker: Architecture and Specification

‘‘C++’’ an object-orientated high level programming language

‘‘EAI’’ Enterprise Application Integration

‘‘EDI’’ Electronic Data Interchange

‘‘EJB’’ Enterprise Java Beans

‘‘General Availability’’ the term used when a product goes through development and testing and is subsequently made available for purchase without restrictions

‘‘GUI’’ Graphical User Interface

‘‘IMS’’ Information Management System

‘‘IT’’ Information Technology

‘‘Java’’ an object-orientated high level programming language that can be used to distribute executable content across a heterogeneous network

‘‘J2EE’’ Java 2 Enterprise Edition

‘‘n-Tier’’ a distributed computing system, with different tier or layers providing the computing system

‘‘Object Management Group’’ or ‘‘OMG’’ an international organisation founded in 1989 to endorse technologies as open standards for object-orientated applications. The OMG specifies the Object Management Architecture (‘‘OMA’’), a definition of a standard object model for distributed environments

‘‘Orbix’’ market-leading CORBA middleware product for developers who need to develop and integrate highly complex technical applications

‘‘OTS’’ Object Transaction Service

‘‘SOAP’’ Simple Object Adapter Protocol

‘‘XML’’ Extensible Mark-up Language PART I – GENERAL INFORMATION

INTRODUCTION AND BACKGROUND TO THE COMPANY

IONA is a leading provider of software and services that allow companies to integrate heterogeneous computer networks thus enabling them to share selected information internally and over the Internet. IONA’s product set enables companies to integrate their existing enterprise applications to develop new Web-based applications to their employees, customers, partners and suppliers in a secure and personal manner through the Internet.

IONA was incorporated in March 1991 and was principally engaged in research and development and software consultancy until the commercial release of its first product, Orbix 1.1, in July 1993. IONA has expanded rapidly since incorporation through a combination of organic and acquisition-led growth. Revenues for the IONA Group have increased from US$2.4 million for the year ended 31 December 1994 to US$153.1 million for the year ended 31 December 2000. The Group employs in excess of 850 people in 47 offices around the world and has been profitable every year since its foundation.

The Company completed an initial public offering of its securities on Nasdaq in the US in February 1997 and a secondary listing on the Official List of the Irish Stock Exchange in December 1997.

In 1997, IONA acquired for US$2.9 million from Transarc, a wholly-owned subsidiary of IBM, a non-exclusive license to the source code of an OTS technology to be further developed and incorporated into certain of its products.

In September 1998, IONA acquired from EDS Corporation, for US$5.0 million, a license to the source code of a component development technology that IONA has developed further and incorporated into certain of its products.

In January 1999, IONA purchased the intellectual property rights of EJBHome Limited for US$1.6 million. EJBHome Limited developed EJB components and shipped the first implementation of the EJB v1.0 specification in July 1998. The acquisition of the EJBHome intellectual property rights placed IONA in a leading position for the provision of Java-based middleware. The combination of EJBHome’s software tools and expertise, with IONA’s Orbix middleware product family, offers developers the ability to create, deploy and manage EJB components and applications within IONA’s powerful CORBA-based middleware infrastructure.

In July 1999, IONA acquired the outstanding shares of Aurora Technologies, Inc. (‘‘Aurora’’), a provider of object middleware consulting services, for a total consideration of US$1.3 million. The consideration was satisfied by way of 48,750 Ordinary Shares and US$520,000 in cash. Aurora’s services included analysis, implementation, mentoring, short and long-term consulting, training and project management services with IONA’s Orbix product family, the CORBA standard and legacy systems integration. IONA merged Aurora with its Global Services Group further extending IONA’s capabilities as a provider of high-end consultancy and training to organisations throughout North America.

In February 2000, IONA acquired substantially all of the assets of Watershed Technologies, Inc (‘‘Watershed’’) for US$13.3 million in cash. Watershed is based in Waltham, Massachusetts and provides XML-based tools and services for building standards based business-to-business and business-to-consumer portals. Watershed’s product offerings enhanced IONA’s iPortal Server component of the IONA Suite by delivering management capabilities for XML, SOAP, EJB, business-to-business interaction capabilities, portal and GUI frameworks for content and presentation development and vertical market portal templates.

In June 2000, IONA acquired Genesis Development Corporation (‘‘Genesis’’). The total consideration for the acquisition consisted of 331,744 newly-issued Ordinary Shares and 126,423 replacement vested options over Ordinary Shares and US$500,000 in cash. Genesis is based in West Chester, Pennsylvania and provides enterprise architecture and XML and Java-based development services for the design and implementation of portals and online exchanges.

In February 2001, IONA acquired the non-exclusive license rights to certain portions of the source code of Software AG, Inc.’s enterprise application integration technology for US$10 million. This acquisition extends the existing integration capabilities of the IONA Suite. In addition to the acquisition of the non-exclusive license rights to the technology, IONA has hired a substantial portion of the Software AG, Inc. engineering team responsible for the development of the technology.

In February 2001, IONA acquired Object Orientated Concepts, Inc. (‘‘OOC’’). The total consideration consisted of 905,564 newly-issued Ordinary Shares and replacement options and US$3 million in cash. OOC is based in Billerica, Massachusetts and provides an advanced suite of CORBA-compliant object middleware products. OOC’s ORBacus product line and ORBacus/E real-time embedded ORB technology will be combined with IONA’s Orbix technology, resulting in new offerings that strengthen developer productivity and offer new functionality for the telecommunications, embedded and real-time markets.

As of 31 December 2000, IONA had directly or indirectly licensed its products and services to over 4,500 customers worldwide in a range of industries including telecommunications, finance, manufacturing, banking, defense, medical, computing, research and independent software vendors.

DETAILS OF THE ACQUISITION

On 15 February 2001, IONA announced that it had signed an agreement to acquire Netfish for a total consideration of up to 5.5 million Ordinary Shares or Consideration Shares. The Acquisition is subject to the approval of shareholders of both IONA and Netfish, as well as customary regulatory and other Closing conditions, details of which are set out in paragraph 12 of Part IV, and is expected to close in the second quarter of IONA’s current financial year. Under the Merger Agreement, NV Acquisition Corp., a wholly owned subsidiary of IONA, will be merged with and into Netfish. Netfish will be the surviving corporation and will become a wholly owned subsidiary of IONA. Upon consummation of the Acquisition, the Outstanding Netfish Shares will be cancelled and, in exchange for such cancellation, Consideration Shares will be issued, with cash being paid in lieu of issuance of fractional shares. The Outstanding Netfish Options will be assumed by IONA and will be exercisable for Consideration Shares.

The total number of Consideration Shares to be issued or issuable for all Outstanding Netfish Shares and Outstanding Netfish Options is 5.5 million Ordinary Shares less any adjustment amount for interest bearing indebtedness for borrowed money of Netfish in excess of US$668,000 and for the aggregate amount of all costs and expenses incurred by Netfish in connection with the Merger Agreement in excess of US$5 million. If after 14 February 2001, and prior to the Effective Time, options to purchase shares of Netfish Common Stock are issued with the consent of IONA, the number of Consideration Shares to be issued will be increased in accordance with a formula set out in the Merger Agreement by reference to the Common Stock Conversion Ratio. The Board, which has been advised by Lehman Brothers as of 14 February 2001, the date on which Lehman Brothers rendered its opinion to the Board, that from a financial point of view, it was of the opinion that the aggregate consideration to be paid by IONA in the Acquisition is fair to IONA, believes that the Acquisition is in the best interests of IONA and its Shareholders.

Each outstanding share of Netfish Common Stock will, on consummation of the Acquisition, be cancelled in exchange for such number of Consideration Shares equal to the Common Stock Conversion Ratio. In addition, each share of Netfish Preferred Stock will, at the same time, be cancelled in exchange for such number of the Consideration Shares equal to the applicable Preferred Stock Conversion Ratio in accordance with the Merger Agreement. The number of Consideration Shares subject to Outstanding Netfish Option will be equal to the number of shares of Netfish Common Stock that were subject to such option immediately prior to the Effective Time multiplied by the Common Stock Conversion Ratio rounded down to the nearest whole number of Consideration

Shares. Corresponding adjustments will be made to the per share exercise price for each Consideration Share issuable upon exercise of each Outstanding Netfish Option, rounded up to the nearest cent. All of the other terms and conditions of Netfish’s 1999 Stock Option Plan will continue to apply to such options. Warrants for Netfish Stock that have been assumed by IONA under the Merger Agreement shall continue to be subject to the same terms and conditions contained in the respective warrant agreements governing such warrants except that they will be exercisable only for Consideration Shares in such number and at such exercise price as is determined by applying either the Common Stock Conversion Ratio in the case of warrants to purchase Netfish Common Stock or the applicable Preferred Stock Conversion Ratio in the case of warrants to purchase Netfish Preferred Stock.

For the purposes of calculating the entitlement of Netfish shareholders to Consideration Shares pursuant to the Common Stock Conversion Ratio and the applicable Preferred Stock Conversion Ratio, an average closing price for IONA ADRs is applied. The Merger Agreement provides that this will be the average closing price of an IONA ADR on the Nasdaq over the 30 trading days ending three trading days prior to the Closing Date. On Closing, only such number of Consideration Shares as are required as consideration for the Outstanding Netfish Shares (which comprise both Netfish Preferred Stock and Netfish Common Stock in issue at the Effective Time) will be issued (subject to adjustment for Holdback Shares as described below). The balance of the Consideration Shares will be issuable after the Closing Date as and when Outstanding Netfish Options are exercised and as and when the Holdback Shares are released. The number and value of Consideration Shares payable on any particular series or class of Netfish Capital Stock will depend on a number of variables including, among other things, the following: l the number of Fully Diluted Shares calculated immediately prior to the Effective Time; l the average closing price of ADRs (calculated over the 30 trading days ending 3 trading days before the Closing Date); l the adjustments, if any, to be made to the total number of Consideration Shares, as outlined above; and l whether holders of shares of Netfish Preferred Stock elect to convert their shares into Netfish Common Stock immediately prior to the Effective Time.

As these Listing Particulars have been published prior to the Closing Date, the total number of Consideration Shares issuable to Netfish shareholders pursuant to the Merger Agreement is not yet determinable. The New Ordinary Shares issued on Closing will be listed on the Irish Stock Exchange. It is intended that separate applications will be made to the Irish Stock Exchange for listing of any further Consideration Shares that are issued after the Closing Date. Assuming the issuance of all 5.5 million Consideration Shares, such issuance would increase the issued share capital of IONA by 24.05% and would represent 19.38% of the Enlarged Share Capital.

Pursuant to the Merger Agreement, IONA, its subsidiary, NV Acquisition Corp. and Netfish make various representations and warranties including (amongst others) representations as to their organisation and capitalisation, their authority to enter into the Merger Agreement and to consummate the transactions contemplated thereby, changes in their businesses and as to the payment of fees or commissions in connection with the Acquisition. Netfish, in addition, gives further representations and warranties including (amongst others) representations as to the absence of litigation, its employee benefits plans, its material contracts, its liabilities, compliance with laws, its assets, proprietary assets, tax matters, the shareholder votes necessary to approve the Merger Agreement and certain other operational matters. The majority of the representations and warranties expire on the first anniversary of the Closing Date but certain of the warranties such as taxation will survive until the second anniversary of the Closing Date. The Netfish shareholders will indemnify IONA for losses or damages to IONA resulting from any inaccuracies or breaches of the representations and warranties. Ten percent of the Consideration Shares will not be issued or delivered on Closing and will be held back by IONA as the sole source of indemnification payments (if any) that may become due to IONA pursuant to such indemnification. Subject to distributions made for actual indemnifications (if any) or continued retention for pending claims (if any), 75% and 25% respectively of the remaining Holdback Shares will be distributed on a pro rata basis to each of Netfish’s shareholders after the first and second anniversaries of the Closing Date, respectively.

Pursuant to the Merger Agreement, a person nominated by Netfish and acceptable to IONA shall be appointed to the Board as of the Closing Date to serve until the first annual general meeting of IONA after the Closing Date, at which time such person shall stand for election by the Shareholders. As at the date of this document, no such nomination has been made by Netfish.

Netfish shareholders holding shares of Netfish representing, respectively, approximately 62% of the outstanding Netfish Common Stock, 41% of the Netfish Preferred Stock, 81% of the Netfish Series C Preferred Stock and 56% of the Netfish Series D Preferred Stock as of 14 February 2001, have agreed pursuant to voting agreements to vote in favour of the Acquisition and against any competing proposals. Any holder of Netfish Capital Stock who objects to the Acquisition may, under certain circumstances, exercise dissenters’ rights and receive cash for the fair market value of the holder’s shares of Netfish Capital Stock.

Each Netfish shareholder who is an employee of, or consultant to Netfish or any Netfish subsidiaries will be required to enter into an investment agreement pursuant to which such shareholder agrees not to sell any Consideration Shares for a period of 180 days from the Effective Time; provided however that up to 10% of such shareholder’s Consideration Shares may be sold prior to the expiration of the 180 day period. Shareholders who were not employees of, or consultants to, Netfish or any subsidiary of Netfish will be allowed to sell their Consideration Shares after the Effective Time, provided that, for a period of 180 days from the Effective Time, such shares may only be sold in brokers’ transactions executed by Lehman Brothers in compliance with Rule 144 of the US Securities Act of 1933, as amended (the ‘‘Securities Act’’), or pursuant to an effective registration statement in connection with an underwritten public offering.

Further details on the terms of the Merger Agreement and the agreements ancillary to it are set out in paragraph 11(s) of Part IV.

REASONS FOR THE ACQUISITION

The Board believes that the Acquisition will enable IONA to achieve its vision of one comprehensive e-business platform from a single vendor. IONA expects that the IONA Suite will deliver the only modular and complete platform for Total Business Integration, providing a solution to integration problems both inside (EAI) and outside (B2Bi) the enterprise.

The Board believes that because IONA and Netfish’s product offerings are complementary, a number of strategic benefits will accrue from the Acquisition. The potential benefits of the Acquisition include:

• potential access to Netfish’s skilled employee base; and

• greater ability to service customers and expand products, services and markets.

In reaching its decision to approve the Acquisition, IONA’s Board considered and reviewed with management the following: • reports from management, legal, financial and accounting advisers as to the results of the due diligence investigation of Netfish. Positive historical information concerning Netfish’s technology and the results of the technical due diligence investigation of the Netfish technology verified the strength of the Netfish product line;

• information concerning the prospects of IONA given IONA’s belief that it will be able to provide one comprehensive e-business platform from a single vendor after giving effect to the Acquisition;

• the Board’s determination that the strategic nature of the acquired technology is likely to enhance the Company’s prospects; and

• the belief, supported by financial advisors, that the terms of the Acquisition are fair and reasonable.

Based on the foregoing potential benefits and reasons, and other matters deemed relevant, the Board believes that the Acquisition is in the best interests of IONA and its Shareholders and support the Acquisition and the transactions contemplated thereby.

The Board acknowledges that the consideration payable for the Acquisition exceeds the value of Netfish’s net assets, however, the Board believes that the strength of the Netfish technology and the impact that this technology will have on IONA’s current products and on IONA’s strategy of Total Business Integration will enhance the Company’s prospects.

ACTIVITIES OF THE IONA GROUP

The IONA Group is a leading provider of software and services that allow companies to integrate heterogeneous computer networks. In doing so, the IONA Group enables these companies to share selected information internally and over the Internet. The IONA Group’s product set, the IONA Suite, enables companies to:

• integrate their existing enterprise applications;

• develop new Web-based application logic; and

• present these integrated applications to their employees, customers, partners, and suppliers in a secure and personal manner via the Internet.

IONA expects that computer networks will continue to be heterogeneous for some time to come, because of ongoing advances in computing hardware, networking and operating systems. The Company also believes that for companies to be competitive, they must make the Internet a central and vital element of their businesses. In order to share information with their customers, partners and contractors, enterprises are using secure, limited-access networks running on the Internet outside the company firewall.

The IONA Group believes that it offers a unique software solution that applies a single, standards-based architecture to what were previously two distinct e-business problems: Enterprise Application Integration (‘‘EAI’’) and business- to-business Integration (‘‘B2Bi’’). The IONA Group has recently unveiled a strategy it calls ‘‘Total Business Integrationtm’’, which provides its clients with a ‘‘One Vendor, One Platform’’ solution for meeting their end-to-end e-business needs, both inside (EAI) and outside (B2Bi) the enterprise.

In 2001, the IONA Group expects to announce revisions and update releases of many current products, as well as to release new products and services. The Group’s strategy for the coming year is to expand its CORBA franchise and gain ‘‘mindshare’’ among the development community, while targeting the Total Business Integration strategy to a more business-oriented audience.

The Internet represents an efficient and productive platform on which companies may transact business with other companies, their partners, their suppliers and their customers. Today, most companies find themselves with a disjointed array of Internet sites and initiatives that are not integrated with their back-office inventory, customer, financial accounting and production systems. Companies confront a critical challenge of interconnecting these Internet sites with their business systems and processes to create the responsive, flexible, scalable and differentiated e-business enterprise. Time to market, scalability, adherence to standards and flexibility are all critical to establishing an Internet presence greater than a marketing-oriented site.

The growth in Internet-based business-to-business activities highlights the importance of middleware that is built on technology standards. New application logic built for e-business Internet applications is primarily written in Java, the most platform-neutral language available to programmers today. The integration of an enterprise’s existing applications frequently involves CORBA (a solid standard for application interoperability) and XML (a platform for exchanging data among heterogeneous applications that is rapidly gaining widespread acceptance, and use, by the developer community).

The IONA Group’s ‘‘Total Business Integration’’ strategy is derived from customer input, and from the Company’s years of experience in building, deploying and managing highly-distributed Internet applications.

This strategy focuses on the following areas:

Extending the network infrastructure over the Internet, on standards-based platforms. The Internet is a full- featured computing platform. The Group’s strategy embraces all of the standards important to the Internet as a business-to-business application platform.

Providing a complete solution, not just a box of products. The Group provides a full range of integrated services, from education to customer service to custom consulting to enable companies to achieve Total Business Integration.

Partnering for Success. The Group enhances its core competencies by leveraging long-term business relationships with more than 400 systems integrators, consultants and software vendors who are committed to IONA’s technology and vision. The Group also allies with many renowned e-business enablers, including Compaq, Microsoft, IBM and Sun. By supplying additional skills, resources and domain expertise, its partners enable the Group to scale at the necessary pace to deliver progressive products that meet the needs of its clients.

Products: the IONA Suite

The IONA Group markets a uniquely-qualified set of integrated infrastructure products, called the IONA Suite, to support the design, development, implementation and management of e-business Internet applications and other large-scale, distributed computing projects.

Because it permits application integration at a higher level of abstraction than other middleware technologies, the IONA Suite reduces the complexity of integrating heterogeneous networks.

The IONA Suite comprises the following seven elements:

(1) iPortal Application Server iPortal Application Server is an open and manageable Java2 Enterprise Edition (‘‘J2EE’’) compliant and branded platform for building custom code for ‘‘n-tier’’ environments. It is built on a CORBA foundation for reliability and scalability. iPortal Application Server is designed to support the rigorous dynamic assembly, configuration and deployment requirements of IT developers and administrators. Developers can change applications running on the server without having to stop the server first. This product also employs an assembly and deployment approach that allows developers to focus on business logic, eliminating the need for system-level code governing security, transaction access and other low-level functions. iPortal Application Server is designed to work well with third-party integrated development environments (‘‘IDEs’’) and easily accommodates the use and ongoing administration of third party EJBs. In the past 12 months, iPortal Application Server has achieved initial General Availability and three product releases.

(2) iPortal Integrator iPortal Integrator is an integration broker, based on JMS message, that automates linkage and integration between the various elements of a company’s Internet e-business applications. It facilitates integration of applications running on IBM mainframes, Microsoft environments, J2EE environments, major enterprise resource planning (‘‘ERP’’) systems, database systems and custom applications.

Benefits of using iPortal Integrator include:

• the ability to leverage existing IT assets;

• reduced costs and time to market;

• ease of learning and use;

• a modern, scalable architecture; and

• less expense than building and maintaining a custom solution.

In January 2001, the Group acquired business process automation technology from Suplicity, to enhance the integration capabilities of its integration server. In February 2001, IONA and IONA Technologies, Inc. entered into an agreement with Software AG, Inc. to acquire non-exclusive license rights to certain portions of Software AG, Inc.’s enterprise application integration technology. In doing so, the IONA Group was able to further extend the integration capabilities of iPortal Integrator. The acquired technology from Software AG, Inc. includes an easy-to- use graphical interface, an integration broker, a transformation engine and a host of application adapters for packaged, custom-developed or legacy applications (including Peoplesoft, SAP, and Siebel), all of which will be incorporated into iPortal Integrator.

(3) Orbix

The IONA Group’s Orbix family is an integrated set of CORBA middleware used to develop high-end, distributed computing systems. Orbix is intended for use by application developers who need to integrate applications, both packaged and custom-built, across diverse and complex computing environments.

Orbix 2000 is IONA’s next generation of CORBA-based middleware, which adheres to the latest Object Management Group CORBA specification. In addition, Orbix 2000 is designed to provide developers with a platform for applying their skills in CORBA design, development and deployment to the construction of e-business Internet applications and other large-scale distributed computing applications. Orbix 2000 offers the dynamic deployment and runtime administration features required by IT administrators and software developers. Every system component and every application interface deployed in the Orbix 2000 environment can be added, removed and changed without having to first shut down the server. Policy-based binding allows developers to implement different quality of service levels for requests and operations (a degree of control that previously required custom coding).

Orbix 2000 is based on the Group’s Adaptable Runtime Technology™ (‘‘ART’’), a powerful distributed computing engine that provides the infrastructure for the entire IONA Suite. The Group is currently pursuing an action plan to migrate users of its older Orbix products to its newer ones. The Group has issued a migration guide to users of its older Orbix products providing these users with technical information on migration to the newer products. This migration guide is also available on the IONA Group’s website. The Group’s Global Services organisation also provides courses to assist users in making the migration. The migration guide and migration courses have been marketed to users of the older Orbix products.

(4) ORBacus/E

ORBacus/E is the IONA Group’s CORBA-compliant Object Request Broker (‘‘ORB’’) for high-speed, embedded applications. It is a solid middleware solution for telecom applications, such as voice-over-IP and optical routing devices. The product has low latency, lowers the memory footprint, and provides an additional performance gain if large amounts of data are transferred. IONA obtained ORBacus technology through its acquisition of OCC in February 2001. In doing so, the IONA Group gained a product line that is targeted at the real-time/embedded market.

(5) iPortal OS/390 Server iPortal OS/390 Server integrates applications on the IBM mainframe into e-business Internet applications and other large-scale distributed computing applications. This component helps software developers to encapsulate the business, data and transactions within existing mainframe applications and to expose and exploit them in a reusable manner.

(6) iPortal XMLBus

In February 2001, IONA announced iPortal XMLBus, a development environment that is designed to simplify the creation of XML-based applications built on Web services. iPortal XMLBus provides companies with tools for building and exposing Web services and linking them to existing systems. iPortal XMLBus supports an increasingly popular approach to application development that exposes applications as dynamic, subscription-oriented services over the Web. This approach is particularly suitable for companies that need to integrate applications outside, and often inside, their enterprises. iPortal XMLBus provides them with a consistent, standards-based approach to exposing loosely coupled interfaces to other enterprise applications and business processes. As such, iPortal XMLBus addresses the problems associated with the rapid customisation of existing systems for integration with new and existing partner applications.

The IONA Group intends that a beta release of this product will, in the course of 2001, be accessible via the IONA Group corporate website.

(7) iPortal SureTrack iPortal SureTrack is a transition methodology and software development process that extends the industry-standard Unified Software Development Process (UP) designed for large-scale e-business and other distributed computing projects. It was developed from over a decade of experience in creating line-of-business critical applications and systems for leading enterprises. IONA acquired the iPortal SureTrack methodology through its acquisition of Genesis in June 2000.

IONA Suite User Benefits:

A Complete Solution. Companies integrating their networks to conduct e-business face a choice of either assembling disparate point solutions from multiple vendors, or relying on an integrated suite of technologies designed by a single vendor. The IONA Suite makes it easier for developers to quickly and effectively design, develop and deploy their networks.

Reduced Time to Market. Large-scale, multi-tier business-to-business applications are complex and difficult to build and deploy. A competitive and demanding marketplace presently offers companies little time to architect and develop their networking systems. It is also important that the resulting systems be easy to adapt and scale, in response to changing business needs. The Group’s products reduce the complexity of integrating heterogeneous networks, enable companies to effectively conduct business online and enable users to make changes without disrupting any running systems.

High Reliability. The cohesive architecture of the IONA Suite provides a reliable infrastructure for growth and scalability, allowing companies to sustain their IT investments over time. The Internet, as a computing platform, relies on standardised technologies, such as CORBA, XML, C++, Java and EJB. The IONA Suite embraces these same technologies thus allowing networks to communicate with each other over the Internet, regardless of software interoperability standard, component model, or operating platform.

IONA Global Services

The IONA Group’s Global Services organisation provides the consulting and education services required to make large business-to-business development projects successful. The Group’s Global Services consultants have substantial expertise in such critical technologies as CORBA, EJB, J2EE and XML.

The IONA Group offers companies a complete array of Total Business Integration services, based upon the specific steps they may require in any new IT initiative:

• The Group’s enterprise consulting services help companies understand any required changes and help them consider the ways in which the new IT initiative impacts the overall enterprise by clearly mapping their business concerns to their current technical requirements.

• The Group’s project services are designed to launch a company’s IT initiative.

• Using its Global Enterprise Methodology, the IONA Group’s process services help companies achieve Total Business Integration.

• The Group’s product consulting services enables companies to quickly become proficient in the use of IONA solutions and immediately leverage them on their next projects.

• Finally, the Group’s open enrolment and education services provide on or off-site training in cutting-edge technologies and standards, in addition to the IONA Suite. THE IONA GROUP’S MARKETING, SALES AND THIRD PARTY RELATIONSHIPS

The Group markets its products and services through its marketing and direct sales organisations and through third- party distributors, original equipment manufacturers, value added resellers and independent software vendors.

Marketing. The IONA Group executes global marketing programs designed to create demand for its products and services. The IONA Group delivers a variety of marketing programs, including trade shows, limited duration evaluation software, direct marketing communications, Webcasts, public relations, product literature and collateral, trade advertising and a corporate website. The Group’s global marketing strategy is executed by marketing teams in the US, Europe and Asia. As of 31 December 2000, the Group’s global marketing organisation comprised 43 full- time employees.

Sales. The IONA Group employs a combination of direct and indirect distribution channels. The direct sales force consists of account managers and field and telesales personnel, complemented by a small number of technical pre- sales and high-level product specialists who are available for customer visits. The indirect distribution channels consist of resellers, distributors, systems integrators and third-party product companies.

The IONA Group sales organisation is divided into three geographical regions: the Americas, Asia-Pacific and Europe/Middle East/Africa. Within each region, the IONA Group dedicates specialised sales and technical personnel to particular industries and markets, such as telecommunications, finance and petrochemical. In addition, the Group dedicates members of the sales force to developing strategic relationships with original equipment manufacturers and value-added resellers. As of 31 December 2000, the Group’s sales organisation consisted of 228 full-time employees.

Third-Party Relationships. Third-party relationships are a critical element of the Group’s business strategy. In 1999, the Group’s Partner Marketing Program, a comprehensive marketing and sales support program, launched a number of new initiatives designed to attract, retain and leverage complementary third-party software vendors and service providers. The Partner Marketing Program tailors individual initiatives to system integrators, independent software vendors, value added technology partners, EJB providers, international distributors, value added resellers, user groups and university research awards.

PRODUCT DEVELOPMENT

The IONA Group operates in a very fast-moving and competitive sector of the software industry. Since its inception, the Group has made substantial investments in product development. The Group believes that its future performance depends, in large part, upon its ability to enhance existing products and to develop new, standards-based e-business infrastructure products that maintain technological competitiveness and that meet the needs of a rapidly changing marketplace. Without its substantial investments in product development, the Group would quickly be overtaken by its competitors. The Group will continue to rely on product enhancements and new products to maintain its leadership as an e-business infrastructure provider.

The IONA Group also expects to continue to participate in the development of industry standards. Much of the Group’s success is due to its long-standing commitment to standards-based technologies. The IONA Group was a pioneer in CORBA, a broadly embraced standard for application interoperability. The Group has expanded its support for industry standards to include Java, C++, EJB, J2EE, SOAP, XML, CICS and IMS.

The IONA Group has joined the Wireless Application Forum to ensure that it stays current with the emerging wireless access standards. The Group continues to be actively involved in other industry organisations and standards- setting bodies, particularly the Object Management Group.

In 2000, IONA was elected to the Executive Committee of the Java Community ProcessTM (‘‘JCP’’) Program 2.0. The JCP is an open and inclusive community-based process to develop and revise JavaTM technology specifications, reference implementations and technology compatibility kits in co-operation with the international Java community.

The IONA Group has developed its technology and products primarily through internal development personnel and third-party contractors. As of 31 December 2000, the Group’s product development organisation consisted of 183 full-time employees. Product development is concentrated at both the Group’s Dublin, Ireland headquarters and its US headquarters in Waltham, Massachusetts. Limited product development is also performed at subsidiary company locations. In addition, the IONA Group has, based on timing and cost considerations, licensed or acquired technologies or products from third parties.

The Group’s product development organisation collaborates with its marketing and sales organisations to increase mindshare and demand for, and sales of, its products and to develop customer and indirect sales relationships. Further discussions of the significant technology licences and technology acquisitions executed by the IONA Group is included in ‘‘Introduction and Background to the Company’’ in this Part I.

In addition, the Group continually reviews opportunities to form marketing or product alliances with third-party vendors of complementary technologies and products.

COMPETITION

The market for e-business infrastructure technology is highly competitive. While the Group believes the total breadth of its e-business infrastructure product portfolio is unmatched by any one competitor, the IONA Group and the IONA Suite compete with a variety of products and solutions, including without limitation, competitors offering distributed component software products and services, e-business infrastructure and interoperability technologies such as data connectivity and messaging, application servers, transaction monitors, messaging systems, component technologies, and Internet integration technologies. The IONA Suite competes with offerings from a number of established infrastructure vendors, as well as new Internet software companies. Some of these companies offer products that compete with single components of the IONA Suite, while other vendors will market a set of products designed to solve broad enterprise portal problems. In addition, Orbix 2000 competes with offerings from other independent suppliers of CORBA-based solutions.

The IONA Group believes that the principal competitive factors affecting the market for e-business infrastructure technology include:

• product features and functionality;

• ease-of-use;

• quality;

• performance;

• price;

• customer service and support; • effectiveness of sales and marketing efforts; and

• company reputation and financial viability.

The Group anticipates continued growth and competition in the market for e-business infrastructure technology and consequently, the entrance of new competitors into this sector of the industry in the future. The IONA Suite technology has been well-received by industry analysts, but this acceptance is no guarantee that other vendors will not offer competition in this area of the software industry.

The Group believes that its ability to compete depends, in part, on a number of factors outside its control, including:

• the development by third parties of software that is competitive with the Group’s products and services;

• the price at which third parties offer comparable products and services;

• the extent of competitors’ responsiveness to customer needs; and

• the ability of the Group’s competitors to hire, retain and motivate key personnel.

PROPRIETARY TECHNOLOGY

IONA regards much of its intellectual property as proprietary and relies primarily on a combination of copyright, trademark, patent and trade secret laws, employee and third-party non-disclosure agreements and technical measures to establish and protect its proprietary rights. IONA has registered, or has applications pending for, the trademarks ‘‘Orbix’’, and ‘‘IONA’’ in Brazil, Canada, China, the European Union, Hong Kong, India, Mexico, New Zealand, Singapore, South Korea, Switzerland, Taiwan and the US. IONA also registered, or has applications pending, in Chile and Japan for the trademark ‘‘Orbix’’, in Australia for the trademarks ‘‘IONA’’, ‘‘OrbixTalk’’ and ‘‘OrbixWeb’’, in Australia, Canada, China, Hong Kong, India, Japan, South Korea, New Zealand, Singapore, Taiwan, the European Union and the US for the trademark ‘‘Wonderwall’’, and in the US for the trademark ‘‘Making Software Work Together.’’ IONA also has registered, or has pending applications for the trademarks ‘‘IONA iPortal Suite’’, ‘‘iPortal Suite’’, and ‘‘iPortal’’ in Australia, Canada, China, the European Union, Hong Kong, India, Israel, Japan, Mexico, New Zealand, Singapore, South Africa, South Korea, Switzerland and the US. IONA also has registered, or has pending applications for the trademark ‘‘Beanmarket’’, in Australia, Canada, the European Union, Hong Kong, India, Israel, Japan, Mexico, New Zealand, Singapore, South Africa, South Korea and the US. IONA also has a pending trademark application for the trademark ‘‘XMLBUS’’ in the US. In addition, IONA has twenty two US and international patents pending with respect to various aspects of its technology. While the Group generally uses negotiated, signed license agreements or shrink-wrap type licenses to restrict copying and use of its software products, the Group does not embed mechanisms in the software to prevent or inhibit unauthorised use or copying. The Group does not possess any patents (but has a number of patent applications pending) or other registered intellectual property rights with respect to its software. Shrink-wrap licenses are not signed by licensees and, therefore, may be unenforceable under the laws of certain jurisdictions. In addition, the laws of various countries in which the Group’s products may be sold may not protect the Group’s proprietary rights to the same extent as the laws of the US and Ireland.

The IONA Group generally enters into confidentiality agreements with its employees and consultants, and limits access to, and distribution of, its proprietary information to customers and potential customers.

IONA Group companies have entered into license agreements with a limited number of customers and end users that allow these customers and end users access to and end use of Orbix source code for certain purposes. These source code license agreements prohibit release of Orbix source code.

ACTIVITIES OF NETFISH

Netfish is a California based corporation and was incorporated in August 1997. Netfish is a provider of Java and XML-based business-to-business process collaboration solutions. Netfish’s products deliver complete end-to-end business-to-business process collaboration, support all major XML protocols and EDI messaging standards and provide back-end integration to best-of-breed and legacy applications. Netfish solutions enable complete automation of a wide spectrum of business processes ranging from procurement and order fulfilment to billing and payment.

The integration of Netfish into IONA further strengthens the IONA Suite e-business platform for Total Business Integration™, providing customers with a comprehensive solution for their e-business needs. Business-to-business integration (‘‘B2Bi’’) links applications and organisations across the Internet. B2Bi is conceptually similar to EAI, the integration that organisations require inside the enterprise, but it involves different technologies and standards. B2Bi typically involves XML document interchanges between specific systems. These interchanges are loosely coupled in that they use asynchronous messaging without transaction controls and can tolerate a range of response times for operations. Like EAI, B2Bi requires sophisticated business process automation, transformation, and adapter technology.

Netfish has more than a dozen offices, located in the US, London, Paris, Stockholm and Tokyo and has approximately 294 employees. Netfish’s product is used by top Internet-enabled companies worldwide, including Cisco, Intel, Sun Microsystems and NTT. In addition, Netfish has alliances with a number of significant partners including Cap Gemini/Ernst & Young, JD Edwards, SAP, i2 and Commerce One.

In November 1999, Netfish was named by Oracle as one of the Most Innovative E-Business Solution Developers from the top 50 E-Business developers on the Oracle platform. In addition, Netfish was recognised by Upside Magazine in its ‘‘Hot 100’’ Privately-Held Companies of 2000 list.

DIRECTORS & MANAGEMENT OF IONA

IONA’s Board comprises three executive Directors and three non-executive Directors. The Board is responsible for agreeing the strategy and policies of the Group and for monitoring its performance. As at the date of this document, the Directors and officers of IONA are as follows:

Executive Directors

Dr. Christopher Horn, aged 44, Chairman, co-founded IONA in 1991 with Annrai O’Toole and Dr. Sean Baker. He was the initial developer of Orbix and served as IONA’s President, Chief Executive Officer and Chairman of the Board from its inception until May 2000 when Barry Morris became Chief Executive Officer. From 1984 until 1994, Dr. Horn was a lecturer in the computer science department at Trinity College Dublin (‘‘Trinity’’), where he was involved in many pan-European IT research projects involving distributed computing. He also worked in Brussels, Belgium for the European Commission, and was part of the ten-year ‘‘Esprit’’ program designed to improve the continent’s technology industry. Dr. Horn received his doctorate in computer science from Trinity. He chaired the ‘‘Expert Group on Future Skills,’’ part of Ireland’s Educational Technology Investment Fund.

Barry Morris, aged 37, Chief Executive Officer, served as IONA’s Chief Operating Officer from April 1999 until May 2000. Prior to that he served as IONA’s Executive Vice President, Operations, Senior Vice President, Product Development, Vice President, Business Development and Vice President, Product Management. Before joining

IONA he worked at Digital Equipment Corporation, Lotus Development Corporation, Protek Electronics Ltd and Leading Technology, Inc. Mr. Morris received his Bachelor of Arts from New College, Oxford University.

Dr. Sean Baker, aged 42, Executive Vice President, Chief Technology Officer, is responsible for shaping the technology vision for IONA’s ongoing product strategy. Dr. Baker co-founded IONA in March 1991 and served as Senior Vice President from March 1991 until 1996 and as Executive Vice President, Customer Services from 1996 until 1999 and as Chief Scientific Officer from 1999 until November 2000. Dr. Baker has been a Director of the Company since its inception. From 1981 to 1994, Dr. Baker held a tenured post in the computer science department at Trinity, where he received his doctorate in computer science. In Trinity, he helped found and manage the Distributed Systems Group, and carried out many projects on support environments for distributed object systems, and also their relationships to databases and persistence in general. He is the author of ‘‘CORBA Distributed Objects’’ published by Addison Wesley Longman; and co-author of ‘‘CORBA Fundamentals and Practice’’ published by Wiley.

Non-Executive Directors

Annrai O’Toole, aged 35, Non-Executive Director, co-founded IONA and has served as a Director since its inception. Mr. O’Toole served as Executive Vice President and Chief Technical Officer from April 1992 to November 2000. Mr. O’Toole holds a Bachelor of Arts, Bacelarius Articus Ingenericus in Computer Engineering from Trinity. From 1987 to April 1992, Mr. O’Toole was a research assistant in the computer science department at Trinity. In 1991, Mr. O’Toole completed a masters program in the ‘‘distributed systems group’’ within the computer science department of Trinity, and was awarded a Masters of Science in Computer Science.

Dr. Ivor Kenny, aged 70, Non-Executive Director, has served as non-executive Director since July 1999. Dr. Kenny, as a senior research fellow at University College Dublin, works with a wide range of international organisations on their business strategies. He is a director of Kerry Group PLC, Independent News and Media PLC and a former Chairman of Smurfit Paribas Bank and of Odyssey Plc. He is Chancellor of the International Management Centres. He was Director General of the Irish Management Institute from 1962 to 1983, Chancellor of the International Academy of Management from 1982 to 1987 and Executive-in-Residence at Indiana University in 1986. In 1998 in Oxford he was awarded Outstanding Doctor of the Year for his D.Litt thesis, on which he based his eighth book, ‘‘Studies in Strategic Leadership’’.

Kevin Melia, aged 53, Non-Executive Director, has served as a non-executive Director of IONA since May 1994. Since June 1994, Mr. Melia has served as Chairman and Chief Executive Officer of Manufacturers’ Services, an electronics manufacturing outsourcing company. From January 1992 to June 1994, he was Chief Financial Officer of Sun Microsystems, a workstation manufacturer. Also, from January 1993 until February 1994, Mr. Melia was President of Sun Microsystems Computer Co., a division of Sun Microsystems. He is also a non-executive Chairman of Horizon Technology PLC.

Senior Management

Daniel Demmer, aged 36, Chief Financial Officer, served as Vice President Finance and Treasurer of IONA from February 1998 until May 2000. From 1987 to 1997, Mr. Demmer worked at Digital Equipment Corporation in a variety of positions. Mr. Demmer joined Digital Equipment Corporation as a financial analyst and progressed in his career to become the Director of Corporate Financial Planning and Analysis. Mr. Demmer held the position of the Assistant Corporate Controller upon his leaving Digital Equipment Corporation. Mr. Demmer holds a Bachelor of Science Degree in Finance from the University of Maryland.

David James, aged 48, Executive Vice President, Corporate Development, served as Senior Vice President and Chief Financial Officer of IONA from July 1997 until May 2000. He also held the position of Treasurer from July 1997 to February 1998. Prior to joining IONA, Mr. James was Vice President—Finance and Treasurer of Marcam Corporation, a provider of enterprise resource planning software, from February 1995 until July 1997 and a financial analyst, manager and controller for Digital Equipment Corporation from 1981 to 1995. Mr. James received his Bachelor of Arts from the University of Pennsylvania and holds a Masters of Business Administration from the Colgate Darden School at the University of Virginia.

Lindsey Kiang, aged 60, Senior Vice President, General Counsel and Secretary, has served as General Counsel and Secretary for IONA since May 1997. Before joining IONA, Mr. Kiang was Senior Corporate Counsel at Digital Equipment Corporation from May 1987 until May 1997. Prior to that he was Vice President and General Counsel of Lotus Development Corporation. Mr. Kiang received his Bachelor of Arts degree, with honours, and his Juris Doctorate from Yale University. Mr. Kiang has served in the United States Marine Corps.

EMPLOYEES

The average number of persons employed by the Group in the last three financial periods are analysed as follows:

Years ended 31 December 1998 1999 2000 By Category: Business operations 200 248 327 Product management 7 16 17 Engineering 198 222 238 Finance, legal and administration 89 101 108 494 587 690 By geographic region: US 133 192 303 Europe, Middle East and Africa 302 334 321 Asia Pacific 59 61 66 494 587 690

SUMMARY FINANCIAL INFORMATION

Key financial information in respect of IONA, which has been extracted from the financial information in Part II of this document, is set out below. Investors should read the whole of this document and not rely only on the information summarised below:

Years ended 31 December 1998Þ 1999Þ 2000Þ US$000 US$ 000 US$ 000 Revenue 83.6 105.4 153.1 Gross Profit 66.7 81.9 123.1 Income before provision for income taxes 9.1 6.5 17.0 Income after provision for income taxes 7.7 5.5 14.2 Basic and diluted net income per ADS and per Ordinary Share—cents 0.4 0.3 0.7 CURRENT TRADING AND FUTURE PROSPECTS

The Company’s most recent financial year ended on 31 December 2000. To date, revenues and operating income in 2001 have been in line with the management’s expectations. Management plan to announce financial results for the first quarter of 2001 on 25 April 2001.

Following the Acquisition, the Company will have a suite of products to address the e-business integration technology needs of its customers. The Directors expect IONA’s operations in 2001 to continue to perform in line with their expectations and that the Acquisition will enhance the Company’s prospects.

Based on information available to date, the Directors believe that the Company’s performance for the current financial year will be satisfactory.

DIVIDEND POLICY

Since its incorporation IONA has not declared or paid dividends on any of its Ordinary Shares. IONA anticipates, for the foreseeable future, that it will retain any future earnings in order to fund the business operations of the Company. The Company does not, therefore, anticipate paying cash dividends or issuing bonus shares on its Ordinary Shares in the foreseeable future.

RISK FACTORS

The following factors should be considered carefully in evaluating the proposed Acquisition and in evaluating an investment in IONA.

Risks Related to the Merger

Volatility of IONA’s Ordinary Shares and ADRs

The aggregate number of Consideration Shares to be issued by IONA in exchange for the cancellation of all Outstanding Netfish Shares and Outstanding Netfish Options exercisable for or convertible into shares of Netfish Capital Stock will be up to to 5.5 million Ordinary Shares (subject to any adjustment amounts for excess expenses in connection with the Merger and excess indebtedness incurred by Netfish). IONA’s Ordinary Shares are publicly traded on the Irish Stock Exchange and its ADRs are publicly traded on Nasdaq. The total value of the Consideration Shares received by Netfish shareholders pursuant to the Acquisition will fluctuate with the market price of IONA ADRs. In recent years, the stock market, in general, and the securities of technology companies (including IONA), in particular, have experienced extreme price and volume fluctuations. These market fluctuations may adversely affect the market price of IONA ADRs. There can be no assurance that the market price of IONA ADRs upon and after the consummation of the Acquisition will not be lower than the market price of the ADRs on the date of the execution of the Merger Agreement or the current market price.

Uncertainties relating to the integration of operations

IONA and Netfish have entered into the Merger Agreement with the expectation that the Acquisition will result in certain benefits, including revenue enhancements. Achieving the benefits of the Acquisition will depend in part on the integration of the two businesses in an efficient manner, and there can be no assurance that this will occur. The integration of IONA’s and Netfish’s businesses involve the assimilation of different operations and products which will require substantial attention from IONA’s management team. Diversion of management attention from ongoing operations and any difficulties encountered in the transition and integration process could have an adverse effect on the revenues, expenses and operating results of the combined company.

Potential dilutive effect to Shareholders

IONA and Netfish believe that certain benefits, including superior financial and operating results, will result from the Acquisition. There can be no assurance, however, that combining the two companies’ businesses, even if achieved in an efficient, effective and timely manner, will result in combined results of operations and financial conditions superior to what would have been achieved by each company independently. The issuance of Consideration Shares in connection with the Acquisition could reduce the market price of IONA Ordinary Shares and ADRs. IONA will issue up to approximately 19% of its Enlarged Share Capital to the Netfish shareholders. The transaction is not initially expected to be accretive to IONA and the benefits of this transaction to IONA will depend on revenue growth or other factors sufficient to offset the dilutive effect of the issuance of Ordinary Shares. There can be no assurance that such benefits will be achieved. In addition, there can be no assurance that shareholders of Netfish would not achieve greater returns on their investment if Netfish were to remain an independent company.

Effect of acquisition on customers and partners

Some of Netfish’s existing customers or strategic partners may view themselves as competitors of IONA, and therefore determine that the Acquisition is competitively disadvantageous to them. As a result, Netfish’s relationship with these customers or strategic partners could be adversely affected.

Tax consequences

The tax consequences under US and Irish law of owning and disposing of Ordinary Shares are complex. If IONA were deemed to be a ‘‘passive foreign investment company’’, or ‘‘PFIC,’’ for US federal income tax purposes, certain holders of Ordinary Shares could be subject to adverse tax consequences, including but not limited to taxation at the highest rates of taxation in effect for ordinary income, plus certain penalty amounts calculated like interest on that tax liability, when shares are sold or are otherwise deemed disposed of under the PFIC rules. The PFIC rules generally apply only to a ‘‘United States Person’’ within the meaning of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder. In addition, certain Irish withholding taxes may apply to dividends paid by IONA, and transfers of Ordinary Shares will generally be subject to Irish stamp taxes. Holders of Netfish Capital Stock should carefully review the more detailed summary of these and other tax issues provided under paragraph 9 of Part IV and should discuss these and all other applicable tax matters with their tax advisors.

Risks Related to Failure to Complete the Merger

In the event that the Acquisition is not consummated, Netfish will be subject to a number of material risks, including among others:

• the possible loss of key employees and management personnel; • the accrual of a high level of legal, accounting, financial advisory and other fees and costs incurred in connection with the Acquisition, most of which must be paid even if the Acquisition is not completed; and

• the immediate need to raise additional capital to continue to operate its business.

Risks Relating to IONA

Potential fluctuations in operating results

IONA’s revenue and results of operations have varied significantly on a quarterly basis in the past and could vary significantly on a quarterly or annual basis in the future. IONA’s revenue and results of operations are difficult to forecast and could be adversely affected by any of the following factors: the demand for application integration solutions and specifically open, standards-based distributed component software solutions; changes in interoperability software and industry standards; the level of product and price competition; the Company’s sales and relatively long implementation cycles for certain of its major customers; the size, timing and terms of individual license transactions and service contracts; seasonality; changes in customers’ budgeting cycles; IONA’s ability to expand its sales force, indirect distribution channels and customer support capabilities; changes in IONA’s operating expenses; IONA’s ability to develop and market new products; changes in the mix of products and services sold and the channels through which products and services are sold; levels of international sales, personnel charges and difficulties in attracting and retaining qualified sales, marketing and technical personnel; foreign currency exchange rates; quality control of products sold; and general economic conditions.

Lengthy sales cycles

The sales cycle for IONA’s products is often lengthy. Prospective sales are subject to delays or cancellation over which IONA has little or no control. Any inability of IONA to generate large customer orders, or any delay or loss of such orders in a particular quarter could have a material adverse effect on IONA’s business, results of operations and financial condition and could cause material fluctuations in quarterly and annual results of operations.

Rapid technological change

The market for IONA’s products and services is characterised by rapidly changing technology, evolving industry standards and changing customer needs. Therefore, IONA’s success will depend upon its ability to enhance its existing products and to introduce new products to meet changing customer requirements on a timely and cost- effective basis. If IONA were to experience delays in the introduction of new or enhanced products, or if IONA were unable to anticipate or respond adequately to such changes, IONA’s business, financial condition and results of operations would be materially adversely affected.

Dependence on emerging markets and evolving standards

IONA’s future financial performance will depend on the growth in demand for distributed component software products and e-business infrastructure. These markets are new and emerging; rapidly evolving; characterised by few proven products, evolving industry standards and an increasing number of market entrants; and expected to be subject to frequent and continuing changes in customers’ preferences and technology. It is possible that markets for IONA’s products may not develop, or that current and potential customers may not adopt IONA’s products. If these markets fail to develop, develop more slowly than expected or attract new competitors, or if IONA’s products do not achieve market acceptance, IONA’s business, financial condition and results of operations would be materially adversely affected. Ability to manage growth

IONA’s continuing rapid growth could place a significant strain on IONA’s management, operating procedures, financial resources, information systems, employees and facilities. To manage its expanded operations, IONA will need to upgrade continuously its operating, accounting, reporting and information systems. If IONA experiences delays or difficulties in upgrading its systems, its business, financial condition and results of operations would be materially adversely affected.

Highly competitive market

The market for distributed component software and e-business infrastructure products and related services is highly competitive. IONA expects this competition to increase. IONA and the iPortal Suite compete with a variety of products and solutions, including without limitation, distributed component software products and services, e- business infrastructure and interoperability technologies such as data connectivity and messaging, application servers, transaction monitors, messaging systems, component technologies and Internet integration technologies. IONA’s competitors range from small independent providers of software products and services and providers of other e-business and interoperability technologies, to large multi-national information technology vendors which offer e-business or interoperability technologies as part of their much broader product and service offerings.

In addition, IONA competes with a number of companies that have substantially greater technical, financial, sales, marketing, customer support and other resources, as well as greater name recognition, than IONA. As a result, IONA’s competitors may be able to adapt more quickly to new or emerging technologies and changes in customer requirements, to devote greater resources to the promotion and sale of their products or to establish more successfully strategic relationships with industry leaders and other third parties than IONA. Further, certain of IONA’s larger competitors may be able to offer competitive products or technologies as part of their broader product or service offerings or may make strategic acquisitions or establish cooperative relationships among themselves or with third parties, thereby increasing the ability of their products to address the needs of IONA’s current and prospective customers. Accordingly, it is possible that new competitors or alliances among current and new competitors may emerge and rapidly gain significant market share. Such competition could materially adversely affect IONA’s ability to sell additional software licenses and maintenance, consulting and support services on terms favorable to IONA. Moreover, competitive pressures could require IONA to reduce the price of its products and related services, which could materially adversely affect IONA’s business, operating results and financial condition. IONA, therefore, may be unable to compete successfully against current and future competitors, which would have a material adverse effect upon IONA’s business, operating results and financial condition.

Product concentration

IONA derives all of its revenue from the licensing of its iPortal and Orbix families of products and fees from related services. IONA expects the iPortal and Orbix families of products to continue to account for a substantial majority of IONA’s revenue for the foreseeable future. As a result, a reduction in demand for or sales of these products or increase in competition would have a material adverse effect on IONA’s business, financial condition and results of operations.

Risks associated with expanding distribution

To date, IONA has sold its products primarily through its direct sales force, independent software vendors and original equipment manufacturers, and, to a lesser extent, through distributors and value added resellers. IONA plans to continue to invest in and rely on sales through these distribution channels. IONA has in the past experienced and expects to continue to experience lower profit margins on the distribution of its products through third party distribution channels. IONA may not be able to successfully expand its direct sales force or other distribution channels. Further, any such expansion may not result in an increase in revenue or operating income. If IONA fails to expand its direct sales force or other distribution channels, IONA’s business, financial condition and results of operations would be materially adversely affected.

Dependence on key personnel

IONA depends to a significant extent upon a limited number of senior executives. IONA’s future success will also depend upon its continuing ability to recruit, retain and assimilate technical, sales and marketing personnel. There is intense competition for highly qualified personnel. Failure to attract, retain or assimilate key personnel would have a material adverse affect on IONA’s business, financial condition and results of operations.

Risk of product defects

Software products as complex as those offered by IONA frequently contain undetected errors or failures that may be detected at any point in the product’s life cycle. IONA has in the past discovered software errors in certain of its new products and enhancements and has experienced delays in shipment of products during the period required to correct these errors. Despite testing by IONA and potential customers, errors may occur, resulting in loss or delay in market acceptance and sales, diversion of development resources, injury to IONA’s reputation or increased service and warranty costs, any of which could have a material adverse effect on IONA’s business, financial condition or results of operations.

Risks associated with international operations

IONA is incorporated in Ireland and substantial portions of its product development, marketing, sales and administrative functions are located in Ireland. IONA expects that operations outside of the US will continue to account for a significant portion of its business and intends to continue to expand its operations outside of the US. Because of the international character of its business, IONA is subject to risks such as fluctuations in exchange rates; difficulties or delays in developing and supporting non-English language versions of IONA’s products; political and economic conditions in various jurisdictions; unexpected changes in regulatory requirements, tariffs and other trade barriers; difficulties in staffing and managing foreign operations and longer accounts receivable payment cycles.

Such factors, either individually or taken as a whole, may have a material adverse effect on IONA’s revenue derived from customers outside the US or its overall business, financial condition and results of operations.

Risks associated with possible acquisitions

IONA may pursue potential acquisitions of businesses, products and technologies that could complement or expand IONA’s business. IONA may be unable to identify any appropriate acquisition candidates or may be unable to negotiate successfully the terms of any such acquisition, finance such acquisition or successfully integrate such acquired business, products or technologies into IONA’s existing business and products. Furthermore, the negotiation of potential acquisitions as well as the integration of an acquired business could cause diversion of management’s time and resources. Each acquisition would have risks specific to such acquisition, and any given acquisition, whether or not consummated, may have a material adverse effect on IONA’s business, financial condition and results of operations.

Risk of increasing taxes

IONA has significant operations and generates a substantial portion of its taxable income in Ireland. Tax rates in Ireland on trading income generally are significantly lower than US rates. In addition IONA’s Irish taxable income derived from software substantially developed in Ireland is taxed at a 10% effective rate under a tax regime which is scheduled to continue until 2010. If such operations no longer qualified for these lower tax rates or if the tax laws were rescinded or changed, IONA’s business, financial condition and results of operations could be materially adversely affected.

Limited protection of intellectual property and proprietary rights

IONA regards certain of its technologies as proprietary and relies primarily on a combination of copyright, trademark and trade secret laws, employee and third-party non-disclosure agreements and technical measures to establish and protect its proprietary rights. The laws of various countries in which IONA’s products may be sold may not protect IONA’s proprietary rights to the same extent as the laws of the US and Ireland. While IONA generally enters into confidentiality agreements and limits access to, and distribution of, its proprietary information, it is possible for a third party to copy or otherwise obtain and use IONA’s technology without authorisation. Third parties may reproduce IONA’s software products without IONA’s consent. Any unauthorised reproduction and inadequate protection could have a material adverse effect on IONA’s business, financial condition or results of operations.

While IONA does not believe that its products, copyrights, trademarks or other proprietary rights infringe upon the proprietary rights of third parties, third parties may notify IONA, from time to time, that IONA is infringing certain of their patents and other intellectual property rights. The cost of responding to any such assertion may be material, whether or not the assertion is valid. In the event that any such assertion is resolved adversely to IONA, IONA could be required to discontinue the use of certain processes; cease the use and sale of infringing products and services; expend significant resources to develop non-infringing technology; or obtain licenses to competing technology.

IONA may be unable to obtain licenses on acceptable terms or at all. IONA may become a party to litigation and the court may assess damages. If IONA fails to obtain licenses or adverse or protracted litigation arises out of any such assertion, IONA’s business, financial condition or results of operations could be materially adversely affected. PART II – FINANCIAL INFORMATION RELATING TO IONA FOR THE THREE YEARS ENDED 31 DECEMBER 2000

The financial information contained in this Part II has been extracted without adjustment from the audited consolidated financial statements of the Company for the years ended 31 December 1998, 1999 and 2000, prepared in accordance with US generally accepted accounting principles. The auditors have reported without qualification or reference to a matter of fundamental uncertainty in respect of these financial statements for each financial year. As stated in Note 1 to this financial information, the financial information relating to the Company contained in this Part II does not constitute full accounts as referred to in Section 19 of the Companies (Amendment) Act, 1986. IONA TECHNOLOGIES PLC

CONSOLIDATED BALANCE SHEETS (U.S. dollars in thousands, except share and per share data)

Year Ended December 31, 2000 1999 1998 ASSETS Current assets: Cash and cash equivalents...... $ 38,193 $ 19,094 $ 13,484 Marketable securities (Note 2)...... 57,447 51,089 47,065 Accounts receivable, net of allowance for doubtful accounts of $926, $776 and $312 at December 31,2000, 1999 and 1998 respectively ...... 47,55 933,798 24,951 Prepaid expenses and other assets...... 7,287 6,481 3,202 Total current assets...... $150,486 $110,462 $ 88,702 Property and equipment, net (Note 10)...... 18,578 18,461 19,179 Other non-current assets (Note 9) ...... 9,948 2,446 1,000 Investments (Note 3)...... 561 12,526 — Goodwill, net of accumulated amortisation of $4,870, $64 and nil at December 31, 2000, 1999 and 1998, respectively (Note 1) 22,986 447 Total assets...... $202,559 $144,342 $108,881 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable ...... $ 2,200 $ 3,331 $ 6,617 Accrued payroll and related expenses...... 11,075 4,986 2,472 Other accrued liabilities (Note 6)...... 16,593 9,791 7,288 Deferred revenue...... 21,384 14,513 10,523 Total current liabilities...... $ 51,252 $ 32,621 $ 26,900

Capital lease due after more than one year — — 3 Redeemable Preference Shares, €0.0025 par value, 101,250,000Þ shares authorised; None issued and outstanding (Note 11)...... — — — Shareholders’ equity: Ordinary Shares, €0.0025 par value, 150,000,000 shares authorised; 21,990,324, 20,450,869 and 19,451,723 shares issued and outstanding at December 31, 2000 and 1999 and 1998 respectively (Note 11) ...... 66 63 61 Additional paid-in capital...... 114,281 78,016 64,852 Retained earnings...... 36,880 22,715 17,256 Deferred stock compensation...... (195) (599) (191) Accumulated other comprehensive income (Note 1) ...... 275 11,526 — Total shareholders’ equity...... $151,307 $111,721 $ 81,978 Total liabilities and shareholders’ equity...... $202,559 $144,342 $108,881

The accompanying notes are an integral part of these statements. IONA TECHNOLOGIES PLC

CONSOLIDATED STATEMENTS OF INCOME (U.S. dollars in thousands, except per share data)

Year Ended December 31, 2000 1999 1998 Revenue: Product revenue ...... $105,533 $ 71,265 $58,900 Service revenue...... 47,530 34,175 24,727 Total revenue (Note 16) ...... $153,063 $105,440 $83,627 Cost of product revenue ...... $ 3,457 $ 2,389 $ 1,409 Cost of service revenue ...... 26,484 21,113 15,568 Total cost of revenue...... $ 29,941 $ 23,502 $16,977 Gross profit ...... $123,122 $ 81,938 $66,650 Operating expenses: In-process research and development ...... $ — $ — $ 5,000 Research and development...... 26,906 21,195 14,849 Sales and marketing ...... 63,669 43,794 28,136 General and administrative ...... 11,642 10,082 9,755 Amortisation of goodwill and purchased intangible assets ...... 7,831 454 — Write-off of assets and related costs ...... — 1,671 1,658 Settlement of litigation (Note 17)...... 1,350 — — Stock compensation ...... 404 372 176 Total operating expenses...... $111,802 $ 77,568 $59,574 Income from operations ...... $ 11,320 $ 4,370 $ 7,076 Interest income, net...... 4,116 2,556 2,552 Net exchange loss ...... (384) (379) (541) Gain on sale of investment and other income...... 1,912 — — Income before provision for income taxes (Note 15)...... $ 16,964 $ 6,547 $ 9,087 Provision for income taxes (Note 15) ...... 2,799 1,088 1,409 Net income available to Ordinary Shareholders...... $ 14,165 $ 5,459 $ 7,678 Basic net income per Ordinary Share and per ADS...... $ 0.67 $ 0.28 $ 0.40 Shares used in computing basic net income per Ordinary Share and per ADS (in thousands)...... 21,177 19,797 19,268 Diluted net income per Ordinary Share and per ADS...... $ 0.60 $ 0.26 $ 0.37 Shares used in computing diluted net income per Ordinary Share andÞ per ADS (in thousands)...... Þ23,520 Þ21,224 Þ20,893

The accompanying notes are an integral part of these statements. IONA TECHNOLOGIES PLC

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (U.S. dollars in thousands except share data)

Additional Deferred Accumulated Other Total Number of Share Paid-in Retained Stock Comprehensive Shareholders’ Shares Capital Capital Earnings Compensation Income Equity Balance at December 31, 1997...... 19,070,770 $ 59 $ 62,354 $ 9,578 $ (367) $ — $ 71,624 Amortisation of deferred compensation(a)...... — $ — $ — $ — $ 176 $ — $ 176 Issuance of Ordinary Shares on exercise of options(a) ...... 380,953 2 2,498 — — — 2,500 Net income available to OrdinaryÞ Shareholders ...... — — — 7,678 — — 7,678 Balance at December 31, 1998...... 19,451,723 $ 61 $ 64,852 $ 17,256 $ (191) $ — $ 81,978 Deferred compensation on issance of options(a)...... — $ — $ 780 $ — $(780) $ 7 $ — Amortisation of deferred compensation(a)...... — — — — 372 — 372 Issuance of Ordinary Shares...... 200,000 — 3,000 — — — 3,000 Issuance of Ordinary Shares on exercise of options(a) ...... 799,146 2 8,384 — — — 8,386 Issuance of Warrants(a)...... — — 1,000 — — — 1,000 Net income available to OrdinaryÞ Shareholders ...... — — — 5,459 — — 5,459 Unrealised gain on investment ...... — — — — — 11,526 11,526 Comprehensive Income...... — — — — — — 16,985 Balance at December 31, 1999...... 20,450,869 $ 63 $ 78,016 $ 22,715 $ (599) $ 11,526 $ 111,721 Amortisation of deferred compensation(a)...... — — — — 404 — 404 Issuance of Ordinary Shares...... 203,990 — 9,651 — — — 9,651 Issuance of Ordinary Shares inÞ connection with acquisitions ...... 331,744 1 8,326 — — — 8,327 Intrinsic value of options issued inÞ connection with acquisitions ...... — — 5,319 — — — 5,319 Issuance of Ordinary Shares on exercise of options(a) ...... 1,003,721 2 12,969 — — 12,971 '97 Net income available to OrdinaryÞ Shareholders ...... — — — 14,615 — — 14,615 Unrealised loss on investment...... — — — — — (9,371) (9,371) Less: reclassification adjustment for gains included in net income...... (1,880) (1,880) Comprehensive Income...... — — — — — — 2,914 Balance at December 31, 2000...... 21,990,324 $ 66 $ 114,281 $ 36,880 $ (195) $ 275 $ 151,307

(a) See Note 11 to these statements.

The accompanying notes are an integral part of these statements. IONA TECHNOLOGIES PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS (U.S. dollars in thousands)

Year Ended December 31, 2000 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES: Net income . $ 14,165 $ 5,459 $ 7,678 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortisation ...... 12,836 5,637 3,418 Stock compensation ...... 404 372 176 Profit on marketable securities...... (2,064) (581) (848) Profit on sale of investments ...... (1,880) — — Loss on disposal of assets ...... 450 281 1,470 Purchase of marketable securities ...... (278,583) (163,658) (170,349) Sale of marketable securities...... 274,289 160,215 168,804 Changes in operating assets and liabilities: Accounts receivable ...... (13,761) (8,847) (5,877) Prepaid expenses and other assets...... (481) (3,358) 1,430 Accounts payable ...... (1,131) (3,286) (1,631) Accrued payroll and related expenses and other accrued liabilities ...... 12,891 5,795 6,992 Deferred revenues ...... 6,871 3,990 6,888 Net cash provided by operating activities ...... $ 24,006 $ 2,019 $ 18,151 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment...... $ (8,084) $ (5,299) $(14,571) Payments for acquisitions...... (14,938) (510) — Purchase of other assets ...... (8,786) (1,844) (1,000) Investments . (50) (1,000) — Proceeds from sale of investments ...... 2,644 — — Proceeds from disposal of property and equipment ...... 1,684 1 — Net cash used in investing activities...... $(27,530) $ (8,652) $(15,571) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on capital leases...... $ — $ (143) $ (243) Issuance of shares, net of issuance costs ...... 22,623 11,386 2,500 Issuance of warrants...... — 1,000 — Net cash provided by financing activities...... $ 22,623 $ 12,243 $ 2,257 NET INCREASE IN CASH AND CASH EQUIVALENTS...... $ 19,099 $ 5,610 $ 4,837 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD...... 19,094 13,484 8,647 CASH AND CASH EQUIVALENTS AT END OF PERIOD ...... $ 38,193 $ 19,094 $ 13,484 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid. $ 5 $ 14 $ 300 Income taxes paid ...... $ 379 $ 1,178 $ 853 SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW INFORMATION: Shares and options issued in connection with acquisitions...... $ 13,645 $ — $ —

Certain amounts reported in 1999 have been reclassified to conform with the 2000 presentation. The accompanying notes are an integral part of these statements. IONA TECHNOLOGIES PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organisation and Summary of Significant Accounting Policies

Organisation

IONA Technologies PLC (‘‘IONA’’) is organised as a public limited company under the laws of Ireland. IONA Technologies PLC and its subsidiaries, all of which are wholly owned (collectively, the ‘‘Company’’), provides software for building enterprise portals and other global e-business applications. The Company also provides professional services, consisting of customer consulting and training and, to a limited extent, product customisation and enhancement, as well as customer technical support. The Company’s major customers, based on revenues earned, are corporate information technology departments of U.S. businesses. The Company also earns significant revenues from similar customers in the United Kingdom, other European countries and the rest of the world.

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying footnotes. Actual results could differ from those estimates.

The accompanying consolidated financial statements include IONA and its wholly-owned subsidiaries in the United States, British West Indies, Europe, Australia and China after eliminating all material intercompany accounts and transactions.

Companies Acts, 1963 to 1999

The financial information relating to IONA Technologies PLC and its subsidiaries included in this document does not comprise full accounts as referred to in Section 19 of the Companies (Amendment) Act, 1986, copies of which are required by that Act to be annexed to a Company’s annual return. The auditors have made reports without qualification under Section 193 of the Companies Act, 1990 in respect of the financial statements for the years ended December 31, 1999 and 1998. They have not yet reported on the financial statements for the year ended December 31, 2000. Copies of full accounts for each of the years ended December 31, 1999 and 1998 have been so annexed to the relevant annual returns, and a copy of the full accounts for the year ended December 31, 2000 will be annexed to the relevant annual return, which will be filed after the annual general meeting of IONA in 2001.

Foreign Currency Translation

The U.S. dollar is the functional currency for IONA and its subsidiaries in the United States, British West Indies, Europe, Australia and China. Assets and liabilities denominated in foreign currencies are translated at year end exchange rates while revenues and expenses are translated at rates approximating to those ruling at the dates of the related transactions. Resulting gains and losses are included in net income for the period.

Revenue Recognition

The Company’s revenue is derived from product license fees and charges for services. For the three year period ended December 31, 2000 the Company followed the revenue recognition criteria of Statement of Position 97-2, Software Revenue Recognition (‘‘SOP 97-2’’), as amended by SOP 98-4 and SOP 98-9 issued by the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants. Under the terms of SOP 97-2 where an arrangement to deliver software does not require significant production, modification or customisation, the Company recognises software revenues when all of the following criteria are met:

• persuasive evidence of an arrangement exists;

• delivery has occurred; • vendor’s fee is fixed or determinable; and • collectibility is probable.

Where the Company enters into a multiple element arrangement consisting of both products and services, revenue is allocated between the elements based on vendor-specific objective evidence of fair values. The portion of the fee allocated to an element is recognised when the four criteria for revenue recognition stated above have been met.

Professional services are provided primarily on a time and materials basis for which revenue is recognised in the period that the services are provided. Where the professional services relate to arrangements requiring significant production, modification or customisation of software, and the service element does not meet the criteria for separate accounting, the entire arrangement, including the software element, is accounted for in conformity with the percentage-of-completion contract accounting method. Percentage-of-completion is generally measured using output measures, primarily arrangement milestones where such milestones indicate progress to completion.

Cost of Revenue

Cost of revenue includes the costs of products and services. Cost of product revenue includes shipping, handling, materials (such as diskettes, packaging and documentation) and the portion of development costs associated with product development arrangements. Cost of service revenue includes the salary costs for personnel engaged in consultancy, training and technical support, and telephone and other support costs.

Cash and Cash Equivalents

IONA considers all highly liquid investments with insignificant interest rate risk and purchased with a maturity of three months or less to be cash equivalents.

Marketable Securities

Marketable securities consist of commercial paper, corporate bonds and U.S. government agency fixed income securities. Marketable securities are stated at market value, and by policy, IONA invests primarily in high grade marketable securities. All marketable securities are defined as trading securities under the provisions of Statement of Financial Accounting Standards No. 115, ‘‘Accounting for Certain Investments in Debt and Equity Securities’’ (‘‘SFAS 115’’), and unrealised holding gains and losses are reflected in earnings.

Investments

Investments consist of equity securities and are stated at market value. All investments are defined as available-for- sale securities under the provisions of Statement of Financial Accounting Standards No. 115 ‘‘Accounting for Certain Investments in Debt and Equity Securities’’ (‘‘SFAS 115’’), and any unrealised holding gains and losses are reported as a separate component of shareholders’ equity, as accumulated other comprehensive income. Research and Development

Research and development expenditures are generally charged to operations as incurred. Statement of Financial Accounting Standards No. 86, ‘‘Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed’’ (‘‘SFAS 86’’), requires capitalisation of certain software development costs subsequent to the establishment of technological feasibility. Based on IONA’s product development process, technological feasibility is established upon completion of a working model. Development costs incurred by IONA between completion of the working model and the point at which the product is ready for general release have been insignificant until 1998.

In September 1998, IONA acquired for $5.0 million from EDS Corp. a license to the source code of a component development technology to be developed further and incorporated into certain of its products. As the technology had not reached technological feasibility and had no alternative uses, IONA expensed the full amount of the cost of the acquired in-process research and development during the year ended December 31, 1998.

Other Non-current Assets

Other non-current assets represent costs of technology which have reached technological feasibility and the fair value at date of acquisition of an assembled workforce related to the Company’s acquisitions as described in Note 4. The costs of technology have been capitalised and will be written off over their useful economic life of four years in accordance with SFAS 86. The cost associated with the acquisition of an assembled workforce will be written off over four years. Amortisation expense was $2,198,000 and $390,000 in 2000 and 1999, respectively. No amortisation was charged to the income statement in 1998 in relation to technology as the technology was not in use by December 31, 1998.

Reviews are regularly performed to determine whether facts or circumstances exist which indicate that the carrying value of other non-current assets is impaired. No indicators of impairment have been identified to date and there has been no need to carry out an impairment calculation.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in various business acquisitions as described in Note 4, and is being amortised on a straight line-basis over four years. Amortisation expense was $4,806,000 and $64,000 in 2000 and 1999, respectively. No amortisation was charged to the income statement in 1998 as the acquisitions occurred subsequent to that date.

Reviews are regularly performed to determine whether facts or circumstances exist which indicate that the carrying value of goodwill is impaired. No indicators of impairment have been identified to date and there has been no need to carry out an impairment calculation.

Property and Equipment

Property and equipment is stated at cost. Depreciation and amortisation are computed using the straight-line method over the estimated useful lives of the assets as follows:

Motor vehicles...... 5 years Computers and office equipment, furniture and fixtures ...... 3 to 10 years Concentration of Credit Risk

IONA sells its products to companies in various industries throughout the world. IONA maintains reserves for potential credit losses. To date such losses have been within management’s expectations. IONA had an allowance for doubtful accounts of approximately $926,000, $776,000 and $312,000 at December 31, 2000, 1999 and 1998 respectively. IONA generally requires no collateral from its customers.

IONA invests its excess cash in low-risk, short term deposit accounts with high credit-quality banks in the United States, British West Indies and Ireland. At December 31, 2000, $57,447,000 was invested in marketable securities held for trading purposes, comprised of $31,058,000 in commercial paper, $1,999,000 in corporate bonds and $24,390,000 in U.S. government agency securities, under the management of two financial institutions. IONA performs periodic evaluations of the relative credit standing of all of the financial institutions dealt with by IONA, and considers the related credit risk to be minimal.

Employment Grants

Employment grants are credited to the income statement and offset against the related payroll expense in two equal installments, the first on the creation of the job and the second on the first anniversary thereof.

Compensated Absences

The Company does not accrue for the liability associated with employee’s absences from employment because of illness, holiday, vacation or other reasons as the amount of compensation is not reasonably estimable.

Accounting for Income Taxes

IONA uses the liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws which will be in effect when the differences are expected to reverse.

Foreign Exchange Contracts

IONA enters into foreign currency forward contracts as a hedge against accounts payable in currencies other than the dollar and as a hedge against firm commitments in foreign currencies. Market value gains and losses are recognised on hedges of payables, and the resulting credit or debit offsets foreign exchange gains or losses on those payables. The gain or loss and premium or discount on forward contracts designated as hedges of firm commitments are deferred until the hedged transaction is completed and then included in the measurement of the hedged transaction. The Company did not enter into any foreign exchange contracts in 2000 or 1999.

Accumulated Other Comprehensive Income

Financial Accounting Standards No. 130, ‘‘Reporting Comprehensive Income,’’ establishes guidelines for the reporting and display of comprehensive income and its components in financial statements. Comprehensive income includes unrealised gains on equity securities classified as available-for-sale in accordance with SFAS 115, and is included as a component of shareholders’ equity. Stock Compensation

IONA has elected to follow Accounting Principles Board Opinion No. 25 ‘‘Accounting for Stock Issued to Employees’’ (APB 25) and related interpretations in accounting for its employee stock options. Accordingly, compensation cost for stock options is measured as the excess, if any, of the fair market value of IONA’s shares at the date of the grant over the amount an employee must pay to acquire the shares. This cost is deferred and charged to expense ratably over the vesting period (generally four years).

Where shares are issued at less than fair market value, the excess of the fair market value over the amount the employee must pay to acquire the shares is charged to expense as stock compensation and credited to additional paid-in capital in the period of transfer.

On July 1, 1999, IONA acquired the outstanding shares of Aurora Technologies, Inc. for a consideration of $520,000 payable in cash and the issuance of 48,750 shares to certain individuals in two equal installments on the first and second anniversary of the acquisition, provided they remain employees of IONA at the anniversary dates. The value of these shares, $780,000, is accounted for as deferred stock compensation and is credited to additional paid-in capital and is being charged to expense as stock compensation on a straight-line basis over the 2 year period in which the stock will be issued. Stock compensation expense related to this transaction amounted to $390,000 and $196,000 in 2000 and 1999, respectively.

Defined Contribution Plan

IONA sponsors and contributes to a defined contribution plan for certain employees and directors. Contribution amounts by IONA are determined by management and allocated to employees on a pro rata basis based on employees’ contributions. IONA contributed approximately $1,411,000, $1,201,000, and $810,000 to the plan in the years ended December 31, 2000, 1999, and 1998, respectively.

Advertising and Promotion Expense

All costs associated with advertising and promoting products are expensed as incurred. Advertising and promotion expense was $3,801,000, $3,076,000, and $2,828,000 for the years ended December 31, 2000, 1999, and 1998, respectively.

Accounting Pronouncements

The Financial Accounting Standards Board issued Statement No. 133, ‘‘Accounting for Derivative Instruments and Hedging Activities’’ (‘‘SFAS 133’’) in June 1998. SFAS 133, which requires all derivative instruments to be recognised as either assets or liabilities on the balance sheet at their fair value, provides a comprehensive and consistent standard for the recognition and measurement of derivatives and hedging activities. As amended, this statement is effective for fiscal years beginning after June 15, 2000. The Company will apply the new rules prospectively to transactions beginning in the first quarter of 2001. Based on current circumstances, the Company believes the application of the new rules will not have a material impact on the consolidated financial statements of the Company.

2. Marketable Securities Marketable securities are considered to be trading securities per SFAS 115 and are carried on the balance sheet at their market value.

As of December 31, 2000 UnrealisedÞ MarketÞ Cost Gain/(loss) Value (U.S. dollars in thousands) Commercial Paper...... $ 30,756 $ 302 $ 31,058 Corporate Bonds ...... 2,004 (5) 1,999 U.S. Government Agency Securities...... 24,334 56 24,390 Total...... $ 57,094 $ 353 $ 57,447

As of December 31, 1999 UnrealisedÞ MarketÞ Cost Gain/(loss) Value (U.S. dollars in thousands) Commercial Paper...... $ 22,980 $ 220 $ 23,200 Corporate Bonds ...... 10,653 (169) 10,484 U.S. Government Agency Securities...... 17,524 (119) 17,405 Total...... $ 51,157 $ (68) $ 51,089

As of December 31, 1998 UnrealisedÞ Cost Gain/(loss) Market Value (U.S. dollars in thousands) Commercial Paper...... $17,103 $ 644 $ 17,747 Corporate Bonds...... 20,877 (63) 20,814 U.S. Government Agency Securities...... 8,503 1 8,504 Total...... $46,483 $ 582 $ 47,065

The change in unrealised gains/(losses) included in net income/(loss) is as follows:

2000 1999 1998 (U.S. dollars in thousands) Unrealised (loss)/gain at beginning of year...... $ (68) $582 $336 Included in income for the year...... 421 (650) 246 Unrealised gain/(loss) at end of year...... $ 353 $ (68) $582

3. Investments

Investments consist of equity securities first purchased in 1999 and are stated at market value. All investments are defined as available-for-sale securities under the provisions of Statement of Financial Accounting Standards No. 115, ‘‘Accounting for Certain Investments in Debt and Equity Securities’’ (‘‘SFAS 115’’), and any unrealised holding gains or losses are reported as a separate component of shareholders’ equity, as accumulated other comprehensive income. During 2000, the Company sold over 75% of the investment made in 1999 and realised gains of $1,880,000 on these sales. There were no sales of available-for-sale securities in 1999.

As of December 31, 2000 Unrealised Market Cost Gain/(loss) Value (U.S. dollars in thousands) Equity securities...... $ 286 $ 275 $ 561 Total available-for-sale securities .... . $ 286 $ 275 $ 561

As of December 31, 1999 UnrealisedÞ MarketÞ Cost Gain/(loss) Value (U.S. dollars in thousands) Equity securities...... $ 1,000 $ 11,526 $12,526 Total available-for-sale securities...... $ 1,000 $ 11,526 $12,526

The change in unrealised gains/(losses) on investments is as follows:

2000 1999 1998 (US dollars in thousands) Unrealised gain at beginning of year...... $ 11,526 $ — $ — Included in comprehensive income for the year...... $(11,251) $11,526 $ — Unrealised gain at end of year...... $ 275 $11,526 $ —

4. Acquisitions

Genesis Development Corporation

On June 13, 2000, a wholly-owned subsidiary of IONA merged with and into Genesis Development Corporation, a Pennsylvania corporation (‘‘Genesis’’), pursuant to which Genesis became a wholly-owned subsidiary of IONA (the ‘‘Merger’’). The total consideration for the Merger consisted of 331,744 newly-issued IONA Ordinary Shares and 126,423 replacement vested options over IONA Ordinary Shares, $500,000 in cash, and disposal costs totaling in aggregate approximately $2,000,000. Of the 331,744 newly-issued Ordinary Shares, 176,156 are subject to forfeiture to IONA upon the failure to achieve certain performance targets. If these performance targets are achieved, the Ordinary Shares no longer subject to forfeiture will be recorded as additional purchase price based on their fair market value at the time they are earned. At December 31, 2000, all of these 176,156 Ordinary Shares remained subject to forfeiture.

The acquisition was accounted for under the purchase method of accounting, and accordingly, the assets, liabilities, and operating results have been included in the accompanying consolidated financial statements from the date of acquisition.

The total purchase costs of $16.2 million, comprising the fair value of the shares issued not subject to relinquishment, the intrinsic value of the options issued and related costs, has been allocated, based on their respective fair values, to other non-current assets (assembled workforce) of $1.2 million, goodwill of $14.0 million and net assets acquired of $1.0 million. Both other non-current assets and goodwill are being amortised on a straight- line basis over their useful economic lives of four years. The fair value of Genesis’ assets at acquisition date was approximately $2.0 million and its liabilities assumed totaled approximately $1.0 million.

Watershed Technologies, Inc.

On February 23, 2000, IONA purchased substantially all the assets of Watershed Technologies, Inc., a provider of XML—based tools and services for building standards-based business-to-business and business-to-consumer portals, for $13.2 million. The costs have all been allocated to goodwill as the fair value of net assets acquired was approximately nil. Aurora Technologies, Inc.

On July 1, 1999, IONA acquired the outstanding shares of Aurora Technologies, Inc. for a consideration of $520,000 payable in cash and the issuance of 48,750 shares to certain individuals in two equal installments on the first and second anniversary of the acquisition, provided they remain employees of IONA at the anniversary dates. The value of these shares, $780,000, is accounted for as deferred stock compensation and is credited to additional paid in capital and is being charged to expense as stock compensation on a straight-line basis over the two year period in which the stock will be issued. Stock compensation expense amounted to $390,000 and $196,000 in 2000 and 1999, respectively. The acquisition was accounted for using the purchase method of accounting. Cash consideration of $520,000 has been allocated to goodwill (Note 1) as the fair value of the net assets acquired was approximately nil.

5. Lease Guarantee Facility

IONA renewed its lease guarantee facility with the Bank of Ireland in 2000 for an additional year in the amount of IR£1,930,000 (approximately $2,309,000 at December 31, 2000), with an annual fee of 1.25%. This renewed facility has a stated termination date of 1 year from the date of issuance unless otherwise renewed; however, the guarantee may be renewed annually at the discretion of the Bank of Ireland.

6. Other Accrued Liabilities

Other accrued liabilities consist of the following:

Year Ended December 31, 2000 1999 1998 (U.S. dollars in thousands) Income and other taxes payable...... $ 5,702 $1,191 $1,811 Other . 10,891 8,600 5,477 Total...... $16,593 $9,791 $7,288

7. Fair Value of Financial Instruments

The carrying amount of cash and cash equivalents approximates fair value due to the short term maturities of these investments. The fair value of trading and available-for-sale marketable securities are based on quoted market prices at year end.

The estimated fair value of IONA’s financial instruments are as follows:

Year Ended December 31, 2000 1999 1998 (U.S. dollars in thousands) CarryingÞ FairÞ CarryingÞ FairÞ CarryingÞ FairÞ Amount Value Amount Value Amount Value Non Derivatives Cash and cash equivalents...... $38,193 $38,193 $19,094 $19,094 $13,484 $13,484 Marketable Securities trading ...... 57,447 57,447 51,089 51,089 47,065 47,065 Investments — available for sale. . . 561 561 12,526 12,526 — —

The carrying amounts in the table are included in the statements of financial position under the indicated captions. 8. Operating Lease Commitments

IONA’s only significant operating leases are for the premises for the Perth, Australia, Dublin, Ireland, Reading, UK, Frankfurt, Germany, Waltham, Massachusetts, San Mateo, California and Washington, DC operations. The Perth lease expires in November 2001. The Dublin lease expires in 2023 with an option to exit the lease in 2013. IONA currently occupies approximately 44,650 square feet of the office space and sublets approximately 11,250 square feet of office space over a period of one to three years. In March 2000, IONA surrendered to a third party the operating lease of 45,000 square feet of Dublin office space not being occupied by IONA. The existing subleases on the 45,000 square feet either expired or were transferred to the new lessor upon surrender. The Reading lease expires in 2014 with an option to exit the lease in 2004 and 2009. The Frankfurt lease expires in 2009 with an option to exit the lease in 2004. The Waltham lease expires in 2006, subject to IONA’s right to renew for an additional term of five years expiring in 2011. IONA currently occupies approximately 61,000 square feet of the office space. IONA sublet approximately 8,000 square feet of this space through October 2000. The San Mateo lease expires in 2006, subject to IONA’s right to renew for an additional term of five years expiring in 2011. IONA currently occupies approximately 10,500 square feet of the office space and sublets the remainder over a period of two years. The Washington, D.C. lease expires in 2005. Rent expenses under all operating leases were approximately $6,124,000, $5,857,000, and $2,535,000 in 2000, 1999, and 1998, respectively. Future minimum lease payments under all operating leases as of December 31, 2000 are as follows (U.S. dollars in thousands):

Year ending December 31, 2001 ...... $ 4,893 2002 ...... 4,218 2003 ...... 4,356 2004 ...... 4,297 2005 ...... 4,199 Thereafter...... 25,040 Total minimum lease payments...... $47,003

Total minimum lease rental income to be received under the operating sub-leases for the Dublin, Waltham, and San Mateo premises as of December 31, 2000 is $1,388,000.

9. Other Non-Current Assets

Other non-current assets consist of the following:

Year ended December 31, 2000 1999 1998 (U.S. dollars in thousands) Purchased technology...... $11,194 $ 2,794 $ 1,000 Assembled workforce...... 1,238 — — Other ...... 104 42 — Total...... $12,536 $ 2,836 $ 1,000 Less: Accumulated amortisation ...... (2,588) (390) — Total Net...... $ 9,948 $ 2,446 $ 1,000

10. Property and Equipment

Property and equipment consists of the following:

Year Ended December 31, 2000 1999 1998 (U.S. dollars in thousands) Motor vehicles...... $ 20 $ 20 $ 20 Computer equipment...... 22,032 17,641 13,949 Office equipment...... 2,093 1,395 1,209 Furniture and fixtures...... 10,733 10,050 9,702 Total property and equipment ...... $34,878 $29,106 $24,880 Accumulated depreciation...... (16,300) (10,645) (5,701) Property and equipment, net...... $18,578 $18,461 $19,179

11. Redeemable Preference Shares, Warrants and Shareholders Equity

IONA’s authorised share capital is divided into Redeemable Preference Shares (‘‘Preference Shares’’) of €0.0025 par value per share and Ordinary Shares of €0.0025 par value per share. The Preference Shares confer on the holders thereof the right to receive notice of and to attend all general meetings of IONA but not the right to vote on any resolution proposed therefor. They confer on the holders thereof the right to be paid out of the profits available for distribution, in priority to any payment of dividend on any other class of shares in IONA, a fixed cumulative preference dividend at a rate of 6% per annum on the amount paid up on the Preference Shares. Upon winding up of IONA, the Preference Shares confer upon the holders thereof the right to repayment of the capital paid thereon, together with payment of all arrears of preferential dividend, whether declared or not, to the date of redemption of the Preference Shares in priority to payment of any dividend or repayment of capital to the holders of the Ordinary Shares in the capital of IONA. Such Preference Shares do not, however, confer upon the holders thereof any further rights to participate in the assets of IONA.

Dividends may only be declared and paid out of profits available for distribution determined in accordance with accounting principles generally accepted in Ireland and applicable Irish Company Law. Any dividends on the Ordinary Shares, if and when declared, will be declared and paid in U.S. dollars. The amount of retained earnings available for distribution as dividends at December 31, 2000, 1999, and 1998, at the exchange rates in effect on those dates, were approximately $28,000,000, $22,000,000, and $17,179,000, respectively.

In December 1999, in connection with a major license agreement, the Company issued 42,900 share purchase warrants to the licensee. The warrants were exercisable immediately at a price of $34.125 per share and expire on December 20, 2003. At December 31, 2000, all 42,900 share purchase warrants were outstanding.

The Company determined the fair value of the warrant at the time of issuance using a Black-Scholes option pricing model with the following weighted-average assumptions: risk free interest rate of 6.5%; dividend yields of 0%; volatility factors of the expected market price of the Company’s Ordinary Shares of 0.913 and a weighted-average expected life of the option of four years. The determined value of the warrants was debited to revenue and credited to additional paid-in capital in 1999.

12. Share Option Scheme

IONA has elected to follow Accounting Principles Board Opinion No. 25, ‘‘Accounting for Stock Issued to Employees’’ (‘‘APB 25’’) and related interpretations in accounting for its stock options. Under APB 25, IONA has recognised compensation expense of $404,000, $372,000, and $176,000 during 2000, 1999, and 1998, respectively, for those instances in which the exercise prices of IONA’s stock options were less than the estimated market price of the underlying shares on the date of grant and for the stock compensation arising on the Aurora acquisition (Note 4).

IONA’s Executive Share Option Scheme has authorised the grant of options to management personnel for up to 1,125,500 shares of IONA’s A Ordinary Shares. All options granted have seven year terms and generally vest in equal installments on each of the first, second, third and fourth anniversaries of the date of grant.

During 1997, IONA’s Board of Directors and shareholders approved the 1997 Share Option Scheme which provides for the grant of share options to employees, consultants, directors and officers of IONA. The 1997 Share Option Scheme initially provided for the issuance of up to 2,250,000 of IONA’s Ordinary Shares. In 1998, IONA’s Board of Directors and shareholders approved an amendment to the 1997 Share Option Scheme, providing for an increase in the number of Ordinary Shares that may be issued under the 1997 Share Option Scheme to an aggregate of 4,750,000. In 2000, IONA’s Board of Directors and shareholders approved an amendment to the 1997 Share Option Scheme, providing for an increase in the number of Ordinary Shares that may be issued under the 1997 Share Option Scheme to an aggregate of 8,900,000. Options granted under the 1997 Share Option Scheme expire ten years from the date of grant or five years from the date of grant in the case of incentive stock options issued to employees holding more than 10% of the total combined voting power of IONA.

During 1997, IONA’s Board of Directors and shareholders also approved the 1997 Director Share Option Scheme which provides for the grant of options to purchase a maximum of 250,000 Ordinary Shares of IONA to non- employee directors of IONA.

Pro forma information regarding net income and earnings per share is required by Statement 123, and has been determined as if IONA had accounted for its stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 2000, 1999, and 1998, respectively: risk-free interest rates of 5%, 6% and 6%; dividend yields of 0%; volatility factors of the expected market price of IONA’s Ordinary Shares of 1.13, 1.27, and 0.49; and a weighted-average expected life of the option of five years.

For purposes of pro forma disclosures, the estimated fair value of the options is amortised to expense over the options’ vesting period. IONA’s pro forma information follows for the years ended December 31, 2000, 1999 and 1998 (in thousands except for earnings per share information):

Year Ended December 31, 2000 1999 1998 Pro forma net income (loss) ...... $(4,064) $(4,050) $ 758 Pro forma income (loss) per share: Basic...... $ (0.19) $ (0.20) $0.04 Diluted...... $ (0.19) $ (0.20) $0.04

A summary of IONA’s stock option activity, and related information for the years ended December 31, 2000, 1999 and 1998 follows:

Year Ended December 31, 2000 1999 1998 Weighted- Weighted- Weighted- Average Average Average Options Exercise Price Options Exercise Price Options Exercise Price Outstanding-beginning of period .... . 3,311,966 $ 14.25 3,170,383 $ 13.04 2,517,783 $ 9.56 Granted ...... 2,779,100 49.23 1,957,864 14.01 1,033,553 19.32 Forfeitures...... (374,869) 19.94 (1,017,135) 13.29 — — Exercised...... (1,003,721) 13.86 (799,146) 10.10 (380,953) 7.04 Outstanding-end of period ...... 4,712,476 $ 34.16 3,311,966 $ 14.25 3,170,383 $ 13.04 Exercisable at end of period...... 715,353 $ 17.77 746,305 $ 15.87 738,715 $ 12.50

Year Ended December 31, 2000 1999 1998 Weighted-Þ Weighted-Þ Weighted-Þ AverageÞ AverageÞ AverageÞ FairÞ ExerciseÞ FairÞ ExerciseÞ FairÞ ExerciseÞ Value Price Value Price Value Price Weighted-average fair value of options granted during the year for options whose exercise price equals the market price of the Ordinary Shares on the date of grant...... $40.31 $ 49.23 $11.92 $ 14.01 $9.64 $ 19.32

Exercise prices for options outstanding as of December 31, 2000 ranged from $0.32 to $78.99 per share. An analysis of options outstanding at December 31, 2000 is as follows:

Weighted average remaining Number of contractual Options options lifeÞ currently outstanding (in years) exercisable Exercise Price Less than $5.00 per share...... 37,966 5.6 36,636 Greater than $5.00 per share and less than $15.00 per share ...... 1,623,742 8.0 412,915 Greater than $15.00 per share and less than $25.00 per share ...... 389,219 7.8 99,510 Greater than $25.00 per share and less than $37.50 per share ...... 529,175 8.5 141,925 Greater than $37.50 per share and less than $50.00 per share ...... 743,189 9.4 24,367 Greater than $50.00 per share and less than $62.50 per share ...... 848,085 9.7 — Greater than $62.50 per share ...... 541,100 8.7 — Total...... 4,712,476 715,353

13. Employee Stock Purchase Plan

In August 1999, the Company established a qualified Employee Stock Purchase Plan, the terms of which allow for qualified employees (as defined) to participate in the purchase of designated shares of the Company’s common stock at a price equal to the lower of 85% of the closing price at the beginning or end of each semi-annual stock purchase period. At December 31, 2000, 60,441 shares have been issued under the plan. There were no shares of common stock issued under the plan at December 31, 1999.

14. Net Income Per Ordinary Share and ADS

The following sets forth the computation of basic and diluted net income per ordinary share:

Year Ended December 31, 2000 1999 1998 Numerator: Numerator for basic and diluted net income per ordinary share and ADS— income available to ordinary shareholders $14,165 $5,459 $7,678

Denominator: Denominator for basic earnings per share—weighted average ordinary Shares and ADS...... Þ21,177 Þ19,797 Þ19,268 Effect of employee stock options...... 2,343 1,427 1,625 Denominator for diluted net income per ordinary share and ADS 23,520 21,224 20,893 Basic net income per ordinary share and ADS...... $ 0.67 $ 0.28 $ 0.40 Diluted net income per ordinary share and ADS...... $ 0.60 $ 0.26 $ 0.37 15. Income Taxes

Income before provision for income taxes consists of the following:

Year Ended December 31, 2000 1999 1998 (U.S. dollars in thousands) Ireland...... $ 7,973 $3,110 $ 8,802 Rest of World...... 8,991 3,437 285 Total...... $16,964 $6,547 $ 9,087

The provision for income taxes consists of the following:

Year Ended December 31, 2000 1999 1998 (U.S. dollars in thousands) Current: Ireland ...... $ 2,097 $ 886 $ 1,409 Rest of World...... 702 202 — Total current...... 2,799 1,088 1,409 Deferred: Ireland ...... — — — Rest of World...... — — — Total deferred...... — — — Total provision for income taxes...... $ 2,799 $1,088 $ 1,409

The provision for income taxes differs from the amount computed by applying the statutory income tax rate to income before taxes. The sources and tax effects of the differences are as follows:

Year Ended December 31, 2000 1999 1998 (U.S. dollars in thousands) Income taxes computed at the Irish statutory income tax rate of 24% for 2000, 28% for 1999, and 32% for 1998...... $ 4,071 Þ$1,833 Þ$ 2,908 Income from Irish manufacturing operations taxed at lower Rates (982) (483) (1,445) Operating losses not utilised ...... 247 542 638 Income/(losses) subject to different rates of tax...... 391 (113) 56 Income not subject to tax ...... (1,261) (657) (786) Non-deductible expenses...... 1,351 40 28 Other individually immaterial items...... 32 22 10 Operating losses utilised...... (1,050) (96) — Total provision for income taxes...... $ 2,799 $1,088 $ 1,409 The effect on basic and diluted net income per ordinary share of the Irish manufacturing operations being taxed at a lower rate than the Irish Statutory income tax rate was $0.05 and $0.04 per share respectively for the year ended December 31, 2000, $0.02 and $0.02 per share respectively for the year ended December 31, 1999, and $0.07 and $0.07 per share respectively for the year ended December 31, 1998.

Year Ended December 31, 2000 1999 1998 (U.S. dollars in thousands) Deferred tax assets: Net operating loss carryforwards .... . $ 685 $ 1,735 $ 2,032 Total deferred tax assets...... 685 1,735 2,032 Valuation allowance...... (685) (1,735) (2,032) Net deferred tax assets ...... $ — $ — $ —

At December 31, 2000, IONA had a net operating carryforward of approximately $ nil for U.S. federal income tax purposes.

At December 31, 2000, IONA also had net operating loss carryforwards totaling approximately $1.9 million for Australian income tax purposes which carry forward indefinitely. The utilisation of these et operating loss carryforwards is limited to the future profitable operation of IONA in the related tax jurisdictions in which such carryforwards arose.

100% valuation allowances have been provided against the net operating loss carryforwards because of the history of operating losses in the related tax jurisdictions.

16. Industry and Geographic Information

The Company has one reportable segment: distributed components software products for building enterprise portals and other global e-business applications. The Company also provides professional services, consisting of customer consulting and training and, to a limited extent, product customisation and enhancements as well as customer technical support.

The accounting policies of the reportable segment are the same as those described in the summary of significant accounting policies.

The following is a summary of enterprise-wide geographic areas information:

Revenues from external customers, all attributable to foreign countries:

Year Ended December 31, 2000 1999 1998 (U.S. dollars in thousands) United States...... $103,107 $ 67,577 $58,878 Other European Countries...... 39,552 30,717 20,717 Rest of World...... 10,404 7,146 4,032 Consolidated Total...... $153,063 $105,440 $83,627

Revenues are attributed to countries based on the location of customers. Long Lived Assets:

Year Ended December 31, 2000 1999 1998 Country of Domicile Ireland . $42,628 $16,056 $16,245

Foreign Countries United States...... 7,598 4,180 3,134 Cayman Islands...... 511 12,526 — Rest of World...... 1,336 1,118 800 Consolidated Total...... $52,073 $33,880 $20,179

17. Settlement of Litigation

In March 2000, RSA Securities, Inc. (‘‘RSA’’) and the Massachusetts Institute of Technology filed suit against the Company alleging that the Company breached the terms of a patent license agreement between RSA and IONA. In June 2000, the Company and RSA entered into a confidential settlement agreement to settle all outstanding claims between the parties. Costs associated with the settlement of this litigation amounted to $1,350,000.

18. Subsequent Events (Unaudited)

On January 22, 2001 IONA issued 19,018 Ordinary Shares, each credited as fully paid to Portal Software, Inc. (‘‘Portal’’) in full exercise by Portal of a warrant to purchase 42,900 Ordinary Shares issued to Portal on December 27, 2000.

On February 7, 2001, IONA acquired the non-exclusive license rights to certain portions of Software AG, Inc.’s enterprise application integration technology for $10,000,000. The software has reached technological feasibility, and accordingly the costs have been capitalised and will be written off over their useful economic life of four years, in accordance with SFAS 86. In addition to the acquisition of the non-exclusive license rights to the technology, IONA has hired a substantial portion of the Software AG, Inc. engineering team responsible for the development of the technology.

On February 8, 2001, a wholly-owned subsidiary of IONA merged with and into Object Oriented Concepts Inc., a Delaware corporation (‘‘OOC’’), pursuant to which OOC became a wholly-owned subsidiary of IONA (the ‘‘Merger’’). The total consideration for the Merger consisted of 905,564 newly-issued IONA Ordinary Shares and replacement options, $3,000,000 in cash. Of the 730,453 newly-issued Ordinary Shares, 262,129 are subject to forfeiture to IONA upon the failure to achieve certain performance targets. If these performance targets are achieved, the Ordinary Shares no longer subject to forfeiture will be recorded as additional purchase price based on their fair market value at the time they are earned.

On February 14, 2001, IONA signed a definitive agreement to acquire Netfish Technologies, Inc., a California corporation, for total consideration of 5,500,000 in newly-issuable IONA Ordinary Shares and replacement options.. The acquisition will be accounted for under the purchase method of accounting. The transaction is subject to the approval of shareholders of both companies, as well as customary regulatory and other closing conditions.

On March 25, 2000, Inprise Corporation (‘‘Inprise’’) filed suit against IONA in the California Superior Court, San Mateo County, alleging among other things, unfair competition, breach of contract, trademark infringement, trade libel, and interference with contract, requesting an injunction against further commission of the alleged act, and requesting monetary damages. In February 2001, Inprise withdrew their suit against IONA. The majority of the costs incurred by IONA in defending this suit will be reimbursed by the Company’s insurance company. PART III – PRO FORMA STATEMENT OF NET ASSETS FOR THE GROUP

Set out below is a pro forma statement of net assets of the Group as of 31 December 2000, as adjusted for the Acquisition. The pro forma is for the purposes of illustration only and, because of its nature may not give a true picture of the Group’s financial position.

IONAÞ Netfish AuditedÞ ÞAuditedÞ 31 31 December December Pro Forma Pro 2000Þ 2000Þ AdjustmentsÞ FormaÞ US’000s US’000s US’000s Note US’000s ASSETS Current assets: Cash and cash equivalents 38,193 38,193 Marketable securities 57,447 57,447 Accounts receivable, net and other current assets 54,846 6,720 61,566 Total current assets 150,486 6,720 157,206 Property and equipment, net and other non-current assets 29,087 3,418 32,505 Goodwill 22,986 281,219 2(a) 304,205 Total assets 202,559 10,138 281,219 493,916

LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued liabilities 29,868 12,297 16,288 2(b) 58,453 Deferred revenue 21,384 3,016 (3,016) 2(c) 21,384 Total current liabilities 51,252 15,313 13,272 79,837 Note payable to stockholder 450 450 Deferred revenue, net of current portion 6,934 (6,934) 2(c) Common Stock 66 3,856 (3,846) 2(d) 76 Preferred Stock 36,406 (36,406) 2(e) Additional paid-in capital 114,281 295,341 2(f) 409,622 Retained earnings 36,880 (50,907) 50,907 2(g) 36,880 Deferred stock compensation (195) (1,914) (31,115) 2(h) (33,224) Accumulated other comprehensive income 275 275 Total shareholders’ equity 151,307 (12,559) 274,881 413,629 Total liabilities and shareholders’ equity 202,559 10,138 281,219 493,916

Notes:

1. Basis of Presentation

The pro forma statement of net assets gives effect to the Acquisition assuming it had occurred on 31 December 2000.

The pro forma statement of net assets for IONA is derived from the audited consolidated balance sheet of IONA as of 31 December 2000 and the audited consolidated balance sheet of Netfish as of 31 December 2000, after giving effect to the pro forma adjustments described in Note 2 below.

The pro forma consolidated statement of net assets is not necessarily indicative of the financial position of IONA as it may be in the future or as it might have been had the Acquisition occurred on 31 December 2000. No adjustment has been made to take account of any transactions of the Group since 31 December 2000.

2. Pro Forma Adjustments

(a) Total purchase price consists of (i) 4,160,756 New Ordinary Shares at a fair market value of US$55 per share, (ii) the fair market value totaling US$68,797,000 of 1,339,244 replacement options over IONA shares and (iii) US$5,000,000 in cash to pay Netfish’s related disposal expenses. The aggregate purchase price plus related direct acquisition costs of US$14,000,000 (including the US$5,000,000 in cash to pay Netfish’s related disposal expenses) and less the amount allocated to unearned compensation expenses of US$33,029,000 (see note (h) below) totals US$278,609,580 and has been allocated to the acquired assets and liabilities at their estimated fair values at 31 December 2000. With the exception of deferred revenues whose estimated fair values are nil, the estimated fair values of acquired assets and liabilities equals their book values.

The following table reflects the allocation of the fair market value of purchase price plus related direct acquisition costs and less the amount allocated to unearned compensation expenses to net assets acquired and the resulting adjustment to goodwill.

US$000 US$000 Fair market value of New Ordinary Shares 228,842 Fair market value of replacement options over IONA shares 68,797 Purchase price related direct acquisition costs 14,000 Unearned compensation expense (33,029) Deferred revenue, current portion (3,016) Deferred revenue, net of current portion (6,934) Common stock (3,856) Preferred stock (36,406) Retained earnings 50,907 Deferred stock compensation (see note (h) below) 1,914 Estimated fair value of acquired assets and liabilities 2,609 Adjustment to Goodwill 281,219

(b) As reflected in the following table, direct acquisition related costs of US$14,000,000 plus total capital duty tax of 1% of the fair market value of 4,160,756 New Ordinary Shares based on a fair market value of US$55 per share, or US$2,288,000, has been added to accrued liabilities.

US$000 Purchase price related direct acquisition costs 14,000 Capital duty tax 2,288 Adjustment to accounts payable and accrued liabilities 16,288

(d) The purchase price consists of 4,160,756 New Ordinary Shares having a par value of US$10,000 and has been added to common stock.

The following table reflects the elimination of Netfish Common Stock on consolidation and the issuance of 4,160,756 New Ordinary Shares with a par value of US$10,000. US$000 Netfish Common Stock (3,856) New Ordinary Shares 10 Adjustment to Common Stock (3,846)

(e) Elimination of preferred stock following the acquisition of Netfish (see note (a) above).

(f) Total purchase price consists of (i) 4,160,756 New Ordinary Shares at a fair market value of US$55 per share, (ii) the fair market value totaling US$68,797,000 of 1,339,244 replacement options over IONA shares and (iii) US$5,000,000 in cash to pay Netfish’s related disposal expenses. The par value of the New Ordinary Shares is US$10,000. The additional paid in capital arising on the New Ordinary Shares totals US$228,832,000 and together with the fair value of the replacement options results in a credit of US$297,629,000 to additional paid in capital. Total capital duty tax of 1% of the fair market value of 4,160,756 New Ordinary Shares is based on fair market value of US$55 per share and totals US$2,288,000. This amount has been deducted from additional paid in capital.

The following table reflects the adjustment to additional paid-in capital resulting from the fair market values of the New Ordinary Shares and the replacement options over IONA shares less capital duty tax and the par value of the New Ordinary Shares.

US$000 Fair market value of New Ordinary Shares 228,842 Fair market value of replacement options over IONA shares 68,797 Capital duty tax (2,288) Par value of New Ordinary Shares (10) Adjustment to Additional Paid-In Capital 295,341

(g) Elimination of retained earnings following the acquisition of Netfish (see note (a) above).

(h) Total unearned compensation cost for outstanding unvested options held by Netfish employees and exchanged for unvested options granted by IONA has been calculated as the portion of the intrinsic value that the future vesting period bears to the total vesting period, using the intrinsic value at 15 February 2001 as an estimate of the intrinsic value at the future consummation date. The amount of unearned compensation cost, US$33,029,000, has been deducted from the fair value of the total purchase price.

The following table reflects the elimination of Netfish deferred stock compensation and the recording of an amount in respect of the unearned compensation for outstanding unvested options held by Netfish employees and exchanged for unvested options granted by IONA (from Note (a) above)

US$000 Netfish deferred stock compensation (1,914) Unearned compensation for outstanding unvested options held by Netfish employees and exchanged for unvested options granted by IONA (from Note (a) above) 33,029 Adjustment to deferred stock compensation 31,115 The Directors IONA Technologies PLC The IONA Building Shelbourne Road Ballsbridge Dublin 4 and

Goodbody Corporate Finance Ballsbridge Park Ballsbridge Dublin 4

2 April 2001

RE: IONA TECHNOLOGIES PLC (‘‘THE COMPANY’’) AND SUBSIDIARY UNDERTAKINGS (‘‘THE GROUP’’)

Dear Sirs,

We report on the pro-forma consolidated statement of net assets set out in Part III of the listing particulars dated 2 April 2001, which has been prepared, for illustrative purposes only to provide information about how the Acquisition might have affected the financial information presented.

Responsibilities

It is the responsibility solely of the directors of IONA Technologies PLC to prepare the pro-forma consolidated statement of net assets in accordance with paragraph 12.29 of the Listing Rules.

It is our responsibility to form an opinion, as requested by the Listing Rules of the Irish Stock Exchange, on the pro- forma consolidated statement of net assets and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the pro-forma consolidated statement of net assets beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

Basis of opinion

We conducted our work in accordance with the Statements of Investment Circular Reporting Standards and Bulletin 1998/8 (‘‘Reporting on pro forma financial information pursuant to the Listing Rules’’) issued by the Auditing Practices Board. Our work, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the pro-forma consolidated statement of net assets with the Directors of IONA Technologies PLC.

Opinion

In our opinion; (a) the pro-forma consolidated statement of net assets has been properly compiled on the basis stated;

(b) such basis is consistent with the accounting policies adopted by IONA Technologies PLC in the preparation of the financial information included in Part II of the Listing Particulars; and

(c) the adjustments are appropriate for the purposes of the pro-forma consolidated statement of net assets as disclosed pursuant to paragraph 12.29 of the Listing Rules of the Irish Stock Exchange.

Yours faithfully,

/s/ Ernst & Young

Ernst & Young PART IV – ADDITIONAL INFORMATION

1. Incorporation

The Company was incorporated in Ireland under the Acts as a private limited company on 19 March 1991 with registration number 171387. On 20 February 1997, it re-registered as a public limited company and changed its name to IONA Technologies PLC.

The business is the provision of software and services that allows companies to integrate heterogeneous computer networks. Its registered and head office is The IONA Building, Shelbourne Road, Ballsbridge, Dublin 4, Ireland.

2. Share Capital

(a) The authorised share capital of the Company, as currently set forth in its Articles of Association, is €628,125 divided into 150,000,000 Ordinary Shares of €0.0025 each and 101,250,000 redeemable preference shares of €0.0025 each (‘‘Preference Shares’’). The number of Ordinary Shares issued and fully paid as at the date of this document, but prior to the issue of the New Ordinary Shares, is 22,873,249. No Preference Shares are currently in issue in the capital of the Company, nor have any such shares been in issue in the Company in the preceding three years.

(b) The alterations in the share capital of IONA in the three years preceding the date of this document are set out below:

Authorised:

On 9 June 1999, in accordance with Section 25(3)(a) of the Economic and Monetary Union Act, 1998 (the ‘‘EMU Act’’), the total authorised share capital of the Company, namely IR£502,500 divided into 150,000,000 Ordinary Shares of IR£0.002 each and 101,250,000 Redeemable Preference Shares of IR£0.002 each, was redenominated into Euros. This resulted in a redenominated total authorised share capital of €638,043.38 and immediately following the redenomination and in accordance with Section 26 of the EMU Act the redenominated authorised share capital of the Company was reduced to €628,125 divided into 150,000,000 Ordinary Shares of €0.0025 each and 101,250,000 Preference Shares of €0.0025 each.

Issued:

(i) On 21 October 1999, IONA issued 200,000 Ordinary Shares each credited as fully paid up to Intel 64 Fund, LLC pursuant to a Share Subscription Agreement dated 21 October 1999 between IONA and Intel 64 Fund, LLC.

(ii) On 8 March 2000, IONA issued 119,175 Ordinary Shares, each credited as fully paid up for a total consideration of US$8,200,000 to Watershed pursuant to an Share Subscription Agreement dated 23 February 2000 between IONA and Watershed.

(iii) On 26 July 2000, pursuant to an Assignment and Bill of Sale effective as of 1 July 1999 between IONA and Aurora (as amended by letter of agreement dated 2 September 1999) IONA issued 24,375 Ordinary Shares, each credited as fully paid up for a total consideration of US$390,000 as follows: to James F. Watson III -17,064 Ordinary Shares; to Lester R. Claudio—2,437 Ordinary Shares; to William G. Henry—2,437 Ordinary Shares; and to Stuart W. Fraser—2,437 Ordinary Shares.

(iv) On 13 June 2000, IONA issued 165,872 Ordinary Shares credited as fully paid up to each of Jason R. Matthews and Michelle M. Matthews jointly and 165,872 Ordinary Shares credited as fully paid up to Michael K. Guttman as part of the consideration for the acquisition by IONA of Genesis pursuant to an Agreement and Plan of Merger dated 13 June 2000 by and between IONA, Groton Merger, Inc. and Genesis. The price per Ordinary Share used for the purpose of this transaction was US$53.511.

(v) On 22 January 2001, IONA issued 19,018 Ordinary Shares at a price of US$34.125, each credited as fully paid to Portal Software, Inc. (‘‘Portal’’) in full exercise by Portal of a warrant to purchase 42,900 Ordinary Shares issued to Portal on 27 December 1999.

(vi) On 8 February 2001, IONA issued 730,453 Ordinary Shares credited as fully paid up to Marc M. Laukien as part of the consideration for the acquisition by IONA of OOC pursuant to an Agreement and Plan of Merger dated 8 February 2001 by and between IONA, Orange Merger Corporation and OOC. The price per Ordinary Share used for the purpose of this transaction was US$57.23135.

(vii) 2,298,554 Ordinary Shares credited as fully paid have been issued pursuant to the exercise of share options granted under the terms of the Company’s Executive Share Option Scheme, the 1997 Share Options Scheme, the 1997 Director Share Option Scheme and the 1999 Employee Share Purchase Plan.

(d) The Company does not have any loan capital in issue including, without limitation, convertible debt securities, exchangeable debt securities or other debt securities with warrants attached.

(e) There are no warrants in issue to subscribe for any of the Company’s shares.

3. Memorandum and Articles of Association

(a) The principal object of the Company as set out in Clause 3 of its Memorandum of Association is the design and/or implementation of computer software and hardware, documentation and technical reports, and carrying out research and/or development in the area of computer systems, information technology and data processing. A full description of the objects of the Company is set out in clause 3 of the Memorandum of Association which is available for inspection as provided in paragraph 15(j) below.

(b) The following is a summary of the material provisions of the Company’s Articles of Association:

(i) Voting

Votes at general meetings may be cast either personally or by proxy. Subject to any rights or restrictions for the time being attached to any class or classes of shares, on a show of hands every member present in person and every proxy shall have one vote, so, however, that no individual shall have more than one vote, and on a poll every member shall have one vote for every share of which he is the holder. The Chairman of a meeting at which there is an equality of votes shall be entitled to a second or casting vote.

(ii) Variation of Rights Whenever the share capital is divided into different classes of shares, the rights attached to any class may be varied or abrogated with the consent in writing of the holders of three-fourths in nominal value of the issued shares of that class, or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class.

(iii) Alteration of Share capital

The Company may by ordinary resolution:

(a) increase its share capital;

(b) consolidate and divide all or any of its share capital into shares of a larger amount;

(d) cancel any shares which have not been taken or agreed to be taken by any person and diminish the amount of its share capital by an amount of the shares so cancelled.

The Company by special resolution may reduce its share capital, any capital redemption reserve fund or any share premium account in any manner and with, and subject to, any incident authorised, and consent required by law.

(iv) Redeemable Shares

Subject to the provisions of the Acts, any shares may be issued on terms that they are, or at the Company’s option or that of the holder are, liable to be redeemed on such terms and in such manner as the Company may determine.

(v) Purchase of Own Shares

Subject to the provisions of the Acts, the Company’s Articles of Association and to any rights conferred on the holders of any class of shares, IONA may purchase all or any of its shares of any class. No purchase by the Company of its own shares will take place unless it has been authorised by special resolution of its members in general meeting. The members have authorised the Company to make on market purchases of its shares as permitted by the 1990 Act. The authority provides that the amount of shares purchased cannot exceed 10% of the nominal value of the issued share capital of the Company as at the date of the general meeting authorising the purchase and specifies minimum and maximum prices for share purchases.

(vi) Allotment of Shares

The Directors are authorised, by Article 10 of the Company’s Articles of Association, to allot relevant securities pursuant to section 20 of the 1983 Act up to a maximum of its authorised unissued share capital. The Directors are further authorised under sections 23 and 24 of the 1983 Act to make such allotments without having to offer the new shares to existing shareholders.

(vii) Transfer of Shares

Subject to such of the restrictions in the Company’s Articles of Association and to such of the conditions of issue as may be applicable, the shares of any member may be transferred by instrument in writing in any usual form or in any other form which the Directors may approve. Any instrument of transfer shall be executed by or on behalf of the transferor and (except in the case of fully paid shares) by or on behalf of the transferee.

Title to the Company’s shares may be evidenced and transferred by electronic means without a written instrument in accordance with statutory regulations made from time to time under Section 239 of the 1990 Act or under any other regulations of a similar effect. The Directors shall have the power to implement any arrangement for such evidencing and transfer to accord with the regulations. In particular, the Directors shall, where they consider it appropriate, be entitled to disapply, vary or amend all or any part of the provisions in the Articles of Association with respect to the requirement for written instruments or transfers of share certificates or where such provisions are inconsistent with statutory regulations as aforesaid in order to give effect to such regulations.

The Directors may, in their absolute discretion and without giving any reason, refuse to register the transfer of a share which is not fully paid, (provided that in the case of any such shares which are listed on Nasdaq or the Irish Stock Exchange, the Directors shall allow dealings in such shares to take place on an open and proper basis), or any transfer of a share by a minor or a person of unsound mind. The Directors may also refuse to register any transfer unless it is lodged at the Company’s registered office or at such other place as the Directors may appoint and is accompanied by the certificate of the shares to which it relates and by such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer save where the transferor is a Stock Exchange nominee. The Directors may also refuse to register any transfer which is in respect of more than one class of shares or which is in favour of more than four transferees.

The registration of transfers of shares may be suspended at such times and for such periods (not exceeding thirty days each year) as the Directors may determine.

(viii) Disclosure of Beneficial Ownership

The Directors may, at any time, in their absolute discretion, give a notice to the holder of any share requiring such holder to notify the Company in writing within such period as may be specified in such notice of full and accurate particulars of:

(a) his interest in such share;

(a) the interests of all persons having any beneficial interest in the share and, where any such person is a body corporate, the identity of the person(s) who control(s) such body corporate; and

(c) any arrangements entered into by him or any person having any beneficial interest in the share whereby it has been agreed or undertaken, or the holder of such share can be required, to transfer the share or any interest therein to any person or to act in relation to any general meeting of the Company’s members, or any meeting of the holders of any class of the Company’s shares in a particular way or in accordance with the wishes or directions of any other person (other than a person who is a joint holder of such share).

The Directors may require any such particulars to be verified by statutory declaration.

If at any time the Directors shall determine that the holder of any share has failed (1) to comply, to the satisfaction of the Directors, with all or any of the terms of any such notice as aforesaid; (2) to comply, to the satisfaction of the Directors, with the terms of any notice given pursuant to Section 81 of the 1990 Act; or (3) to pay any monies in respect of that share in the manner and at the time appointed for payment (‘‘Specified Event’’), the Directors may serve a notice on the holder(s) of the shares (‘‘Restriction Notice’’), whereby upon the expiry of 14 days and for so long as such Restriction Notice remains in force:

(a) no holder(s) of the shares specified in such Restriction Notice (the ‘‘Specified Shares’’) shall be entitled to attend, speak or vote at any general meeting of the Company’s members or to exercise any other right conferred by membership in relation to any such meeting; and

(b) the Directors shall in addition be entitled:

(I) to withhold payment of any dividend or other amount payable, including shares issuable in lieu of dividends, in respect of the Specified Shares; and/or

(II) to refuse to register any transfer of the Specified Shares or any renunciation of any allotment of new shares or debentures made in respect thereof unless such transfer or renunciation is shown to the satisfaction of the Directors to be an arm’s length transfer or renunciation to another beneficial owner unconnected with the holder or any person appearing to have an interest in the Specified Shares.

(ix) Directors

(a) Numbers of Directors: the number of Directors shall not be more than fifteen.

(b) Remuneration: the ordinary remuneration of the Directors shall from time to time be determined by an ordinary resolution of the Company’s members and shall (unless such resolution shall otherwise provide) be divisible among the Directors as they may agree, or, failing agreement, equally, except that any Director who shall hold office for part only of the period in respect of which such remuneration is payable shall be entitled only to rank in such division for a proportion of the remuneration related to the period during which he has held office. Any Director who holds any executive office or who serves on any committee or who otherwise performs services which, in the opinion of the Directors, are outside the scope of the ordinary duties of a director may be paid such extra remuneration as the Directors may determine. Options which are granted to Directors, shall not be regarded as remuneration.

(c) Share Qualification: the Company’s Articles of Association provide that no share qualification is required by a Director.

(d) Retirement:

(I) the Directors are divided into Class I Directors, Class II Directors and Class III Directors. If the total number of Directors (not including alternate Directors) at any time shall be a multiple of 3, the number of Directors of each of the classes aforesaid shall be the same. If the total number of Directors (not including alternates) shall not be a multiple of 3, there may be a different number of Directors in each class but such that the difference in the numbers in each class shall not be more than one (e.g. if there are 8 Directors, there may be 2 Class I, 3 Class II and 3 Class III, but not 2 Class I, 2 Class II and 4 Class III). (II) on the co-option or election of any new Director, a class shall be assigned to such Director but so that:-

(1) a Director who is replacing a retiring Director shall be of the same class as the Director he replaces; and

(2) any additional Director not within (1) above shall insofar as possible be classified such that the annual general meeting at which he retires by rotation will be the meeting for the third year after his election (or failing this the second year after his election) subject always to there being no breach of sub-paragraph (I) as regards numbers in each class.

(III) All of the following Directors shall retire by rotation at the annual general meeting specified below:

Annual General Meeting held Directors to Retire in Calendar Year

Class I Directors 1997 Class II Directors 1998 Class III Directors 1999 Class I Directors 2000 Class II Directors 2001 Class III Directors 2002 Class I Directors 2003

And so on in that order for the years 2004 and following years.

(IV) A Director who retires at an annual general meeting may, if willing to act, be reappointed. If he is not reappointed he shall retain office until the meeting appoints someone in his place or, if it does not do so, until the end of the meeting.

(V) No Director shall be required to retire on account of age.

(e) Votes: questions arising at any meeting of Directors shall be decided by a majority of votes. Where there is an equality of votes the chairman of the meeting shall have a second or casting vote.

(f) Restrictions on Director’s Voting: save as otherwise provided by the Company’s Articles of Association a Director shall not vote at a meeting of the Directors or a committee of Directors on any resolution concerning a matter in which he has, directly or indirectly, an interest which is material or a duty which conflicts or may conflict with the Company’s interests. Subject to the Company’s Articles of Association, a Director shall not be counted in the quorum present at a meeting in relation to a resolution on which he is not entitled to vote.

A Director shall (in the absence of some other material interest than is indicated below) be entitled to vote (and be counted in the quorum) in respect of any resolutions concerning any of the following matters:

(I) the giving of any security, guarantee or indemnity to him in respect of money lent by or obligations incurred by him at the request of or for the benefit of the Company or any of the Company’s subsidiary companies;

(II) the giving of any security, guarantee or indemnity to a third party in respect of a debt or obligation of the Company or any of the Company’s subsidiary companies for which he himself has assumed responsibility in whole or in part and whether alone or jointly with others under a guarantee or indemnity or by the giving of security;

(III) any proposal concerning any offer of shares or debentures or other securities of or by the Company or any of the Company’s subsidiary companies for subscription, purchase or exchange in which offer he is entitled to participate as a holder of securities or is to be interested as a participant in the underwriting or sub-underwriting thereof;

(IV) any proposal concerning any other company in which he is interested, directly or indirectly and whether as a officer or shareholder or otherwise howsoever, provided that he is not the holder of or has an interest in 1 per cent. or more of the issued shares of any class of such company or of the voting rights available to members of such company (or of a third company through which his interest is derived) any such interest being deemed for this purpose to be a material interest in all circumstances;

(V) any proposal relating to a superannuation fund or retirement, death or disability benefits scheme under which he may benefit in a manner similar to the benefits awarded to other employees to whom the scheme relates and which has been approved by or is subject to and conditional upon approval for taxation purposes by the appropriate Revenue authorities;

(VI) any proposal relating to any scheme for enabling IONA’s employees (including full time executive Directors) and/or those of any subsidiary or associated company to acquire shares in the Company or any of the Company’s subsidiary or associated companies under which he benefits or may benefit in a manner similar to the benefits awarded to other employees to whom the scheme relates or which has been approved by or is subject to and is conditional upon approval for taxation purposes by the appropriate Revenue authorities; or

(VII) any proposal concerning insurance which the Company proposes to maintain or purchase for the benefit of Directors and for the benefit of persons including the Directors.

(g) Directors’ Interests: subject to the provisions of the Acts, and provided that he has disclosed to the Directors the nature and extent of any material interest of his, a Director notwithstanding his office:

(I) may be a party to, or otherwise interested in, any transaction or arrangement with the Company or any of the Company’s subsidiary or associated companies or in which the Company or any of its subsidiary or associated companies is otherwise interested;

(II) may be a director or other officer of, or employed by, or a party to any transaction or arrangement with, or otherwise interested in, any body corporate promoted by the Company or in which the Company or any of its subsidiaries or associated companies is otherwise interested;

(III) shall not, by reason of his office, be accountable to the Company for any remuneration or other benefit which he derives from any such office or employment or from any such transaction or arrangement or from any interest in any such body corporate unless the Company otherwise direct; and

no such transaction or arrangements shall be liable to be avoided on the ground of any such interest or benefit.

(h) If a Director at any time has or acquires a Conflicting Interest (as defined below), the Director shall, as soon as practicable, give notice to the Directors of that Conflicting Interest and shall from time to time while he retains such Conflicting Interest advise the Directors of any matters relating thereto which may conflict with the Company’s interests.

(I) While a Director has a Conflicting Interest his position as Director may be terminated at any time by resolution of a majority of his co-Directors whereupon he shall be deemed to have vacated office provided always that prior to passing such a resolution, the Director in question shall be given a reasonable time to dispose of or divest himself of the Conflicting Interest.

(II) For the purposes hereof a Conflicting Interest shall mean:

(a) being a director of a company or being a partner in a partnership or other business venture which is in competition with or likely to compete with the Company or the Company’s subsidiaries in a material business conducted by the Company or the Company’s subsidiaries (a ‘‘Competing Entity’’);

(b) having a shareholding or other entitlement in a Competing Entity which represents more than 1% of such Competing Entity; or

and shall include a spouse and/or minor child having any such interest such that such Conflicting Interest shall be deemed to be a Conflicting Interest of the Director in question and any determination by the Directors (other than the Director with the Conflicting Interest) that, based on their reasonable opinion, the Director in question has a Conflicting Interest, shall be final and binding on the Director in question.

(i) Borrowing Powers: subject to the provisions of the Articles of Association, the Directors may exercise all the Company’s powers to borrow or raise money and to mortgage or charge the Company’s undertaking, property, assets and uncalled capital or any part thereof subject to Part III of the 1983 Act, and to issue debentures, debenture stock and other securities, whether outright or as collateral security for any of the Company’s debts, liabilities or obligations of the Company or of any third party without limitation as to any amount.

(x) Dividends

The Company may by ordinary resolution declare dividends in accordance with the respective rights of the members, but no dividend shall exceed the amount recommended by the Directors.

Except as otherwise provided by the rights attached to shares, all dividends shall be declared and paid according to the amounts paid up on the shares on which the dividend is paid. Subject as aforesaid, all dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid on the shares during any portion or portions of the period in respect of which the dividend is paid; but, if any share is issued on terms providing that it shall rank for dividend as from a particular date, such share shall rank for dividend accordingly. No amount paid on a share in advance of calls shall be treated as paid on a share for purposes of the above.

The Directors may, subject to approval by the Company’s members at any general meeting in respect of any dividend declared or proposed to be declared at that general meeting or at any time prior to or at the next following annual general meeting (and provided that an adequate number of unissued Ordinary Shares is available for that purpose), offer holders of Ordinary Shares the right, prior to or contemporaneously with their announcement of the dividend in question and any related information as to the Company’s profits for such financial period or part thereof, to elect to receive in lieu of such dividend (or part thereof) an allotment of additional Ordinary Shares credited as fully paid.

Any dividend which has remained unclaimed for twelve years from the date the dividend became due for payment shall, if the Directors so resolve, be forfeited and cease to remain owing by the Company.

(xi) Distribution of Assets on Winding-Up

If the Company shall be wound up and the assets available for distribution among the Company’s members as such shall be insufficient to repay the whole of the paid up or credited as paid up share capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the members in proportion to the capital paid up or credited as paid up at the commencement of the winding-up on the shares held by them respectively. If on a winding-up the assets available for distribution among the members shall be more than sufficient to repay the whole of the share capital paid up or credited as paid up at the commencement of the winding-up, the excess shall be distributed among the members in proportion to the capital at the commencement of the winding-up paid up or credited as paid up on the said shares held by them respectively.

(xii) Entitlement to Grant Pensions

The Directors may provide benefits, whether by way of pensions, gratuities or otherwise for any Director, former Director or other officer or former officer of the Company or to any person who holds or has held any employment with the Company or with any body corporate which is or has been a subsidiary or associated company of the Company or a predecessor in business of the Company or of any such subsidiary or associated company and to any member of his family or any person who is or was dependent on him and may set up, establish, support, alter, maintain and continue any scheme for providing such benefits and for such purposes any Director may accordingly be, become or remain a member of, or rejoin any scheme and receive or retain for his own benefit all benefits to which he may be or become entitled thereunder. The Directors may pay out of the funds of the Company any premiums, contributions or sums payable by the Company under the provisions of any such scheme in respect of any of the persons or class of persons above referred to who are or may be or become members thereof.

4. Directors’ and Other Interests

(a) Directors’ Interests As at the date of this document, the interests of the Directors (including any interests of their spouses or minor children) or any connected person in the ordinary share capital of the Company, the existence of which is known to, or could with reasonable diligence be ascertained by the Directors whether or not held through another party which is notifiable as required to be disclosed pursuant to sections 53 and 64 of the 1990 Act or which are required pursuant to section 59 of the 1990 Act to be entered in the register referred to therein and, as far as the Company and the Directors are aware, having made due and proper enquiry, the interest of any persons connected (as that term is defined in the listing rules of the Irish Stock Exchange) with a Director were, prior to Admission and are, after Admission as follows:

Number of Number of Ordinary Shares Ordinary Shares Beneficially % of Total Beneficially % of Total Owned Share Capital Owned Share Capital Name Prior to Admission Following Admission Dr. Christopher Horn 2,205,914 9.56% 2,205,914 7.78% Barry Morris 41,500 0.18% 41,500 0.14% Dr. Sean Baker 1,428,885 6.25% 1,428,885 5.04% Annrai O’Toole 1,567,389 6.85% 1,567,389 5.20% Kevin Melia 0 0 0 0 Dr. Ivor Kenny 0 0 0 0

As at the date of this document, the following share options, which remain outstanding, have been granted over an aggregate of 629,236 Ordinary Shares pursuant to the Employee Share Option Schemes summarised at paragraph 6 of this Part IV:

Number of Range of Ordinary Shares Dates when Option firstÞ Exercise Price under Option exercisable (US$) Dr. Christopher Horn 1,126 25 May 1997 – 8 April 1999 0.3212-18.75 Barry Morris 508,700 1 October 1998 – 16 August 2001 1.141-65.25 Dr. Sean Baker 1,126 29 May 1997 – 8 April 1999 0.3212-18.75 Annrai O’Toole 700 15 November 1997 – 8 April 1999 5.00-18.75 Kevin Melia 36,250 16 June 1999 – 27 July 2000 15.00-74.50 Dr. Ivor Kenny 26,334 16 August 1999 – 27 July 2000 12.75-74.50

Except as disclosed above, no interest in the share capital of the Company is held by a Director and no such interest, the existence of which is known to or would with reasonable diligence be ascertained by the relevant Director, is held by any person connected with a Director.

IR£1 is payable on the grant of certain options under the Employee Share Option Schemes.

(b) Directors’ Interests in Transactions

During the period June 1999 to November 1999, Dr. Ivor Kenny was retained by IONA as a consultant. Dr. Kenny provided advice to the Directors and senior management on the strategic direction of the Company. For these services he was paid IR£36,750 and a research grant of IR£36,750 was paid to University College Dublin during the financial year ended 31 December 1999.

Save as disclosed in this paragraph 4(b) and in paragraph 4(a) above, no Director has any interest in any transaction which is or was unusual in its nature or conditions or significant to the business of the Group and which: (i) was effected by the Company during the current or immediately preceding financial year; or

(ii) was effected by the Company during an earlier financial year and remains in any respect outstanding or unperformed.

In addition to the interests set out in paragraph 4(a) above, details of shareholders who, as far as the Company is aware, as at the date of this document, are interested directly or indirectly in 3 per cent. or more of the Company’s issued Ordinary Shares are as follows:

Percentage of Issued Number of Ordinary Shares Ordinary Shares following Admission Holder Guaranty Nominees Limited 15,500,012 54.6%

Except as disclosed in this paragraph 4(c), the Directors are not aware of any person who, as at the date of this document, directly or indirectly, jointly or severally, exercises or could exercise control over the Company.

(d) Directors’ Remuneration

The aggregate remuneration (including salaries, fees, pension contributions, bonus payments and benefits in kind) payable to the Directors during the financial year ended 31 December 2000 amounted to US$687,000. The aggregate remuneration payable to the Directors in respect of the year ending 31 December 2001, under the arrangements in force at the date of this document, is expected to amount to approximately US$1,219,998.

There are no arrangements under which a Director has agreed to waive future emoluments and no such waivers occurred in the financial year ended 31 December 2000. (e) Directors’ Service Agreements

Dr. Christopher Horn

The Company entered into an employment agreement with Christopher Horn on 1 January 1994. The employment agreement is terminable by Dr. Horn on four weeks’ notice and by the Company either on eight weeks’ notice or by payment of eight weeks’ salary. Under its original terms a salary of IR£40,000 per annum was paid to Dr. Horn. Dr. Horn’s current salary is IR£225,000 per annum. Under the terms of the employment agreement a performance related bonus can be provided to Dr. Horn, with the Board’s consent. A bonus payment of IR£110,358 was paid to Dr. Horn in February of 2001.

Barry Morris

The Company entered into an employment agreement with Barry Morris on 21 November 1994. The employment agreement is terminable by Mr. Morris on four weeks’ notice and by the Company either on eight weeks’ notice or by payment of eight weeks’ salary. Under its original terms a salary of IR£30,000 per annum was paid to Mr. Morris. Mr. Morris’ current salary is US$350,000 per annum. Under the terms of the employment agreement a performance related bonus can be provided to Mr. Morris, with the Board’s consent. A bonus payment of US$285,489 was paid to Mr. Morris in February of 2001.

Dr. Sean Baker

The Company entered into an employment agreement with Sean Baker on 1 July 1994. The employment agreement is terminable by Dr. Baker on four weeks’ notice and by the Company either on eight weeks’ notice or by payment of eight weeks’ salary. Under its original terms a salary of IR£35,000 per annum was paid to Dr. Baker. Dr. Baker’s current salary is IR£90,000 per annum. Under the terms of the employment agreement a performance related bonus can be provided to Mr. Morris, with the Board’s consent. Dr. Baker did not receive a bonus for the financial year ended 31 December 2000.

There are no service agreements in place with Mr. O’ Toole, Mr Melia and Dr. Kenny. Pursuant to actions of the Board, IONA pays Mr. Melia and Dr. Kenny US$3,000 per month for services rendered by them to IONA.

5. Subsidiaries

As at the date of this document, the Company was the holding company of all companies in the Group. Details of the Company’s subsidiaries, all of which are wholly owned, are set out below:

Subsidiary andÞ Registered Office Principal activity Country of Incorporation IONA Technologies, Inc Development and supply of US 200 West St. computer software and Waltham Massachusetts support, training and 02451 US consultancy

IONA Technologies Pty. Limited Development and supply of Australia 3rd Floor, Ashton Chambers computer software and 189 St. George’s Terrace support, training and Perth, WA 6000 consultancy Australia

IONA Technologies Finance Investment and Finance Cayman Islands PO Box 309 Company Grand Cayman Cayman Islands British West Indies

Subsidiary andÞ Registered Office Principal activity Country of Incorporation

IONA Technologies China Limited Sale of software products, China 2203-2206 Pioneer Centre support, training and 750 Nathan Road consultancy Kowloon Hong Kong

IONA Technologies GmbH Sale of software products, Germany Brunnenweg 7 support, training and D-64331 Weiterstadt consultancy Germany

IONA Technologies UK Limited Sale of software products, UK 125 Wharfedale Road support, training and Winnersh Triangle consultancy Wokingham Berkshire RG41 5RB England

IONA Technologies Sarl Sale of software products, France Tour Ariane support, training and Place de la Defense consultancy La Defense 9 92088 Paris La Defense Cedex France

IONA Technologies Singapore Sale of software products, Singapore 20 Havelock Road support, training and 02-45 Central Square consultancy Singapore 059765

IONA Technologies Japan Sale of software products, Japan Akaska Sanchome Bldg support, training and 7F 3-12-16 consultancy Akaska Minato-ku Tokyo 107-0052 Japan

IONA Technologies Italia Srl Sale of software products, Italy Via Cornaggia 10 support, training and 20123 Milano Italy consultancy IONA Technologies (Suisse) SA Sale of software products, Switzerland Ueberlandstrasse 107 support, training and 8600 Duebendorf consultancy Switzerland

IONA Technologies (Belgium) SA Sale of software products, Belgium Avenue Marcel Thiry 204 support, training and 1200 Brussels consultancy Belgium Subsidiary andÞ Registered Office Principal activity Country of Incorporation

IONA Technologies Netherlands BV Sale of software products, The Netherlands Drantestraat 20 support, training and 1083 HK, Amsterdam consultancy The Netherlands

IONA Research (Ireland) Limited Non-trading Ireland The IONA Building Shelbourne Road Dublin 4 Ireland

Orbix Limited Dormant Ireland The IONA Building Shelbourne Road Dublin 4 Ireland

Genesis Development Corporation Consulting services US 10 North Church Street 4th floor West Chester, PA 19380 US

Object Orientated Concepts, Inc Sale of software products, US 200 West Street support, training and Waltham, MA 02451 consultancy US

6. Employee Share Option Schemes

Executive Share Option Scheme

In May 1995, IONA adopted the Executive Share Option Scheme, under which it reserved 1,125,500 Ordinary Shares for issuance. Options under the Executive Share Option Scheme may only be granted to Directors of IONA and full-time employees of IONA or of a subsidiary of IONA and must have an exercise price not less than the par value of the Ordinary Shares. Options lapse when not exercised:

• within seven years of the date of grant;

• twelve months after the death of an optionee; or

• prior to termination of optionee’s employment for any reason, although the Board has discretion to delay lapse in individual cases.

1997 Share Option Scheme

IONA’s Board and Shareholders approved the 1997 Share Option Scheme in January 1997 and February 1997, respectively, and amendments in July 1998 and March 2000 to increase the number of Ordinary Shares reserved for grant under such Scheme. The 1997 Share Option Scheme, as amended, provides for the grant of share options to employees, consultants, Directors and officers of IONA and its subsidiaries. As of 31 March 2000, the 1997 Share Option Scheme provides for the issuance of up to 8,900,000 of IONA’s Ordinary Shares. Generally, under the 1997 Share Option Scheme, an award is not transferable by the award holder except by will or by the laws of descent and distribution. Options granted under the 1997 Share Option Scheme expire ten years from the date of grant or five years from the date of grant in the case of incentive stock options issued to employees holding more than 10% of the total combined voting power of IONA.

The 1997 Share Option Scheme is administered by the Compensation Committee of the Board. Subject to the provisions of the 1997 Share Option Scheme, the Compensation Committee has the authority to select the optionees and determine the terms of the options granted, including:

• the number of shares subject to each option;

• when the option becomes exercisable;

• the exercise price of the option (which in the case of an incentive stock option cannot be less than the market price of the Ordinary Shares as of the date of grant or, in the case of employees holding more than 10% of the combined voting power of IONA, 110% of the market price of the Ordinary Shares as of the date of grant);

• the duration of the option; and

• the time, manner and form of payment upon exercise of an option.

IONA, at its forthcoming general meeting, has proposed a resolution that the number of shares authorised for issuance under the 1997 Share Option Scheme be increased from 8,900,000 to 12,900,000.

1997 Director Share Option Scheme

IONA’s Board and Shareholders approved the 1997 Director Share Option Scheme in January 1997 and February 1997, respectively. The 1997 Director Share Option Scheme provides for the grant of options to purchase a maximum of 250,000 Ordinary Shares of IONA to non-employee Directors of the Group. The 1997 Director Share Option Scheme is administered by the compensation committee of the Board.

Under the 1997 Director Share Option Scheme, each Director of any Group company who is not also an employee or officer of any Group company will automatically receive an option to purchase 30,000 Ordinary Shares on the date such person is first elected to the Board. In addition, each such Director, as well as any other Director who is not also an employee or officer of any Group company, will automatically receive (1) an option to purchase an additional 21,000 Ordinary Shares at the time of each annual meeting of Shareholders at which such Director is re-elected for a three-year term; and (2) an option to purchase an additional 3,000 Ordinary Shares at the time of each other annual meeting of Shareholders after the first anniversary of such Director’s initial award, provided, however, that such person has continuously served as a non-employee Director during such period. The exercise price per share for all options granted under the 1997 Director Share Option Scheme will be equal to the fair market value of the Ordinary Shares on the date of grant. All options granted under the 1997 Director Share Option Scheme are exercisable in three equal annual instalments, assuming such Director satisfies certain requirements. The term of each option will be for a period of ten years from the date of grant. Options under the 1997 Director Share Option Scheme may not be assigned or transferred except by will or by the laws of descent and distribution and are exercisable to the extent vested only while the optionee is serving as a Director of any Group company or within 90 days after the optionee ceases to remain as a Director of IONA or any of its subsidiaries. However, if a Director dies or becomes disabled while he or she is serving as a Director of any Group company, all options held by the Director at his or her death immediately vest and are fully exercisable until the scheduled expiration date of the options; and under certain circumstances following an acquisition of IONA, the options may be exercisable as well.

1999 Employee Share Purchase Plan

In August 1999, the Company established a qualified Employee Stock Purchase Plan (the ‘‘1999 Plan’’), the terms of which allow for qualified employees to participate in the purchase of designated shares of the Company’s common stock at a price equal to the lower of 85% of the closing price at the beginning or end of each semi-annual stock purchase period. At 31 December 2000, 60,441 shares have been issued under the plan. There were no shares of common stock issued under the plan at 31 December 1999.

The 1999 Plan may be administered by a committee of the Board. All employees of the Company or its participating subsidiaries in full-time employment for more than five months in the calendar year are eligible to receive options under the 1999 Plan under which up to 500,000 Ordinary Shares may be issued. The option price per Ordinary Share for each payment period (a six month period commencing 1 February and 1 August and ending 31 July and 31 January respectively in each year) is the lesser of (1) 85% of the average market price of the ADRs on the first business day of the payment period and (2) 85% of the average market price of such ADRs on the last business day of the payment period, in either event rounded up to the nearest cent. In each payment period an employee may authorise payroll deductions in an amount not less than 1% but not more than 10% of the employee’s salary for participation in the 1999 Plan. Options granted under the 1999 Plan may not be transferred or assigned and may be exercised only by the participants. Rights under the 1999 Plan terminate in certain specified events including retirement, resignation and death. Unless terminated sooner, the 1999 Plan terminates on 9 June 2009.

7. Property

The Group’s principal establishments are as follows:

Location Tenure Approximate Area of Premises The IONA BuildingÞ Leasehold—expires in 2023 with anÞ 44,650 square feet (11,250 of whichÞ Shelbourne Road BallsbridgeÞ option to exit the lease in 2013 is sublet by the Company) Dublin 4Þ Ireland

200 West StreetÞ Leasehold—expires in 2006, subjectÞ 60,718 square feet WalthamÞ to IONA’s right to renew for anÞ Massachusetts 02451Þ additional term of five years expiringÞ US in 2011

8. Pensions

IONA sponsors and contributes to a defined contribution plan for certain employees and Directors. Contribution amounts by IONA are determined by management and allocated to employees on a pro rata basis based on employees’ contributions. IONA contributed approximately US$1,411,000 and US$1,201,000, to the plan in the years ended 31 December 2000 and 1999, respectively. 9. Taxation

The following is a general summary of the significant Irish tax consequences applicable to US holders in respect of the ownership and disposition of IONA Ordinary Shares.

This summary is based on Irish taxation laws currently in force, regulations promulgated thereunder, the current provisions of the convention between the Government of the US and the Government of Ireland for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains (the ‘‘Treaty’’), specific proposals to amend any of the forgoing publicly announced prior to the date hereof and the currently published administrative practices of the Irish Revenue Commissioners, all as of the date of this document. Taxation laws are subject to change, from time to time, and no representation is or can be made as to whether such laws will change, or what impact, if any, such changes will have on the statements contained in this summary. No assurance can be given that proposed amendments will be enacted as proposed, or that legislative or judicial changes, or changes in administrative practice, will not modify or change the statements expressed herein.

This summary is of a general nature only and does not discuss all aspects of Irish taxation that may be relevant to a particular US Holder of Ordinary Shares.

Holders of Ordinary Shares are advised to consult their own tax advisors with respect to the application of taxation laws to their particular circumstances in relation to the ownership and disposition of Ordinary Shares.

This summary applies to US holders that (i) are resident in the US for the purposes of the Treaty; (ii) are not also residents of, or ordinarily resident in, Ireland for Irish tax purposes; (iii) are not engaged in any trade or business and do not perform independent personal services through a permanent establishment or fixed base in Ireland; (iv) do not own, directly, indirectly or by attribution, ten percent or more of the Ordinary Shares (by votes or value) and (v) in the case of US holders that are corporations, are ultimately controlled by persons resident in the US.

The summary deals only with Ordinary Shares legally and beneficially held by US Holders as capital assets and does not address special classes of purchasers, including, but not limited to dealers in securities, insurance companies, tax-exempt organisations and financial institutions which may be subject to special rules not discussed below.

Dividends

IONA does not expect to pay dividends in the foreseeable future. Should IONA begin paying dividends, such dividends will generally be subject to dividend withholding tax (‘‘DWT’’) in Ireland at the standard rate of income tax (currently 22%). The Finance Act 2001 reduces this DWT rate to 20% from 6 April 2001. IONA is responsible for withholding DWT at source.

Dividends paid by IONA to US holders will be exempt from DWT if, prior to the payment of such dividends, the recipient US holder delivers to IONA a declaration which has not been subsequently withdrawn or expired, a certificate of residency and, in the case of US holders that are corporations, an auditor’s certificate, each in the form prescribed by the Irish Revenue Commissioners. Alternatively, US holders that receive dividends that have been subject to DWT can apply to the Irish Revenue Commissioners claiming a full refund of DWT paid by filing similar prescribed documents with the Irish Revenue Commissioners following the receipt of such dividends.

The DWT rate applicable to US holders is reduced to 15% under the terms of the Treaty. While this will generally entitle US holders to claim a partial refund of DWT from the Irish Revenue Commissioners, US holders will, in most instances, likely prefer to claim exemption or seek a full refund of DWT under Irish domestic legislation.

Capital Gains on Disposal of IONA Ordinary Shares

US holders will not be subject to Irish capital gains tax on the disposal of Ordinary Shares provided that such shares are quoted on a stock exchange at the time of disposition. A stock exchange for this purpose includes the Irish Stock Exchange or the Nasdaq. While it is the intention of IONA to continue the quotation of Ordinary Shares on the Irish Stock Exchange (and the quotation of ADRs on the Nasdaq), no assurances can be given in this regard.

Irish Capital Acquisitions Tax

A gift or inheritance of Ordinary Shares will fall within the charge to Irish capital acquisition tax (‘‘CAT’’) because IONA shares are considered to be Irish property for CAT purposes. CAT is currently chargeable at a rate of 20% on the value of gifts or inheritances above specified tax free thresholds. Different classes of tax free thresholds apply depending upon the relationship between the donor and the recipient. These tax free thresholds are also affected by the value of previous gifts or inheritances received since 2 December 1988. Gifts or inheritances between spouses are not subject to Irish CAT.

In a case where an inheritance of Ordinary Shares is subject to both Irish CAT and US Federal Estate tax, the Estate Tax Convention between Ireland and the US allows for the crediting, in whole or in part, of the Irish CAT against the US Federal Estate tax payable. Similar relief is not available for CAT payable on gifts.

Irish Stamp Duty

Irish stamp duty, which is a tax imposed on certain documents, is payable on all transfers of Ordinary Shares (other than transfers made between spouses or between 90% controlled associated companies). Irish stamp duty is also payable on CREST transfers of Ordinary Shares.

Where the transfer is made as part of a sale, stamp duty will be charged at a rate of 1%, rounded up to the nearest €1 (the ad valorem rate), of the value of the consideration received for the transfer, or, if higher, the market value of the shares transferred. Where the consideration for the sale is expressed in a currency other than euros, the duty will be charged on the euro equivalent calculated at the rate of exchange prevailing at the date of the transfer.

Transfers of Ordinary Shares where no beneficial interest passes (e.g. a transfer of shares from a shareholder to a nominee for the benefit of such shareholder), will generally be exempt from stamp duty if the transfer form contains an appropriate certification, otherwise a flat stamp duty rate of €12.50 (the nominal rate) will apply.

A transfer of Ordinary Shares by a US holder to the Depositary or Custodian of ADSs in return for ADRs, will be stampable at the ad valorem rate if the transfer relates to a sale or contemplated sale or any other change in the beneficial ownership of the underlying Ordinary Shares. The transfer will be exempt from stamp duty if the transfer does not involve a change in the beneficial ownership in the underlying Ordinary Shares, provided the transfer form contains an appropriate certification, otherwise the nominal rate of €12.50 will apply.

The person accountable for payment of stamp duty is the transferee or, in the case of a transfer by way of gift or for a consideration less than the market value, both parties to the transfer. Stamp duty is normally payable within 30 days after the date of execution of the transfer. Late or inadequate payment of stamp duty will result in liability for interest, penalties and fines.

10. Litigation

No Group company is involved in nor has any Group company been involved in any legal or arbitration proceedings which may have or have had during the twelve months prior to the date hereof a significant effect on the Group’s financial position nor are any such proceedings pending or threatened by or against any Group company save for the following:

On 25 March 2000, Inprise Corporation filed suit against IONA and IONA Technologies, Inc. in the California Superior Court, San Mateo County, alleging, among other things, unfair competition, breach of contract, trademark infringement, trade libel, and interference with contract, requesting an injunction against further commission of the alleged acts, and requesting monetary damages. In February 2001, Inprise Corporation withdrew its suit against IONA and IONA Technologies, Inc. The majority of costs incurred by IONA in defending this suit will be reimbursed by the Company’s insurance company.

On 29 March 2000, RSA Securities, Inc. and the Massachusetts Institute of Technology filed suit against IONA and IONA Technologies, Inc. in the US District Court, District of Northern California alleging that IONA had breached the terms of a patent license between RSA and IONA dated 30 December 1997, seeking to enjoin IONA from distributing software products practising the patent in question, and requesting monetary damages. In June 2000, IONA and RSA entered into a confidential settlement agreement to settle all outstanding claims between the parties. Costs associated with the settlement of this litigation amounted to US$1,350,000.

11. Material Contracts

The following is a summary of the contracts (not being contracts entered into in the ordinary course of business) which have been entered into by any member of the IONA Group within the two years immediately preceding the date of this document and are or may be material, or contracts (not being contracts entered into in the ordinary course of business) which contain any provision under which any Group company has any obligation or entitlement which is or may be material to the Group as at the date of this document:

(a) Assignment of the Intellectual Property Rights dated 27 January 1999 between Peter James Morgan and Malcolm James Congreve Sparks and IONA for the assignment of the intellectual property rights of EJBHome Limited in relation to HomeBase software and HomeStart software, for a consideration of US$1.6 million. The consideration was satisfied by US$1 million in cash as initial consideration and US$600,000 as deferred consideration, which was paid in January 2000.

(b) Assignment and Bill of Sale Agreement dated 1 July 1999 between IONA, Aurora, James F. Watson III, Lester Rene Claudio, Stuart Walter Fraser and William G.Henry (as amended by a letter of agreement dated 2 September 1999) under which IONA acquired the outstanding shares of Aurora for a consideration of US$1.3 million. The consideration was satisfied by US$520,000 in cash and 48,750 Ordinary Shares, issuable in two tranches as 24,375 Ordinary Shares each, of which the first issued on 26 July 2000 and the second is due to be issued on 1 July 2001. (c) Share Subscription Agreement dated 21 October 1999 between Intel 64 Fund, LLC and IONA, under which the Intel 64 Fund, LLC subscribed for 200,000 fully paid Ordinary Shares. Pursuant to this Agreement, IONA made various representations and warranties to Intel concerning (inter alia) the Company, its capitalisation, financial position, business and valid issue of the shares issued under this Agreement to Intel.

(d) Investor Rights Agreement dated 21 October 1999 between IONA and the Intel 64 Fund, LLC, in relation to the rights the Intel 64, LLC obtained in consideration of completing the Intel Share Subscription Agreement under which the Company covenanted and agreed to:-

(i) give Intel information rights by way of prompt delivery to Intel of Annual Reports, Current Reports on Form 6-K and other SEC Filings; and

(ii) afford Intel certain registration rights and in particular to use all reasonable commercial efforts to cause to be filed and become effective with the US Securities Exchange Commission a Registration Statement on Form F-3 relating to all Ordinary Shares then owned by Intel within 181 days of the closing of the subscription by Intel described at paragraph 11 (c) above.

(e) Asset Purchase Agreement dated 23 February 2000 (‘‘Watershed Asset Purchase Agreement’’) between IONA, IONA Technologies, Inc., Watershed and Watershed Technologies Trust under which IONA acquired substantially all of the assets of Watershed for cash consideration of US$13.3 million. Pursuant to this Agreement IONA received certain representations and warranties from Watershed concerning (inter alia) the Company, its capital, financial position and business. The consideration was satisfied by US$12.8 million in cash on closing with US$500,000 held back for payment in cash six months following closing, subject to indemnity claims.

(f) Share Subscription Agreement between IONA and Watershed dated 23 February 2000 under which Watershed agreed to subscribe for 119,175 Ordinary Shares for an aggregate cash subscription price of US$8.2 million. Pursuant to this Agreement, IONA made certain representations and warranties to Watershed concerning (inter alia) the Company, its capital, financial position, business and valid issue of the shares issued under this Agreement to Watershed.

(g) Registration Rights Agreement dated 23 February 2000 between IONA and Watershed under which Watershed was afforded certain registration rights including the undertaking by IONA to file a registration statement registering the Ordinary Shares issued pursuant to the Watershed Share Subscription Agreement and to use all reasonable efforts to cause the registration statement to become effective as expeditiously as possible and to remain effective until the second anniversary of the date such registration became effective.

(h) Agreement and Plan of Merger between IONA, Groton Merger, Inc. (‘‘Groton Merger Sub’’) and Genesis dated 13 June 2000 whereby a wholly-owned subsidiary of IONA merged with and into Genesis, pursuant to which Genesis became a wholly-owned subsidiary of IONA. The total consideration for this merger consisted of 331,744 newly-issued Ordinary Shares and 126,423 replacement vested options over Ordinary Shares, US$500,000 in cash. Pursuant to the Agreement and Plan of Merger, Genesis made various representations and warranties to IONA and Groton Merger Sub relating to, inter alia, Genesis, its capitalisation, business and financial conditions. Such representations and warranties were supported by an indemnification given by Genesis stockholders. Pursuant to this Agreement IONA and Groton Merger Sub made various representations and warranties relating to (inter alia) their valid existence, authority to enter into this Agreement, capital, financial position, business and the due and valid issue of the Ordinary Shares issued pursuant to this Agreement as consideration for the acquisition of Genesis.

(i) Registration Rights Agreement dated 13 June 2000 between IONA and the stockholders of Genesis listed in Schedule 1 thereto under which such stockholders were afforded certain registration rights including the undertaking by IONA to file a registration statement registering the Ordinary Shares issued to such stockholders pursuant to the Genesis Merger Agreement and to use all reasonable efforts to cause such registration statement to become effective as expeditiously as possible and to remain effective until the first anniversary of the date of the Genesis Merger Agreement. In addition, the Genesis stockholders were afforded certain piggy-back registration rights.

(j) Escrow Agreement dated 13 June 2000 between IONA, the Genesis stockholders’ representative and State Street Bank and Trust Company (the ‘‘Escrow Agent’’) under which US$500,000 was withheld and placed in escrow as security for any indemnity payments until 31 March 2001, if any, to be made by the stockholders pursuant to Article VIII of the Merger Agreement.

(k) Relinquishment Agreement dated 13 June 2000 between IONA and the Genesis stockholders’ representative under which the Genesis stockholders agreed that if specified revenue targets for the periods ending 31 May 2001 and 2002 are not achieved, specified Ordinary Shares will be relinquished and transferred to IONA for no consideration. Certain Genesis stockholders agreed not to sell, transfer or otherwise dispose of certain of the Ordinary Shares other than according to the terms of this Relinquishment Agreement.

(l) Stockholder Representation Letters dated 13 June 2000 between each of the Genesis stockholders and IONA under which the Genesis stockholders make certain representations and acknowledge that Ordinary Shares issued pursuant to the Genesis Merger Agreement cannot be resold until they are registered under the US Securities Act 1933 or unless an exemption is available and that the Ordinary Shares are acquired by the stockholder for his own account and not for resale.

(m) Agreement and Plan of Merger between IONA, Orange Merger Corporation (‘‘Orange Merger Sub’’) and OOC dated 8 February 2001, whereby a wholly-owned subsidiary of IONA merged with and into OOC, pursuant to which OOC became a wholly-owned subsidiary of IONA. The total consideration for the Merger consisted of 905,564 newly-issued Ordinary Shares and replacement options, US$3,000,000 in cash. Pursuant to the Agreement and Plan of Merger, OOC made various representations and warranties to IONA and Orange Merger Sub relating to, inter alia, OOC, its share capital, business and financial conditions. Such representations and warranties were supported by an indemnification given by the OOC stockholder. Pursuant to this Agreement IONA and Orange Merger Sub also made certain representations and warranties relating to (inter alia) their valid existence, authority to enter into this Agreement and the due and valid issue of the Ordinary Shares issued pursuant to this Agreement as consideration for the acquisition of OOC.

(n) Registration Rights Agreement dated 8 February 2001 between IONA and the stockholders of OOC listed in Schedule 1 thereto under which such stockholders were afforded certain registration rights including the undertaking by IONA if necessary to file a registration statement registering the Ordinary Shares issued to such stockholders pursuant to the OOC Merger Agreement and to use all reasonable efforts to cause such registration statement to become effective as expeditiously as possible and to remain effective until the first anniversary of the date of the OOC Merger Agreement. In addition, the OOC Stockholders were afforded certain piggy-back registrations rights.

(o) Escrow Agreement dated 8 February 2001 between IONA, the stockholders of OOC’s representative, Marc Laukien and State Street Bank and Trust Company (the ‘‘Escrow Agent’’) under which US$3 million was withheld and placed in escrow as security for any indemnity payments until 8 February 2003 if any to be made by the stockholders pursuant to Article VIII of the Merger Agreement.

(p) Relinquishment Agreement dated 8 February 2001 between IONA, the stockholders listed in Exhibit A and the stockholders representative of OOC under which the OOC stockholders agreed that if specified revenue targets for the periods ending 31 August 2001 and 28 February 2002 are not achieved specified Ordinary Shares will be relinquished and transferred to IONA for no consideration. OOC stockholders agreed not to sell, transfer or otherwise dispose of certain of the Ordinary Shares specified in this Agreement other than according to the terms of this Relinquishment Agreement.

(q) Lock-Up Agreement dated 8 February 2001 under which option holders of common stock in OOC agreed, for a period of 180 days from the closing date of the OOC Agreement and Plan of Merger, not to exercise, directly or indirectly, 80% of the options held by them as of 8 February 2001.

(r) Asset Purchase Agreement dated 7 February 2001 between IONA, IONA Technologies, Inc. and Software AG, Inc. (‘‘SAG’’) for the acquisition of certain assets of SAG and the non-exclusive license rights to certain portions of SAG’s enterprise application integration technology for a consideration of US$10 million. The consideration is satisfied by US$6,000,000 paid on 15 February 2001 and US$4,000,000 payable within five business days of acceptance of Version 2.5 of the SAG Software, which is estimated under the Asset Purchase Agreement to be early May 2001.

(s) An Agreement and Plan of Reorganisation dated 14 February 2001, between IONA, NV Acquisition Corp. and Netfish, pursuant to which IONA has agreed to acquire Netfish for a total consideration of up to 5.5 million Ordinary Shares or the Consideration Shares. The Acquisition is subject to the approval of shareholders of both IONA and Netfish, as well as customary regulatory and other closing conditions, details of which are set out in paragraph 12 of this Part IV. The Merger Agreement may be terminated by either IONA or Netfish if the Effective Time does not occur on or prior to (i) 31 May 2001 or (ii) if certain regulatory approvals set forth in the Merger Agreement have not been obtained prior to 31 May 2001, the earlier of (A) 31 August 2001 and (B) five business days following the date such regulatory approval has been obtained other than as a result of a breach of the Merger Agreement by the terminating party. Under the Merger Agreement, NV Acquisition Corp., a newly created wholly owned subsidiary of IONA will be merged with and into Netfish. Netfish will be the surviving corporation and will become a wholly owned subsidiary of IONA. Upon consummation of the Acquisition, the Outstanding Netfish Shares will be cancelled and in exchange for such cancellation Consideration Shares will be issued, with cash being paid in lieu of issuance of fractional shares. The outstanding options and warrants of Netfish will be assumed by IONA and will be exercisable for Ordinary Shares. Netfish’s nominee shall be appointed to the Board at Closing to serve until the next annual general meeting of IONA at which time such person shall stand for re-election.

The total number of Consideration Shares to be issued or issuable pursuant to the Merger Agreement for Fully Diluted Shares is 5.5 million Ordinary Shares less any adjustment amount for interest bearing indebtedness for borrowed money of Netfish in excess of US$668,000 and for the aggregate amount of all costs and expenses incurred by Netfish in connection with the Merger Agreement in excess of US$5 million. If after 14 February 2000 and prior to the Effective Time of the Acquisition options to purchase shares of Netfish Common Stock are issued with the consent of IONA, the number of Consideration Shares issuable will be increased in accordance with a formula set out in the Merger Agreement by reference to the Common Stock Conversion Ratio (as referred to below).

The ratio at which one outstanding share of Netfish Preferred Stock will be cancelled and Consideration Shares issued in exchange for such cancellation is herein called the ‘‘Preferred Stock Conversion Ratio,’’ the ratio at which one outstanding share of Netfish Common Stock will be cancelled and Consideration Shares issued in exchange for such cancellation is herein called the ‘‘Common Stock Conversion Ratio,’’ and each will be calculated as described below and as set forth in Section 2.1(c) of the Merger Agreement. At the Effective Time, each Outstanding Netfish Share will be cancelled and, simultaneously upon and in exchange for the cancellation of such share, the rights attaching to such share shall be converted into the right to receive that number of the Consideration Shares as follows: (i) First, each Outstanding Netfish Share, that is a share of Netfish Series D Preferred Stock will, on such cancellation and exchange, entitle the holder thereof to the right to receive that number of the Consideration Shares that equals the quotient obtained by dividing (A) US$6.455, by (B) the average closing price of the IONA ADRs on the Nasdaq over the 30 trading days ending three trading days prior to the Closing Date (the ‘‘Parent Average Closing Price’’); and each Outstanding Netfish Share, that is a share of Netfish Series C Preferred Stock will, on such cancellation and exchange, entitle the holder thereof to the right to receive that number of the Consideration Shares that equals the quotient obtained by dividing (A) US$2.34244, by (B) the Parent Average Closing Price;

(ii) Second, each Outstanding Netfish Share, that is a share of Netfish Series B Preferred Stock will, on such cancellation and exchange, entitle the holder thereof to the right to receive that number of the Consideration Shares that equals the quotient obtained by dividing (A) US$1.30, by (B) the Parent Average Closing Price; and each Outstanding Netfish Share, that is a share of Netfish Series A Preferred Stock will, on such cancellation and exchange, entitle the holder thereof to the right to receive that number of the Consideration Shares that equals the quotient obtained by dividing (A) US$0.6536, by (B) the Parent Average Closing Price;

(iii) Third, in addition to the amounts set forth above, each Outstanding Netfish Share that is a share of:

(I) Netfish Series D Preferred Stock will, on such cancellation and exchange, entitle the holder thereof to the right to receive that number of the Consideration Shares that equals the lesser of (1) the quotient obtained by dividing (x) US$12.91, by (y) the Parent Average Closing Price and (2) the quotient obtained by dividing (x) the Post-Liquidation Preference Merger Shares by (y) the number of Fully Diluted Shares;

(II) Netfish Series C Preferred Stock, will, on such cancellation and exchange, entitle the holder thereof to the right to receive that number of shares of the Consideration Shares that equals the lesser of (1) the quotient quotient obtained by dividing (x) US$4.68488, by (y) the Parent Average Closing Price and (2) the quotient obtained by dividing (x) the Post-Liquidation Preference Merger Shares, by (y) the number of Fully Diluted Shares;

(III) Netfish Series B Preferred Stock will, on such cancellation and exchange, entitle the holder thereof to the right to receive that number of the Consideration Shares that equals the lesser of (1) the quotient obtained by dividing (x) US$2.60, by (y) the Parent Average Closing Price and (2) the quotient obtained by dividing (x) the Post-Liquidation Preference Merger Shares, by (y) the number of Fully Diluted Shares;

(IV) Series A Preferred will, on such cancellation and exchange, entitle the holder thereof to the right to receive that number of the Consideration Shares that equals the lesser of (1) the quotient obtained by dividing (y) US$1.3072, by (y) the Parent Average Closing Price and (2) the quotient obtained by dividing (x) the Post-Liquidation Preference Merger Shares, by (y) the number of Fully Diluted Shares; and

(V) Netfish Common Stock will, on such cancellation and exchange, entitle the holder thereof to the right to receive that number of the Consideration Shares that equals the quotient obtained by dividing (1) the Post-Liquidation Preference Merger Shares, by (2) the number of Fully Diluted Shares.

(iv) In addition to the amount set forth above, each Outstanding Netfish Share that is a share of Netfish Common Stock will, on such cancellation and exchange, entitle the holder thereof to the right to receive that number (which may be a fraction) of the Consideration Shares that equals the quotient obtained by dividing (A) the number of Residual Merger Shares (as such term is defined in the Merger Agreement) by (B)(1) the number of shares of Netfish Common Stock actually issued and outstanding immediately prior to the Effective Time plus (2) the number of shares of Netfish Common Stock issuable upon the exercise or conversion of all Outstanding Netfish Options.

(v) Each holder of Outstanding Netfish Shares will be entitled to receive that aggregate number of the Consideration Shares equal to the number of shares of Netfish Preferred Stock held by such holder immediately prior to the Effective Time multiplied by the applicable Preferred Stock Conversion Ratio and the number of shares of Netfish Common Stock held by such holder immediately prior to the Effective Time multiplied by the Common Stock Conversion Ratio.

Pursuant to the Merger Agreement, the Outstanding Netfish Options shall be assumed by IONA in accordance with the terms of Netfish’s 1999 Stock Option Plan and the stock option agreement by which each Netfish Option is evidenced will be amended to entitle such option holder to Consideration Shares. The number of Consideration Shares subject to each such assumed Netfish option shall be equal to the number of shares of Netfish Common Stock that were subject to such Netfish Option immediately prior to the Effective Time multiplied by the Common Stock Conversion Ratio, rounded down to the nearest whole number, and the per share exercise price for the Consideration Shares issuable upon exercise of each such assumed Netfish option shall be determined by dividing the exercise price per share of Netfish Common Stock subject to such Netfish option, as in effect immediately prior to the Effective Time, by the Common Stock Conversion Ratio, and rounding the resulting exercise price up to the nearest whole cent. All restrictions on the exercise of each such assumed Netfish option shall continue in full force and effect, and the term, exercisability, vesting schedule and other provisions of such Netfish option shall otherwise remain unchanged. As of 14 February 2001, 8,202,341 shares of Netfish Common Stock were subject to outstanding Netfish options. In general, options granted under the 1999 Stock Option Plan contain four year vesting schedules, vesting as to 25% on the first anniversary of the date of option agreement evidencing the grant of option and as to the remaining 75% being exercisable in successive equal six-monthly instalments of 12.5%.

Warrants for Netfish stock that have been assumed by IONA under the Merger Agreement shall continue to be subject to the same terms and conditions contained in the respective warrant agreements governing such warrants except that it shall be exercisable only for Consideration Shares in such number and at such exercise price as is determined by applying either the Common Stock Conversion Ratio in the case of warrants to purchase Netfish Common Stock or the applicable Preferred Stock Conversion Ratio in the case of warrants to purchase Netfish Preferred Stock. As of 14 February 2001, there were warrants outstanding to purchase an aggregate of 15,492 shares of Netfish Series D Preferred Stock and 131,142 shares of Netfish Common Stock.

In lieu of fractional shares, any holder of Outstanding Netfish Shares who would otherwise be entitled to a fraction of a Consideration Share (after aggregating all such fractional Consideration Shares to be received by such holder) will be paid the cash value of such fraction, which will be equal to such fraction multiplied by the Parent Average Closing Price.

Pursuant to the Merger Agreement, IONA, its subsidiary, NV Acquisition Corp. and Netfish make various representations and warranties including (inter alia) representations as to their organisation and capitalisation, their authority to into this Merger Agreement and to consummate the transactions contemplated thereby, changes in their businesses and as to the payment fees or commissions in connection with the Acquisition. Netfish in addition gives further representations and warranties including (inter alia) representations as to the absence of litigation, its employee benefits plans, its material contracts, its liabilities, compliance with laws, its assets, its proprietary assets, its tax matters, the shareholder votes necessary to approve the Merger Agreement and certain other operational matters. The majority of the representations and warranties expire on the first anniversary of Closing but certain of the warranties such as taxation will survive until the second anniversary of Closing. The Netfish shareholders, pursuant to the Merger Agreement, will indemnify IONA for losses or damages to IONA resulting from any inaccuracies or breaches of these representations and warranties. Up to 550,000 of the Consideration Shares will be held back by IONA to secure these indemnification obligations of the Netfish shareholders with respect to the representations and warranties and covenants made by Netfish in the Merger Agreement (in most cases once such losses exceed US$250,000). The maximum aggregate liability of each Netfish shareholder under such indemnification will be limited to the Holdback Shares issuable to such shareholder except that there will be no limitation for certain claims such as title to ownership of securities or

arising out of fraud or wilful misstatements or omissions. Subject to distributions made for actual indemnifications (if any) or continued retention for pending claims, (if any) 75% and 25% respectively of the remaining Holdback Shares will be distributed on a pro rata basis to each of Netfish’s shareholders after the first and second anniversaries respectively of the Closing Date.

Pursuant to the Merger Agreement, IONA has entered into voting agreements with certain Netfish shareholders. As of 14 February 2001, shareholders holding shares of Netfish representing, respectively, approximately 62% of the outstanding Netfish Common Stock, 41% of the Netfish Preferred Stock, 81% of the Netfish Series C Preferred Stock and 56% of the Netfish Series D Preferred Stock have agreed pursuant to such voting agreements to vote in favour of the Acquisition and against any competing proposals. Any holder of Netfish Capital Stock who objects to the Acquisition may, under certain circumstances, exercise dissenters’ rights and receive cash for the fair market value of the holder’s shares of Netfish Capital Stock.

Pursuant to the Merger Agreement, each Netfish shareholder who is an employee of or consultant to Netfish or any Netfish subsidiaries will be required to enter into an investment agreement pursuant to which such shareholder agrees not to sell any New Ordinary Shares for a period of 180 days from the Effective Time, provided, however, that up to 10% of such shareholder’s New Ordinary Shares may be sold prior to the expiration of the 180 day period. Shareholders who were not employees of, or consultants to, Netfish or any subsidiary of Netfish will be allowed to sell such shareholder’s New Ordinary Shares after the Effective Time, provided that, for a period of 180 days from the Effective Time, such shares may only be sold in brokers’ transactions executed by Lehman Brothers in compliance with Rule 144 of the US Securities Act of 1933, as amended or pursuant to an effective registration statement in connection with an underwritten public offering.

IONA has agreed that all rights to indemnification existing on 14 February 2001 (including rights, if any, to the advancement of expenses) in favour of the present or former officers and directors of Netfish, with respect to actions taken in their capacities as directors or officers of Netfish prior to the Effective Time as provided in the Charter Documents of Netfish and any applicable indemnification agreements (copies of which have been provided to IONA) will survive the Acquisition and continue in full force and effect following the Effective Time and the obligations related thereto will be assumed by IONA until the sixth anniversary of the Closing Date. Notwithstanding the foregoing, the provisions of such Charter Documents or agreements will have no effect on the obligations of any shareholders of Netfish pursuant to Article X of the Merger Agreement which deals with the indemnification to be given to IONA by Netfish shareholders.

The above summaries of material contracts and in particular (without limitation) the summary of the Merger Agreement relating to Netfish in paragraph 11(s) above are intended only as a brief outline of certain of the terms and conditions of those contracts and are, in each case, subject to and qualified in their entirety by reference to the specific material contract that has been summarised, all of which are available for review as display documents, see paragraph 15(j) of this Part IV for details of location of display. For further details of the Merger Agreement, you are urged to read the Merger Agreement and the Information Statement.

12. Governmental and Regulatory Matters

The Acquisition, in addition to being subject to the approval of shareholders of both IONA and Netfish, is also subject to certain customary, regulatory and other closing conditions. The principal governmental and regulatory filings and/or clearances required are as follows:

(a) The statutory Merger Agreement, which is provided for and exhibited in the Merger Agreement and certain ancillary documents to the statutory Merger Agreement must, prior to consummation of the Acquisition, be filed with the Secretary of State of California, USA.

(b) Under Hart-Scott-Rodino Anti-Trust Improvement Act of 1976, as amended, and the Rules and Regulations thereunder (the ‘‘HSR Act’’), both IONA and Netfish are required to report the Acquisition to and make a filing about the Acquisition with the US Federal Anti-Trust Agency, the US Department of Justice and the Federal Trade Commission (the ‘‘Federal Entities’’) prior to the Acquisition closing. After this filing, IONA

and Netfish will be subject to a 30 day waiting period during which such Federal Entities will review the terms of the Acquisition for potential anti-trust violations and during which time the Acquisition may not be consummated. The 30 day waiting period may, if the Federal Entities favourably review the filing, be terminated earlier, or should the contrary occur, it may be extended. On 8 March 2001, both IONA and Netfish made the required filings under the HSR Act with both Federal Entities and on 16 March 2001, early termination of the waiting period was granted.

(c) A confirmation in respect of the Acquisition was sought from the Irish Minister for Enterprise, Trade and Employment (the ‘‘Minister’’) pursuant to the Irish Mergers, Takeovers and Monopolies (Control) Act, 1978 (the ‘‘Irish Mergers Act’’) as amended. The Minister has stated in writing on 27 March 2001 that she does not intend to make an order under section 9 of the Irish Mergers Act in relation to the Acquisition.

(d) The New Ordinary Shares will not be registered under the US Securities Act 1933 but instead reliance is being made upon the exemption from such registration provided by section 3(a)(10) of such Securities Act. In order to perfect such exemption from registration afforded by Section 3(a)(10), a permit for the issuance of securities needs to be issued by the Commissioner of the California Department of Corporations pursuant to section 25121 of the California Corporate Securities Law of 1968, as amended. The permit will be issued after the completion of a fairness hearing upon the authorisation by the California Commissioner of Corporations of the issuance of IONA Ordinary Shares to be issued pursuant to the Acquisition. The parties anticipate that the fairness hearing will be held within six to eight weeks from the date of the filing of the initial application for the permit. In the event that either (i) the fairness hearing is not available to IONA and Netfish; (ii) the fairness hearing is available but the California Department of Corporations does not issue the permit or (iii) the exemption from registration under Section 3(a)(10) of the Securities Act is otherwise not available in connection with the Merger Agreement, then IONA shall promptly prepare and file a registration statement on Form F-4 under the Securities Act for the purpose of registering the Ordinary Shares to be issued by IONA under the Securities Act.

It should be noted that the requirement for approval of the Shareholders to the issuance of the Consideration Shares emanates from certain rules of Nasdaq which require Shareholder approval for share issuances of 20% or more of the Company’s prevailing issued share capital. By virtue of IONA’s secondary listing on the Irish Stock Exchange, there is no requirement under the Listing Rules of the Irish Stock Exchange for Shareholder approval for the Acquisition.

13. Working Capital

In the opinion of the Directors, having made due and careful enquiry, the working capital available to the Group is sufficient for the Group’s present requirements, that is, for at least the next twelve months from the date of this document.

14. Description of American Depositary Receipts or ADRs

ADRs evidencing American Depositary Securities (‘‘ADSs’’) are issuable pursuant to a deposit agreement (the ‘‘Deposit Agreement’’) entered into between IONA and Morgan Guaranty Trust Company of New York, as Depositary (the ‘‘Depositary’’) and the registered holders (the ‘‘Holders’’) from time to time of the ADRs issued thereunder. Each ADS represents as of the date hereof one Ordinary Share which is deposited with the Custodian, currently the London office of Morgan Guaranty Trust Company of New York (together with any successor or successors thereto (the ‘‘Custodian’’). The following is a summary of certain provisions of the Deposit Agreement, this summary does not purport to be complete and is qualified in its entirety by reference to the Deposit Agreement.

American Depositary Receipts

The Depositary will issue the ADSs. Each ADS will represent an ownership interest in one Ordinary Share. The shares or the right to receive shares will be deposited by us with the Custodian. Each ADS will also represent securities, cash or other property deposited with the Depositary but not distributed to ADS holders.

The Depositary’s Principal New York Office is located at 60 Wall Street, New York, New York 10260 (the ‘‘Principal New York Office’’).

Shareholders may hold ADSs either directly or indirectly through their broker or other financial institution. If they hold ADSs directly, they are an ADS holder. This description assumes they hold ADSs directly. If Shareholders hold the ADSs indirectly, they must rely on the procedures of their broker or other financial institution to assert the rights of ADS holders described in this section.

Because the Depositary will actually be the legal owner of the shares, Shareholders must rely on it to exercise the rights of a shareholder. The obligations of the Depositary are set out in the Deposit Agreement. The Deposit Agreement and the ADSs are generally governed by New York law.

Share Dividends and Other Distributions

The Depositary has, subject to the terms and conditions of the Deposit Agreement, agreed to pay Shareholders the cash dividends or other distributions it or the Custodian receives on shares or other deposited securities after deducting its fees and expenses. Shareholders will receive these distributions in proportion to the number of shares their ADSs represent.

The Depositary will, as promptly as practicable, convert any cash dividend or other cash distribution the Company pays on the shares into US dollars, if it can do so on a reasonable basis and can transfer the US dollars to the US. If that is not possible or if any approval from any government is needed and cannot be obtained, the Deposit Agreement allows the Depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. It may hold the foreign currency it cannot convert for the account of the ADS holders who have not been paid. It will not invest the foreign currency and it will not be liable for the interest.

Before making a distribution, any withholding taxes that must be paid will be deducted. It will distribute only whole US dollars and cents and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when the Depositary cannot convert the foreign currency, Shareholders may lose some or all of the value of the distribution.

The Depositary will distribute new ADSs representing any shares the Company may distribute as a dividend or free distribution, if we request it to make this distribution. The Depositary will only distribute whole ADSs. It will sell shares which would require it to issue a fractional ADS and distribute the net proceeds in the same way as it does with cash. If the Depositary does not distribute additional ADSs, each ADS will also represent the new shares. If the Company offers holders of securities any rights to subscribe for additional shares or any other rights, the Depositary, after consultation with the Company, will have discretion as to the procedure to be followed in making these rights available to Shareholders. If the Depositary determines that it is not legal or feasible to make these rights available to Shareholders, the Depositary may sell the rights and allocate the net proceeds. The Depositary, may allow rights that are not distributed or sold to lapse. In that case, Shareholders will receive no value for them.

After consultation with the Company, if the Depositary makes rights available to a Shareholder, upon instruction from a Shareholder it will exercise the rights and purchase the shares on the Shareholder’s behalf. The Depositary will then deposit the shares and issue ADSs to the Shareholder. It will only exercise rights if Shareholders pay it the exercise price and any other charges which are required to be paid.

US Securities laws may restrict the sale, deposit, cancellation and transfer of the ADSs issued after exercise of rights. For example, Shareholders may not be able to trade the ADSs freely in the US. In this case, the Depositary may issue the ADSs under a separate restricted deposit agreement which will contain the same provisions as the Deposit Agreement, except for the changes needed to put the restrictions in place. The Depositary will not offer Shareholders rights unless those rights and the securities to which the rights relate are either exempt from registration or have been registered under the Securities Act with respect of a distribution to Shareholders. The Company will have no obligation to register under the Securities Act those rights or the securities to which they relate.

The Depositary will, after consultation with the Company, send to Shareholders anything else the Company distributes on deposited securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, the Depositary, after consultation with the Company, may decide to sell what the Company distributed and distribute the net proceeds in the same way as it does with cash or it may decide to hold what the Company distributed, in which case the ADSs will also represent the newly distributed property.

The Depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. The Company has no obligation to register ADSs, shares, rights or other securities under the Securities Act. The Company also has no obligation to take any other action to permit the distribution of ADSs, shares, rights or anything else to ADS holders. This means that Shareholders may not receive the distribution the Company makes on its shares or any value for them if it is illegal or impractical for the Company to make them available to Shareholders.

Deposit, Withdrawal and Cancellation

The Depositary will issue ADSs if a Shareholder or its broker deposit shares or evidence of rights to receive shares with the Custodian. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer fees, the Depositary will register the appropriate number of ADSs in the names the Shareholders request and will deliver the ADSs as promptly as practicable at its Principal New York Office to the persons the Shareholders request.

Shareholders may turn in their ADSs at the Depositary’s Principal New York Office. Upon payment of its fees and expenses any of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the Depositary will deliver (1) the underlying shares to the office of The Custodian to or upon the order of the person designated in the instructions received by the Depositary and (2) any other deposited securities underlying the ADS at the Depositary’s Principal New York Office or, at a Shareholders’ request, risk and expense, the Depositary will deliver the deposited securities at its Principal New York Office.

Voting Rights Shareholders may instruct the Depositary to vote the shares underlying their ADSs. Otherwise, they won’t be able to exercise their right to vote unless the Shareholder withdraws the shares. However, Shareholders may not know about the meeting enough in advance to withdraw the shares.

The Company will ask the Depositary to notify Shareholders of the upcoming vote and to arrange to deliver its voting materials to Shareholders. The materials will (1) describe matters to be voted on and (2) explain how Shareholders, by a specified date, may instruct the Depositary to vote the shares or other deposited securities underlying their ADSs as directed. For instructions to be valid, the Depositary must receive them on or before the date specified. The Depositary will try, as far as practical, subject to Irish law and the provisions of the Memorandum and Articles of Association, to vote or to have its agents vote the shares or other deposited securities as instructed. If the Depositary does not receive instructions from Shareholders by the date specified, the Depositary will deem Shareholders to have instructed the Depositary to give a discretionary proxy to a person designated by the Company and the Depositary will give a discretionary proxy to a person designated to vote such shares.

The Company cannot give assurance that Shareholders will receive the voting materials in time to ensure they can instruct the Depositary to vote their shares. In addition, the Depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that Shareholders may not be able to exercise their right to vote and there may be nothing they can do if their shares are not voted as they requested.

Payment of Taxes

The Depositary may deduct the amount of any taxes owed from any payments to Shareholders. The Depositary may refuse to transfer ADSs or allow the withdrawal of deposited securities underlying ADSs until such taxes or other charges are paid. The Depositary may withhold any dividends or other distributions, or may also sell deposited securities, by public or private sale, to pay any taxes owed. Shareholders will remain liable if the proceeds of the sale are not enough to pay the taxes. If the Depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay Shareholders any proceeds, or send any property, remaining after it has paid the taxes.

Disclosure of Interests

Each Shareholder, and each ADS holder, agree to provide the information that the Company request in each disclosure notice (a ‘‘Disclosure Notice’’) given pursuant to the Companies Acts or its Memorandum and Articles of Association. Shareholders also agree to comply with the provisions of the Companies Acts that require them to notify us if they become directly or indirectly interested within the meaning of the Companies Acts, in 5% or more of its outstanding shares which carry voting rights at its general meetings or are aware that another person for whom ADRs are held is so interested. Shareholders must notify the Company of their interest within five business days after becoming so interested or so aware. In addition, the Companies Acts require that Shareholders notify the Company of any subsequent changes in interests in the Company’s outstanding shares, up until and including the time of the transaction, which reduces their holding to below the above-mentioned 5% threshold.

Amendment and Termination

The Company may agree with the Depositary to amend the Deposit Agreement and the ADSs without Shareholder consent for any reason. If the amendment adds or increases fees or charges, except for taxes and other governmental charges or administrative expenses of the Depositary, or prejudices an important right of ADS holders, it will only become effective 30 days after the Depositary notifies Shareholders of the amendment.

The Depositary will terminate the Deposit Agreement if the Company asks it to do so. The Depositary may also terminate the agreement if the Depositary has told the Company that it would like to resign and the Company has not appointed a new depositary bank within 90 days. In both cases, the Depositary must notify Shareholders at least 90 days before termination.

15. Miscellaneous

(a) Goodbody Corporate Finance and Lehman Brothers have given and have not withdrawn their written consent to the issue of this document with the inclusion therein of the references to them, and Ernst & Young has given and not withdrawn its consent to the inclusion of its report and the references to it and its name in the form and context in which it is included.

(b) The financial information contained in Part II of this document does not comprise statutory financial statements as referred to in Section 19 of the 1986 Act. Statutory accounts of the Group have been delivered to the Registrar of Companies in Ireland for the three years ended 31 December 1997, 1998 and 1999. The auditors have made reports without qualification under Section 193 of the 1990 Act in respect of all such accounts.

(c) The total costs and expenses of or incidental to the preparation of this document (including registration fees, professional fees and printing costs) are estimated to amount to approximately IR£ 220,000 (excluding VAT where appropriate) and are payable by the Company.

(d) The Ordinary Shares have a nominal value of €0.0025 and the premium on the issue of the New Ordinary Shares will be €62.4478 per share.

(e) Following Admission, the New Ordinary Shares will be in registered form. It is expected that share certificates will be sent by mail to holders of Ordinary Shares who have elected to remain outside the CREST system promptly following the delivery by Netfish shareholders of share certificates in respect of Netfish Common Stock to the Company’s registrars. Temporary documents of title to Ordinary Shares will not be issued pending delivery of share certificates. Any holder of New Ordinary Shares electing to remain outside the CREST system should request that the Company cause to be delivered ADRs evidencing such holder’s Ordinary Shares in lieu of delivery of the share certificates therefor. The Company is not contractually bound to satisfy any such request.

(f) The New Ordinary Shares are neither being sold nor are they available in whole or in part to the public in conjunction with the Acquisition.

(g) There have not been any interruptions to the business of the Company or of the Group which may have had in the last twelve months, a significant effect on the financial position of the Group.

(h) The Director are not aware of any arrangement under which future dividends are waived or agreed to be waived.

(i) There has been no significant change in the financial or trading position of the Group since 31 December 2000, the date to which the most recently published audited financial statements have been prepared. (j) Copies of the following documents may be inspected during normal business hours, on any weekday (Saturdays and public holidays excepted) for a period of not less than 14 days following the date of this document, at the offices of William Fry Solicitors, Fitzwilton House, Wilton Place, Dublin 2 Ireland and at the Company’s registered office, The IONA Building, Shelbourne Road, Ballsbridge, Dublin 4 Ireland:

(i) the Memorandum and Articles of Association of the Company;

(ii) the audited financial statements of the Company for the financial periods ended 31 December 1997, 1998 and 1999 prepared in accordance with Irish generally accepted accounting principles;

(iii) the audited financial statements of the Company for the financial periods ended 31 December 1998, 1999 and 2000 prepared in accordance with US generally accepted accounting principles;

(iv) the Comparative Table set out in Part II of this document;

(v) the Directors’ service agreements referred to in paragraph 4(e) of this Part IV;

(vi) the rules of the IONA Employee Share Option Schemes referred to in paragraph 6 of this Part IV;

(vii) the written consents referred to in paragraph 15(a) of this Part IV;

(viii) the material contracts referred to in paragraph 11 of this Part IV, and the ADRs referred to in the Deposit Agreement (in paragraph 14 of this Part IV); and

(ix) the Information Statement.

2 April, 2001 IONA Technologies PLC

APPLICATION FORM

THIS APPLICATION FORM IS ISSUED WITH THIS LISTING PARTICULARS TO COMPLY WITH THE REQUIREMENTS OF THE EUROPEAN COMMUNITIES (STOCK EXCHANGE) REGULATIONS, 1984 OF IRELAND. IF YOU ARE A HOLDER OF COMMON STOCK OR PREFERRED STOCK IN NETFISH TECHNOLOGIES, INC. (‘‘NETFISH’’) AND HAVE ALREADY MADE OR EXPECT TO MAKE YOUR APPLICATION (PURSUANT TO A TRANSMITTAL FORM OR OTHERWISE) FOR ORDINARY SHARES IN IONA TECHNOLOGIES PLC (THE ‘‘COMPANY’’) OR IF YOU HAVE ALREADY RECEIVED OR EXPECT TO RECEIVE A CONFIRMATION OF YOUR APPLICATION FOR ORDINARY SHARES IN THE COMPANY (‘‘CONSIDERATION SHARES’’) YOU NEED NOT TAKE ANY ACTION WITH REGARD TO THIS APPLICATION FORM. NEITHER THE COMPANY OR ANY OF ITS AGENTS SHALL BE BOUND IN ANY WAY WHATSOEVER TO SELL ANY ORDINARY SHARES OR ADSs TO ANY PERSON WHO COMPLETES AND RETURNS THIS APPLICATION FORM.

THIS FORM DOES NOT CONSTITUTE AN OFFER OF ORDINARY SHARES OR ADSs FOR SALE TO THE PUBLIC.

THE CONSIDERATION SHARES WILL BE ISSUED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE US SECURITIES ACT OF 1933 (THE ‘‘US SECURITIES ACT’’), AS AMENDED AND ACCORDINGLY, HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER SUCH US SECURITIES ACT AND THE RELEVANT CLEARANCES HAVE NOT BEEN, AND WILL NOT BE, OBTAINED FROM THE SECURITIES COMMISSION OF ANY PROVINCE OF CANADA. NO PROSPECTUS IN RELATION TO THE CONSIDERATION SHARES HAS BEEN, OR WILL BE LODGED WITH OR REGISTERED BY THE AUSTRALIAN SECURITIES COMMISSION. ACCORDINGLY, THE CONSIDERATION SHARES MAY NOT BE OFFERED, SOLD, RESOLD OR DELIVERED, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA (EXCEPT IN COMPLIANCE WITH THE US SECURITIES ACT AND THE RULES AND REGULATIONS THEREUNDER), CANADA, AUSTRALIA OR ANY OTHER JURISDICTION IN WHICH THE OFFER OF CONSIDERATION SHARES WOULD CONSTITUTE A VIOLATION OF RELEVANT LAWS OR REQUIRE REGISTRATION THEREOF.

To:* Computershare Services (Ireland) Limited

I/We apply for 1 Ordinary Shares of €0.0025 each in the Company (‘‘Ordinary Shares’’) on and subject to the terms and conditions contained in the Agreement and Plan of Reorganisation between the Company, NV Acquisition Corp. and Netfish dated 14 February 2001, subject to the Memorandum and Articles of Association of the Company and in compliance with applicable law.

MR MRS MS OR TITLE FORENAME(S) (IN FULL)

SURNAME

ADDRESS (IN FULL)

Any joint applicants should complete the following details:

MR MRS MISS OR TITLE

FORENAME(S) IN FULL SURNAME

ADDRESS (IN FULL)

SIGNATURE

MR MRS MISS OR TITLE

FORENAME(S) IN FULL

SURNAME

ADDRESS (IN FULL)

SIGNATURE

MR MRS MISS OR TITLE

FORENAME(S) IN FULL

SURNAME

ADDRESS (IN FULL)

SIGNATURE Listing Particulars relating to the Company and its ordinary share capital have been prepared, and have been approved by The Irish Stock Exchange Limited in accordance with the European Communities (Stock Exchange) Regulations, 1984 of Ireland. Copies of such particulars can be inspected at or obtained from the offices of the Company at the IONA Building, Shelbourne Road, Ballsbridge, Dublin 4.

1 Number is fixed in accordance with the priority of the Merger Agreement relating to cancellation of Netfish capital stock in exchange for Ordinary Shares in the Company. APPENDIX I

INDEX TO NETFISH TECHNOLOGIES, INC. FINANCIAL STATEMENTS

Appendix I Page Years ended December 31, 2000 (and 1999) Report of Independent Auditors...... 2 Balance Sheets ...... 3 Statements of Operations ...... 4 Statements of Stockholders’ Equity (Deficit)...... 5 Statements of Cash Flows ...... 6 Notes to Financial Statements...... 7

Year ended December 31, 1999 Independent Auditor’s Report...... 17 Balance Sheet...... 18 Statement of Loss...... 19 Statement of Stockholders’ Equity...... 20 Statement of Cash Flows...... 21 Notes to Financial Statements...... 22

Years ended December 31, 1998 (and 1997) Independent Auditor’s Report...... 28 Balance Sheets ...... 29 Statements of Earnings...... 30 Statements of Stockholder’s Equity ...... 31 Statements of Cash Flows ...... 32 Notes to Financial Statements...... 33

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders NETFISH TECHNOLOGIES, INC.

We have audited the accompanying balance sheet of Netfish Technologies, Inc. as of December 31, 2000, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Netfish Technologies, Inc. as of, and for the year ended, December 31, 1999 were audited by other auditors whose report, dated August 8, 2000, expressed an unqualified opinion on those statements and included an explanatory paragraph that discussed the Company’s ability to continue as a going concern.

We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the 2000 financial statements referred to above present fairly, in all material respects, the financial position of Netfish Technologies, Inc. at December 31, 2000, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States.

As discussed in Note 3 to the financial statements, the Company’s recurring losses from operations, its working capital deficit, and net capital deficiency raise substantial doubt about its ability to continue as a going concern. The 2000 financial statements do not include any adjustments that might result from the outcome of this uncertainty.

San Jose, February 26, 2001 Ernst & Young LLP /s/ NETFISH TECHNOLOGIES, INC.

BALANCE SHEETS

December 31 2000 1999 Assets Current assets: Cash and cash equivalents...... $ — $1,010,173 Accounts receivable, net of allowance for doubtful accounts ofÞ $241,000 in 2000 ...... 6,355,368 140,000 Prepaid expenses and other current assets...... 364,518 26,768 Total current assets ...... 6,719,886 1,176,941 Property and equipment, net ...... 2,589,479 419,997 Other assets . 828,507 305,266 Total assets . $10,137,872 $1,902,204

Liabilities and stockholders’ equity (deficit) Current liabilities: Short-term debt ...... $ 776,711 $ — Accounts payable ...... 5,324,430 892,122 Accrued payroll and related benefits...... 2,123,485 481,588 Current portion of long-term debt ...... — 26,669 Convertible notes payable...... 2,970,000 2,482,000 Other accrued expenses...... 1,102,031 84,535 Deferred revenue...... 3,015,805 — Total current liabilities...... 15,312,462 3,966,914

Notes payable to stockholder ...... 450,000 350,000 Deferred revenue, noncurrent portion...... 6,934,333 —

Commitments and contingencies

Stockholders’ equity (deficit): Common stock—no par value: Authorized shares—39,000,000...... Issued and outstanding shares—14,941,032 in 2000 andÞ 13,935,414 in 1999 ...... 3,855,862 43,415 Convertible preferred stock—no par value: Authorized shares—11,970,018 Issued and outstanding shares—10,688,712 in 2000 andÞ 4,301,197 in 1999 ...... 36,406,012 4,399,367 Deferred stock-based compensation...... (1,914,077) — Accumulated equity (deficit)...... (50,906,720) (6,857,492) Total stockholders’ equity (deficit)...... (12,558,923) (2,414,710) Total liabilities and stockholders’ equity (deficit) ...... $10,137,872 $1,902,204

See accompanying notes. NETFISH TECHNOLOGIES, INC.

STATEMENTS OF OPERATIONS

Years Ended December 31 2000 1999 Revenue: License fee revenue...... $ 5,186,058 $ — Service revenue...... 2,734,519 385,739 Total revenue ...... 7,920,577 385,739

Cost of revenue: Cost of license fee revenue ...... 621,677 — Cost of service revenue ...... 1,349,526 217,342 Total cost of revenue...... 1,971,203 217,342 Gross profit ...... 5,949,374 168,397

Operating expenses: Research and development...... 19,728,494 1,153,994 Sales and marketing ...... 17,946,053 1,196,588 General and administrative ...... 12,781,576 4,795,556 Amortization of deferred stock-based compensation ...... 135,000 — Total operating expenses...... 50,591,123 7,146,138 Operating loss ...... (44,641,749) (6,977,741)

Interest and other income, net ...... 667,521 20,078 Loss before income taxes...... (43,974,228) (6,957,663) Provision for income taxes...... 75,000 800 Net loss ...... $(44,049,228) $(6,958,463)

See accompanying notes. NETFISH TECHNOLOGIES, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

DeferredÞ ConvertibleÞ Stock-BasedÞ AccumulatedÞ Preferred Stock Common Stock Compensation Equity Total (Deficit) Shares Amount Shares Amount Balances at December 31, 1998 ...... — $ — 9,000,000 $ 9,000 $ — $ 100,971 $ 109,971 Issuance of shares of Series A convertible preferred stock ...... 1,844,353 1,205,470 — — — — 1,205,470 Issuance of shares of Series B convertible preferred stock ...... 2,456,844 3,193,897 — — — — 3,193,897 Stock options exercised ...... — — 127,885 14,327 — — 14,327 Issuance of common stock...... — — 4,807,529 20,088 — — 20,088 Net loss...... — — — — — (6,958,463) (6,958,463) Balances at December 31,1999 ...... 4,301,197 4,399,367 13,935,414 43,415 — (6,857,492) (2,414,710) Issuance of shares of Series B convertible preferred stock ...... 23,100 30,030 — — — — 30,030 Issuance of shares of Series C convertible preferred stock ...... 2,210,332 5,162,009 — — — — 5,162,009 Issuance of shares of Series D convertible preferred stock ...... 4,154,083 26,814,606 — — — — 26,814,606 Stock options exercised ...... — — 515,296 99,986 — — 99,986 Issuance of common stock...... — — 490,322 1,231,295 — — 1,231,295 Fair value of options issued to nonemployees ...... — — — 432,089 — — 432,089 Deferred stock-based compensation...... — — — 2,049,077 (2,049,077) — — Amortization of deferred stock- based compensation...... — — — — 135,000 — 135,000 Net loss...... — — — — — (44,049,228) (44,049,228) Balances at December 31, 2000 ...... 10,688,712 $ 36,406,012 14,941,032 $ 3,855,862 $ (1,914,077) $ (50,906,720) $ (12,558,923)

See accompanying notes. NETFISH TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOW

Years Ended December 31 2000 1999 Operating activities Net loss . $(44,049,228) $(6,958,463) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation...... 539,866 42,985 Amortization of deferred stock-based compensation ...... 135,000 — Issuance of stock in exchange for services...... 61,198 369,172 Stock-based compensation...... 432,089 — Changes in operating assets and liabilities: Accounts receivable ...... (6,215,368) (140,000) Prepaids and other assets...... (860,991) (301,503) Accounts payable ...... 4,432,308 892,122 Accrued payroll and related benefits...... 1,641,897 481,588 Other accrued expenses...... 1,017,496 61,085 Deferred revenue...... 9,950,138 — Net cash used in operating activities...... (32,915,595) (5,553,014)

Investing activities Purchases of property and equipment ...... (2,709,348) (462,982) Net cash used in investing activities...... (2,709,348) (462,982)

Financing activities Proceeds from issuance of convertible preferred stock...... 32,006,645 4,045,495 Proceeds from issuance of common stock...... 1,170,097 4,788 Proceeds from the exercise of stock options ...... 99,986 14,327 Proceeds from borrowing, net...... 1,338,042 2,858,668 Net cash provided by financing activities ...... 34,614,770 6,923,278

Net increase (decrease) in cash and cash equivalents ...... (1,010,173) 907,282 Cash and cash equivalents at beginning of year ...... 1,010,173 102,891 Cash and cash equivalents at end of year ...... $ — $ 1,010,173

Supplemental disclosures of cash flow information Cash paid for income taxes ...... $ — $ 19,583 Cash paid for interest ...... $ — $ —

Supplemental schedule of noncash investing and financing activities Issuance of stock in exchange for services...... $ 61,198 $ 369,172 Stock-based compensation related to stock options...... $ 432,089 $ — Deferred stock-based compensation related to options granted ...... $ 2,049,077 $ —

See accompanying notes. NETFISH TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

1. Organization

Netfish Technologies, Inc. (the ‘‘Company’’) was incorporated in the state of California on August 9, 1997. The Company provides software products that enable the seamless business-to-business integration of information systems, both inside and outside the enterprise. The Company derives the majority of its revenues from the licensing of its software and from providing related software support. The Company also provides professional services, consisting of customer consulting and training.

2. Summary of Significant Accounting Policies

Use of Estimates

The accompanying financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of GAAP financial statements requires management to make certain estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.

Stock Split

Effective as of May 19, 1999, the Company declared a one for one thousand stock split. All share data included within the Company’s financial statements have been adjusted as appropriate to reflect the stock split.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of accounts receivable, accounts payable, and accrued liabilities. The current carrying amount of each of these instruments approximates fair market value due to the relatively short period of time to maturity for these instruments.

Comprehensive Loss

Comprehensive loss approximates net loss for all periods presented.

Property and Equipment

Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets, which range from three to five years. Leasehold improvements are amortized using the straight-line method over the term of the related lease or the estimated useful lives of the assets, whichever is shorter. Reclassifications

Certain reclassifications, none of which affected operating loss or net loss, have been made in the 1999 financial statements to conform to the 2000 presentation.

Long-Lived Assets

Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, requires that long-lived assets and certain intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the estimated undiscounted cash flows that are expected to result from the use of the assets are less than the carrying amount of the assets, an impairment loss is recorded equal to the excess of the carrying amount over the fair value of the assets. The Company, based on current circumstances, does not believe that any long-lived assets are impaired at December 31, 2000.

Revenue Recognition

The Company’s revenue is derived from product licenses and related services. The Company applies the revenue recognition criteria of Statement of Position 97-2, Software Revenue Recognition (‘‘SOP 97-2’’), as amended.

Under the terms of SOP 97-2, where an arrangement to deliver software does not require significant production, modification, or customization, the Company recognizes software revenues when all of the following criteria are met:

• Persuasive evidence of an arrangement exists.

• Delivery has occurred.

• The fee is fixed or determinable.

• Collection of the resulting receivable is probable.

When the Company enters into multiple element arrangements consisting of both product and service, revenue is allocated between the elements based on vendor-specific objective evidence of fair values. The portion of the fee allocated to an element is recognized when the four criteria for revenue recognition stated above have been met. In circumstances where no vendor-specific evidence of fair value can be determined for undelivered maintenance services, but all other revenue criteria have been met, the whole arrangement value is spread ratably over the period of the agreement.

Service revenues consist of revenue from professional service consulting and training which are provided primarily on a time and materials basis for which revenue is recognized in the period that the services are provided.

Where the professional services relate to arrangements requiring significant production, modification, or customization of software, and the service element does not meet the criteria for separate accounting, the entire arrangement, including the software element, is accounted for in conformity with the percentage-oI-completion contract accounting method. Percentage-oI-completion is generally measured using input measures, primarily hours.

The Company generated approximately 25% of its product license revenue by selling its products through indirect channels (Distributors, Value-Added Resellers, and Original Equipment Manufacturers). Revenue on arrangements with customers who are not the ultimate end users is generally not recognized until the software has been delivered to an end user. However, the Company recognizes revenue on the sale of its products to indirect channel partners upon delivery when an explicit provision in the underlying agreement exists, eliminating the indirect channel partner’s right to return product. Historically, the Company has not experienced significant returns or exchanges of its products.

NETFISH TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Cost of Revenue

Cost of revenue includes the costs of products and services. Cost of product revenue includes materials (such as diskettes, packaging, and documentation). Cost of service revenue includes the salary costs of personnel engaged in consultancy, third-party consultants contracted by the Company, training, and technical support as well as telephone and other support costs.

Deferred Revenue

Deferred revenue consists primarily of the unrecognized portion of revenue under maintenance and support contracts, software arrangements, including services that do not qualify for the separate service accounting method as discussed above, and revenue under arrangements where sufficient vendor-specific objective evidence does not exist to allocate the overall revenue to the delivered and undelivered elements of the arrangement.

Research and Development Costs

Research and development expenditures are generally charged to operations as incurred. Statement of Financial Accounting Standards No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed, requires capitalization of certain software development costs subsequent to the establishment of technical feasibility. The Company defines the establishment of technological feasibility as the completion of all planning, design, coding, and testing activities that are necessary to establish products that meet design specifications, including functions, features, and technical performance requirements. Under the Company’s definition, establishing technological feasibility is considered complete only after the majority of customer testing and customer feedback has been incorporated into product functionality. To date, the period between technological feasibility and general availability has been short, and thus, software development costs qualifying for capitalization have been insignificant.

Advertising Costs

Costs related to advertising and promotions of services are charged to sales and marketing expense as incurred. Advertising expenses for the years ended December 31, 2000 and 1999 were approximately $6.1 million and $322,000, respectively.

Income Taxes

The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (‘‘SFAS 109’’). In accordance with SFAS 109, the Company uses the liability method in accounting for income taxes. Deferred tax assets and liabilities are determined based upon differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

Segment Reporting

Statement of Financial Accounting Standards No. 131, Disclosure About Segments of an Enterprise and Related Information, establishes annual and interim reporting standards for an enterprise’s operating segments and related disclosures about its products, services, geographic areas, and major customers. The Company has determined that it operates in only one segment.

NETFISH TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board (‘‘FASB’’) issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, (‘‘SFAS 133’’), which requires companies to record derivative financial instruments on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The key criterion for hedge accounting is that the hedging relationship must be highly effective in achieving offsetting changes in fair value or cash flows. The Company will be required to adopt SFAS 133 in fiscal 2001 in accordance with SFAS 137, which delays the required implementation of SFAS 133 for one year. As the Company currently does not invest in derivative instruments or engage in hedging activities, management does not expect the adoption of SFAS 133 to have a significant impact on the Company’s financial position, operating results, or cash flows.

In March 2000, the FASB issued Financial Accounting Standards Board Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation—an Interpretation of APB Opinion No. 25 (‘‘FIN 44’’). FIN 44 addresses the application of APB Opinion No. 25 to clarify, among other issues, (a) the definition of employee for purposes of applying APB Opinion No. 25, (b) the criteria for determining whether a plan qualifies as a noncompensatory plan, (c) the accounting consequence of various modifications to the terms of a previously fixed stock option or award, and (d) the accounting for an exchange of stock compensation awards in a business combination. FIN 44 is effective July 1, 2000, but certain conclusions cover specific events that occur after either December 15, 1998 or January 12, 2000. To the extent FIN 44 covers events occurring during the period after December 15, 1998 or January 12, 2000, but before the effective date of July 1, 2000, the effects of applying the interpretation will be recognized on a prospective basis from July 1, 2000. The adoption of FIN No. 44 has not had a material effect on the Company’s financial position or results of operations.

3. Going Concern

The Company is subject to a number of risks associated with companies in a similar stage of development, including, but not limited to, a history of net losses and the expectation of continuing losses; volatility of and rapid change in the information technology support provider market; potential competition from larger, more established companies, and dependence on key employees for technology and support.

Since its inception, the Company has incurred operating losses and has been unable to generate sufficient cash flow from its operations to meet its obligations as they become due. As a result, the Company has had to rely principally on private equity funding to continue its activities to date. The Company intends to continue to invest in its sales, marketing, and technology development efforts, which the Company believes is critical to its ability to increase its customer base and its revenue and, thus, its ability to support its operations. The Company intends to utilize the proceeds of the $20 million bridge loan (see Note 15), obtained in connection with the definitive agreement entered into with IONA Technologies PLC (IONA) for the sale of the Company, to fund its short-term working capital needs. Management anticipates that the sale of the Company to IONA will close in April 2001. Upon the completion of this transaction, management believes that the Company will have access to capital resources sufficient to fund the Company’s planned operations and expansion going forward. If the Company is unable to complete the proposed transaction, raise additional private equity funding, or close an additional debt financing, significant uncertainty exists as to the ability of the Company to continue as a going concern over the next 12 months.

NETFISH TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

4. Concentration of Credit Risk and Significant Customers

The Company sells its products to companies in various industries. The Company maintains reserves for potential credit losses. To date, such losses have been within management’s expectations. The Company maintained an allowance for doubtful accounts of approximately $241,000 at December 31, 2000. The Company generally requires no collateral from its customers.

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade accounts receivable. The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. Four customers comprised approximately 60% of the accounts receivable balance at December 31, 2000. One customer comprised approximately 99% of the accounts receivable balance at December 31, 1999.

For the years ended December 31, 2000 and 1999, certain customers individually accounted for more than 10% of revenues as follows:

Years Ended December 31 2000 1999 Customer A .... . 20% 100% Customer B .... . 18% * Customer C .... . 13% * Customer D .... . 10% *

* Represents less than 10% of revenues for the indicated period.

5. Property and Equipment

Property and equipment consisted of the following at December 31:

2000 1999 Computers and equipment...... $2,413,523 $343,991 Software ...... 363,221 62,311 Furniture and fixtures...... 303,722 49,275 Leasehold improvements...... 91,861 7,405 3,172,327 462,982 Less accumulated depreciation...... (582,848) (42,985) $2,589,479 $419,997

6. Other Assets

Other assets consisted of the following at December 31:

2000 1999 Rent deposits...... $738,955 $140,320 Other deposits ..... 89,552 77,948 Other assets...... — 86,998 $828,507 $305,266

NETFISH TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

7. Short-Term Debt

In December 2000, the Company entered into a $2.0 million secured revolving credit facility (the Line) with a financial institution. The Line bears interest at the bank’s prime rate (6% at December 31, 2000) plus 1%. The Line will terminate, and all outstanding amounts will become due on December 15, 2001. The Line is collateralized by all of Company’s assets. At December 31, 2000, the Company had drawn down $776,711 and had $1,223,289 available under the Line.

8. Convertible Notes Payable

In November 2000, the Company entered into convertible note purchase agreements with current stockholders and third parties for $370,000 and $2.6 million, respectively, at an annual interest rate of 6%. If the Company consummates an equity financing prior to January 30, 2001, the unpaid principal and accrued interest shall be converted into the Company’s capital stock. If an equity financing is not consummated prior to January 30, 2001, the unpaid principal and accrued interest shall be due and payable upon demand. On February 7, 2001, $1.0 million was fully repaid, and $2.0 million was converted into 394,000 shares of common stock.

In December 1999, the Company entered into two convertible subordinated note purchase agreements with a third party totaling $2.0 million at an annual interest rate of 6%. If the Company consummates an equity financing prior to June 30, 2000, the unpaid principal and accrued interest shall be converted into the Company’s capital stock. If an equity financing is not consummated prior to June 30, 2000, the unpaid principal and accrued interest shall be due and payable upon demand. The $2.0 million outstanding as of December 31, 1999 was fully repaid in August 2000. Interest on the notes was forgiven upon repayment. Also included in the convertible notes balance as of December 31, 1999 are funds totaling $482,000 for payments on Series C preferred stock issued in February 2000.

Interest charged to expense on convertible notes at December 31, 2000 and 1999 was approximately $28,000 and $9,000, respectively.

9. Commitments and Contingencies

The Company leases its office space under noncancelable operating lease agreements. Monthly base rental payments under the agreements are fixed, and the office lease includes scheduled annual increases. As of December 31, 2000, the aggregate future minimum lease payments under all noncancelable operating leases with initial or remaining lease terms in excess of one year are as follows:

Year Ended December 31 (In Thousands) 2001 ...... $ 4,621 2002 ...... 5,173 2003 ...... 4,877 2004 ...... 3,675 2005 ...... 2,933 Thereafter...... 347 Total minimum lease commitments...... $ 21,626

NETFISH TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Rent expense under noncancelable operating leases was approximately $2.3 million and $321,255 for the years ended December 31, 2000 and 1999, respectively. The Company subleased a former facility under a noncancelable operating lease that expired December 31, 2000. Sublease rental income for the years ended December 31, 2000 and 1999 was $62,050 and $29,549, respectively.

From time to time, the Company is subject to various legal proceedings and claims that have arisen in the ordinary course of its business and which are pending. In the opinion of management, such matters will not result in any material liability to the Company.

10. Stockholders’ Equity (Deficit)

The Company is authorized to issue common and preferred stock. The total number of shares the Company is authorized to issue is 50,970,018, of which 39,000,000 shares are common stock, no par value, and 11,970,018 shares are preferred stock, no par value. The authorized preferred stock is designated to four classes.

Preferred stock as of December 31, 2000 consists of the following:

SharesÞ Shares Issued and Liquidation Authorized Outstanding Preference Series A.... . 1,923,357 1,844,353 $ 0.6536 Series B.... . 2,479,944 2,479,944 $ 1.3000 Series C.... . 3,066,717 2,210,332 $ 2.3424 Series D.... . 4,500,000 4,154,083 $ 6.4550 Total...... 11,970,018 10,688,712

Each share of Series A, Series B, Series C, and Series D is convertible by the holder, at any time, into common stock, as determined by dividing the issuance price of $.6536, $1.30, $2.34, and $6.46, respectively, by the conversion price which is initially the same as the issuance price and adjusted from time to time as defined by the preferred stock agreements in effect at the time of conversion. In addition, the preferred stock will automatically 2 convert into common stock at the then effective conversion price upon the affirmative vote of at least 66 /3% of the outstanding shares of preferred stock or immediately upon the closing of a firm underwritten public offering of the Company’s common stock, registered under the Securities Exchange Act of 1933, at a public offering price of at least $12.00 per share with aggregate proceeds to the Company of at least $20.0 million. The preferred stockholders have voting rights equal to the voting rights of the common stockholders on an as-if converted basis.

Preferred stockholders are entitled to receive noncumulative dividends, when and as declared by the Board of Directors, at annual amounts of $0.0327 per share, $0.065 per share, $0.188 per share, and $0.516 per share for Series A, Series B, Series C, and Series D, respectively. The Board of Directors has declared no dividends to date.

In the event of liquidation, the Series A, Series B, Series C, and Series D preferred stockholders are entitled to receive cash distributions equivalent to the liquidation preference noted in the table above, plus all declared and unpaid dividends prior to and in preference to any distributions to the holders of common stock.

NETFISH TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

11. Stock Option Plan

In May 1999, the Board of Directors approved the 1999 Stock Option Plan (‘‘the Plan’’). Awards under the Plan may be granted as incentive stock options (‘‘ISOs’’) and nonqualified stock options. The Plan provides for the granting of a maximum of 7,500,000 options to purchase common stock to employees and consultants of the Company. The option price per share shall not be less than 100% (110% if the optionee is granted ISOs and owns more than 10% of the total combined voting power of all classes of stock of the Company) of the fair market value of the underlying shares on the date of grant. The maximum term of an option may not exceed ten years (five years for any 10% stockholder). The options generally have a ten-year term and vest ratably over a four-year period. Shares available for future grants at December 31, 2000 and 1999 were 577,829 and 3,327,876, respectively.

Stock option activity under the Plan is as follows:

Stock Option Plan Weighted Number of Average Options Exercise Price Outstanding shares at December 31, 1998 ...... — $ — Granted...... 4,669,509 $ 0.159 Exercised...... (127,885) $ 0.112 Canceled...... (369,500) $ 0.101 Outstanding shares at December 31, 1999 ...... 4,172,124 $ 0.165 Granted...... 5,606,940 $ 1.096 Exercised...... (515,296) $ 0.194 Canceled...... (2,341,597) $ 0.344 Outstanding shares at December 31, 2000 ...... 6,922,171 $ 0.857 Exercisable at December 31, 1999...... 518,957 Exercisable at December 31, 2000...... 1,288,879

The following table summarizes the stock options outstanding as of December 31, 2000:

Options Outstanding Average Weighted Number of Contractual Average Exercise Prices Options Life Exercise Price (Years) $0.01 804,000 8.38 $ 0.10 $0.20 1,353,582 8.71 $ 0.20 $0.60 3,332,987 9.12 $ 0.60 $2.50 1,431,602 9.50 $ 2.50 $0.01—$2.50 6,922,171 9.03 $ 0.857

Pro forma information regarding net income is required by SFAS 123 and has been determined as if the Company had accounted for its employee stock options under the fair value method of that statement. The fair value of outstanding options was estimated at the date of grant using the minimum value method with the following assumptions: a risk-free interest rate of 6% for 2000 and 1999; no expected dividends; and a weighted average expected life of the options of nine years. NETFISH TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

The option valuation models require the input of highly subjective assumptions. Because changes in the subjective assumptions can materially affect the fair value estimates, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period. The Company’s pro forma net loss for the years ended December 31, 2000 and 1999 is approximately $44.4 million and $7.0 million, respectively.

12. Stock-Based Compensation

During the year ended December 31, 2000, in connection with stock option grants to employees, the Company recorded deferred stock-based compensation of approximately $2.0 million, representing the difference between the deemed fair market value per share of the common stock for financial reporting purposes and the exercise price per share of such options at the date of grant. The amount is presented as an increase in stockholders’ deficit and amortized ratably over the vesting period of the individual options, based on a graded vesting method consistent with the method described in Financial Accounting Standards Board Interpretation No. 28. The Company recorded amortization of deferred stock-based compensation of $135,000 for the year ended December 31, 2000, and the remaining balance will be amortized ratably over the vesting period.

The Company has issued nonqualified stock options to purchase common stock to consultants and other nonemployees. Stock options issued to consultants and other nonemployees are valued under the provisions of SFAS 123. These stock options generally vest immediately and are issued to consultants and other nonemployees in exchange for past services. The compensation expense related to these options was approximately $432,089 in fiscal 2000, and is included in operating expenses in the accompanying statements of operations. The fair value of outstanding options was estimated at the date of grant using the minimum value method with the following assumptions: a risk-free interest rate of 6% for 2000 and 1999; no expected dividends; and a weighted average expected life of the options of nine years.

13. Income Taxes

The Company has no provision for U.S. federal or state income taxes for any period as it has incurred operating losses in all periods and for all jurisdictions. The provision for income taxes entirely comprises withholding taxes imposed by a foreign jurisdiction.

As of December 31, 2000 and 1999, the Company had net operating loss carryforwards for federal income tax purposes of approximately $43.0 million and $6.4 million, respectively. The Company also had federal research and development tax credit carryforwards of approximately $700,000 and $128,000 at December 31, 2000 and 1999, respectively. The net operating loss and credit carryforwards will expire at various dates beginning in 2018 through 2020, if not utilized.

Utilization of the net operating losses and credit carryforwards may be subject to a substantial annual limitation due to ownership change provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

NETFISH TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Significant components of the Company’s deferred tax assets affected are as follows:

December 31 2000 1999 (In Thousands) Net operating loss carryforwards ...... $16,100 $2,731 Federal research credit carryforwards...... 700 128 State research credit carryforwards...... 300 73 Other—net ...... 3,500 17 Total deferred tax assets...... 20,600 2,949 Valuation allowance for deferred tax assets...... (20,600) (2,932) Net deferred tax assets ...... $ — $ 17

Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net 2000 deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $2,932,000 during the year ended December 31, 1999.

14. Notes Payable to Stockholder

Two unsecured demand notes were entered into with a stockholder for $350,000 and $100,000 on July 1, 1999 and March 1, 2000, respectively. Both notes bear no interest rate and have no maturity date. The notes payable to a stockholder are $450,000 and $350,000 at December 31, 2000 and 1999, respectively.

15. Subsequent Events

On February 15, 2001, IONA signed a definitive agreement to acquire the Company. The purchase price consists of 5.5 million shares of IONA’s common stock. This acquisition will be accounted for as a purchase. The transaction is subject to the approval of stockholders of both companies, as well as customary regulatory and other closing conditions, and is expected to close in April 2001.

In connection with the definitive agreement, the Company obtained a $20 million bridge loan from IONA that accrues interest at an annual rate of 8%. The loan will be advanced in two installments of $10 million. The Company received the first installment in February 2001. The second installment will be paid to the Company if the definitive agreement is terminated. In addition, if the agreement is terminated, the Company is obligated to issue IONA certain warrants to purchase shares as defined by the agreement. Both installments mature at the earlier of one year after the date of the advance, an initial public offering, closing of additional financing, or the occurrence of a change of control. The loan contains certain covenants, including restrictions on the Company’s ability to incur additional indebtedness. NETFISH TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued) Crawford, Pimentel & Co., Inc. Certified Public Accountants 2150 Trade Zone Boulevard, Suite 200 San Jose, California 95131

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors NETFISH TECHNOLOGIES, INC. Santa Clara, California

We have audited the accompanying balance sheet of Netfish Technologies, Inc., a California corporation, as of December 31, 1999, and the related statements of loss, stockholders’ equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Netfish Technologies, Inc. as of December 31, 1999, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note A, the company has incurred substantial operating losses and anticipates incurring additional losses in the future. This condition raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note H. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Crawford, Pimentel & Co., Inc.

August 8, 2000 NETFISH TECHNOLOGIES, INC.

BALANCE SHEET December 31, 1999

ASSETS CURRENT ASSETS Cash and cash equalivents...... $1,010,173 Accounts receivables...... 140,000 Prepaid expenses...... 26,768 Total current assets...... 1,176,941

PROPERTY AND EQUIPMENT, NET...... 419,997 OTHER ASSETS...... 305,266 $1,902,204

LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable ...... $ 892,122 Accrued expenses...... 84,535 Accrued payroll and related benefits...... 481,588 Current portion of long-term debt ...... 26,669 Convertible note payable ...... 2,482,000 Total current liabilities...... 3,966,914

NOTES PAYABLE TO STOCKHOLDER...... 350,000

COMMITMENTS

STOCKHOLDERS’ EQUITY Common stock, 20,000,000 shares authorized, 13,935,414 shares issued and outstanding...... 43,415 Series A noncumulative convertible preferred stock, 2,000,000 shares authorizedÞ 1,844,353 shares issued and outstanding ...... 1,205,470 Series B noncumulative convertible preferred stock, 2,500,000 shares authorizedÞ 2,456,844 shares issued and outstanding ...... 3,193,897 Retained deficit ...... (6,857,492) (2,414,710) $1,902,204

The accompanying notes are an integral part of these financial statements. NETFISH TECHNOLOGIES, INC.

STATEMENT OF LOSS For the Year Ended December 31, 1999

REVENUE...... $ 385,739 COST OF SERVICES ...... 217,342 Gross profit ...... 168,397

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES General and administrative ...... 4,795,556 Sales and marketing ...... 1,196,588 Research and development...... 1,153,994 7,146,138 Loss before other income and income taxes...... (6,977,741)

OTHER INCOME (EXPENSE) Sublease income...... 29,549 Interest expense...... (9,471) 20,078 Loss before income taxes ...... (6,957,663)

INCOME TAXES...... (800) Net loss ...... $(6,958,463)

The accompanying notes are an integral part of these financial statements. NETFISH TECHNOLOGIES, INC.

STATEMENT OF STOCKHOLDERS’ EQUITY For the Year Ended December 31, 1999

Noncumulative ConvertibleÞ Common Stock Preferred Stock NumberÞ NumberÞ of SharesÞ of SharesÞ RetainedÞ Issued Amount Issued Amount Earnings Total Balances at January 1, 1999 ...... 9,000 $ 9 — $ — $ 100,971 $ 100,980 Stock split in May 1999 ...... 8,991,000 8,991 — — — 8,991 Stock issuance in January & February 1999...... 4,788,000 4,788 — — — 4,788 Stock issuance in October 1999 ...... 7,803 5,100 — — — 5,100 Stock issuance in November 1999...... 7,803 5,100 — — — 5,100 Stock issuance in December 1999...... 3,923 5,100 — — — 5,100 Exercise of common stock options during November and December 1999...... 127,885 14,327 — — — 14,327 Issuance of Series A preferred stock in April 1999...... — — 1,844,353 1,205,470 — 1,205,470 Issuance of Series B preferred stock in November 1999 ...... — — 2,456,844 3,193,897 — 3,193,897 Net loss for the year ended December 31, 1999 ...... — — — — (6,958,463) (6,958,463) Balances at December 31, 1999 ...... 13,935,414 $ 43,415 4,301,197 $ 4,399,367 $ (6,857,492) $ (2,414,710)

The accompanying notes are an integral part of these financial statements. NETFISH TECHNOLOGIES, INC.

STATEMENT OF CASH FLOWS For the Year Ended December 31, 1999

CASH FLOWS FROM OPERATING ACTIVITIES Net loss ...... $(6,958,463) Adjustments to reconcile net loss to net cash used by operating activities Stock issued for compensation and services ...... 369,172 Depreciation...... 42,985 Increase in accounts receivable...... (140,000) Increase in prepaid expenses and other assets...... (301,503) Increase in accounts payable...... 892,122 Increase in accrued liabilities...... 542,673 Net cash used by operating activities ...... (5,553,014)

CASH FLOWS FROM INVESTING ACTIVITIES Purchase of fixed assets ...... (462,982) Net cash used by investing activities...... (462,982)

CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of preferred stock...... 4,045,495 Proceeds from issuance of common stock...... 4,788 Proceeds from exercise of stock options...... 14,327 Proceeds from debt financing...... 2,858,668 Net cash provided by financing activities...... 6,923,278 Net increase in cash and cash equivalents...... 907,282

Cash and cash equivalents at beginning of year ...... 102,891 Cash and cash equivalents at end of year ...... $ 1,010,173

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS Income taxes paid ...... $ 19,583 Interest paid...... $ —

SUPPLEMENTAL DISCLUSRES OF NONCASH TRANSACTIONS Issuance of common and preferred stock in exchange for services...... $ 369,172

The accompanying notes are an integral part of these financial statements. NETFISH TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS December 31, 1999

Note A—Summary of Significant Accounting Policies

Business Activity

Netfish Technologies, Inc. (the Company) operates a software consulting practice. The Company also specializes in designing and implementing integrated enterprise-wide information systems. During 1999, the Company expanded its focus and devoted resources to technology development, recruiting personnel, developing its facility and raising capital. Management anticipates incurring additional research and development costs into the foreseeable future as they continue to design and test their product.

Revenue Recognition

The Company records revenue when the consulting services are provided to its customer. The one customer is required to pay for these consulting services on the terms of net thirty days.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a maturity of three months or less at the date of purchase to be cash equivalents. All of the Company’s cash and cash equivalents consist of monies held in demand deposits or money market accounts.

Advertising

Advertising costs are expensed as incurred and totaled $321,588 for the year ended December 31, 1999.

Concentration of Credit Risks

During the year ended December 31, 1999, one customer accounted for 100% of the Company’s consulting revenue. Historically, the Company has not incurred any credit related losses.

Property and Equipment

For financial reporting purposes, depreciation and amortization of property and equipment is provided on the straight-line method and amounted to $42,985 for the year ended December 31, 1999. The estimated useful life of the office furniture, fixtures and equipment is three to five years. The estimated useful life of computers and software is three years. Leasehold improvements are amortized over the shorter of the useful life or the remaining lease term.

Stock-Based Compensation

The Company accounts for employee stock options in accordance with Accounting Principles Board Opinion No. 25, ‘‘Accounting for Stock Issued to Employees’’ (APB Opinion No. 25), and has adopted the ‘‘disclosure only’’ alternative described in Statement of Financial Accounting Standards No. 123, ‘‘Accounting for Stock-Based Compensation’’ (FAS 123).

Research and Development

Research and development costs are charged to expense as incurred and amounted to $1,153,994 for the year ended December 31, 1999. During 1999, the Company continued research and development activities relating to system based applications.

Income Taxes

Deferred income taxes are provided using the liability method whereby deferred tax assets and/or liabilities are established for the differences between the financial reporting and income tax basis of assets and liabilities as well as operating losses and tax credit carryforwards.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is uncertain whether the deferred tax assets will be realized. Management believes that based on a number of factors a valuation allowance should be recorded to offset deferred tax assets as of December 31, 1999.

Management’s Estimates

The preparation of financial estimates in conformity with generally accepted accounting principles requires the use of management’s estimates. Accordingly, these financial statements reflect management’s estimates, when necessary. Actual results could differ from these estimates.

Note B—Related Party Transactions

The notes payable to stockholder consist of one unsecured demand note totaling $350,000.

Note C—Commitments

Netfish Technologies, Inc. is obligated under operating lease agreements for four office spaces for varying periods through October 2002. Rental expenses under the operating office space leases totaled $321,255 for the year ended December 31, 1999.

The minimum future rentals on noncancelable leases as of December 31, 1999, are as follows:

2000.... . $848,944 2001.... . 446,385 2002.... . 320,792

The Company subleases a former facility under a noncancelable operating lease that expires in December 2000. Future minimum lease receipts under this sublease are $53,940. Sublease rental income for the year ended December 31, 1999 was $29,549.

From time to time, the Company is party to miscellaneous claims in the ordinary course of conducting its business. Management believes that the resolution of all such pending matters will not have a material effect on the Company’s financial position or statement of operations. Note D—Long-term Debt

Furniture purchase agreement from landlord,Þ due in equal monthly installments of $3,333Þ through August 2000, including interest at 6%Þ per annum, collateralized by office furniture. .... $26,669 Less current portion ...... (26,669) $ —

NETFISH TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued) December 31, 1999

Note E—Income Taxes

The components of net deferred tax asset consist of the following:

Federal California Net operating loss carryover ...... $2,165,000 $566,000 Research and development credit...... 128,000 73,000 Accrued vacation ...... 40,000 10,000 Depreciation...... (15,000) (18,000) Total net deferred tax assets...... 2,318,000 631,000 Less: Valuation allowance...... (2,305,0 (626,9 02) 54) Net deferred tax...... $ 12,998 $ 4,046 Presentation in balance sheet Current deferred tax asset...... $ — $ — Non-current deferred tax asset .... . 12,998 4,046 Net deferred tax...... $ 12,998 $ 4,046

As of December 31, 1999, the Company has unused net operating loss carryforwards of $6,370,000 and $6,408,000 for federal and state tax purposes, respectively, which if not used, will expire as follows:

Federal California December 31, 2005.... . $ — $6,408,000 December 31, 2019.... . 6,370,000 — $6,370,000 $6,408,000

The Company also has federal and California research credit carryovers of:

Federal California Research Research Credit Credit December 31, 2018.... . $ 13,000 $ — December 31, 2019.... . 115,400 — No expiration ...... — 73,300 $128,400 $73,300 Under the Tax Reform Act of 1986, the amounts of and benefits from net operating loss and research credit carryforwards may be impaired or limited in certain circumstances. Events which cause limitations in the amount of net operating losses and research credit carryforwards that the Company may utilize in any one year include, but are not limited to, a cumulative ownership change of more than 50% defined, over a three year period.

Note F—Noncumulative Convertible Preferred Stock

The holders of Series A noncumulative convertible preferred stock (Series A) and Series B noncumulative convertible preferred stock (Series B) are entitled to receive noncumulative annual dividends of $.0327 per share and $.065, respectively, when and if declared by the Board of Directors. Series A and Series B dividends NETFISH TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued) December 31, 1999 are paid prior to dividends declared or paid on common stock. No dividends have been declared through December 31, 1999. In the event of liquidation, any shares of Series A or Series B that remain outstanding have a liquidation preference over common stock of $.6536 per share and $1.30 per share, respectively, plus all declared and unpaid dividends. After the payment of the full liquidation preference of the Series A and Series B, the remaining assets of the Company legally available for distribution, if any, shall be distributed ratably to the holders of the common stock and the Series A and Series B, on an as-if-converted basis. If the assets of the Company shall be insufficient to make payment in full to all holders of the Series A and Series B, then such assets shall be ratably distributed among the holders in proportion to the full amounts to which they would otherwise be respectively entitled. Certain reorganizations, consolidations or mergers, sales, or other dispositions of all or substantially all of the assets of the Company or a transaction resulting in the sale of the shares representing a majority of the voting power of the Company are deemed to be a liquidation dissolution, or winding up of the Company for these purposes.

Each share of Series A and Series B is convertible by the holder, at any time, into common stock, which is determined by dividing the issuance price of $.6536 and $1.30, respectively, by the conversion price of $.6536 and $1.30, respectively, and adjusted from time to time as defined by the agreement for the Series A and Series B, in effect at the time of conversion. In addition, the Series A and B will automatically convert into common stock at the then effective conversion price upon the affirmative vote of the holders of at least a majority of the outstanding shares of the Series A and Series B voting together as a single class or immediately upon the closing of an underwritten public offering of the Company’s common stock with a per share price of at least $5.00, as adjusted for certain future dilutive transactions, and an aggregate gross offering price of not less than $15,000,000.

Except as otherwise required by law, Series A and Series B shareholder is entitled to the number of votes equal to the number of shares of common stock into which such shares of preferred stock could be converted at the record date. The Company has reserved 4,426,378 shares of common stock for issuance on the conversion of the Series A and Series B.

Note G—Incentive Compensation Plan

The Company adopted an incentive stock plan on May 19, 1999. The plan allows the Company to grant both statutory incentive stock options (ISO’s) and nonstatutory stock options (NSO’s). The exercise price for ISO’s will generally be no less than 100% of the fair market value per share on the date of grant. The exercise price for NSO’s will generally be no less than 85% of the fair market value per share on the date of grant. The term of the option is generally ten years. Options generally vest over a four year period, with 25% vesting on the first anniversary of the vesting date and 12.5% vesting bi-annually thereafter. Shares available for option grants at December 31, 1999 were 3,210,493. There were approximately 80 employees/service providers authorized for options for 4,161,622 shares as of December 31, 1999. The following table summarizes the option activity during the year ended December 31, 1999:

Weighted-Average Shares Exercise Price Outstanding at beginning of year ...... — $ — Granted ...... 4,659,007 .165 Exercised...... (127,885) .165 Canceled...... (369,500) .165 Outstanding at end of year ...... 4,161,622 $ .165 NETFISH TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued) December 31, 1999

The Company has elected to follow APB Opinion No. 25, ‘‘Accounting for Stock Issued to Employees,’’ in accounting for its employee stock options. Under APB No. 25 compensation expense must be recognized on the difference between the exercise price and the fair market value of the underlying stock on the date of grant. There was no compensation expense recognized as a result of options granted during the year ended December 31, 1999.

Pro Forma Information

Pro forma information regarding net income is required by SFAS No. 123. This information is required to be determined as if the Company had accounted for its employee stock options under the fair value method. The fair value of the options granted during the year ended December 31, 1999, has been estimated at the date of grant using a Black-Scholes option pricing model with these following weighted average assumptions: Expected life (years)—9; Risk-free interest rate—6.%; Volatility—0%; and Dividend yield—0%.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company’s options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimated, in the opinion of management, the existing models do not necessarily provide a reliable single measure of the fair value of its options.

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting periods. The Company’s pro forma net loss for the year ended December 31, 1999 is $7,021,000.

Other Stock Compensation

During the year ended December 31, 1999, the Company recorded $369,172 of employee compensation and consulting expenses in exchange for the issuance of shares of the Company’s stock. The estimated market value of the shares issued was charged to expense.

Note H—Subsequent Events

During July 2000, $2,000,000 of the convertible note payable balance was returned to Active Software, Inc., the accrued interest was written off and the note purchase agreements were voided.

In addition, the Company has issued Series C and Series D noncumulative convertible preferred stock which has generated additional cash flow in excess of $25,000,000.

Note I—Convertible Note Payable

During December 1999, the Company entered into two convertible subordinated note purchase agreements with Active Software, Inc. totaling $2,000,000. If the Company consummates an equity financing prior to June 30, 2000, the unpaid principal and accrued interest shall be converted into the Company’s capital stock. If an equity financing is not consummated prior to June 30, 2000, the unpaid principal and accrued interest shall be due and payable upon demand. Accrued interest payable at December 31, 1999 on these notes was $8,872. The Company issued warrant agreements pursuant to the terms of this convertible note agreement. The warrant NETFISH TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued) December 31, 1999 agreement requires the Company to issue warrants to Active Software, Inc. if the product of the purchase price multiplied by the total number of shares is greater than $60,000,000.

Also included in the convertible note payable balance is funds totaling $482,000 for prepayments on Series C preferred stock to be issued in 2000. NETFISH TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued) December 31, 1999 Crawford, Pimentel & Co., Inc. Certified Public Accountants 2150 Trade Zone Boulevard, Suite 200 San Jose, California 95131

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors NETFISH TECHNOLOGIES, INC. Santa Clara, California

We have audited the accompanying balance sheets of Netfish Technologies, Inc., a California corporation, as of December 31, 1998 and December 31, 1997, and the related statements of earnings, stockholder’s equity, and cash flows for the year ended December 31, 1998, and the period from inception (August 8, 1997) to December 31, 1997. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Netfish Technologies, Inc. as of December 31, 1998 and December 31, 1997, and the results of its operations and its cash flows for the periods then ended in conformity with generally accepted accounting principles.

/s/ Crawford, Pimentel & Co., Inc.

October 19, 1999 NETFISH TECHNOLOGIES, INC.

BALANCE SHEETS December 31, 1998 and 1997

ASSETS 1998 1997 CURRENT ASSETS Cash . $102,909 $4,909 Deferred income taxes ...... 17,000 — $119,909 $4,909

LIABILITIES AND STOCKHOLDERS’ EQUITY 1998 1997 CURRENT ASSETS Other payables ...... $ 500 $ 500 Income taxes payable ...... 18,500 1,500 Total current liabilities...... $ 19,000 $2,000

COMMITMENTS

STOCKHOLDER’S EQUITY Common stock, 1,000,000 shares authorized, 9,000 shares issued and outstanding...... 9 9 Retained earnings...... 100,900 2,900 100,909 2,909 $119,909 $4,909

The accompanying notes are an integral part of these financial statements. NETFISH TECHNOLOGIES, INC.

STATEMENTS OF EARNINGS For the Year Ended December 31, 1998 and For the Period From Inception (August 8, 1997) to December 31, 1997

1998 1997 REVENUE . $588,700 $34,600 COST OF SERVICES ...... (235,300) (20,200) 353,400 14,400

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES General and administrative ...... 110,900 10,000 Selling . 4,500 — Research and development...... 140,000 — Total selling, general, and administrative expenses ...... 255,400 10,000 Earnings before income taxes...... 98,000 4,400

INCOME TAXES Current ...... 17,000 1,500 Deferred ...... (17,000) — Net earnings ...... $ 98,000 $ 2,900

The accompanying notes are an integral part of these financial statements. NETFISH TECHNOLOGIES, INC.

STATEMENTS OF STOCKHOLDER’S EQUITY For the Years Ended December 31, 1998 and For the Period From Inception (August 8, 1997) to December 31, 1997

Common Stock Number ofÞ RetainedÞ Shares Issued Amount Earnings Total Balances at August 8, 1997...... — $ — $ — $ — Stock issued on August 8, 1997 ...... 9,000 9 — 9 Net earnings for the period ended December 31, 1997...... — — 2,900 2,900 Balances at December 31, 1997...... 9,000 9 2,900 2,909 Net earnings for the year ended December 31, 1989 ...... — — 98,000 98,000 Balances at December 31, 1998...... 9,000 $ 9 $100,900 $100,909

The accompanying notes are an integral part of these financial statements. NETFISH TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1998 and 1997

1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES Net earnings ...... $ 98,000 $2,900 Adjustments to reconcile net earnings to net cash provided by operating activities: Increase in other payables ...... — 500 Increase in income taxes payable ...... 17,000 — Deferred income tax provision...... (17,000) — Net cash provided by operating activities ...... 98,000 4,900

CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from stock issued ...... — 9 Net cash provided by financing activities...... — 9 Net increase in cash...... 98,000 4,909

CASH AT BEGINNING OF YEAR...... 4,909 — CASH AT END OF YEAR...... $102,909 $4,909 SUPPLEMENTAL DISCLOSURES Income taxes paid...... $ 0 $ 0 Interest paid...... $ 0 $ 0

The accompanying notes are an integral part of these financial statements. NETFISH TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS December 31, 1998 and December 31, 1997

Note A- Summary of Significant Accounting Policies

Business Activity

Netfish Technologies, Inc. (the Company) operates a software consulting practice. The Company also specializes in designing and implementing integrated enterprise-wide information systems. During 1998, the Company expanded it focus and devoted resourses to technology development and raising capital. Management anticipates incurring additional research and development costs into the foreseeable future as they continue to design and test their product.

Revenue Recognition

The Company records revenue when the consulting services are provided to its customer. The one customer is required to pay for these consulting services on the terms of net thirty days.

Advertising

Adverting costs are expensed as incurred and totaled $4,500 for the year ended December 31, 1998.

Concentration of Credit Risks

Financial instruments which potentially subject the Company to concentration of credit risk consist of cash. At times the cash balances may be in excess of the maximum federally insured limits. By policy, the Company places cash with high-quality financial institutions.

During the years ended December 31, 1998 and December 31, 1997, one customer accounted for 100% of the Company’s sales. Historically, the Company has not incurred any credit related losses.

Research and Development

Research and development costs are charged to expense as incurred and amounted to $140,000 for the year ended December 31, 1998. During 1998, the Company began research and development activities relating to the system based applications. Prior to this, all business activities related exclusively to consulting services.

Income Taxes

Deferred income taxes are provided using the liability method whereby deferred tax assets and/or liabilities are establish for the differences between the financial reporting and income tax basis of assets and liabilities as well as operating loss and tax credit carryforwards.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management believes that the Company will generate future taxable income adequate enough to realize the entire deferred tax asset prior to the expiration of the research credit carryovers; therefore, there is no valuation allowance.

Management’s Estimates

Note B—Related Party Transactions

The sole shareholder transferred the one customer’s billings to his sole proprietorship, Netfish Consulting, during March 1999.

Note C—Commitments

Like other organizations and individuals around the world, the Company could be adversely affected in the computer systems it uses and those used by significant third parties (e.g. vendors, customers, third party administrators, etc.) do not properly process and calculate date-related information and data. This is commonly known as the ‘‘Year 2000 issue’’ (Y2K). Management is assessing its computer systems and business processes and intends to initiate actions to address the Y2K needs identified. Management is also assessing the actions being taken by significant third parties that interface with the Company. At this time management is not able to determine the impact, including the costs of remediation, of the ‘‘Year 2000 issue’’ on the Company.

Note D—Income Taxes

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at year end are as follows:

Federal California Deferred tax assets Research and development credit...... $13,000 $ 4,000 Total gross deferred tax assets ...... 13,000 4,000 Presentation in balance sheet Current deferred tax asset...... $13,000 $ 4,000 Non-current deferred tax...... — — Net deferred tax...... $13,000 $ 4,000

As of December 31, 1998, the Company has federal and California research credit carryovers of $13,000 and $4,000, respectively, which, if not used, will expire as follows:

FederalÞ California ResearchÞ Þ CreditÞ ResearchÞ Credit December 31, 2008.... . $ — $ 4,000 December 31, 2018.... . 13,000 — $13,000 $ 4,000 Note E—Subsequent Events

During 1999, the Company significantly increased research and development activities by moving into a new corporate facility, purchasing fixed assets, hiring fifty employees, establishing vacation policies, stock option plans, and 401(k) plans. The Company received $4,100,000 in private placement equity funding during the first six months of 1999 in order to continue research and development of their system based applications.

In addition, the one consulting service was transferred to Netfish Consulting (a sole proprietorship of the sole shareholder) during March 1999. NETFISH TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued) December 31, 1998 and December 31, 1997 APPENDIX II

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma condensed consolidated balance sheet as of December 31, 2000 and unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2000 include the historical operations of IONA Technologies PLC (‘‘IONA’’) and its subsidiaries and Netfish Technologies, Inc. (‘‘Netfish’’) and its subsidiaries for the year ended December 31, 2000. The unaudited pro forma condensed consolidated balance sheet as of December 31, 2000 gives effect to the Acquisition as if it had occurred on December 31, 2000 and the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2000 gives effect to the Acquisition as if it had occurred on January 1, 2000.

The unaudited pro forma consolidated condensed balance sheet and unaudited pro forma consolidated condensed statement of operations are not necessarily indicative of the results of IONA as they may be in the future or as they might have been had the Acquisition occurred on December 31, 2000 and January 1, 2000, respectively. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

Unaudited Pro Forma Condensed ConsolidatedÞ Balance SheetÞ For the Year Ended December 31, 2000Þ (U.S. dollars in thousands) IONAÞ NetfishÞ Pro FormaÞ Audited Audited Adjustments Note Pro Forma ASSETS Current assets: Cash and cash equivalents...... 38,193 38,193 Marketable securites ...... 57,447 57,447 Accounts receivable, net and other current assets ...... 54,846 6,720 61,566 Total current assets...... 150,486 6,720 157,206 Property and equipment, net and other non-current assets ...... 29,087 3,418 32,505 Goodwill ...... 22,986 281,219 2(a),2(b) 304,205 Total assets...... 202,559 10,138 281,219 493,916

LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued liabilities ...... 29,868 12,297 16,288 2(a),2(c) 58,453 Deferred revenue...... 21,384 3,016 (3,016) 2(a) 21,384 Total current liabilities...... 51,252 15,313 13,272 79,837 Note payable to stockholder...... 450 450 Deferred revenue, net of current portion...... 6,934 (6,934) 2(a) Common Stock...... 66 3,856 (3,846) 2(a) 76 Preferred Stock ...... 36,406 (36,406) 2(a) Additional paid-in capital...... 114,281 295,341 2(a),2(c) 409,622 Retained earnings...... 36,880 (50,907) 50,907 2(a) 36,880 Deferred stock compensation...... (195) (1,914) (31,115) 2(a),2(b) (33,224) Accumulated other comprehensive income...... 275 275 Total shareholders’ equity...... 151,307 (12,559) 274,881 413,629 Total liabilities and shareholders’ equity ...... 202,559 10,138 281,219 493,916

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION (continued)

Unaudited Pro Forma Condensed ConsolidatedÞ Statement of OperationsÞ For the Year Ended December 31, 2000Þ (U.S. dollars in thousands) IONAÞ NetfishÞ Pro FormaÞ Audited Audited Adjustments Note Pro Forma Revenue: Product revenue ...... 105,533 5,186 110,719 Service revenue...... 47,530 2,735 50,265 Total revenue ...... 153,063 7,921 160,984 Cost of product revenue ...... 3,457 622 4,079 Cost of service revenue ...... 26,484 1,350 27,834 Total cost of revenue...... 29,941 1,972 31,913 Gross profit ...... 123,122 5,949 129,071 Operating expenses: Research and development...... 26,906 19,728 46,634 Sales and marketing ...... 63,669 17,946 81,615 General and administrative ...... 11,642 12,781 24,423 Amortization of goodwill and purchasedÞ intangible assets ...... 7,831 70,305 2(d) 78,136 Settlement of litigation...... 1,350 1,350 Stock compensation 404 135 8,984 2(e) 9,523 Total operating expenses...... 111,802 50,590 79,289 241,681 Income (loss) from operations ...... 11,320 (44,641) (79,289) (112,610) Interest income, net...... 4,116 667 4,783 Gain on sale of investments and other income...... 1,528 1,528 Income (loss) before provision for income taxes ...... 16,964 (43,974) (79,289) (106,299) Provision for income taxes 2,799 75 2(f) 2,874 Net income (loss) available to Ordinary Shareholders...... 14,165 (44,049) (79,289) (109,173) Basic net income (loss) per Ordinary Share and per ADS ...... 0.67 (4.31) Shares used in computing basic net income (loss) per Ordinary Share and per ADS (in thousands)...... 21,177 25,338 Diluted net income (loss) per Ordinary ShareÞ and per ADS...... 0.60 (4.31) Shares used in computing diluted net income (loss) per Ordinary Share and per ADS (in thousands)...... 23,520 25,338

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

1. Basis of Presentation

On February 14, 2001, IONA signed a definitive agreement to acquire Netfish, a California corporation, for total consideration of 4,160,756 newly-issuable IONA ordinary shares and 1,339,244 replacement options over IONA shares. The acquisition will be accounted for under the purchase method of accounting. The transaction is subject to the approval of shareholders of both companies, as well as customary regulatory and other closing conditions.

The pro forma consolidated statement of operations gives effect to the purchase of Netfish by IONA assuming it had occurred on January 1, 2000 and the pro forma consolidated balance sheet gives effect to the purchase of Netfish by IONA assuming it had occurred on December 31, 2000.

The pro forma consolidated statement of operations and pro forma consolidated balance sheet of IONA are derived from the audited consolidated statement of operations and the audited consolidated balance sheet of IONA for the year ended December 31, 2000 and the unaudited consolidated statement of operations and the unaudited consolidated balance sheet of Netfish for the year ended December 31, 2000, after giving effect to the pro forma adjustments described in Note 2.

The pro forma consolidated statement of operations and pro forma consolidated balance sheet are not necessarily indicative of the results of IONA as they may be in the future or as they might have been had the acquisition occurred on January 1, 2000 or December 31, 2000, respectively.

2. Pro Forma Adjustments

The pro forma consolidated statement of operations and pro forma consolidated balance sheet give effect to the following pro forma adjustments:

(a) Total purchase price consists of 4,160,756 newly issuable IONA ordinary shares at a fair market value of $55 per share, the fair market value of 1,339,244 replacement options over IONA shares and $5.0 million in cash to pay Netfish’s related disposal expenses. The aggregate purchase price plus related direct acquisition costs less the amount allocated to unearned compensation expenses totaling $281 million has been allocated to the acquired assets and liabilities at their estimated fair values at December 31, 2000.

(b) Total unearned compensation cost for outstanding unvested options held by Netfish employees and exchanged for unvested options granted by IONA has been calculated as the portion of the intrinsic value that the future vesting period bears to the total vesting period, using the intrinsic value at February 15, 2001 as an estimate of the intrinsic value at the future consummation date. The amount of unearned compensation cost has been deducted from the fair value of the total purchase price.

(c) Total capital duty tax of 1% of the fair market value of 4,160,756 newly issued IONA ordinary shares is based on fair market value of $55 per share.

(d) Goodwill and other intangible assets resulting from the acquisition of Netfish are being amortized over four years.

(e) Unearned compensation cost resulting from the exchange of IONA unvested options for the outstanding unvested options held by Netfish employees is being amortized over the remaining vesting period. (f) No pro forma adjustment for the provision for income taxes is required as the Netfish losses are in a different tax jurisdiction to those in which IONA generated taxable income and to which its provision for income taxes relates. APPENDIX III INDEPENDENT ACCOUNTANTS

We agree to the inclusion in the IONA Technologies PLC Circular to Shareholders Relating to the Acquisition of Netfish Technologies, Inc. dated April 2, 2001 of our report dated January 17, 2001, with respect to the consolidated financial statements of IONA Technologies PLC for the year ended December 31, 2000.

/s/ Ernst & Young Ernst & Young Dublin, Ireland 30 March, 2001 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We agree to the inclusion in the IONA Technologies PLC Circular to Shareholders Relating to the Acquisition of Netfish Technologies, Inc. dated April 2, 2001 of our report dated February 26, 2001, with respect to the consolidated financial statements of Netfish Technologies, Inc. for the year ended December 31, 2000.

/s/ Ernst & Young San Jose, California March 30, 2001 Crawford, Pimentel & Co., Inc. Certified Public Accountants 2150 Trade Zone Boulevard, Suite 200 San Jose, California 95131

INDEPENDENT ACCOUNTANTS

We agree to the inclusion in the IONA Technologies PLC Circular to Shareholders Relating to the Acquisition of Netfish Technologies, Inc. dated April 2, 2001 of our reports dated August 8, 2000 and October 19, 1999, with respect to the consolidated financial statements of Netfish Technologies, Inc. for the years ended December 31, 1999 and December 31, 1998, respectively.

/s/ Crawford, Pimental & Co., Inc. Crawford, Pimental & Co., Inc. San Jose, California March 30, 2001