Annual Reports | Quarterly Filings | News | Prospectuses | Proxies | Mergers & Acquisitions | Initial Public Offerings

SILVERLINE TECHNOLOGIES LTD
F-4/A, 2001-01-18
COMPUTER PROGRAMMING SERVICES

Previous: AT&T LATIN AMERICA CORP, 8-K, EX-99.1, 2001-01-18

Next: SILVERLINE TECHNOLOGIES LTD, F-4/A, EX-4.3, 2001-01-18

---

---

Republic of India   (State or other jurisdiction of incorporation or organization)

7371   (Primary Standard Industrial Classification Code Number)

Not applicable   (I.R.S. Employer Identification No.)

RAJIV KHANNA Greenberg Traurig, LLP 200 Park Avenue New York, New York 10166 (212) 801-9268

JAMES E. ABBOTT Carter, Ledyard & Milburn 2 Wall Street New York, New York 10005 (212) 732-3200

---

---

Title of each class of securities to be registered		Amount to be registered			Proposed maximum offering price per unit		Proposed maximum aggregate offering price			Amount of registration fee
Equity Shares, par value Rs. 10 each, represented by one-half of      an American Depositary Share(1)		12,473,618 shs.(2	)		$4.0401429		$50,395,199			$12,598.80
Equity Shares, par value Rs. 10 each, represented by one-half of      an American Depositary Share(1)		2,800,000 shs.(3	)		$4.0401429		11,312,400	(5)		2,828.10
Totals		15,273,618 shs.					$61,707,599			$15,426.90	(6)

---

(1)	American Depositary Shares (“ADSs”), each representing two Equity Shares, have been registered on a separate Registration Statement on Form F-6 (Registration No. 333-12000).

(2)

Represents the estimated maximum number of Equity Shares of the registrant which may be issued to the holders of the common stock of SeraNova, Inc. (“SeraNova”) in connection with the merger and related transactions described herein, based on the exchange ratio in the merger of 0.35 of an ADS for each of 17,820,883 shares of SeraNova common stock. Includes 216,000 Equity Shares which may be issued in connection with or after the merger upon the exercise of currently outstanding warrants and employee stock options to purchase the common stock of SeraNova.

(3)

Represents the estimated maximum number of Equity Shares of the registrant which may be issued to the holders of the 6% Series A convertible preferred stock of SeraNova in connection with the merger described herein, assuming that all shares of the preferred stock are converted into SeraNova common stock immediately before the merger at a conversion rate of one share of common stock for each $2.00 of stated value of the preferred stock.

(4)

Pursuant to Rules 457(f)(1) and 457(c) under the Securities Act of 1933, the proposed maximum aggregate offering price for the SeraNova common stock is equal to 17,820,883 (the maximum number of shares of SeraNova common stock to be converted in the merger and to be issued upon exercise of the warrants and options referred to in footnote (2), multiplied by the average ($2.8281) of the high and low prices of a share of SeraNova common stock as quoted on the Nasdaq National Stock Market on January 12, 2001.

(5)

Pursuant to Rules 457(f)(1) and 457(c) under the Securities Act of 1933, the proposed maximum aggregate offering price for the SeraNova 6% Series A convertible preferred stock is equal to 4,000,000 (the estimated maximum number of shares of SeraNova common stock issuable upon conversion of the preferred stock immediately prior to the merger) multiplied by the average ($2.8281) of the high and the low sales prices of a share of SeraNova common stock as quoted on the Nasdaq National Stock Market on January 12, 2001.

(6)	$13,214 of this fee was paid by the Registrant with the initial filing of this Registration Statement on December 26, 2000. The balance of this fee is being paid with this Amendment No. 1.

---

---

Sincerely,

Rajkumar Koneru

Chairman, Chief Executive Officer and President

BY ORDER OF THE BOARD OF DIRECTORS

DAVID ROGERS

Secretary

		Page
Special Note Regarding Forward-Looking Statements		1
Exchange Rates		1
Questions and Answers about the Merger and the Special Meeting		2
Summary		4
Risk Factors		15
Risk Factors Relating to the Merger		15
Risk Factors Related to Silverline’s Business		19
Risks Related to Investment In Silverline Because It Is an Indian Company		28
Risks Related to the ADSs		35
Risks Related to Silverline’s Corporate Charter and Share Ownership		36
The Companies		38
SeraNova, Inc.		38
Silverline Technologies Limited		39
The Special Meeting		41
Date, Time and Place		41
Purpose of Special Meeting		41
Record Date; Stock Entitled to Vote; Quorum		41
Vote Required		41
Voting of Proxies		42
Revocation of Proxies		42
Solicitation of Proxies		42
Pro Forma Financial Data		42
The Merger		47
Background of the Merger		47
SeraNova’s Reasons for the Merger and Board of Director’s Recommendation		48
Silverline’s Reasons for the Merger		49
Opinion of SeraNova’s Financial Advisor		49
Interests of Directors and Management of SeraNova in the Merger		52
Accounting Treatment		54
Conversion of Shares; Procedures for Exchange of Certificates		55
Regulatory and Corporate Matters		55
No Appraisal Rights		56
Resales of ADSs by Affiliates of SeraNova		57
Material U.S. Federal Income Tax Consequences		57
Tax Consequences of the Merger		58
Taxation of ADSs or Equity Shares		59
Tax Consequences for Non-U.S. Holders of ADSs or Equity Shares		61
Information Reporting and Backup Withholding		61
The Merger May Cause SeraNova to Become Liable for Taxes Payable by Intelligroup in                Connection with its Spin-off of SeraNova		62
Material Indian Income Tax Consequences		64
The Agreement and Plan of Merger		65
Effective Time of the Merger		65
The Merger		65
Merger Consideration		65
Conditions to the Merger		66
No Solicitation of Competing Transaction		68
Termination and Amendment		68
Conduct of Business Before the Merger		70
Amendment; Extension and Waiver		71
Expenses		71
Additional Agreements		71

		Page
Indemnification and Insurance		72
Voting Agreement		72
Silverline’s Dividend Policy		72
Price Range of Silverline’s Equity Shares and ADSs		73
Trading Prices of Silverline’s Equity Shares and ADSs		74
Trading Practices and Procedures on the Indian Stock Exchanges		74
Silverline’s Selected Consolidated Financial Data		76
Silverline’s Management’s Discussion and Analysis of Financial Condition and Results of Operations		79
Silverline’s Business		93
Silverline’s Management		108
Silverline’s Related Party Transactions		115
Silverline’s Principal Shareholders		117
SeraNova’s Business		118
Price Range of SeraNova Common Stock		127
SeraNova’s Selected Historical Financial Data		128
SeraNova’s Management’s Discussion and Analysis of Financial Condition and Results of Operations		130
SeraNova’s Principal Shareholders		141
Description of Silverline’s Equity Shares		142
Comparison of Rights of Shareholders of SeraNova and Silverline		149
Description of Silverline’s American Depositary Shares		163
Indian Regulations Affecting The Acquisition		171
Regulatory Regime for Foreign Investment in India		174
Indian Companies (Amendment) Act, 2000		176
Indian Taxation		179
Legal Matters		181
Experts		181
Where You Can Find More Information		182
Index to Financial Statements		F-1
Annexes:
Annex A—Amended and Restated Agreement and Plan of Merger
Annex B—Opinion of Punk, Ziegel & Company, L.P.

Ÿ

the noon buying rate at each year end;

Ÿ

the average of the noon buying rates on the last day of each month during each year;

Ÿ

the high noon buying rate during the year; and

Ÿ

the low noon buying rate during the year.

Year		Year end		Average		High		Low
1996		Rs. 35.95		Rs. 35.53		Rs. 36.46		Rs. 34.35
1997		39.30		36.53		39.30		35.72
1998		42.52		41.43		42.65		38.80
1999		43.51		43.20		43.59		42.50
2000		46.75		45.00		46.82		43.59

Ÿ

In April 2000, Silverline’s wholly-owned subsidiary Silverline Technologies, Inc. acquired CIT Canada, a software development firm in Toronto, Canada, for approximately $4.2 million in cash. CIT Canada had approximately $3.1 million in annual revenues and 70 employees as of December 31, 1999.

Ÿ

As of September 2000, Silverline had invested $30.2 million in Silverline Technologies, Inc. for expansion of its sales and marketing operations and to meet the working capital requirements for the expanded scope of the business. On September 30, 2000, Silverline Technologies, Inc. issued 32,681 shares of its common stock to Silverline Technologies Limited.

Ÿ

In September 2000, Silverline Technologies, Inc. acquired Megasys Software Services Inc., an information technology services provider based in Columbus, Ohio for $6.22 million. Megasys had approximately $10 million in annual revenues as of December 1999 and 149 employees.

Ÿ

Silverline Technologies, Inc. invested $6.5 million for a 36% interest in Expo 24-7.com, a U.K.-based company, and $5 million for a 15% interest in Unified Herbal, a U.K.-based company.

Ÿ

In October 2000, Silverline acquired its second largest customer, Sky Capital International Ltd., a Hong Kong based information technology consulting company, for $22 million in cash. Sky Capital had $24.3 million in revenues for the year ended June 30, 2000 and 100 professionals as of June 30, 2000.

Ÿ

Silverline has finalized an investment and a strategic alliance agreement with TIS Worldwide, Inc. (or “TIS”), an e-business solutions integrator that specializes in delivery of Internet-based applications to help corporations increase and improve customer services. Silverline has agreed to invest $12.5 million for a 6% interest in TIS. Silverline will be TIS’s exclusive Indian supplier for all software development services for a period of three years. This investment is subject to Indian regulatory approvals. TIS has operations in 10 offices with over 600 professionals.

Ÿ

SeraNova must obtain the necessary shareholder approval for the agreement and plan of merger.

Ÿ

Silverline must obtain the approval of the agreement and plan of merger by the holders of 75% of its equity shares at an extraordinary general meeting of Silverline shareholders which is being scheduled. Three shareholders of Silverline holding in the aggregate about 31.5% of the outstanding Silverline equity shares have granted to SeraNova an irrevocable proxy to vote their equity shares in favor of the agreement and plan of merger.

Ÿ

No laws shall have been adopted or promulgated, and no temporary restraining order, injunction or other order issued by a court or other governmental entity is in effect, that would make the merger illegal or otherwise prohibit consummation of the merger.

Ÿ

No stop order shall have been issued by the Securities and Exchange Commission suspending the effectiveness of Silverline’s Form F-4 registration statement of which this proxy statement/prospectus is a part, and no proceedings for that suspension shall have been initiated or threatened by the SEC.

Ÿ

Each of Silverline and SeraNova must obtain all required approvals from the Reserve Bank of India and other regulatory authorities in India in order to consummate the merger and other transactions set forth in the agreement and plan of merger.

Ÿ

Each of the representations and warranties of SeraNova and Silverline in the agreement and plan of merger must be true and correct as of the closing date of the merger except to the extent a representation or warranty is expressly made as of an earlier date.

Ÿ

Each of Silverline and SeraNova must have performed or complied in all material respects with all its material agreements and covenants in the agreement and plan of merger at or prior to the closing date of the merger.

Ÿ

Silverline must receive from Deloitte & Touche LLP on the closing date of the merger a written opinion in form reasonably acceptable to Silverline stating that: (1) the merger will qualify as a tax-free “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, or the “Code”, (2) Silverline and SeraNova will each be a “party” to that reorganization within the meaning of Section 368(b) of the Code, and (3) the issuance of the Silverline ADSs to the holders of the SeraNova common stock in the merger will not result in Silverline’s recognizing an amount of income or gain and/or being subject to an amount of tax that is reasonably likely to have a material adverse effect on Silverline.

Ÿ

SeraNova must receive from Carter, Ledyard & Milburn, counsel to SeraNova, on the closing date of the merger, a written opinion in form reasonably acceptable to Silverline stating that: (1) the merger will qualify as a tax-free “reorganization” within the meaning of Section 368(a) of the Code, (2) SeraNova and Silverline will each be a “party” to that reorganization within the meaning of Section 368(b) of the Code, and (3) the Silverline ADSs received in the merger by holders of SeraNova common stock is properly permitted to be received under Section 354 of the Code without the recognition of gain.

Ÿ

Since the date of the agreement and plan of merger, there shall not have been any material adverse change in SeraNova or Silverline.

Ÿ

Each of Rajan Nair, the chief operating officer of Sera Nova, and Ragu Rajagopal, the chief executive officer of SeraNova India, shall have entered into an employment retention agreement in form and substance reasonably satisfactory to Silverline.

Ÿ

The representations and warranties of certain directors and officers of SeraNova in support of the tax-free treatment of SeraNova’s spin-off from Intelligroup will be true and correct as of the closing date of the merger.

Ÿ

SeraNova has reached an agreement with its preferred shareholders, or such shareholders have otherwise exercised their rights under SeraNova’s certificate of incorporation dated September 26, 2000, so that one, and only one, of the alternatives set forth in Section 1.5(c)(A), (B) or (C) of the agreement and plan of merger can and will take place, and the merger qualifies as a tax-free reorganization under §368(a) of the Internal Revenue Code, See Annex A.

Ÿ

by mutual consent of Silverline and SeraNova;

Ÿ

by Silverline or SeraNova if the merger has not been completed by July 31, 2001;

Ÿ

by SeraNova or Silverline if any governmental entity shall have issued an order, decree or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by the agreement and plan of merger, and such order, decree, ruling or to take any other action shall have become final and nonappealable;

Ÿ

by SeraNova or Silverline if the approval by the shareholders of SeraNova or Silverline required for the consummation of the merger shall not have been obtained;

Ÿ

by SeraNova in certain circumstances where it receives an acquisition proposal superior to the merger with Silverline; or

Ÿ

by Silverline or SeraNova if the other has materially breached any of its representations or obligations under the agreement and plan of merger, unless the breach is cured within 45 days after Silverline or SeraNova receive a notice of breach from the other.

Ÿ

the agreement and plan of merger is terminated after a competing proposal or offer is made to acquire at least 20% of the assets of SeraNova and its subsidiaries or at least 20% of the combined voting power of the shares of SeraNova common stock, or after a competing proposal is made to involve SeraNova or any of its subsidiaries in a merger, consolidation, business combination, recapitalization, dissolution, liquidation or similar transaction in which the other party to the transaction or its stockholders would own at least 20% of the combined voting power of the parent entity resulting from any such transaction, and

Ÿ

within twelve months of such termination, SeraNova or any of its subsidiaries enters into an agreement with respect to, or approves or consummates, a proposal to acquire at least 50% of the assets of SeraNova and its subsidiaries or at least 50% of the combined voting power of the shares of SeraNova common stock, or a proposal involving SeraNova or any of its subsidiaries in a merger, consolidation, business combination, recapitalization, dissolution, liquidation or similar transaction in which the other party to the transaction or its stockholders will own at least 40% of the combined voting power of the parent entity resulting from any such transaction.

Ÿ

for approval, under the Indian Foreign Exchange Management (Transfer or Issue of a Foreign Security) Regulations, 2000 of the exchange of SeraNova common stock for Silverline ADSs in the merger;

Ÿ

for certain clarifications, under the Indian Foreign Exchange Management (Transfer or Issue of Security By a Person Resident Outside India) Regulations, 2000 with respect to the proposed conversion of SeraNova stock options held by non-Indian resident employees of SeraNova into options to purchase Silverline ADSs; and

Ÿ

for permission, under the Indian Foreign Exchange Management (Transfer or Issue of a Foreign Security) Regulations, 2000, for the proposed conversion of SeraNova stock options held by Indian resident employees of SeraNova into options to purchase Silverline ADSs.

Ÿ

exemption from certain provisions of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 relating to the conversion in the merger of SeraNova employee stock options into Silverline ADS options, particularly the exemption from the requirement that the converted options have a minimum vesting period of one year from the date of the conversion. The Securities and Exchange Board of India has refused to grant the requested exemption, and Silverline is applying to the Ministry of Finance of India to review this refusal. Silverline cannot predict the outcome of this review by the Ministry of Finance. If the requested exemptions are not granted, Silverline will be required to comply with the provisions of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999; and

Ÿ

clarifications with regard to the non-applicability of certain provisions of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 to the proposed issue of ADSs to the shareholders of SeraNova and the issuance of the equity shares underlying the ADSs to the depositary.

		Historical SeraNova, Inc.			Pro forma adjustments						Pro forma
Revenues		$39,795									$39,795
Cost of sales		22,475									22,475
Gross profit		17,320									17,320
Selling, general and administrative expenses		17,605			$(803	)(1)		$  1,162	(2)		17,964	(3)
Depreciation and amortization		1,131									1,131
Total operating expenses		18,736			(803	)		1,162			19,095
Operating loss		(1,416	)		803			(1,162	)		(1,775	)
Other income (expense), net		(80	)					(288	)(4)		(368	)
Loss before income taxes		(1,496	)		803			(1,450	)		(2,143	)
Benefit for income taxes		(235	)								(235	)
Net loss		$(1,261	)		$803			$(1,450	)		$(1,908	)
Unaudited pro forma net loss per common share—basic and      diluted		$  (0.08	)								$  (0.11	)
Shares used in per share calculation of unaudited pro forma net      loss—basic and diluted		16,629									16,629

(1)	Represents the elimination of historical costs covered by the services and space sharing agreements.

(2)	Represents the estimated annual costs that would have been incurred under the services and space sharing agreements (See Note 4 to SeraNova’s Combined Financial Statements).

(3)

The difference between the historical costs covered by the services and space sharing arrangements and the costs to be incurred under the services and space sharing agreements is due to SeraNova’s growth throughout 1999 which resulted in it utilizing an increasing volume of office space and incurring higher costs as the year progressed.

(4)	Represents the estimated annual interest expense that would have been incurred if the bank credit facility had been in place for the year 1999.

		Nine months ended September 30, 2000			Year ended December 31, 1999
Silverline Technologies Limited
Pro forma results of operations (in thousands):
Revenues		$164,538			$133,602
Income before extraordinary item		12,198			5,561
Pro forma financial position at end of period (in thousands):
Total assets		364,585			110,751
Total debt		87,308			35,678
Book value per ADS (at end of period):
Historical		$5.51			$2.40
Pro forma combined		6.49			2.08
Pro forma per equivalent share of SeraNova common stock		18.67			5.97
Cash dividends declared per ADS (1)
Historical		0			0
Pro forma combined		0			0
Pro forma per equivalent share of SeraNova common stock		0			0
Income before extraordinary item per ADS (diluted):
Historical		0.70			0.49
Pro forma combined		0.29			0.14
Pro forma per equivalent share of SeraNova common stock		0.84			0.40
SeraNova, Inc.
Book value per share (at end of period)		0.60			0.30
Diluted earnings per share from continuing operations		(0.30	)		(0.08	)

		October 26, 2000(2)		January 8, 2001(2)
Closing price:
Silverline ADS		$15.875		$10.00
SeraNova common stock:
Per share		4.4375		2.375
Per equivalent Silverline ADS		5.55625		3.50

(1)

During 1999 and 2000, Silverline declared dividends to its equity shareholders of record as of March 31 in each year of 1.75 Indian rupees per equity share in 1999 and 1.75 Indian rupees per equity share in 2000 (approximately $0.04 per share and $0.04 per share, respectively). On June 20, 2000, Silverline completed its U.S. initial public offering of its ADSs. No dividends have been declared to holders of Silverline’s ADSs since its initial public offering; therefore, dividends per ADS are computed at 0.

(2)

October 26, 2000, was the last trading day preceding the date on which the proposed general terms of the merger were publicly announced. The closing prices of SeraNova common stock per equivalent Silverline ADS were calculated by multiplying the respective closing prices of Silverline ADS by 0.35, the exchange ratio in the merger. The Silverline ADSs are listed on the New York Stock Exchange, and the SeraNova common stock is quoted on the Nasdaq National Stock Market. See “Price Range of SeraNova Common Stock” on page 127.

Ÿ

recruiting and retaining skilled technical, marketing and management personnel in an environment where there is intense competition for skilled personnel;

Ÿ

managing a larger, more complex international organization;

Ÿ

expanding its facilities and other infrastructure in a timely manner to accommodate a significantly larger global workforce;

Ÿ

maintaining high employee utilization rates, which is important to cover its relatively high fixed costs;

Ÿ

expanding its sales and marketing efforts;

Ÿ

providing adequate training and supervision to maintain its high quality standards;

Ÿ

strengthening its financial and management controls in a manner appropriate for a larger enterprise; and

Ÿ

preserving its culture, values and entrepreneurial environment.

Ÿ

the number, size, scope, timing, duration and profitability of its projects due to the long and unpredictable sales cycle of its services;

Ÿ

the fixed nature of a significant proportion of its operating expenses, particularly personnel and facilities;

Ÿ

the effect of seasonal expenditures on information technology solutions by its clients;

Ÿ

the effect of seasonal hiring and training patterns, employee utilization rates and the time required to train and productively engage new employees;

Ÿ

the proportion of services performed at client sites rather than at its off-shore facilities, because its profit margins for services performed at its off-shore facilities are higher;

Ÿ

changes in its pricing policies or those of its competitors; and

Ÿ

unanticipated project terminations, delays or deferrals.

Ÿ

Indian information technology services companies, such as HCL Technologies, Infosys Technologies Ltd., Satyam Computer Services Limited, Tata Consultancy Services and Wipro Limited;

Ÿ

U.S. information technology services companies with off-shore capabilities, such as Cognizant Technology Solutions Corp., Complete Business Solutions Inc. and iGate Capital Corporation;

Ÿ

Internet professional services firms, such as AGENCY.COM Ltd., Proxicom Inc., Razorfish Inc., Sapient Corp.;

Ÿ

Systems consulting and integration firms, such American Management Systems Inc., Cambridge Technology Partners Inc., Computer Horizons Corp. and marchFIRST;

Ÿ

Large international accounting firms and their consulting affiliates, such as Andersen Consulting LLP, Ernst & Young LLP and PricewaterhouseCoopers LLP;

Ÿ

Outsourcing firms, such as Computer Sciences Corp., Electronic Data Systems Corp., International Business Machines Corp. and Perot Systems Corp.; and

Ÿ

In-house information technology departments.

Ÿ

actual or perceived lack of security of information;

Ÿ

high cost or lack of availability of access;

Ÿ

congestion of traffic or other usage delays on the Internet;

Ÿ

inconsistent quality of service or the lack of availability of cost-effective, high-speed service;

Ÿ

governmental regulation;

Ÿ

uncertainty regarding intellectual property ownership; and

Ÿ

possible outages or other damage to the Internet.

Ÿ

estimate accurately the resources and time required or the future rates of wage inflation and currency exchange rates; or

Ÿ

complete its contractual obligations within the time frame committed.

Ÿ

In April 2000, Silverline Technologies, Inc. acquired CIT Canada, a software development firm in Toronto, Canada, for approximately $4.2 million in cash. CIT Canada has approximately $3.1 million in revenues and 70 employees as of December 31, 1999.

Ÿ

As of September 2000, Silverline Technologies Limited had invested $30.2 million in its existing wholly owned subsidiary, Silverline Technologies, Inc. for expansion of its sales and marketing operations and to meet the working capital requirements for the expanded scope of the business.

Ÿ

In September 2000, Silverline Technologies, Inc. acquired Megasys Software Services Inc., an information technology services provider based in Columbus, Ohio for $6.22 million. Megasys had approximately $10 million in revenues as of December 1999 and 149 employees.

Ÿ

Silverline Technologies, Inc. invested $6.5 million for a 36% stake in the equity of Expo 24-7.com, a U.K.-based company and $5.0 million for a 15% stake in the equity of Unified Herbal, a U.K.-based company.

Ÿ

In October 2000, Silverline acquired its second largest customer, Sky Capital International Ltd., a Hong Kong based information technology consulting company for cash consideration of $22 million. Sky Capital had $24.3 million in revenues for the year ended June 30, 2000 and 100 professionals.

Ÿ

Silverline has finalized an investment and a strategic alliance agreement with TIS Worldwide, Inc. (or “TIS”), an e-business solutions integrator that specializes in delivery of Internet-based applications to help corporations increase and improve customer services. Silverline has agreed to invest $12.5 million for a 6% stake in TIS. Silverline will be TIS’s exclusive Indian supplier for all software development services for a period of three years. This investment is subject to Indian regulatory approvals. TIS has operations in 10 offices with over 600 professionals.

Ÿ

foreign regulation, including restrictions against the repatriation of earnings, acquisitions, export requirements and restrictions, and multiple and possibly overlapping tax structures; and

Ÿ

overseas facilities management, including difficulties relating to administering our business globally and managing foreign operations and currency exchange rate fluctuations.

Ÿ

its insurance coverage will be available in sufficient amounts to cover one or more significant claims that are successfully asserted against it;

Ÿ

Silverline’s insurance coverage will continue to be available to it in the future on reasonable terms, including reasonable premium, deductible and co-insurance requirements; or

Ÿ

Silverline’s insurer will not disclaim coverage as to any future claim.

Ÿ

a 10-year tax holiday from payment of Indian corporate income taxes for operation of its Indian facilities, all of which are “ Export Oriented Units” or located in “Software Technology Parks” or “Export Processing Zones”; and

Ÿ

an income tax deduction of 100% for profits derived from exporting information technology services, which is an alternate tax benefit available to Silverline.

1. The scope of the tax benefit available to software development centers has become much more restricted. Under the old provision, 100% of the business profits earned by such units were exempt from income tax. Now, this exemption applies only to the export income earned by these units.

2. This exemption is being phased out over the financial years 2000–2001 to the financial year 2008–2009. Accordingly, facilities set up on or before March 31, 2001 would have a 9-year tax benefit, new facilities set up on or before March 31, 2002 would have a 8-year tax benefit and so forth until the tax benefit under this provision would not be available to new facilities set up after March 31, 2009. Silverline’s tax benefits extend until 2002, 2003, 2008 and 2009, respectively, for its Mumbai (Bombay), Chennai (Madras) and its new Thane and new Chennai facilities.

3. Indian software companies lose this tax benefit with respect to a particular software development center if there is a change of more than 49% in their ownership between the last date of the financial year in which that software development center was set up and the last date of any subsequent financial year. As a result, companies are more likely to lose their tax benefits if large shareholders sell their shares or if new shares are issued in order to raise capital, for acquisitions or otherwise. In addition, companies are more likely to lose their tax holidays with respect to their older facilities, because more time will have elapsed in which to accumulate the 49% ownership change.

Ÿ

has not been pronounced by a court of competent jurisdiction;

Ÿ

has not been given on the merits of the case;

Ÿ

appears on its face to be founded on an incorrect view of international law or a refusal to recognize the law of India where applicable;

Ÿ

has been obtained in proceedings opposed to natural justice;

Ÿ

has been obtained by fraud; or

Ÿ

is founded on a breach of law or public policy in India.

Ÿ

the U.S. dollar equivalent of the Indian rupee trading price of equity shares in India and indirectly the U.S. dollar trading price of Silverline ADSs in the United States;

Ÿ

the U.S. dollar equivalent of the proceeds that you would receive upon the sale in India of any equity shares that you withdraw from the depositary; and

Ÿ

the U.S. dollar equivalent of cash dividends, if any, paid in Indian rupees on the equity shares represented by the ADSs.

Ÿ

A broad range of information technology services. Silverline provides a broad range of information technology services, including application development, migration and maintenance, and e-business solutions. Silverline has also begun focusing on CRM services.

Ÿ

Proven scaleable processes with SEI-CMM Level 4 rating. Silverline’s proven processes and methodologies, which it uses at its three software development centers in India, have been assessed as Level 4 under the Software Engineering Institute’s Capability Maturity Model, or SEI-CMM, a rating system for information technology companies. The Software Engineering Institute is a research development center operated by Carnegie Mellon University.

Ÿ

Highly skilled, relatively low cost information technology professionals. By having software development centers in both India and the U.S., Silverline is able to provide near 24-hour service. Silverline’s Indian software development centers are staffed with relatively low-cost professionals, whose average annual wages are historically approximately 10% of that of their U.S. counterparts.

Ÿ

Silverline’s in-house training institute. Silverline believes its in-house training facility, the Silverline Institute of Software Technology, addresses its training needs and provides it with a competitive advantage in recruiting and retaining information technology professionals.

Ÿ

Silverline’s industry-specific knowledge and experience. Silverline’s extensive knowledge and experience in the business information services, financial services and telecommunications industries reduces Silverline’s learning curve on new engagements in these industries, and allows it to accurately define and deliver tailored solutions that effectively address the challenges that its clients face.

Ÿ

Expanding its services offerings;

Ÿ

Increasing the services Silverline performs off-shore;

Ÿ

Developing and enhancing long-term client relationships;

Ÿ

Attracting and retaining skilled personnel;

Ÿ

Pursuing strategic acquisitions and relationships; and

Ÿ

Capitalizing on its investments in infrastructure.

Ÿ

In April 2000, Silverline Technologies, Inc. acquired CIT Canada, a software development firm in Toronto, Canada, for approximately $4.2 million in cash. CIT Canada has approximately $3.1 million in revenues and 70 employees as of December 31, 1999.

Ÿ

As of September 2000, Silverline Technologies Limited had invested $30.2 million in its existing wholly owned subsidiary, Silverline Technologies, Inc. for expansion of its sales and marketing operations and to meet the working capital requirements for the expanded scope of the business.

Ÿ

In September 2000, Silverline Technologies, Inc. acquired Megasys Software Services Inc., an information technology services provider based in Columbus, Ohio for $6.22 million. Megasys had approximately $10 million in revenues as of December 1999 and 149 employees.

Ÿ

Silverline Technologies, Inc. invested $6.5 million for a 36% stake in the equity of Expo 24-7.com, a U.K.-based company and $5 million for a 15% stake in the equity of Unified Herbal, a U.K.-based company.

Ÿ

In October 2000, Silverline acquired its second largest customer, Sky Capital International Ltd., a Hong Kong based information technology consulting company for cash consideration of $22 million. Sky Capital had $24.3 million in revenues for the year ended June 30, 2000 and 100 professionals as of June 30, 2000. Sky Capital has an existing blue-chip client base, including AT& T, Cable & Wireless, Cathay Pacific, Lehman Brothers, Standard Chartered, and ITSD. Sky Capital has an expansive network of information technology professionals and sales and recruiting teams, including bilingual human resources pool in Hong Kong and Japan.

Ÿ

Silverline has finalized an investment and a strategic alliance agreement with TIS Worldwide, Inc. (or “TIS”), an e-business solutions integrator that specializes in delivery of Internet-based applications to help corporations increase and improve customer services. Silverline has agreed to invest $12.5 million for a 6% stake in TIS. Silverline will be TIS’s exclusive Indian supplier for all software development services for a period of three years. This investment is subject to Indian regulatory approvals. TIS has operations in 10 offices with over 600 professionals.

		September 30, 2000
		Historical						Pro forma adjustments
		Silverline Technologies Limited		SeraNova, Inc.		Sky Capital International		SeraNova, Inc.			Sky Capital International			Pro Forma combined
ASSETS
Current assets:
Cash and cash equivalents		$  17,991		$  4,911		$12,097								$  34,999
Short term investments		30,607												30,607
Accounts receivable—net		48,222		17,154		3,613					$(4,809	)(3)		64,180
Other current assets				5,250										5,250
Unbilled services		3,035		8,782										11,817
Prepaid expenses		61,155												61,155
Total current assets		161,010		36,097		15,710					(4,809	)		208,008
Property, plant and equipment, net		36,313		8,500		88								44,901
Note receivable														—
Deposits						133								133
Deferred income taxes		842												842
Investments		11,680				611								12,291
Intangible assets—net		18,164		2,871				$ 58,028	(1)		18,108	(2)		97,171
Other assets		500		739										1,239
		31,186		3,610		744		58,028			18,108			111,676
TOTAL ASSETS		$228,509		$48,207		$16,542		$  58,028			$13,299			$364,585
Current liabilities:
Accounts payable and accrued             expenses		$    9,404		$  7,638		$11,038					$(4,809	)(3)		$  23,271
Notes payable				11,686										11,686
Advance from customers		49												49
Current portion of long-term debt		7,724		37										7,761
Line of credit payable		12,382		9,921		168								22,471
Other accrued liabilities		8,928				576								9,504
Total current liabilities		38,487		29,282		11,782					(4,809	)		74,742
Long term debt		3,148		580		868								4,596
Convertible preferred stock and warrants				7,970										7,970
Total shareholders’ equity		186,874		10,375		3,892		$  58,028			18,108			277,277
TOTAL LIABILITIES AND     SHAREHOLDERS’ EQUITY		$228,509		$48,207		$16,542		$  58,028			$13,299			$364,585

		For the year ended December 31, 1999
		Historical								Pro forma adjustments
		Silverline Technologies Limited			SeraNova, Inc.			Sky Capital International		SeraNova, Inc.			Sky Capital International			Pro Forma Combined
Net revenue		$87,577			$39,795			$19,289					$(13,059	)(3)		$133,602
Cost of sales		49,446			22,475			17,139					(13,059	)(3)		76,001
Gross Profit		38,131			17,320			2,150					—			57,601
Selling, general and administrative     expenses		13,141			17,605			536								31,282
Deferred stock compensation amortization		532			0			0								532
Depreciation and amortization		4,095			1,131			0		$  8,290	(1)		2,587	(1)		16,103
Total operating expenses		17,768			18,736			536		8,290			2,587			47,917
INCOME (LOSS) FROM     OPERATIONS		20,363			(1,416	)		1,614		(8,290	)		(2,587	)		9,684
Other income (expense)—net		(1,380	)		(80	)		199								(1,261	)
INCOME (LOSS) BEFORE INCOME     TAXES AND EXTRAORDINARY     ITEM		18,983			(1,496	)		1,813		(8,290	)		(2,587	)		8,423
Provision (benefit) for income taxes		2,808			(235	)		289								2,862
Income (loss) before extraordinary item		16,175			(1,261	)		1,524		(8,290	)		(2,587	)		5,561
Extraordinary item (net of taxes)		375			0			0								375
NET (LOSS) INCOME		$15,800			$(1,261	)		$  1,524		$(8,290	)		$  (2,587	)		$    5,186
Earnings per equity share
Basic:
Net income		$0.28			$(0.08	)		$15.24								$0.07	(4)
Diluted:
Net income		0.24			(0.08	)		15.24								0.06	(4)
Earnings per ADS
Basic:
Net income		0.55			(0.08	)		15.24								0.14	(4)
Diluted:
Net income		0.48			(0.08	)		15.24								0.13	(4)
Weighted average equity shares used in     computing earnings per equity share
Basic		57,150			16,629			100								72,313
Diluted		65,597			16,629			100								80,760
ADS used in computing earnings per ADS
Basic		28,575			16,629			100								36,156
Diluted		32,799			16,629			100								40,380

		Nine months ended September 30, 2000
		Historical							Pro forma adjustments
		Silverline Technologies Limited		SeraNova, Inc.			Sky Capital International		SeraNova, Inc.			Sky Capital International			Pro Forma combined
Net revenue		$100,451		$59,287			$23,047					$(18,247	)(3)		$164,538
Cost of sales		52,379		29,550			20,794					(18,247	)(3)		84,476
Gross profit		48,072		29,737			2,253								80,062
Selling, general and administrative     expenses		18,399		35,062			601								54,062
Deferred stock compensation amortization		1,838		0			0								1,838
Depreciation and amortization		3,234		1,862			0		$  6,217	(1)		1,940	(1)		13,253
Total operating expenses		23,471		36,924			601		6,217			1,940			69,153
INCOME (LOSS) FROM     OPERATIONS		24,601		(7,187	)		1,652		(6,217	)		(1,940	)		10,909
Other income (expense)—net		3,205		(879	)		128								2,454
INCOME (LOSS) BEFORE INCOME     TAXES AND EXTRAORDINARY     ITEM		27,806		(8,066	)		1,780		(6,217	)		(1,940	)		13,363
Provision (benefit) for income taxes		3,811		(2,934	)		288								1,165
Income before extraordinary item		23,995		(5,132	)		1,492		(6,217	)		(1,940	)		12,198
Extraordinary item (net of taxes)
NET INCOME (LOSS)		$  23,995		$(5,132	)		$  1,492		$(6,217	)		$(1,940	)		$  12,198
Earnings per equity share
Basic:
Net income		$0.35		$(0.30	)		$0.30								$0.15	(4)
Diluted:
Net income		0.35		(0.30	)		0.30								0.15	(4)
Earnings per ADS
Basic:
Net income		0.71		(0.30	)		0.30								0.29	(4)
Diluted:
Net income		0.70		(0.30	)		0.30								0.29	(4)
Weighted average equity shares used in     computing earnings per equity share
Basic		67,770		17,236			5,050								82,933
Diluted		68,648		17,236			5,050								83,811
ADS used in computing earnings per ADS
Basic		33,885		17,236			5,050								41,466
Diluted		34,324		17,236			5,050								41,905

(1)

Represents goodwill which is the excess of $76.4 million purchase price over the fair value of the identifiable tangible and intangible net assets acquired. Such goodwill is amortized over a 7-year period. The purchase price is calculated based on the closing price of the Silverline ADS on the NYSE on January 8, 2001 which was $10.00. The total number of ADSs issued to SeraNova including the equity, preferred shareholders and warrant holders equal 7,637,309 ADS. The purchase price is ($10 x 7,637,309 = $76,373,090).

(2)	Represents goodwill which is the excess of $22 million purchase price over the fair value of the identifiable tangible and intangible net assets acquired. Such goodwill is amortized over a 7-year period.

(3)	Reflects the elimination of the transactions between Sky Capital International and Silverline Technologies Limited relating to services performed by Silverline Technologies Limited for Sky Capital International.

(4)	Represents EPS calculated as follows:

Basic EPS:

Net Income/Total Pro Forma weighted average ADSs Issued and Outstanding for the year ended December 31, 1999 and nine months ended September 30, 2000, respectively

Diluted EPS:

Net Income/Total Pro Forma weighted average ADSs Issued and Outstanding for the year ended December 31, 1999 and nine months ended September 30, 2000, respectively

160,000 shares that would be exercisable under SeraNova warrants have been excluded from the calculation of diluted EPS because such shares are anti-dilutive.

Ÿ

the benefit of access to Silverline’s strong offshore delivery model which will enable SeraNova’s business to significantly reduce its costs and finally achieve profitability;

Ÿ

the access afforded to SeraNova’s services through Silverline’s established relationships with large business organizations and enterprises and with major customers, sales and marketing resources and distribution channels; and

Ÿ

the belief that the opportunity to own Silverline ADSs would provide SeraNova shareholders with greater future liquidity in the security of an attractive company that could capitalize on the business prospects of Silverline and provide a better return on shareholder investment.

Ÿ

information relating to the business, assets, management, competitive position and operating performance of SeraNova, including the prospects of SeraNova if it were to continue as an independent company;

Ÿ

the financial presentation of Punk, Ziegel & Company, including its opinion described under “Opinion of SeraNova’s Financial Advisor” on page 49, to the effect that, as of the date of such opinion, the exchange ratio was fair from a financial point of view, to the holders of SeraNova common stock;

Ÿ

the likelihood that the merger would be completed; and

Ÿ

the expected qualification of the merger as a tax-free reorganization under Section 368(a) of the Internal Revenue Code.

Ÿ

the operations of Silverline and SeraNova might not be successfully integrated;

Ÿ

despite the efforts of SeraNova and Silverline after the merger, key personnel might leave SeraNova;

Ÿ

the potential benefits of the merger might not be fully realized; and

Ÿ

the market price for Silverline ADSs might decline.

Ÿ

The merger will help Silverline to strengthen its e-business consulting practice;

Ÿ

The merger will provide Silverline with entrée into the automobile industry; and

Ÿ

The merger will help Silverline to deepen its financial services client base.

Comparable Stock Price Performance

Peer Group Enterprise Value Premium Comparison

Precedent Acquisition Analysis

Exchange Ratio Analysis

Pro Forma Contribution Analysis

Miscellaneous

Ÿ

the conversion of SeraNova stock options into Silverline stock options and the possible accelerated vesting of options;

Ÿ

the continued indemnification of current directors and officers of SeraNova;

Ÿ

the retention of executive officers as employees of Silverline or SeraNova after the merger; and

Ÿ

settlements for SeraNova stock options held by non-employee directors James E. Abbott and Nagarjun Valluripalli, which cannot be converted into options for Silverline ADSs pursuant to the requirements of Indian law.

Stock Options

		SeraNova options				Silverline options
		No. of SeraNova shares(a)		Exercise price		No. of ADSs(b)		Exercise price(b)
Rajkumar Koneru		777,938		$2.52		272,278		$7.20
Ravi Singh		466,763		2.52		163,367		7.20
Rajan Nair		466,763		2.52		163,367		7.20
Richard Bevis		50,000		2.52		17.500		7.20
Tarun Chandra		350,072		2.52		122,525		7.20
Ashok Roy		311,175		2.52		108,911		7.20

(a)

Subject to the approval of the Indian Ministry of Finance, as described below under “—Indian Regulatory Matters,” the merger could result in the acceleration of the vesting of options for the following numbers of shares of SeraNova common stock, which would not otherwise vest within 60 days of the record date: Mr. Koneru—311,170 shares; Mr. Singh—186,699 shares; Mr. Nair—280,058 shares; Mr. Bevis—33,334 shares; Mr. Chandra—233,382 shares; and Mr. Roy—207,450 shares. When these options are converted into Silverline options at the effective time of the merger, they may be fully vested and exercisable.

(b)

The exercise price may have to be adjusted to comply with Indian government regulations requiring a minimum exercise price at fair market value at the date of when the options are converted, with a maximum permissible discount from fair market price of 10%. To reflect that exercise price, the number of ADSs will be adjusted using the Black-Scholes option pricing model, to result in the same total option value.

Employment Agreements

Indemnification and Insurance

Ÿ

that certificate is properly endorsed and otherwise is in proper form for transfer; and

Ÿ

the person requesting the issuance (1) pays to the exchange agent any transfer or other taxes resulting from the issuance of Silverline ADSs in a name other than that on the surrendered certificate, or (2) establishes to the satisfaction of the exchange agent that tax has been paid or is not payable.

Ÿ

for approval, under the Indian Foreign Exchange Management (Transfer or Issue of a Foreign Security) Regulations, 2000 of the exchange of SeraNova common stock for Silverline ADSs in the merger;

Ÿ

for certain clarifications, under the Indian Foreign Exchange Management (Transfer or Issue of Security By a Person Resident Outside India) Regulations, 2000 with respect to the proposed conversion of SeraNova stock options held by non-Indian resident employees of SeraNova into options to purchase Silverline ADSs; and

Ÿ

for permission, under the Indian Foreign Exchange Management (Transfer or Issue of a Foreign Security) Regulations, 2000, for the proposed conversion of SeraNova stock options held by Indian resident employees of SeraNova into options to purchase Silverline ADSs.

Ÿ

exemption from certain provisions of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 relating to the conversion in the merger of SeraNova employee stock options into Silverline ADS options, particularly the exemption from the requirement that the converted options have a minimum vesting period of one year from the date of the conversion. The Securities and Exchange Board of India has refused to grant the requested exemption, and Silverline is applying to the Ministry of Finance of India to review this refusal. We cannot predict the outcome of this review by the Ministry of Finance. If the requested exemptions are not granted, Silverline will be required to comply with the provisions of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999; and

Ÿ

clarifications with regard to the non-applicability of certain provisions of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 to the proposed issue of ADSs to the shareholders of SeraNova and the issuance of the equity shares underlying the ADSs to the depositary.

Ÿ

a citizen or individual resident of the United States;

Ÿ

a corporation or other entity taxable as a corporation for U.S. federal income tax purposes that is created or organized in the United States or under the law of the United States or of any state or the District of Columbia;

Ÿ

an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or

Ÿ

a trust, if (1) a court within the United States is able to exercise primary supervision over the administration of the trust, and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (2) the trust was in existence on August 20, 1996 and properly elected to continue to be treated as a United States person.

Ÿ

are broker-dealers or insurance companies;

Ÿ

have elected mark-to-market accounting;

Ÿ

are tax-exempt organizations;

Ÿ

are financial institutions or “financial services entities”;

Ÿ

hold SeraNova common stock or ADSs or equity shares as part of a straddle, “hedge” or “conversion transaction” with other investments;

Ÿ

own directly, indirectly or by attribution, Silverline equity shares (whether by ownership of ADSs or otherwise) having at least five percent or more of either the total voting power or the total value of Silverline equity shares after the merger, and which must enter into and comply with the terms of a gain recognition agreement under Treasury Department regulation section 1.367(a)-8 in order to be eligible for the tax treatment described below in “Tax Consequences of the Merger” at the time of the merger, and which may be subject to tax as of a later date if Silverline disposes of SeraNova stock or SeraNova disposes of substantially all of its assets before the end of the fifth full taxable year after the merger;

Ÿ

acquired their shares of SeraNova common stock, or that acquire their ADSs or equity shares, through the exercise of options or similar derivative securities or otherwise as compensation;

Ÿ

have a functional currency that is not the U.S. dollar; or

Ÿ

are regulated investment companies.

U.S. federal tax implications to U.S. Holders of SeraNova common stock.

Ÿ

A U.S. Holder of SeraNova common stock will not recognize gain or loss for U.S. federal income tax purposes on an exchange of SeraNova common stock for ADSs pursuant to the merger, except to the extent cash is received in lieu of a fractional ADS. A U.S. Holder who receives cash with respect to a fractional Silverline ADS will be treated as having received the fractional ADS pursuant to the merger and then as having had the fractional ADS redeemed by Silverline for cash. The U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the cash received for the fractional ADS and the tax basis of the SeraNova common stock surrendered that is allocated to the fractional ADS. In the case of a noncorporate U.S. Holder, any such gain will be subject to U.S. federal income tax at a maximum rate of 20% if the U.S. Holder has held the SeraNova common stock for more than one year at the consummation of the merger.

Ÿ

The aggregate tax basis of the ADSs issued to a U.S. Holder of SeraNova common stock pursuant to the merger will be the same as the aggregate tax basis in the SeraNova common stock surrendered by that holder pursuant to the merger, reduced by the basis allocable to any fractional ADS for which cash is received.

Ÿ

The holding period of an ADS issued to a U.S. Holder in exchange for SeraNova common stock pursuant to the merger will include the holding period of the SeraNova common stock.

U.S. federal income tax implications to Silverline and SeraNova

Taxation of Dividends Paid on ADSs or Equity Shares

Taxation of the Disposition of ADSs or Equity Shares

Tax Consequences if Silverline is a Passive Foreign Investment Company

Foreign Personal Holding Company and Personal Holding Company Rules

Foreign Investment Company Rules

Ÿ

the gain or income is effectively connected with the conduct by the Non-U.S. Holder of trade or business in the United States and, in the case of a resident of a country that has a treaty with the United States, the gain or income is attributable to a permanent establishment or, in the case of an individual, a fixed place of business, in the United States, or

Ÿ

in case of gain from a disposition of SeraNova common stock or of an ADS or equity share, the Non-U.S. Holder is an individual who holds the SeraNova common stock, ADS or equity share as a capital asset and is present in the United States for 183 days or more in the taxable year of the disposition and does not qualify for an exemption.

(1)  The distributing or controlled corporation and the acquirer, or any of their respective controlling shareholders, discussed the acquisition or a similar acquisition by the acquirer before the distribution. The weight accorded the discussions depends on the nature, extent and timing of the discussions. For this purpose, an acquisition does not include a public offering or auction.

(2)  The distributing or controlled corporation and a potential acquirer, or any of their respective controlling shareholders, discussed an acquisition before the distribution, and a similar acquisition by a different person occurred after the distribution. The weight accorded the discussions depends on the nature, extent and timing of the discussions and the similarity of the acquisition actually occurring to the acquisition discussed before the distribution. For this purpose, an acquisition does not include a public offering or auction. The 2000 proposed Treasury Department regulations indicate that an acquisition of a corporation’s stock pursuant to an offering of stock by it to the public is not similar to an acquisition of outstanding stock by another corporation for this purpose.

(3)  The distribution was motivated by a business purpose to facilitate the acquisition or a similar acquisition of the distributing or controlled corporation.

(4)  The acquisition and the distribution occurred within six months of each other, or there was an agreement, understanding, arrangement or substantial negotiations regarding the acquisition within six months after the distribution. Alternatively, there was an agreement, understanding, arrangement or substantial negotiations regarding a similar acquisition at the time of the distribution or within six months thereafter. For purposes of the 2000 proposed Treasury Department regulations, whether an agreement, understanding or arrangement exists depends on the facts and circumstances. The parties do not necessarily have to have entered into a binding contract or to have reached agreement on all terms to have an agreement, understanding or arrangement. An agreement, understanding or arrangement clearly exists if enforceable rights to acquire stock exist.

(5)  The allocation of debt between the distributing and the controlled corporations makes an acquisition of either corporation likely in order to service the debt.

(1)  Neither the distributing nor the controlled corporation and the acquirer or any potential acquirer, nor any of their respective controlling shareholders, discussed the acquisition or a similar acquisition before the distribution. For this purpose, an acquisition does not include a public offering or auction.

(2)  There was an identifiable, unexpected change in market or business conditions occurring after the distribution that resulted in the acquisition that was otherwise unexpected at the time of the distribution.

(3)  The distribution was motivated in whole or substantial part by an corporate business purpose appropriate for a spin-off, other than a business purpose to facilitate the acquisition or a similar acquisition of the distributing or controlled corporation. The presence of a business purpose to facilitate the acquisition or a similar acquisition of the distributing or controlled corporation is relevant in determining the extent to which the distribution was motivated by a corporate business purpose appropriate for a spin-off other than a business purpose to facilitate the acquisition or a similar acquisition of the distributing or controlled corporation.

(4)  The distribution would have occurred at approximately the same time and in similar form regardless of the acquisition or a similar acquisition.

(1)  There is evidence of a business purpose to facilitate an acquisition of the distributing or controlled corporation if, at the time of the distribution, it was reasonably certain that before a date that is six months after the distribution, an acquisition would occur, an agreement, understanding or arrangement would exist, or substantial negotiations would occur regarding an acquisition of the distributing or controlled corporation.

(2)  The occurrence of internal discussions regarding an acquisition may be indicative of the business purpose that motivated the distribution.

(3)  If the distributing corporation distributes the controlled corporation’s stock intending, in whole or in substantial part, to decrease the likelihood of the acquisition of either the distributing or controlled corporation by separating it from another corporation that is likely to be acquired, the distributing corporation will be treated as having a business purpose to facilitate the acquisition of the corporation that was likely to be acquired.

(4)  For purposes of determining the parties’ intentions, the consequences of the application of section 355(e), and the existence of any contractual indemnity by the controlled corporation for tax resulting from the application of section 355(e) caused by an acquisition of the controlled corporation, are disregarded.

Ÿ

a majority of the holders of SeraNova’s common stock shall have approved the agreement and plan of merger;

Ÿ

the holders of 75% of the of the total voting power of Silverline’s equity shares entitled to vote present (in person or by a proxy) at a general meeting shall have approved the agreement and plan of merger (four shareholders of Silverline holding in the aggregate about 31.5% of the outstanding Silverline equity shares have granted to SeraNova an irrevocable proxy to vote their equity shares in favor of the agreement and plan of merger);

Ÿ

no laws shall have been adopted or promulgated, and no temporary restraining order, injunction or other order issued by a court or other governmental entity shall be in effect that would make the merger illegal or otherwise prohibit consummation of the merger; however, this condition will not be available to Silverline or SeraNova if its failure to use its reasonable best efforts to obtain all required governmental approvals shall have been the cause of, or shall have resulted in, such order or injunction;

Ÿ

the Silverline ADSs to be issued in the merger shall have been approved for listing on the New York Stock Exchange;

Ÿ

no stop order shall have been issued by the Securities and Exchange Commission suspending the effectiveness of Silverline’s Form F-4 registration statement of which this proxy statement/prospectus is a part, and no proceedings for that suspension shall have been initiated or threatened by the Securities and Exchange Commission; and

Ÿ

each of Silverline and SeraNova shall have obtained all required approvals from the Reserve Bank of India and other regulatory authorities in India in order to consummate the transactions set forth in the agreement and plan of merger.

Ÿ

Each of the representations and warranties of SeraNova in the agreement and plan of merger will be true and correct on the closing date of the merger except to the extent expressly made as of an earlier date, and except where the failure of such representations and warranties to be so true and correct individually or in the aggregate, does not have, and is not reasonably likely to have, a material adverse effect on the business, operations, results of operations or financial condition of SeraNova and its material subsidiaries, or on the ability of SeraNova to consummate the transactions contemplated by the agreement and plan of merger;

Ÿ

SeraNova will have performed or complied in all material respects with all material agreements and covenants required to be performed by it or complied with under the agreement and plan of merger at or prior to the closing date;

Ÿ

Silverline will have received from Deloitte & Touche LLP on the closing date of the merger a written opinion in form reasonably acceptable to Silverline stating that: (1) the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code, (2) Silverline and SeraNova will each be a party to the reorganization within the meaning of Section 368(b) of the Code, and (3) the issuance of the Silverline ADSs to the holders of the SeraNova common stock in the merger will not result in Silverline’s recognizing an amount of income or gain and/or being subject to an amount of tax that is reasonably likely to have a material adverse effect on the business, operations, results of operations or financial condition of Silverline and its material subsidiaries, or on the ability of Silverline to consummate the transactions contemplated by the agreement and plan of merger;

Ÿ

since the date of the agreement and plan of merger, there will not have been any material adverse change in the business operations, results of operations, or financial condition of SeraNova and its material subsidiaries, or on the ability of SeraNova to consummate the transactions contemplated by the agreement and plan of merger;

Ÿ

two key SeraNova employees, Rajan Nair, the chief operating officer, and Ragu Rajagopal, chief executive officer of SeraNova, India, will have entered into employment retention agreements in form and substance reasonably satisfactory to Silverline; and

Ÿ

the representations and warranties of certain directors and officers of SeraNova in support of the tax-free treatment of SeraNova’s spin-off from Intelligroup will be true and correct as of the closing date;

Ÿ

SeraNova will have reached an agreement with its preferred shareholders, or such shareholders will have otherwise exercised their rights under SeraNova’s certificate of incorporation dated September 26, 2000, so that one, and only one, of the alternatives set forth in Section 1.5(c)(A), (B) or (C) of the agreement and plan of merger can and will take place, and the merger will qualify as a tax-free reorganization under §368(a) of the Internal Revenue Code. See Annex A.

Ÿ

each of the representations and warranties of Silverline in the agreement and plan of merger will be true and correct on the closing date of the merger except to the extent expressly made as of an earlier date, and except where the failure of such representations and warranties to be so true and correct individually or in the aggregate, does not have, and is not reasonably likely to have, a material adverse effect on the business, operations, results of operations or financial condition of Silverline and its material subsidiaries, or on the ability of Silverline to consummate the transactions contemplated by the agreement and plan of merger.

Ÿ

Silverline will have performed or complied in all material respects with all material agreements and covenants required to be performed by it or complied with under the agreement and plan of merger at or prior to the closing date;

Ÿ

SeraNova will have received from Carter, Ledyard & Milburn, counsel to SeraNova, on the closing date of the merger a written opinion in form reasonably acceptable to Silverline stating that: (1) the merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, (2) SeraNova and Silverline will each be a party to the reorganization within the meaning of Section 368(b) of the Code, and (3) the Silverline ADSs received in the merger by holders of SeraNova common stock are properly permitted to be received under Section 354 of the Code without recognition of gain; and

Ÿ

since the date of the agreement and plan of merger, there shall not have been any material adverse change in the business, operations, results of operations or financial condition of Silverline and its material subsidiaries, or on the ability of Silverline to consummate the transactions contemplated by the agreement and plan of merger.

Ÿ

any bona fide proposal or offer from any person relating to any direct or indirect acquisition or purchase of 20% or more of the assets of SeraNova and its subsidiaries taken as a whole, or 20% or more of the combined voting power of the shares of SeraNova common stock; or

Ÿ

any tender offer or exchange offer that if consummated would result in any person beneficially owning 20% or more of the combined voting power of the shares of SeraNova common stock; or

Ÿ

any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving SeraNova or any of its subsidiaries in which the other party thereto or its shareholder will own 20% or more of the combined voting power of the parent entity resulting from any such transaction, other than the transactions contemplated by the agreement and plan of merger.

Ÿ

any proposal made by a third party relating to any direct or indirect acquisition or purchase of 50% or more of the assets of SeraNova and its subsidiaries, taken as a whole, or 50% or more of the combined voting power of the shares of SeraNova common stock; or

Ÿ

any tender offer or exchange offer that if consummated would result in any person beneficially owning 50% or more of the combined voting power of the shares of SeraNova common stock; or

Ÿ

any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving SeraNova or any of its subsidiaries in which the other party thereto or its shareholders will own 40% or more of the combined voting power of the parent entity resulting from any such transaction;

Ÿ

by mutual written consent of Silverline or SeraNova;

Ÿ

by either SeraNova or Silverline if the merger has not been completed by July 31, 2001, but this right to terminate will not be available to SeraNova or Silverline if its failure to fulfill any obligation under the agreement and plan of merger has caused or resulted in the failure of the merger to occur by July 31, 2001;

Ÿ

by either SeraNova or Silverline if any governmental entity shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by the agreement and plan of merger, and such order, decree, ruling or to take any other action shall have become final and nonappealable; however, this right to terminate the agreement and plan of merger will not be available to SeraNova or Silverline if its failure to use its reasonable best efforts has caused or resulted in such governmental action;

Ÿ

by either SeraNova or Silverline if the approval by the shareholders of SeraNova or Silverline required for the consummation of the merger shall not have been obtained at duly held meetings of the shareholders of SeraNova and Silverline;

Ÿ

by SeraNova if its board of directors withdraws its recommendation of the merger in response to a SeraNova superior proposal, so long as SeraNova has given Silverline the notices required by the agreement and plan of merger and has paid the termination fee described below;

Ÿ

by SeraNova or Silverline if the other has materially breached or failed to perform any of its representations, warranties, covenants or other agreements contained in the agreement and plan of merger and has not cured or is incapable of curing such breach within 45 calendar days after its receipt of written notice of breach from the other party; and

Ÿ

by Silverline if the board of directors of SeraNova modifies or proposes publicly to modify, in a manner adverse to Silverline, the approval or recommendation of the merger or the agreement and plan of merger by the board of directors of SeraNova.

Ÿ

the agreement and plan of merger is terminated after a competing proposal or offer is made to acquire at least 20% of the assets of SeraNova and its subsidiaries or at least 20% of the combined voting power of the shares of SeraNova common stock, or after a competing proposal is made to involve SeraNova or any of its subsidiaries in a merger consolidation, business combination, recaptialization, dissolution, liquidation or similar transaction in which the other party to the transaction or its stockholders would own at least 20% of the combined voting power of the party entity resulting from any such transaction, and

Ÿ

within twelve months of such termination, SeraNova or any of its subsidiaries enters into an agreement with respect to, or approves or consummates, a proposal to acquire at least 50% of the assets of SeraNova and its subsidiaries or at least 50% of the combined voting power of the shares of SeraNova common stock, or a proposal involving SeraNova or any of its subsidiaries in a merger, consolidation, business combination, recaptialization, dissolution, liquidation or similar transaction in which the other party to the transaction or its stockholders will own at least 40% of the combined voting power of the parent entity resulting from any such transaction.

Ÿ

maintain its existence in good standing;

Ÿ

maintain the general character of its business and properties and conduct its business in the ordinary and usual manner consistent with past practices, except as expressly permitted by the agreement and plan of merger;

Ÿ

maintain business and accounting records consistent with past practices; and

Ÿ

use its reasonable best efforts to preserve its business intact, to keep available the services of its present officers and employees, and to preserve the goodwill of its suppliers, customers and others having business relations with SeraNova.

Ÿ

amend or otherwise change its certificate of incorporation or by-laws;

Ÿ

issue or sell, or authorize for issuance or sale, or grant any options or make other agreements with respect to, any shares of its capital stock or any other of its securities, except in connection with the exercise of outstanding stock options or warrants;

Ÿ

declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise with respect to any of its capital stock;

Ÿ

reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock except redemption of its preferred stock;

Ÿ

acquire any corporation, partnership, other business organization or any division thereof; acquire assets with an aggregate purchase price in excess of $100,000; incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any person, or make any loans or advances, except for (A) interest and fees on indebtedness set forth on the schedules of the agreement and plan of merger, (B) indebtedness incurred in the ordinary course of business and consistent with past practice or (C) indebtedness in aggregate principal amount not in excess of $100,000; enter into any contract or agreement other than in the ordinary course of business, consistent with past practice; authorize any capital commitment which is in excess of $200,000 or capital expenditures which are, in the aggregate, in excess of $100,000; or enter into or amend any contract, agreement, commitment or arrangement with respect to any matter set forth in this paragraph;

Ÿ

mortgage, pledge or subject to lien any of its assets or properties, or agree to do so except for liens permitted by the agreement and plan of merger;

Ÿ

assume, guarantee or otherwise become responsible for the obligations of any other person, or agree to so do;

Ÿ

enter into or agree to enter into, or terminate prior to its expiration date, any employment agreement with respect to any employee whose annual salary exceeds $75,000;

Ÿ

increase the compensation or benefits payable, or to become payable, to its officers or employees, except for increases in accordance with past practices in salaries or wages of its employees who are not officers of SeraNova; or grant any severance or termination pay to, or enter into any severance agreement with any of its current directors, officers or other employees; or establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any current director, officer or employee except as required under applicable law;

Ÿ

take any action, other than in the ordinary course of business and consistent with past practice, with respect to accounting policies or procedures, including procedures with respect to the payment of accounts payable and collection of accounts receivables;

Ÿ

make any material tax election, or settle or compromise any material federal, state, local or foreign income tax liability;

Ÿ

settle or compromise any pending or threatened suit, action or claim which is material, or which relates to any of the transactions contemplated by the agreement and plan of merger;

Ÿ

pay, discharge or satisfy any claim, liability or obligation other than the payment, discharge or satisfaction, in the ordinary course of business and consistent with past practice, of liabilities reflected or reserved against in the balance sheet or subsequently incurred in the ordinary course of business and consistent with past practice; and other claims, liabilities or obligations, as so qualified, that in the aggregate do not exceed $100,000;

Ÿ

except in connection with the sale or licensing of its products in the ordinary course of business and consistent with past practice, sell, assign, transfer, license, sublicense, pledge or otherwise encumber any of the intellectual property rights; and

Ÿ

announce an intention, commit or agree, to do any of the above mentioned.

Ÿ

Upon reasonable notice, each of Silverline and SeraNova will afford to the other, and to the officers, employees, accountants, counsel, financial advisors and other representatives of the other, reasonable access during normal business hours, during the period prior to the effective time of the merger, to all its properties, books, contracts, commitments and records.

Ÿ

During the one-year period following the effective time of the merger, Silverline will maintain employee benefit plans, programs and policies for the employees of SeraNova and its subsidiaries which in the aggregate are substantially comparable to the employee benefit plans, programs and policies provided by SeraNova and its subsidiaries before the merger. Thereafter for one more year the employees of SeraNova and each of its subsidiaries will be eligible to participate in employee benefit plans, programs and policies which, in the aggregate, are substantially comparable to the employee benefit plans, programs and policies maintained by Silverline for similarly situated employees. During the first year after the effective time, no employee of SeraNova or its subsidiaries will have his or her base hourly rate of pay, base salary or bonus opportunity reduced except to the extent such reduction is called for as a result of a violation of Silverline’s generally applicable policies or a failure to satisfy Silverline’s generally applicable performance standards for similarly situated Silverline employees. The participant accounts in each unfunded plan, program or policy of SeraNova and each subsidiary of SeraNova which are designed to track the performance of SeraNova’s stock but which only pay benefits in cash will be converted at the effective time of the merger to accounts which track the performance of the corresponding Silverline’s stock based upon the principles set forth in the agreement and plan of merger for converting SeraNova’s stock to Silverline’s stock except that there shall be no rounding up or down as part of such conversions.

Ÿ

SeraNova will use its reasonable best efforts to obtain the consent of its bank lenders Fleet Capital Corporation and Fleet Bank to the terms of the agreement and plan of merger and the transactions contemplated in the agreement and plan of merger.

Ÿ

Silverline has agreed that the annual dividend which it declares and pays on its equity shares for the financial year ended March 31, 2001, will not exceed 2 Indian rupees per share.

Ÿ

the reported high and low closing sales prices for Silverline’s equity shares on The Stock Exchange, Mumbai;

Ÿ

the imputed high and low closing sales prices for Silverline’s equity shares translated into U.S. dollars based on the noon buying rate on the last date of each period presented;

Ÿ

the average daily trading volume for Silverline’s equity shares on The Stock Exchange, Mumbai; and

Ÿ

the high and low sale price for the Silverline ADSs as reported for New York Stock Exchange composite transactions.

Year		Price per equity share (Indian rupees)				Price per equity share (U.S. dollars)				Average daily equity share trading volume		Price per ADS				Average daily ADS trading volume
		High		Low		High		Low				High		Low
										(in thousands)						(in thousands)
1998
First Quarter		Rs.    44.80		Rs.  25.50		$  1.08		$  0.61		22.52		—		—		—
Second Quarter		121.40		8.55		2.93		1.17		174.23		—		—		—
Third Quarter		109.70		60.65		2.93		1.46		356.47		—		—		—
Fourth Quarter		112.40		74.95		2.72		1.81		364.21		—		—		—
1999												—		—		—
First Quarter		Rs.  380.25		Rs.106.80		$  8.80		$  2.47		1,294.62		—		—		—
Second Quarter		351.75		180.80		8.14		4.18		760.88		—		—		—
Third Quarter		373.55		191.95		8.67		4.44		1,031.93		—		—		—
Fourth Quarter		844.00		350.00		19.54		8.10		2,943.12		—		—		—
2000												—		—		—
First Quarter		Rs.1,360.00		Rs.657.00		$31.18		$15.05		1,908.18		—		—		—
Second Quarter		752.00		338.90		16.82		7.58		3,124.61		32.00		21.63		620.00
Third Quarter		456.20		300.20		9.90		6.52		4,906.01		22.50		14.88		78.92
Fourth Quarter		367.50		244.25		7.86		5.22		4,581.04		18.00		10.00		80.76

		Year ended December 31,															Nine months ended September 30
		1995			1996			1997			1998			1999			1999			2000
																	(unaudited)			(unaudited)
		(in thousands, except per equity share data)
Statement of Operations Data:
Revenues		$39,449			$45,252			$46,769			$60,219			$87,577			$60,032			$100,451
Cost of revenues sold		24,743			27,801			25,053			31,273			49,446			33,194			52,379
Gross profit		14,706			17,451			21,716			28,946			38,131			26,838			48,072
Operating expenses:
Selling, general and administrative expenses		6,407			7,599			10,342			11,316			13,141			9,181			18,399
Stock-based compensation		—			—			—			—			532			—			1,838
Depreciation and amortization		1,592			3,234			4,945			4,415			4,095			3,170			3,234
Total operating expenses		7,999			10,833			15,287			15,731			17,768			12,352			23,471
Operating income		6,707			6,618			6,429			13,215			20,363			14,486			24,601
Other income/(expense), net		(608	)		(437	)		(878	)		(895	)		(1,380	)		(1,046	)		3,205
Income before income taxes and extraordinary item		6,099			6,181			5,551			12,320			18,983			13,440			27,805
Provision for income taxes		413			847			1,216			1,482			2,808			2,071			3,811
Income before extraordinary item		5,686			5,334			4,335			10,838			16,175			11,369			23,994
Extraordinary item (net of taxes)		—			59			10			—			375			375			—
Net income		$  5,686			$  5,275			$  4,325			$10,838			$15,800			$10,994			$  23,994
Earnings per equity share
Basic:
Income before extraordinary item		$    0.13			$    0.12			$    0.10			$    0.26			$    0.28			$    0.21			$      0.35
Extraordinary item		—			—			—			—			$  (0.01	)		$  (0.01	)		—
Net income		$    0.13			$    0.12			$    0.10			$    0.26			$    0.27			$    0.20			$      0.35
Diluted:
Income before extraordinary item		$    0.13			$    0.12			$    0.10			$    0.19			$    0.25			$    0.17			$      0.35
Extraordinary item		—			—			—			—			$  (0.01	)		$  (0.01	)		—
Net income		$    0.13			$    0.12			$    0.10			$    0.19			$    0.24			$    0.17			$      0.35
Earnings per ADS
Basic:
Income before extraordinary item		$    0.26			$    0.24			$    0.20			$    0.52			$    0.56			$    0.42			$      0.71
Extraordinary item		—			—			—			—			$  (0.02	)		$  (0.01	)		—
Net income		$    0.26			$    0.24			$    0.20			$    0.52			$    0.54			$    0.41			$      0.71
Diluted:
Income before extraordinary item		$    0.26			$    0.24			$    0.20			$    0.38			$    0.50			$    0.35			$      0.70
Extraordinary item		—			—			—			—			$  (0.02	)		$  (0.01	)		—
Net income		$    0.26			$    0.24			$    0.20			$    0.38			$    0.48			$    0.34			$      0.70
Weighted average equity shares used in computing     earnings per equity share
Basic		42,450			42,450			42,450			42,450			57,150			54,242			67,770
Diluted		42,450			42,450			42,450			56,314			65,596			65,271			68,648
ADSs used in computing earnings per ADS
Basic		21,225			21,225			21,225			21,225			28,575			27,121			33,885
Diluted		21,225			21,225			21,225			28,157			32,798			32,636			34,324

		At December 31,										At September 30,
		1995		1996		1997		1998		1999		2000
		(in thousands)
Balance Sheet Data:
Cash and cash equivalents		$  834		$1,705		$7,943		$12,528		$20,662		$  17,991
Working capital		13,907		10,843		15,424		21,783		29,075		123,164
Total assets		35,882		49,386		57,224		69,275		87,646		228,509
Long-term debt (net of current portion)		5,823		7,787		4,399		5,510		317		3,148
Total shareholders’ equity		20,448		24,169		34,455		43,280		68,640		186,874

Ÿ

In April 2000, Silverline Technologies, Inc. acquired CIT Canada, a software development firm in Toronto, Canada, for approximately $4.2 million in cash. The firm has approximately $3.1 million in revenues and 70 employees as of December 31, 1999.

Ÿ

As of September 2000, Silverline Technologies Limited had invested $30.2 million in its existing wholly owned subsidiary, Silverline Technologies, Inc. for expansion of its sales and marketing operations and to meet the working capital requirements for the expanded scope of the business. Silverline Technologies, Inc. issued 32,681 shares of common stock to Silverline Technologies Limited.

Ÿ

In September 2000, Silverline Technologies, Inc. acquired Megasys Software Services Inc., an information technology services provider based in Columbus, Ohio for $6.22 million. Megasys had approximately $10 million in revenues as of December 1999 and 149 employees.

Ÿ

Silverline Technologies, Inc. invested $6.5 million for a 36% stake in the equity of Expo 24-7.com, a U.K. based company and $5 million for a 15% stake in the equity of Unified Herbal, a U.K. based company.

Ÿ

In October 2000, Silverline acquired its second largest customer, Sky Capital International Ltd., a Hong Kong based information technology consulting company, for cash consideration of $22 million. The company had $24.3 million in revenues for the year ended June 30, 2000 and 100 professionals as at June 30, 2000.

Ÿ

Silverline has finalized an investment and a strategic alliance agreement with TIS Worldwide, Inc. (or “TIS”), an e-business solutions integrator that specializes in delivery of Internet-based applications to help corporations increase and improve customer services. Silverline has agreed to invest $12.5 million for a 6% stake in TIS. Silverline shall be TIS’s exclusive Indian supplier for all software development services for a period of three years. This investment is subject to Indian regulatory approvals. TIS has operations in 10 offices with over 600 professionals.

		Year Ended December 31,									Nine Months Ended September 30,
		1997			1998			1999			1999			2000
Revenue		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenue		53.6			51.9			56.5			55.3			52.1
Gross profit		46.4			48.1			43.5			44.7			47.9
Selling, general and administrative expenses		22.1			18.8			15.0			15.3			18.3
Stock-based compensation		—			—			0.6			0.0			1.8
Depreciation and amortization		10.5			7.3			4.6			5.3			3.2
Operating income		13.8			22.0			23.3			24.1			24.6
Other income (expenses), net		(1.9	)		(1.5	)		(1.6	)		(1.7	)		3.2
Income before income taxes and extraordinary item		11.9			20.5			21.7			22.4			27.8
Provisions for income taxes		2.6			2.5			3.3			3.4			3.8
Income before extraordinary item		9.3			18.0			18.4			19			24
Extraordinary item (net of taxes)		—			—			0.4			0.6			—
Net income		9.3	%		18.0	%		18.0	%		18.3	%		24	%

		Three-Month Period Ended
		Dec. 31 1998			Mar. 31 1999			June 30 1999			Sept. 30 1999			Dec. 31 1999			Mar. 31 2000			June 30 2000			Sept. 30 2000
		(in thousands)
Revenue		$18,058			$16,997			$18,321			$24,714			$27,545			$30,998			$32,883			$36,569
Cost of revenue		9,299			9,093			10,189			13,912			16,251			16,112			17,456			18,810
Gross profit		8,759			7,904			8,132			10,802			11,294			14,886			15,427			17,759
Selling, general and administrative expenses		3,606			2,564			2,992			3,625			3,959			5,688			5,596			7,115
Stock-based compensation		—			—			—			—			532			862			862			115
Depreciation and amortization		1,191			1,024			1,080			1,066			925			939			1,199			1,095
Operating income		3,962			4,316			4,060			6,111			5,878			7,397			7,770			9,434
Other income (expenses), net		(248	)		(544	)		(217	)		(285	)		(334	)		(284	)		(370	)		3,859
Income before income taxes and extraordinary     item		3,714			3,772			3,843			5,826			5,544			7,113			7,400			13,293
Provisions for income taxes		327			598			526			910			776			1,230			1,100			1,231
Income before extraordinary item		3,387			3,174			3,317			4,916			4,768			5,883			6,300			12,062
Extraordinary item (net of taxes)		—			375			—			—			—			—			—			—
Net income		$  3,387			$  2,799			$  3,317			$  4,916			$  4,768			$  5,883			$  6,300			$12,062

Ÿ

the age, amount and quality of the account receivable;

Ÿ

the relationship with, size of and history of the client; and

Ÿ

the quality of service performed for a client to determine the classification of an account receivable.

Ÿ

In April 2000, Silverline Technologies, Inc. acquired CIT Canada, a software development firm in Toronto, Canada, for approximately $4.2 million in cash. The firm has approximately $3.1 million in revenues and 70 employees as of December 31, 1999.

Ÿ

As of September 2000, Silverline Technologies Limited had invested $30.2 million in its existing wholly owned subsidiary, Silverline Technologies, Inc., for expansion of its sales and marketing operations and to meet the working capital requirements for the expanded scope of the business. Silverline Technologies, Inc. issued 32,681 shares of common stock to Silverline Technologies Limited.

Ÿ

In September 2000, Silverline Technologies, Inc. acquired Megasys Software Services Inc., an information technology services provider based in Columbus, Ohio, for $6.22 million. Megasys had approximately $10 million in revenues as of December 1999 and 149 employees.

Ÿ

Silverline Technologies, Inc. invested $6.5 million for a 36% stake in the equity of Expo 24-7.com, a U.K.-based company, and $5 million for a 15% stake in the equity of Unified Herbal, a U.K.-based company.

Ÿ

In October 2000, Silverline acquired its second largest customer, Sky Capital International Ltd., a Hong Kong based information technology consulting company, for cash consideration of $22 million. The company had $24.3 million in revenues for the year ended June 30, 2000 and 100 professionals as at June 30, 2000.

Ÿ

Silverline has finalized an investment and a strategic alliance agreement with TIS Worldwide, Inc. (or “TIS”), an e-business solutions integrator that specializes in delivery of Internet-based applications to help corporations increase and improve customer services. Silverline has agreed to invest $12.5 million for a 6% stake in TIS. Silverline shall be TIS’s exclusive Indian supplier for all software development services for a period of three years. This investment is subject to Indian regulatory approvals. TIS has operations in 10 offices with over 600 professionals.

Ÿ

a 10-year tax holiday from payment of Indian corporate income taxes for operation of its software development centers which are “Export Oriented Undertakings” or located in “Software Technology Parks” or “Export Processing Zones” under sections 10A and 10B of the Indian Income Tax Act; and

Ÿ

an income tax deduction of 100% for profits derived from exporting information technology services under section 80HHE of the Indian Income Tax Act.

Ÿ

business information services, with clients such as First Data Corp.;

Ÿ

financial services, with clients such as J.P. Morgan & Co.; and

Ÿ

telecommunications, with clients such as Verizon.

Silverline’s Industry Information

The Information Technology Professional Services Industry

Impact of the Internet.    International Data Corporation estimates that there were approximately 56 million Internet users in the U.S. at year-end 1998 and that by 2002 there will be approximately 137 million Internet users in the U.S. Silverline believes that the development of the Internet has resulted in increased customer expectations, reduced barriers to market entry, reduced costs and increased competition. As a result, companies are seeking to build, implement or enhance their existing or alternative solutions, as well as offer more sophisticated Internet services in order to meet customers’ expectations, remain competitive and effectively benefit from new customer information. Silverline believes that companies that are able to successfully develop and maintain an Internet presence will be able to more efficiently conduct business with their partners and suppliers, communicate with customers and employees, and address the rapidly growing, global base of business-to-customer and business-to-business online transactions.

Competitive necessity.    Deregulation, globalization and technological innovation are accelerating the pace of business competition. Companies face constant pressures to improve the quality of their products and services, reduce the cost and time to market them, improve operating efficiencies and strengthen customer relationships. In order to achieve these objectives, companies are re-engineering their business processes and improving their information systems to enable and support their re-engineered processes. Using information technology as a strategic tool for addressing critical business issues enables enterprises to reduce cycle times and production costs, improve the rate of introduction of new products and services and price products and services more competitively.

Increasing complexity of information technology.     Designing, developing and implementing information technology solutions has become increasingly complex. Information technology departments must integrate and manage computing environments often consisting of multiple operating systems, databases, programming languages and networking protocols, and must implement both custom and packaged software applications. Many businesses do not have the time, resources or experience to keep pace with rapid industry and technological changes or to build appropriate and cost-effective information technology solutions. Globally, enterprises are increasingly focusing on their core business competencies and outsourcing to specialized firms to provide information technology solutions on a timely basis and assist them in changing business processes to meet specific business objectives.

Growth in packaged software applications.    Businesses are increasingly turning to e-commerce, CRM and enterprise resource planning packaged software applications such as those made by BroadVision, Inc., Commerce One, Inc., Oracle Corporation, SAP AG and Siebel Systems Inc. International Data Corporation estimates that the worldwide packaged software market was equal to $35.2 billion in 1999. Businesses use these integrated applications packages to replace, on an enterprise-wide basis, existing or legacy applications which have limited functionality and integration capability. Customizing and implementing these packages is often a major undertaking that requires highly specialized skill sets and functional experience, all of which is in short supply. International Data Corporation forecasts that custom application development and maintenance services will grow worldwide from $18 billion in 1999 to $23.4 billion in 2004.

The Indian Information Technology Industry

Ÿ

Large base of highly skilled information technology professionals.    According to NASSCOM, India, with 4.3 million technical workers, currently has the second largest English-speaking pool of scientific professionals, second only to the United States. There are over 1,900 educational institutions, including engineering colleges, technical institutes and polytechnics, that annually train over 73,500 computer professionals. In addition, Silverline believes that the quality of technical training in India is among the highest in the world.

Ÿ

High quality information technology services companies.    Indian information technology services companies have developed the capability to deliver a high quality product. Many of India’s leading information technology services companies have been measured against international quality standards and have received certification and recognition for their processes and quality controls. A NASSCOM analysis of international quality standards conducted in December 1999 showed that about 145 of the top 300 Indian information technology service companies had already been assessed by the International Standards Organization, a standards assessment organization, at ISO 9000. ISO 9000 is a model for quality assurance in design, development, production, installation and services. As of December 1999, 12 of the 19 organizations worldwide that had achieved Level 5 certification under the Software Engineering Institute’s Capability Maturity Model (or “SEI-CMM”), a rating system for information technology companies, were Indian companies. Further, as of December 1999, 15 of the 40 organizations worldwide that had achieved SEI-CMM Level 4 certification were Indian companies.

Ÿ

Significantly lower wages for information technology professionals.    India’s sizable pool of information technology talent is available to companies worldwide at relatively low labor costs. According to an October 1999 report by Software Productivity Research, a research firm, the average annual wage rate for software professionals in India was then approximately 10% of the average U.S. rate. Although wages in India are rising significantly faster than in the United States, the wage rate differential is anticipated to remain a substantial competitive advantage for Indian companies in the foreseeable future.

Ÿ

Near 24-hour service using time zone differences.    Indian information technology companies use the 9  1 /2 to 10  1 /2 hour time difference between India and the eastern United States to create, when combined with U.S. operations, a near 24-hour software development office.

Ÿ

72% of web sites are still based in the U.S.;

Ÿ

92% of e-commerce is generated through U.S.-based web sites;

Ÿ

Exports are becoming increasingly critical to U.S. e-commerce growth; and

Ÿ

9 in 10 revenue dollars are product and service sales, not advertisements.

Internet Economy

Ÿ

multiple professional challenges and the opportunity to work in one or more of its consulting and training divisions;

Ÿ

the ability to work with leading-edge technologies;

Ÿ

attractive compensation plans that align employees’ interests and goals with its own;

Ÿ

a stimulating, flexible and entrepreneurial work environment; and

Ÿ

the opportunity to receive ongoing technical training at its in-house training institute, the Silverline Institute.

Ÿ

In April 2000, Silverline Technologies, Inc. acquired CIT Canada, a software development firm in Toronto, Canada, for approximately $4.2 million in cash. The firm has approximately $3.1 million in revenues and 70 employees as of December 31, 1999.

Ÿ

As of September 2000, Silverline Technologies Limited had invested $30.2 million in its existing wholly owned subsidiary, Silverline Technologies, Inc. for expansion of its sales and marketing operations and to meet the working capital requirements for the expanded scope of the business. Silverline Technologies, Inc. issued 32,681 shares of common stock to Silverline Technologies Limited.

Ÿ

In September 2000, Silverline Technologies, Inc. acquired Megasys Software Services Inc., an information technology services provider based in Columbus, Ohio for $6.22 million. Megasys had approximately $10 million in revenues as of December 1999 and 149 employees.

Ÿ

Silverline Technologies, Inc. invested $6.5 million for a 36% stake in the equity of Expo 24-7.com, a U.K. based company and $5 million for a 15% stake in the equity of Unified Herbal, a U.K. based company.

Ÿ

In October 2000, Silverline acquired its second largest customer, Sky Capital International Ltd., a Hong Kong based information technology consulting company for cash consideration of $22 million. The company had $24.3 million in revenues for the year ended June 30, 2000 and 100 professionals as at June 30, 2000.

Ÿ

Silverline has finalized an investment and a strategic alliance agreement with TIS Worldwide, Inc. (or “TIS”), an e-business solutions integrator that specializes in delivery of Internet-based applications to help corporations increase and improve customer services. Silverline has agreed to invest $12.5 million for a 6% stake in TIS. Silverline shall be TIS’s exclusive Indian supplier for all software development services for a period of three years. This investment is subject to Indian regulatory approvals. TIS has operations in 10 offices with over 600 professionals.

Ÿ

assessment, strategy and definition;

Ÿ

application design and customization;

Ÿ

database design;

Ÿ

user interface design;

Ÿ

implementation; and

Ÿ

testing.

Ÿ

Internet integration;

Ÿ

Internet, intranet and extranet strategy;

Ÿ

intranet and extranet development; and

Ÿ

website design.

Bell & Howell Publishing Services Verizon Carboline Company Compuware Technologies Inc. Click4care Ecomparts, Inc. Evergreen Funds

First Data Corp. InterRide, Inc. J.P. Morgan & Co. Object XPERTS Inc. Philip Morris Management Corp. Realsoft, Inc. Style Asia Inc.

Challenge: Allow Philip Morris Management Corp. to monitor, achieve, modify and retrieve information about its worldwide trademarks.

Solution: Silverline designed and developed a global intranet, the Mark Management System, which integrated a wide variety of back-end relational or integrated databases and multiple file systems. This system will allow employees more effectively to search for trademark information. Security features were built in to protect sensitive information from unauthorized users, including a conditional access system which offers employees multiple read-and-write access levels. The resulting database solution will position Philip Morris Management Corp. more effectively to track and monitor its worldwide trademark licensing arrangements.

Challenge: Re-engineer from mainframe to client server technology a mission critical access system used by Verizon to process access service requests concurrently to 300-350 users.

Solution: Silverline redesigned an IBM mainframe base Verizon access ordering system into a client/ server based architecture to provide greater automation, control and convenience to 300-350 concurrent users of Bell Atlantic. Deployed in 1997, this system called CAFE is currently in the third of five years of maintenance contract work with us. In the current year, plans are underway to migrate CAFE’s client server architecture to the web environment.

Challenge: Enable InterRide, Inc., a transportation portal company, to electronically pool its consortium of member transportation companies in order to facilitate the efficient processing of reservations and the economical administration of vehicle dispatching over the Internet.

Solution: Silverline developed an online integrated system for InterRide, Inc. This system allows a customer of InterRide, Inc. to identify availability among various ground transportation companies and create their own personal travel itinerary. Consequently, the ground transportation companies monitor and dispatch the appropriate vehicles and then bill these customers. In addition to pricing and booking a reservation via the Internet, customers of InterRide, Inc. have the ability to access InterRide’s system through an interactive voice response system. InterRide, Inc. released the beta version of the system in January 2000 and the system is scheduled to go live in May 2000.

Challenge: Assist three business units of First Data Corp. with various information technology services: First Data Merchant Services, First Data Resources and Western Union.

Solution: Silverline has provided valuable information technology services to First Data Corp. for the past three years, executing over 30 projects including mainframe, client/server, application migration and maintenance, Year 2000 remediation and a feasibility study. On a recent project, Silverline developed an Internet based application, which integrates with various mainframe systems and enables the company to respond in a significantly shorter timeframe.

Ÿ

direct sales; and

Ÿ

leads from its established clients and strategic relationships.

Location		Approximate square feet		Status/Term		Type of facility
Thane, India		120,000, of which 40,000 is built-out and operational		Owned		Software Development & Training Center
Mumbai (Bombay), India		58,000		Leased/varies from August 2002 to August 2006		Global Headquarters, Software Development & Training Center
Mumbai (Bombay), India		1,500		Owned		Corporate Office
Mumbai, (Bombay), India		30,000		Owned		Residential Complex
Chennai (Madras), India		25,000		Leased/varies from January 2002 to May 2003		Software Development & Training Center
Chennai (Madras), India		160,000, of which 40,000 is built-out and operational		Owned		Software Development & Training Center
Piscataway, New Jersey		65,000		Leased/January 2013		U.S. Headquarters, Sales Office and Software Development & Training Center
Oakbrook, Illinois		3,600		Leased/April 2004		Sales Office (Midwest)
Bedford, New Hampshire		250		Leased/December 2000		Sales Office (New England)
Toronto, Canada		2,500		Leased/September 2004		Sales Office (Canada)
London, United Kingdom		1,000		Leased/month to month		Sales Office (U.K.)
Tokyo, Japan		300		Leased/January 2009		Sales Office (Japan)
Cairo, Egypt		2,000		Leased/2022		Sales Office and Software Development Center

Ÿ

multiple professional challenges and the opportunity to work in one or more of its consulting and training divisions;

Ÿ

the ability to work with leading-edge technologies;

Ÿ

attractive compensation plans that align employees’ interests and goals with its own;

Ÿ

a stimulating, flexible and entrepreneurial work environment; and

Ÿ

the opportunity to receive continuous, ongoing technical training at its in-house training institute, the Silverline Institute.

Ÿ

its competitors’ abilities to attract and retain skilled information technology professionals;

Ÿ

prices at which its competitors offer comparable services;

Ÿ

its competitors’ responsiveness to client needs; and

Ÿ

loss of information technology professionals to foreign markets including the U.S.

Name		Age		Position
Executive Officers and      Directors:
Ravi Subramanian		43		Chairman of the Board of Directors
Krishna K. Subramanian (1)		39		Vice Chairman of the Board of Directors and
				Executive for International Initiatives
Shankar Iyer (1)		36		President and Chief Executive Officer (Principal Executive Officer) and Director
Venkatachalam K. Murthy		42		Senior Vice President and Chief Financial Officer (Principal Accounting Officer)
Shiva Vohra		49		Senior Vice President, Corporate Finance
Srinivasan Viswanathan		50		Chief Technology Officer
Albert May		41		Chief Executive Officer, Europe
Brett Proud		41		Executive Vice President, Business Development
K. Mohan Subramanian		44		Wholetime Director
Uday Khona		45		Company’s Secretary
Arjan R. Daswani		55		Director
S. V. Mony (1)		63		Director
P. Murari		66		Director
Vaidyanathan Panchapakesan (1)		65		Director
George R. Zoffinger		52		Director
Other Key Employees:
Dilip Londhe		50		Head of Operations—Mumbai
P.S. Karthikeyan		44		Head of Operations—Chennai
Charles F. Carlino		52		Head of Lorin Business Unit—New York
Venkatarajan Subramanian		32		Head of e-Commerce Business Unit

(1)	Member of the Compensation Committee

Mr. V. Panchapakesan—Chairman

Mr. P. Murari—Member

Mr. Arjan Daswani—Member

Mr. S.V. Mony—Chairman

Mr. P. Murari—Member

Mr. V. Panchapakesan—Member

Mr. Kumar Subramanian—Chairman

Mr. Arjan Daswani—Member

Ÿ

in which the amount involved was material; and

Ÿ

in which any of its directors or officers, or any member of their immediate family, or any company or government entity which holds a controlling interest in Silverline’s equity shares, had or will have a direct or indirect material interest.

Ÿ

each person or group of affiliated persons known by Silverline to beneficially own 10% or more of Silverline’s equity securities;

Ÿ

each director and Silverline’s Chief Executive Officer; and

Ÿ

all of Silverline’s directors and executive officers as a group.

				Percentage of equity shares beneficially owned
Name and Address		Number of equity shares beneficially owned (1)		Before the merger			After the merger
Silverline Holdings Corp. (2)		19,347,954		26.4	%		21.9	%
Ravi Subramanian (2)		19,347,954		26.4			21.9
KS Software Technologies Ltd. (2)(3)		19,347,954		26.4			21.9
Subra Mauritius Ltd. (2)(4)		2,758,670		3.8			3.1
Shreyas Holdings Ltd. (5)		87,267		0.1			0.1
Krishna K. Subramanian (3)(4)(5)		22,193,891		30.3			25.1
All directors and executive officers as a group (12 persons)		22,238,401		30.4			25.1

(1)

Beneficial ownership is determined in accordance with rules of the Securities and Exchange Commission that deem shares to be beneficially owned by any person who has or shares voting or investment power with respect to the shares. All information with respect to the beneficial ownership of any principal shareholder has been furnished by the shareholder and, unless otherwise indicated below, Silverline believes that persons named in the table have sole voting and sole investment power with respect to all shares shown as beneficially owned, subject to community property laws where applicable.

(2)

Ravi Subramanian, Silverline’s Chairman and Silverline Holdings, Corp.’s Chairman, KS Software Technologies Ltd. and Subra Mauritius Ltd. beneficially own approximately 46.30%, 45.04% and 8.66%, respectively, of the outstanding voting securities of Silverline Holdings, Corp. The equity shares held by Silverline Holdings Corp. are included in the equity shares shown as beneficially owned by Ravi Subramanian and KS Software Technologies Ltd. KS Software Technologies Ltd. disclaims beneficial ownership of the shares owned by Silverline Holdings, Corp. In addition, 3.5 million shares of Silverline Holdings, Corp. and 6.5 million shares of Silverline Technologies Limited that are held by Ravi Subramanian are pledged to lenders who could foreclose on those shares in the event of default under the respective loan agreements.

(3)

Krishna K. Subramanian beneficially owns 100% of the outstanding voting securities of KS Software Technologies Ltd. Accordingly, all the equity shares shown as beneficially owned by KS Software Technologies Ltd. are included in the equity shares shown as beneficially owned by Krishna K. Subramanian.

(4)	Krishna K. Subramanian beneficially owns 100% of the outstanding voting securities of Subra Mauritius Ltd. Accordingly, all the equity shares held by Subra Mauritius Ltd. are included in the equity shares shown as beneficially owned by Krishna K. Subramanian.

(5)	Krishna K. Subramanian beneficially owns 100% of the outstanding voting securities of Shreyas Holdings Ltd.

Market for Strategic Internet Professional Services

Challenges in Selecting the Right Internet Professional Services Provider

Ÿ

approximately 75 strategy consultants with strong expertise in business processes and substantial knowledge in specific industry markets;

Ÿ

approximately 800 technology professionals across seven global delivery centers;

Ÿ

information planning and program management experience;

Ÿ

knowledge of widely-used enterprise software applications and technologies;

Ÿ

SeraNova Time-to-Market Approach, a proprietary methodology that emphasizes constant innovation and enables rapid execution; and

Ÿ

internet application maintenance capabilities.

SeraNova Time-to-Market Approach—A Structured and Proprietary Methodology

Global Delivery Model

Ÿ

Build Brand Recognition.

SeraNova plans to establish and build recognition of the SeraNova name through an aggressive marketing strategy, which will emphasize its industry expertise, broad knowledge of business processes and its global delivery model. In addition, it intends to sponsor seminars and host roundtable discussions that will highlight its innovative Internet applications that it has developed for its clients.

Ÿ

Attract and Retain Outstanding Professionals.

SeraNova’s future growth and ability to build meaningful competitive advantages for its clients are dependent on its ability to attract and retain highly skilled, dedicated and experienced professionals. SeraNova is committed to training and developing its professionals to meet the challenges of the fast-paced environment in which it performs. It attracts business and technical professionals who are driven by a desire to work on strategic and technically leading-edge projects. It plans to retain and motivate its employees through competitive compensation packages, stock option grants and a culture that rewards teamwork and customer-orientation. It places great emphasis on training its employees and provides numerous career and personal improvement programs within SeraNova. It seeks to reward employees based on merit.

Ÿ

Deepen Industry Expertise and Expand Business Process Offerings.

SeraNova is investing to build superior practice groups along specific industry markets and business processes. SeraNova continues to enhance its capabilities in five target industry markets—financial services, telecommunications, automotive, technology and healthcare. Its business process offerings are focused on suppliers, partners, employees and customers. For example, its electronic procurement offering focuses on building strategy and Internet applications to facilitate transactions and communications between companies and their suppliers. SeraNova’s interactive customer offering targets companies looking to conduct sales and provide customer service over the Internet. It believes its integrated approach, in which it combines business process expertise with industry specific knowledge allows its consultants to quickly formulate effective Internet strategies.

Ÿ

Further Penetrate Client Base.

SeraNova seeks to establish close and long term relationships with its clients. The Internet market is continuously and rapidly changing. In such an environment, SeraNova’s long lasting relationships with its clients become critical in developing sustainable competitive advantages for them. By working closely with its clients to define and enhance their Internet strategies, SeraNova believes it can help its clients effectively address challenges and seize opportunities. To further strengthen the relationships with its key clients, it continues to assemble a portfolio of client-driven service offerings. SeraNova believes such a focus results in client-satisfaction, follow-on engagements with existing clients and referrals for engagements with new clients.

Ÿ

Widen Global Presence.

SeraNova has established a worldwide organization to support Silverline’s customers’ global needs. Currently, in addition to the United States, it offers services in Europe, Australia, New Zealand, Thailand, India and the Philippines. Additionally, it intends to enhance its presence within the United States and certain global markets, as a result of demands from its existing clients, gaining new customers and through strategic acquisitions.

Ÿ

Provide Comprehensive Offerings.

SeraNova provides an integrated set of services, including strategy consulting, creative design, technology implementation and maintenance of Internet-based software applications. By offering a portfolio of integrated services, SeraNova believes it reduces the development time and maximizes the impact, quality, consistency and cost-effectiveness of these Internet applications for its clients. SeraNova’s comprehensive offering also allows it to increase the potential size of a client project. SeraNova believes that it is one of the very few Internet professional services providers that offer a seamless application management service. This offering allows SeraNova to continue its engagement beyond the implementation phase. When it maintains the applications, and updates the website and related databases, it often learns of new client opportunities.

Ÿ

Refine and Enhance SeraNova Time-To-Market Approach and Solutions Frameworks.

In all of its projects, SeraNova uses the SeraNova Time-to-Market Approach, its proprietary methodology, enabling its team to formulate strategy, implement Internet applications in a rapid time-frame and maintain the application after deployment. SeraNova believes its approach allows it to reduce its implementation time, lower its costs and consistently deliver high quality results. SeraNova continues to refine these processes, resulting in further acceleration of the delivery of its services. It also continues to evaluate, identify, test and incorporate new technologies into its methodology. SeraNova believes that continuous enhancement of its methodology is critical to maintaining a competitive advantage in the market for Internet professional services.

Strategy Consulting

Internet-based Application Development

Ÿ

Customer Interaction Applications.

SeraNova believes that the Internet offers its clients an opportunity to reach customers on a global basis and to target specific services and products based on their customers’ needs. The Internet allows companies to significantly reduce their customer acquisition costs. SeraNova designs and implements customer focused applications that enable clients to engage in personalized interactions with their customers and prospects over the Internet. These applications allow SeraNova’s clients to establish long-term relationships with their customers, segment customers based on specific criteria, tailor their marketing efforts to individual customers, and rapidly grow their online customer base by attracting and serving prospects with relevant information.

Ÿ

Electronic Procurement Applications.

The Internet has created an opportunity to re-engineer procurement processes. SeraNova has created new Internet-enabled procurement processes for businesses and implemented Internet-based applications that automate their online procurement cycle. SeraNova believes that these electronic procurement applications streamline clients’ procurement processes and deliver significant direct cost-savings to its clients.

Ÿ

Employee Services Applications.

SeraNova has gained significant experience in designing and implementing Internet-based applications that provide employees with the relevant and timely information needed to effectively perform their job. In addition, it develops applications that help its clients provide a range of services over the Internet to their employees reducing certain of the company’s existing human resources costs.

Ÿ

Channel Management Applications.

SeraNova’s clients interact with multiple business partners like dealers, resellers and distributors. While the Internet can serve as a cost-effective channel for selling products and services within certain industries, it can often result in channel conflicts. For example, automotive manufacturers selling vehicles directly over the Internet can create a conflict with their dealer network. Through careful planning and execution, it is possible to resolve these conflicts and have the Internet and traditional channels co-exist and often complement each other. SeraNova builds channel management applications that expand, integrate and manage multiple channels.

Application Management

SeraNova Time-to-Market Approach

Ÿ

eStrategy.

In this phase, SeraNova identifies enterprise business objectives, assesses opportunities and risks and analyzes the market and competition. Its strategy consultants help companies define the relevant criteria to improve their business processes, evaluate existing infrastructures and recommend an appropriate technology architecture. The eStrategy phase identifies multiple projects that can be executed simultaneously across the organization. Each of these projects then goes through the next four phases: Discover; Plan; Implement; and Optimize. One of the key components of eStrategy is the program management function that allows SeraNova’s team to manage multiple projects.

Ÿ

Discover.

In this phase, SeraNova defines the requirements and scope for a specific project. Based on its client’s objectives, SeraNova professionals help its clients define the appropriate technology architecture and choose relevant software packages.

Ÿ

Plan.

During this phase, the SeraNova project team creates an initial layout and subsequent plan to deploy the Internet applications. The project team carefully plans development objectives and testing criteria.

Ÿ

Implement.

In this fourth phase, SeraNova builds and deploys Internet applications through incremental releases. Its project team performs rigorous testing on each release to ensure proper function and reliability.

Ÿ

Optimize.

This final phase coincides with the application management offering. Some of the activities SeraNova engages in during its Optimize phase include return on investment analyses, application support, website and database updates, maintenance and performance reviews.

Application Frameworks

Volkswagen of America: New Product Launch

LiquidPrice.com: Online market place connecting buyers, merchants and manufacturers

Financial Services

Automotive

American Express Toyota Finance Jardine Insurance

Volkswagen of America Audi of America Subaru of America

Technology & Telecommunication

Healthcare & Insurance

Hewlett Packard 3 COM Novell Verizon Motorola Liquidprice.com

Medical Internet Solutions Sun Alliance Life Ltd. Sunquest

Ÿ

Internet professional service providers, including Sapient, Scient, Viant, Proxicom, iXL and Razorfish.

Ÿ

Large systems integrators and consulting firms, such as Andersen Consulting and the consulting units of “Big Five” accounting firms.

Ÿ

General management consulting firms, such as McKinsey & Co., Bain & Company and Boston Consulting Group.

United States		Europe		Asia Pacific
Edison, New Jersey Foster City, California Phoenix, Arizona Rosemont, Illinois Auburn Hills, Michigan Provo, Utah Fayetteville, Georgia		United Kingdom		Australia New Zealand Philippines Thailand India Hong Kong

2000		High		Low
Third quarter (beginning July 6)		$12.25		$4.9375
Fourth quarter		5.375		1.7812
2001
First quarter (through January 16)		2.9375		1.875

		Nine months ended September 30,						Year ended December 31, 1999(1)			Nine months ended December 31, 1998(2)			Year ended March 31,
		2000			1999									1998			1997			1996
Statement of Operations Data:
Revenues		$59,287			$27,073			$39,795			$12,438			$8,995			$9,200			$9,347
Cost of sales		29,550			15,606			22,475			7,315			4,797			4,949			4,664
Gross profit		29,737			11,467			17,320			5,123			4,198			4,251			4,683
Selling, general and administrative     expenses		35,062			9,797			17,605			5,106			3,812			4,092			3,576
Depreciation and amortization		1,862			630			1,131			102			133			150			119
Total operating expenses		36,924			10,427			18,736			5,208			3,945			4,242			3,695
Operating income (loss)		(7,187	)		1,040			(1,416	)		(85	)		253			9			988
Other income (expense), net		(879	)		(37	)		(80	)		(66	)		13			(80	)		13
Income (loss) before income taxes		(8,066	)		1,003			(1,496	)		(151	)		266			(71	)		1,001
Provision (benefit) for income taxes		(2,934	)		449			(235	)		401			519			172			470
Net income (loss)		$(5,132	)		$    554			$(1,261	)		$    (552	)		$  (253	)		$  (243	)		$  531
Net income (loss) per common share—basic     and diluted(3)		$  (0.30	)		$    0.03			$  (0.08	)		$  (0.03	)		$(0.02	)		$(0.01	)		$  0.03
Shares used in per share calculation of net     income (loss)—basic and diluted(3)		17,236			16,629			16,629			16,629			16,629			16,629			16,629

		Nine months ended September 30,				Year ended December 31, 1999(1)			Nine months ended December 31, 1998(2)			Year ended March 31,
		2000		1999								1998		1997		1996
Balance Sheet Data: (at period end)
Cash		$  4,911		$    321		$    611			$  677			$  368		$  635		$1,237
Working capital (deficit)		6,815		1,034		(776	)		(424	)		145		565		1,152
Total assets		48,207		17,433		18,880			5,775			3,216		2,402		4,026
Long-term debt		580		647		618			—			219		521		523
Shareholders’ equity		10,375		5,667		4,970			392			241		536		925

(1)

On January 8, 1999, Intelligroup, Inc. acquired the common stock of Network Publishing, Inc. in a purchase business combination. The results of operations of Network Publishing, Inc. have been included above since the date of acquisition. Pro forma results for the period January 1, 1999 to January 7, 1999 are not material to SeraNova’s combined financial statements for the year ended December 31, 1999. The financial statements of Network Publishing, Inc. at December 31, 1998 and 1997, and for the years ended December 31, 1998, 1997 and 1996, appear in this proxy statement/prospectus beginning on page F-46.

(2)	Effective April 1, 1998, SeraNova changed its fiscal year from March 31 to December 31.

(3)	See Note 2 to SeraNova’s Combined Financial Statements.

		Nine months ended September 30,						Year ended December 31, 1999			Nine-month period ended December 31, 1998			Year ended March 31, 1998
		2000			1999
		(in thousands)
Revenues		$59,287			$27,073			$39,795			$12,438			$8,995
Cost of sales		29,550			15,606			22,475			7,315			4,797
Gross profit		29,737			11,467			17,320			5,123			4,198
Operating expenses:
Selling, general and administrative expenses		35,062			9,797			17,605			5,106			3,812
Depreciation and amortization		1,862			630			1,131			102			133
Total operating expenses		36,924			10,427			18,736			5,208			3,945
Operating income (loss)		(7,187	)		1,040			(1,416	)		(85	)		253
Other income (expenses), net:
Interest expense		(870	)		(64	)		(82	)		(14	)		(10	)
Other income (expense), net		(9	)		27			2			(52	)		23
Total other income (expenses), net		(879	)		(37	)		(80	)		(66	)		13
Income (loss) before income taxes		(8,066	)		1,003			(1,496	)		(151	)		266
Provision (benefit) for income taxes		(2,934	)		449			(235	)		401			519
Net income (loss)		$(5,132	)		$    554			$(1,261	)		$    (552	)		$  (253	)

		Nine months ended September 30,						Year ended December 31, 1999			Nine-month period ended December 31, 1998			Year ended March 31, 1998
		2000			1999
As a Percentage of Revenues:
Revenues		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		49.8			57.6			56.5			58.8			53.3
Gross profit		50.2			42.4			43.5			41.2			46.7
Operating expenses:
Selling, general and administrative expenses		59.1			36.2			44.2			41.1			42.4
Depreciation and amortization		3.1			2.3			2.9			0.8			1.5
Total operating expenses		62.2			38.5			47.1			41.9			43.9
Operating income (loss)		(12.0	)		3.9			(3.6	)		(0.7	)		2.8
Other income (expenses), net:
Interest expense		(1.5	)		(0.2	)		(0.2	)		(0.1	)		(0.1	)
Other income (expense)		0.0			0.0			0.0			(0.4	)		0.3
Total other income (expenses), net		(1.5	)		(0.2	)		(0.2	)		(0.5	)		0.2
Income (loss) before income taxes		(13.5	)		3.7			(3.8	)		(1.2	)		3.0
Provision (benefit) for income taxes		(4.9	)		1.7			(0.6	)		3.2			5.8
Net income (loss)		(8.6	)%		2.0	%		(3.2	)%		(4.4	)%		(2.8	)%

		Quarter ended
		Sept. 30, 2000			June 30, 2000			Mar. 31, 2000			Dec. 31, 1999			Sept. 30, 1999			June 30, 1999			Mar. 31, 1999			Dec. 31, 1998
		(in thousands)
Revenues		$23,268			$19,843			$16,176			$12,722			$10,471			$8,614			$7,988			$4,811
Cost of sales		11,115			10,046			8,389			6,869			6,091			4,866			4,649			2,898
Gross profit		12,153			9,797			7,787			5,853			4,380			3,748			3,339			1,913
Operating expenses:
Selling, general and Administrative     expenses		11,967			11,776			11,319			7,808			3,698			3,373			2,726			2,327
Depreciation and amortization		731			659			472			501			350			145			135			75
Total operating expenses		12,698			12,435			11,791			8,309			4,048			3,518			2,861			2,402
Operating income (loss)		(545	)		(2,638	)		(4,004	)		(2,456	)		332			230			478			(489	)
Other (expenses) income, net		(535	)		(159	)		(185	)		(43	)		(5	)		(13	)		(19	)		(156	)
Income (loss) before income taxes		(1,080	)		(2,797	)		(4,189	)		(2,499	)		327			217			459			(645	)
Provision (benefit) for income taxes		(839	)		(985	)		(1,110	)		(684	)		205			65			179			(69	)
Net income (loss)		$    (241	)		$(1,812	)		$(3,079	)		$(1,815	)		$    122			$  152			$  280			$  (576	)
		Quarter ended
		Sept. 30, 2000			June 30, 2000			Mar. 31, 2000			Dec. 31, 1999			Sept. 30, 1999			June 30, 1999			Mar. 31, 1999			Dec. 31, 1998
As a percentage of revenues:
Revenues		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		47.8			50.6			51.9			54.0			58.2			56.5			58.2			60.2
Gross profit		52.2			49.4			48.1			46.0			41.8			43.5			41.8			39.8
Operating expenses:
Selling, general and administrative     expenses		51.4			59.3			70.0			61.4			35.3			39.2			34.1			48.3
Depreciation and amortization		3.1			3.3			2.9			3.9			3.3			1.7			1.7			1.6
Total operating expenses		54.5			62.6			72.9			65.3			38.6			40.9			35.8			49.9
Operating income (loss)		(2.3	)		(13.2	)		(24.8	)		(19.3	)		3.2			2.6			6.0			(10.1	)
Other (expenses) income, net		(2.3	)		(0.8	)		(1.1	)		(0.3	)		(0.1	)		(0.2	)		(0.2	)		(3.3	)
Income (loss) before income taxes		(4.6	)		(14.0	)		(25.9	)		(19.6	)		3.1			2.4			5.8			(13.4	)
Provision (benefit) for income taxes		(3.6	)		(5.0	)		(6.9	)		(5.4	)		2.0			0.8			2.2			1.4
Net income (loss)		(1.0	)%		(9.0	)%		(19.0	)%		(14.2	)%		1.1	%		1.6	%		3.6	%		(12.0	)%

Ÿ

each person or group of affiliated persons known to SeraNova to be the beneficial owner of more than 5% of the outstanding shares of SeraNova common stock;

Ÿ

each director and officer of SeraNova; and

Ÿ

all directors and officers of SeraNova as a group.

Name		Shares (1)			Percentages (2)
Rajkumar Koneru		2,661,488	(3)		14.1	%
Ashok Pandey		2,080,083	(4)		11.9
Nagarjun Valluripalli		1,689,221	(5)		9.6
Capital Guardian Trust Company		1,199,000	(6)		5.0
Ravi Singh		280,064	(7)		1.6
Rajan Nair		186,705	(7)		1.1
James E. Abbott		–0–			—
Richard Bevis		18,466	(8)		*
Tarun Chandra		120,490	(9)		*
Ashok Roy		103,725	(7)		*
All directors and officers as a group (eight persons)		5,060,159	(10)		27.0

(1)

Beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power and also any shares which the individual or entity has a right to acquire, or will first have a right to acquire within 60 days after January 15, 2001, through the exercise of any stock options. The inclusion herein of such shares, however, does not constitute an admission that the named shareholder is a direct or indirect beneficial owner of such shares. Unless otherwise indicated, each person or entity named in the table has sole voting power and investment power with respect to all shares of common stock listed as owned by such person or entity.

(2)	Based upon 17,510,883 shares of SeraNova common stock outstanding as of January 15, 2001.

(3)	Includes 466,768 shares of common stock issuable upon the exercise of options.

(4)	The address for Ashok Pandey is c/o Intelligroup, Inc., 499 Thornall Street, Edison, New Jersey 08837. Includes 603,755 shares held in trust as to which Mr. Pandey, or co-trustee shares voting and dispositive power.

(5)	Includes 75,000 shares of common stock issuable upon exercise of options.

(6)

The address for Capital Guardian Trust Company is 11100 Santa Monica Boulevard, Los Angeles, California 90025-3384. The information set forth in the table concerning Capital Guardian Trust Company and its parent holding company—Capital Group International, Inc.—is based solely on a Schedule 13F Holdings Report filed by Capital Guardian Trust Company for the calendar quarter ended September 30, 2000. This report discloses that at September 30, 2000, Capital Guardian Trust Company and Capital Group International, Inc. shared “investment discretion” with respect to 1,199,000 shares of SeraNova common stock and together had sole voting power with respect to 815,000 shares of SeraNova common stock.

(7)	Consists of shares of common stock issuable upon the exercise of options.

(8)	Includes 16,666 shares of common stock issuable upon exercise of options.

(9)	Includes 116,690 shares of common stock issuable upon exercise of options.

(10)	Includes 1,245,618 shares of common stock issuable upon exercise of options.

Ÿ

the rate of dividend to be declared may not exceed 10% of paid-in capital or the average of the rate at which dividends were declared by Silverline in the prior five years, whichever is less;

Ÿ

the balance of reserves after withdrawals shall not fall below 15% of its paid-in capital; and

Ÿ

the total amount to be drawn from the accumulated profits earned in the previous years and transferred to Silverline’s reserves may not exceed an amount equivalent to 10% of its paid-in capital and reserves not allocated to provide for any liability, and the amount so drawn is to be used first to set off Silverline’s losses incurred in the fiscal year before any dividends are declared.

Ÿ

a right, exercisable by shareholders of record, to renounce the shares offered in favor of any other person acceptable to the board of directors; and

Ÿ

the number of shares offered and the deadline for accepting the offer, which can not be less than 15 days from the date of the offer .

Ÿ

at least 10% of the total shares entitled to vote at the general meeting; or

Ÿ

shares with an aggregate paid-in capital of at least Rs. 50,000.

Ÿ

amendments to Silverline’s charter documents;

Ÿ

commencement of a new line of business;

Ÿ

waiver of pre-emptive rights for the issuance of any new equity shares; and

Ÿ

reduction of Silverline’s share capital.

Ÿ

alter or change adversely the powers, preferences or rights given to the Series A preferred stock or alter or amend the certificate of designation providing for the Series A preferred stock;

Ÿ

authorize or create any class of stock ranking senior to or equal to the Series A preferred stock as to dividends or distribution of assets upon a liquidation;

Ÿ

amend SeraNova’s certificate of incorporation or other charter documents so as to affect adversely any rights of the holders of Series A preferred stock;

Ÿ

increase the authorized number of shares of Series A preferred stock; or

Ÿ

enter into any agreement with respect to clauses (a) through (d) above.

Ÿ

the number of shares of common stock at the time authorized, unissued and unreserved for all purposes is insufficient to accrete such dividends to the stated value to permit conversion in full of all outstanding stated value; or

Ÿ

the common stock is not then listed or quoted on the Nasdaq National Stock Market, the New York Stock Exchange, the American Stock Exchange or the Nasdaq SmallCap Stock Market.

Ÿ

either (a) SeraNova would be unable to pay its debts as they become due in the usual course of its business; or (b) SeraNova’ s total assets would be less than its total liabilities, and

Ÿ

one or more classes or series of shares do not remain outstanding possessing collectively voting rights and unlimited residual rights as to dividends and distribution of assets on liquidation.

Ÿ

where the dividend proposed exceeds 10%, but not 12.5%, of the paid-up capital, the amount to be transferred to the reserves shall not be less than 2.5% of the current profits;

Ÿ

where the dividend proposed exceeds 12.5%, but not 15%, of the paid-up capital, the amount to be transferred to the reserves shall not be less than 5% of the current profits;

Ÿ

where the dividend proposed exceeds 15%, but not 20%, of the paid-up capital, the amount to be transferred to the reserves shall not be less than 7.5% of the current profits;

Ÿ

where the dividend proposed exceeds 20% the paid-up capital, the amount to be transferred to the reserves shall not be less than 10% of the current profit.

Ÿ

where the payment of dividend is not possible owing to operation of law;

Ÿ

where the shareholder has issued certain directions to the company which cannot be complied with;

Ÿ

where there is a dispute regarding the shareholder’s right to receive a dividend;

Ÿ

where the dividend has been lawfully adjusted by the company against any sum due to it from the shareholder; and

Ÿ

where for any other reason, the failure to pay the dividend within the prescribed time was not due to any default on the part of the company.

Ÿ

a company may buy back its shares only out of the share premium account, its free reserves or from the proceeds of any shares. However, no buy-back can be made from the proceeds of an earlier issue of the same kind of shares.

Ÿ

a company may not buy back its shares unless it is authorized to do so by its articles of association. Silverline’s articles of association permit it to buy back its shares.

Ÿ

the consent of the shareholders of a company in general meeting by way of a special resolution is required before a company can buy back its shares.

Ÿ

a company may not, in any financial year, buy back more than 25% of its total paid-up capital in that financial year.

Ÿ

a company may not, at any time, buy back more than 25% of its total paid-up capital and free reserves.

Ÿ

the debt-equity ratio of the company should not be higher than 2:1 after the buy back is completed.

Ÿ

all other shares of the company shall be fully paid-up.

Ÿ

in case of companies whose shares are listed on a recognized stock exchange, the provisions of the Securities and Exchange Board of India (Buy-back of Securities) Regulations, 1998 are required to be complied with.

Ÿ

the company cannot issue further shares for a period of 24 months from the date of completion of the buy-back.

Ÿ

upon completion of a buy-back, the company is required to destroy physically and extinguish the shares so bought back within a period of seven days of the completion of the buy-back, and may not hold the shares in its own name for any treasury purposes.

Ÿ

if such actions were taken in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the corporation;

Ÿ

with respect to any criminal proceeding, if such person had no reasonable cause to believe his or her conduct was unlawful; and

Ÿ

with respect to any derivative proceeding by or in the right of the corporation, if and to the extent that the New Jersey Superior Court or the court in which such proceeding was brought shall determine that despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper.

Ÿ

in breach of the director’s or officer’s duty of loyalty to SeraNova or its shareholders;

Ÿ

not in good faith or involving a knowing violation of law; or

Ÿ

resulting in receipt by the director or officer of an improper personal benefit.

Ÿ

the contract or other transaction is fair and reasonable as to the corporation at the time it is authorized, approved or ratified; o r

Ÿ

the fact of the relationship or interest is disclosed or known to the board or committee and the board or committee authorizes, approves, or ratifies the contract or transaction either by unanimous written consent if at least one director so consenting is a disinterested, or by affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or

Ÿ

the fact of the relationship or interest is disclosed or known to the shareholders, and they authorize, approve or ratify the contract or transaction.

Ÿ

the short-term and long-term interests of SeraNova and its shareholders, including the possibility that these interest might be best served by the continued independence of SeraNova;

Ÿ

whether the proposed transaction might violate federal or state law;

Ÿ

not only the consideration being offered in the proposed transaction and the relationship of such consideration to the then current market price for the outstanding capital stock of SeraNova, but also (1) the market price for the capital stock of SeraNova over a period of years, (2) the estimated price that might be achieved in a negotiated sale of all or part of SeraNova or through an orderly liquidation of SeraNova, (3) the premiums over market price for the securities of other corporations in similar transactions, (4) current political, economic and other factors bearing on securities prices, and (5) SeraNova’s financial condition and future prospects; and

Ÿ

the social, legal and economic effects of the proposed transaction upon employees, suppliers, creditors, customers and others having similar relationships with SeraNova, upon the communities in which SeraNova operates its business and upon the economy of the state, region and nation.

Ÿ

the board of directors approves the proposed amendment and directs that it be submitted to a vote at the meeting of shareholders; an d

Ÿ

the amendment receives the affirmative vote of a majority of the votes cast by the holders of shares entitled to vote on the amendment.

Ÿ

in addition to any vote of the holders of any class or series of stock of the corporation required by law or by the certificate of incorporation, the affirmative vote of the holders of at least 66 2 /3% of the voting power of all of the outstanding shares entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend the provisions of the certificate of incorporation relating to (1) the power of the board of directors and the shareholders to adopt and amend SeraNova’s by-laws, (2) the prohibition against shareholder action by written consent (see “—Action by Written Consent”), (3) the persons authorized to call a special meeting of shareholders and the business which can be transacted at any special meeting of shareholders, see “—Quorum; Meetings of Shareholders”, and (4) the matters described above under “—Exercise of Directors’ Business Judgment;” and

Ÿ

in addition to any vote of the holders of any class or series of stock of the corporation required by law or by the certificate of incorporation, the affirmative vote of the holders of at least 80% of the voting power of all of the then outstanding shares entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend the provisions of the certificate of incorporation (1) requiring an 80% vote to amend Article XI of the by-laws, see “—Indemnification of Directors and Officers” and (2) limiting the personal liability of SeraNova’s directors to SeraNova and its shareholders, see “—Limited Liability of Directors”.

Ÿ

in addition to any vote of the holders of any class or series of stock of the corporation required by law or by the certificate of incorporation, the affirmative vote of the holders of at least 66 2 /3% of the voting power of all of the outstanding shares entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of the bylaws;

Ÿ

in addition to any vote of the holders of any class or series of stock of the corporation required by law or by the certificate of incorporation, the affirmative vote of the holders of at least 80% of the voting power of all of the then outstanding shares entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of Article XI of the bylaws entitled “Indemnification and Insurance.”

Ÿ

the shares of the corporation are (1) listed on a national securities exchange or (2) held of record by more than 1,000 shareholders; or

Ÿ

a shareholder will receive (i) cash, (ii) shares, obligations or other securities which, upon consummation of the transaction will either be listed on a national securities exchange or held of record by more than 1,000 shareholders, or (iii) cash and such securities; or

Ÿ

in the case of a merger, the corporation will be the surviving corporation in the merger and approval of the merger requires no vote of the shareholders of the surviving corporation.

Ÿ

an annual report on Form 10-K within 90 days after the end of each fiscal year;

Ÿ

a quarterly report on Form 10-Q within 45 days after the end of each fiscal quarter; and

Ÿ

current reports on Form 8-K upon the occurrence of specific material events, such as material acquisitions and dispositions.

Ÿ

file with the Securities and Exchange Commission an annual report on Form 20-F within six months after the end of each fiscal year; and

Ÿ

furnish to the Securities and Exchange Commission reports on Form 6-K containing all public filings of Silverline required under Indian law and stock exchange rules and all communications made by Silverline with its shareholders.

Ÿ

an annual report containing audited financial statements; and

Ÿ

a proxy statement that complies with the requirements of the Securities Exchange Act.

1.

50% or more of Silverline’s equity shares are beneficially owned by shareholders who are not residents of the U.S.; or

2.

all three of the following conditions continue to be satisfied:

Ÿ

at least 50% of Silverline’s directors and its executive officers are neither citizens nor residents of the U.S.; and

Ÿ

at least 50% of Silverline’s assets are located outside the U.S.; and

Ÿ

Silverline’s business is administered principally outside the U.S.

Ÿ

Silverline fails to deliver satisfactory documents to the depositary; or

Ÿ

it is not reasonably practicable to distribute the rights.

Ÿ

temporary delays that may arise because (1) the transfer books for the equity shares or ADSs are closed, or (2) equity shares are immobilized on account of a shareholders’ meeting or a payment of dividends;

Ÿ

obligations to pay fees, taxes and similar charges; and

Ÿ

restrictions imposed because of laws or regulations applicable to ADSs or the withdrawal of securities on deposit.

Ÿ

to receive a dividend, distribution or rights; or

Ÿ

to give instructions for the exercise of voting rights at a meeting of holders of equity shares or other deposited securities, all subject to the provisions of the deposit agreement.

Ÿ

fees for the transfer and registration of equity shares, for example, upon deposit and withdrawal of equity shares;

Ÿ

expenses incurred for converting foreign currency into U.S. dollars;

Ÿ

expenses for cable, telex and fax transmissions and for delivery of newly issued securities; and

Ÿ

taxes and duties upon the transfer of securities, for example, when equity shares are deposited or withdrawn from deposit.

Ÿ

for a period of six months after termination, you will be able to request the cancellation of your ADSs and the withdrawal of the equity shares represented by your ADSs and the delivery of all other property held by the depositary in respect of those equity shares. During this six month period, the depositary will continue to collect all distributions received on the equity shares on deposit, that is, dividends, but will not distribute any property to you until you request the cancellation of your ADSs; and

Ÿ

after the expiration of this six month period, the depositary may sell the securities held on deposit. The depositary will hold the proceeds from this sale and any other funds then held for the holders of ADSs in a non-interest bearing account. At that point, the depositary will have no further obligations to holders other than to account for the funds then held for the holders of ADSs still outstanding.

Ÿ

Silverline and the depositary are obligated only to take the actions specifically stated in the depositary agreement without gross negligence or bad faith;

Ÿ

the depositary disclaims any liability for any failure to carry out voting instructions, for any manner in which a vote is cast or for the effect of any one vote, provided it acts in good faith and in accordance with the terms of the depository agreement;

Ÿ

Silverline and the depositary will not be obligated to perform any act that is inconsistent with the terms of the depository agreement;

Ÿ

Silverline and the depositary disclaim any liability if Silverline is prevented or forbidden from acting on account of any law or regulation, any provision of any securities on deposit or by reason of any act of God or war or other circumstances beyond Silverline’s control;

Ÿ

Silverline and the depositary disclaim any liability by reason of any exercise of, or failure to exercise, any discretion provided for by the depository agreement or in any provisions of the securities on deposit;

Ÿ

Silverline and the depositary further disclaim any liability for any action or inaction in reliance on the advice or information received from legal counsel, accountants, any person presenting equity shares for deposit, any holder of ADSs or authorized representative thereof, or any other person believed by either Silverline or the depositary in good faith to be competent to give such advice or information;

Ÿ

Silverline and the depositary may rely without any liability upon any written notice, request or other document believed to be genuine and to have been signed or presented by the proper parties;

Ÿ

neither the depositary nor its agents have any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any deposited securities or ADSs. Silverline and its agents shall be obligated to appear in, prosecute or defend any action, suit or other proceeding in respect of any deposited securities or ADSs only if Silverline is indemnified by ADSs holders, in a manner satisfactory to Silverline, against all expenses, including fees and disbursements of counsel, as often as Silverline may require; and

Ÿ

the depositary may own and deal in deposited securities and in ADSs.

Ÿ

the capacity in which you and other holders and beneficial owners own or owned ADSs;

Ÿ

the identity of any other persons then or previously interested in such ADSs; and

Ÿ

the nature of such interest and various other matters.

Ÿ

the depositary has received collateral for the full market value of the pre-released ADSs; and

Ÿ

each recipient of pre-released ADSs agrees in writing that he or she owns the underlying equity shares, assigns all rights in such shares to the depositary, holds such shares for the account of the depositary and will deliver such shares to the custodian as soon as practicable, and promptly if the depositary so demands.

Ÿ

any renunciation of rights in the underlying equity shares in favor of a person resident in India; and

Ÿ

the sale of the underlying equity shares by a non-resident of India to an Indian resident.

Ÿ

at least 25% of the paid-up capital of the private company is held by one or more bodies corporate, that is, public companies or private companies which have become public companies by virtue of section 43A of the Companies Act; or

Ÿ

the private company holds at least 25% of the paid-up share capital of a public company; or

Ÿ

the annual turnover of the private company exceeds 250 million Indian rupees; or

Ÿ

the private company has made an invitation to the public, other then to the existing shareholders, directors and their relatives, to accept or renew deposits from the public.

a. A statement to the effect that while preparing the annual accounts of the company, the applicable accounting standards have been followed along with proper explanation relating to material departures from the same;

b. A statement to the effect that the directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

c. That the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, for safeguarding the assets of the company and detecting fraud and other irregularities; and

d. That the directors have prepared the annual accounts of the company on a going concern basis.

The board of directors is also bound to give full information and explanations in its report with respect to any reservation, qualification or adverse remark contained in the auditor’s report.

The New Act increases the a penalty of Rs. 2000 to Rs. 20,000 for the breach of any of the above provisions.

Ÿ

The Companies Act does not permit a foreign company to issue Indian Depositary Receipts. The New Act amends the Companies Act to provide for the issuance of Indian Depositary Receipts by foreign companies.

Ÿ

The New Act amends the Companies Act to provide for the appointment of nominee directors by minority shareholders. However, the appointment of such nominee directors is optional.

Ÿ

The Companies Act does not recognize the concept of an of-shelf prospectus for public offerings by financial institutions and banks, including scheduled banks. Subsequent to the amendment by the New Act, the Companies Act recognizes the concept of an off-shelf prospectus for public offerings by financial institutions and banks, including scheduled banks.

Ÿ

The Companies Act does not provide for compulsory dematerialization of shares. The New Act amends the Companies Act to provide for the same.

Ÿ

The New Act amends the Companies Act to provide for the disqualification of a person from being appointed as a director of a company, if he or she was already a director of a public company that committed certain defaults such as not filing the annual accounts or failing to pay deposits or interest on the deposits.

Ÿ

The New Act also amends Section 275 of the Companies Act to prohibit a person from being a director of more than fifteen companies at the same time.

Ÿ

a period or periods amounting to 182 days or more; or

Ÿ

60 days or more and, within the four preceding years has been in India for a period or periods amounting to 365 days or more; or

Ÿ

182 days or more, in case of a citizen of India or a person of Indian origin living abroad who visits India and within the four preceding years has been in India for a period or periods amounting to 365 days or more.

Ÿ

Gains from the sale of ADSs outside India, by a non-resident to another non-resident are not taxable in India.

Ÿ

Redemption of ADSs into the underlying equity shares is not a taxable event.

Ÿ

Long term capital gains realized by a non-resident holder other than an individual, upon the sale of equity shares within India are subject to tax at a rate of 10%.

Ÿ

Long term capital gains realized by a non-resident individual holder, upon the sale of equity shares within India are subject to tax at a rate not exceeding 11.5%, including the presently applicable surcharge on tax.

Ÿ

Long term capital gains realized by a resident employee upon the sale of equity shares obtained from the redemption of ADSs are subject to tax at a rate of 11.5%, including the presently applicable surcharge.

Ÿ

Short-term capital gains realized upon the sale of equity shares obtained from the redemption of ADSs will be taxed at variable rates with a maximum rate of 48% in case of foreign companies and 34.5% in case of individuals, including the presently applicable surcharge.

		Page
Silverline Technologies Limited
Independent Auditors’ Report		F-2
Consolidated Balance Sheets		F-3
Consolidated Statements of Income		F-4
Consolidated Statements of Cash Flows		F-5
Notes to Consolidated Financial Statements		F-6
SeraNova, Inc. and Affiliates
Report of Independent Public Accountants		F-27
Combined Balance Sheets		F-28
Combined Statements of Operations		F-29
Combined Statements of Changes in Shareholders’ Equity and Comprehensive Income (Loss)		F-30
Combined Statements of Cash Flows		F-31
Notes to Combined Financial Statements		F-32
Network Publishing, Inc.
Report of Independent Public Accountants		F-46
Balance Sheets		F-47
Statements of Operations		F-48
Statements of Shareholders’ Equity		F-49
Statements of Cash Flows		F-50
Notes to Financial Statements		F-51
Sky Capital International Limited
Auditors’ Report		F-58
Income Statement		F-59
Balance Sheet		F-60
Cash Flow Statement		F-61
Notes to the Accounts		F-62

/S/    DELOITTE HASKINS & SELLS

DELOITTE HASKINS & SELLS

		December 31, 1998			December 31, 1999			(Unaudited) September 30, 2000
(in U.S. $)
ASSETS
Current assets:
Cash and cash equivalents		$12,528,234			$20,661,829			$  17,991,497
Short term investments		—			—			30,607,298
Accounts receivable—net		24,394,589			22,776,996			48,222,065
Unbilled project costs		315,672			687,399			3,034,666
Prepaid expenses and other current assets		4,742,131			3,274,459			61,154,676
Deferred taxes		287,724			362,743			640,640
Total current assets		42,268,350			47,763,426			161,650,842
Property, plant and equipment—net		21,021,891			34,596,930			36,312,546
Intangible assets—net		4,541,542			4,373,498			18,638,646
Deferred taxes		74,175			109,493			201,749
Investments		115,886			115,389			11,680,040
Other assets		1,253,304			686,770			500,000
Total assets		$69,275,148			$87,645,506			228,508,907
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses		$  3,452,342			$  5,709,568			9,403,775
Advance from customers		7,072			14,893			49,211
Current portion of long-term debt and capital lease                obligation		1,473,290			2,150,382			7,723,632
Working capital facilities from banks		10,770,515			6,925,504			12,382,599
Other accrued liabilities		4,781,844			3,888,085			8,927,630
Total current liabilities		20,485,063			18,688,432			38,486,847
Long-term debt and capital lease obligations		5,510,404			316,732			3,148,013
Commitments and contingencies		—			—			—
Stockholders’ equity:
Equity shares, $0.23 per share par value—85,000,000                authorized as of 1999, 65,000,000 authorized as of                1998: issued and outstanding—64,500,000 as of                1999 and 73,200,000 as of September 30, 2000,                42,449,970 as of 1998		13,237,731			18,305,532			20,249,666
Additional paid-in capital		14,407,281			23,156,472			120,174,385
Accumulated other comprehensive                income/(expense)		(3,546,454	)		(3,942,243	)		(7,769,155	)
Deferred, stock-based compensation		—			(2,164,486	)		(326,329	)
Retained earnings		19,181,123			33,285,067			54,545,480
Total stockholders’ equity		43,279,681			68,640,342			186,874,047
Total liabilities and stockholders’ equity		$69,275,148			$87,645,506			$228,508,907

											Nine months ended September 30,
		1997			1998			1999			1999			2000
		(in U.S. $)									(unaudited)			(unaudited)
Revenue		$46,768,627			$60,219,458			$87,576,908			$60,031,873			$100,450,880
Cost of revenue		25,052,547			31,273,001			49,445,513			33,193,994			52,378,683
Gross profit		21,716,080			28,946,457			38,131,395			26,837,879			48,072,197
Operating expenses:
Selling, general and                administrative expenses		10,342,019			11,316,545			13,140,710			9,181,164			18,399,389
Stock-based compensation		—			—			532,065			—			1,838,157
Depreciation and                amortization		4,944,901			4,414,991			4,095,227			3,170,687			3,233,675
Total operating expenses		15,286,920			15,731,536			17,768,002			12,351,851			23,471,221
Operating income		6,429,160			13,214,921			20,363,393			14,486,028			24,600,976
Other income/(expense), net		(878,155	)		(894,515	)		(1,379,763	)		(1,046,057	)		3,204,835
Income before income taxes and      extraordinary item		5,551,005			12,320,406			18,983,630			13,439,971			27,805,811
Provision for income taxes		1,215,757			1,481,606			2,808,449			2,070,878			3,811,332
Income before extraordinary item		4,335,248			10,838,800			16,175,181			11,369,093			23,994,479
Extraordinary item (net of taxes)		10,105			—			374,624			374,624			—
Net income		$  4,325,143			$10,838,800			$15,800,557			$10,994,469			$  23,994,479
Earnings per equity share before      extraordinary item
Basic:
Income before                          extraordinary item		$            0.10			$            0.26			$            0.28			$            0.21			$              0.35
Extraordinary item		—			—			$          (0.01	)		$          (0.01	)		$              —
Net Income		$            0.10			$            0.26			$            0.27			$            0.20			$              0.35
Diluted:
Income before                          extraordinary item		$            0.10			$            0.19			$            0.25			$            0.17			$              0.35
Extraordinary item		—			—			$          (0.01	)		$          (0.01	)		$              —
Net Income		$            0.10			$            0.19			$            0.24			$            0.17			$              0.35
Number of equity shares used in      computing earnings per share
—Basic (weighted average)		42,449,970			42,449,970			57,149,990			54,242,294			67,770,438
—Diluted		42,449,970			56,314,292			65,596,505			65,271,460			68,647,648

											Nine months ended September 30,
		1997			1998			1999			1999			2000
		in U.S. $									(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net income		$  4,325,143			$10,838,800			$15,800,557			$10,994,469			$23,994,479
Adjustments to reconcile net income to net cash provided by     operating expenses
Stock-based compensation		—			—			532,065			—			1,838,157
Extraordinary item		10,105			—			374,624			374,624			—
Depreciation and amortization		4,944,901			4,414,991			4,095,227			3,170,687			3,233,675
Deferred taxes		(557,703	)		(270,328	)		(110,336	)		74,175			(92,256	)
Loss/(gain) on sale of assets		30,575			—			(13,017	)		—			(1,877	)
Changes in assets and liabilities:
Decrease/(increase) in short term investments											(1,990,638	)		(30,607,298	)
Decrease/(increase) in accounts receivable		2,508,683			(7,043,133	)		1,617,593			(10,678,567	)		(25,445,069	)
Decrease/(increase) in unbilled project costs		501,657			1,135,546			(371,727	)		(3,993,784	)		(2,347,267	)
Decrease/(increase) in prepaid expenses and other current             assets		(1,271,297	)		676,984			1,467,672			(8,380,719	)		(57,880,217	)
Decrease/(increase) in other assets		2,143,647			311,945			566,534			253,304			186,770
(Decrease)/increase in accounts payable and accrued expenses,		(1,046,541	)		977,099			1,564,718			2,946,388			3,694,207
(Decrease)/increase in advances from customers		(11,245	)		2,221			7,821			12,084			34,318
(Decrease)/increase in other accrued liabilities		83,797			1,264,763			(893,760	)		(3,128,185	)		2,305,480
(Decrease)/increase in deferred tax		(522,720	)		—			—			(56,746	)		(277,897	)
Net cash provided by operating activities		11,139,002			12,308,888			24,637,971			(10,103,574	)		(81,364,795	)
Cash flows from investing activities:
Expenditure on plant and equipment		(9,299,318	)		(4,591,731	)		(16,826,753	)		(9,566,927	)		(4,482,569	)
Purchase of businesses, net of cash acquired		(2,840,846	)		(2,257,467	)		—			—			(14,736,294	)
Purchase of investments		3,274,026			—			—			—			(11,566,387	)
Proceeds from sale of investments		—			—			42,638			—
Proceeds from sale of plant and equipment		5,504,860			—			10,688			—			6,301
Net cash (used in) investing activities		(3,361,278	)		(6,849,198	)		(16,773,427	)		(9,566,927	)		(30,778,949	)
Cash flows from financing activities:
Proceeds from/(repayment) of long-term debt (net)		(2,873,588	)		1,072,961			(4,542,821	)		(4,247,405	)		8,404,531
Line of credit payable		1,922,238			(90,403	)		(3,845,011	)		3,141,528			5,457,095
Net proceeds from issuance of common stock (ADS)		1,752,165			—			11,120,441			11,120,441			1,944,134
Additional paid-in capital on issue of ADS											—			106,805,866
Advance from issue of stock options		—			—			—			—			—
ADS issue expenses		—			—			—			—			(9,787,953	)
Charges on prepayment of loans		(10,105	)		—			(374,624	)		(374,624	)		—
Payment of dividend		(1,327,767	)		(1,276,351	)		(1,696,613	)		(1,696,613	)		—
Net cash provided by / (used in ) financing activities		(537,057	)		(293,793	)		661,372			7,943,327			112,823,673
Effect of exchange rate changes on cash and cash equivalents		(1,002,719	)		(580,933	)		(392,321	)		(173,398	)		(3,350,261	)
Net change in cash and cash equivalents		6,237,948			4,584,964			8,133,595			(12,200,572	)		(2,670,332	)
Cash and cash equivalents at the beginning of the year		1,705,322			7,943,270			12,528,234			12,528,234			20,661,829
Cash and cash equivalents at the end of the year		$  7,943,270			$12,528,234			$20,661,829			327,662			17,991,497
Supplementary information of cash transactions:
Cash paid during the year for:
Interest		$  2,451,183			$  1,576,125			$  2,022,522			1,829,321			$  1,475,135
Income taxes		$      251,066			$  1,665,542			$  1,733,478			1,733,478			$  3,282,419
Supplementary disclosure of non cash investing and financing     activities:
Capital lease		$      363,666			$              —			$      239,649			$        26,241			$        24,576
Contingent payment- Lorin Acquisition		$              —			$              —			$      692,508			$      692,508			$      175,000
Supplemental schedule of non cash investing and financing activities:
The Company purchased all of the common stock of Silverline     Technologies Inc.
Fair value of assets acquired		$44,332,960			$              —			$              —			$            —			$              —
Issue of equity shares of the Company		$44,332,960			$              —			$              —			$            —			$              —

The Company and its Business

Basis of Presentation and Principles of Consolidation

Uses of Estimates

Revenue Recognition

Accounting for Long-Lived Assets.

Foreign Currency Translation

Earnings Per Equity Share

Income Taxes

Fair Value of Financial Instruments

Concentrations of Risks

Employee Benefit Plans

Provident and 401 (k) Funds

Gratuity

Superannuation

Cash, Cash Equivalents and Short-Term Investments

Unbilled Project Costs

Investments

Intangibles

Research and Development

Employee Stock Options

		December 31,				(Unaudited) September 30, 2000
		1998		1999
		$		$		$
Cash and checks on hand		24,615		19,960		43,521
Balances with bank:
—in current account		8,067,316		5,554,151		17,284,547
—in term deposit account		4,436,303		15,087,718		663,429
Total		$12,528,234		$20,661,829		$17,991,497

		December 31,				(Unaudited) September 30, 2000
		1998		1999
IDBI Principal Money Market Fund		—		—		$      435,208
—1,829,501,846 units of $0.22 (Rs10) each
Templeton India Liquid Fund		—		—		435,350
—1,614,261,616 units of $0.22 (Rs10) each
Chola Gilt-Savings (Cumulative Plan)		—		—		650,642
—2,906,005 units of $0.22 (Rs10) each
Zurich India Liquidity Fund		—		—		326,105
—1,453,994,546 units of $0.22 (Rs10) each
Birla Cash Plus-Growth Plan		—		—		5,062,961
—17,260,668 units of $0.22 (Rs10) each
Alliance Cash Manager-Growth		—		—		1,085,540
—40,558 units of $22 (Rs1000) each
Kothari Pioneer Money Market Fund		—		—		868,432
—40 billion units of $0.22 (Rs10) each
Dundee Liquidity-Appreciation Option		—		—		10,855,405
—42.016 billion units of $0.22 (Rs10) each
Cholamandalam Cazenove Liquid Fund		—		—		10,855,405
—48,447,735 units of $0.22 (Rs10) each
Fleet Bank Federated Investors Prime Obligation Fund		—		—		32,250
—32,249 units of $1 each
Total		$—		$—		$30,607,298

		December 31,						(Unaudited) September 30, 2000
		1998			1999
Accounts receivable		$24,556,009			$23,202,364			$48,778,359
Allowance for doubtful accounts		(161,420	)		(425,368	)		(556,294	)
Accounts receivable, net		$24,394,589			$22,776,996			$48,222,065

		December 31,				(Unaudited) September 30, 2000
		1998		1999
Unbilled project costs		$310,850		$687,399		$3,034,666
Other		4,822
Total		$315,672		$687,399		$3,034,666

		December 31,				(Unaudited) September 30, 2000
		1998		1999
Notes receivable		$    500,000		$    500,000		$      500,000
Deposits		1,497,007		742,283		15,682,539
Loans to employees		250,365		86,195		150,489
Prepaid expenses		455,998		684,731		13,794,519
Other receivables		1,840,029		959,086		30,694,126
Taxes receivable		198,732		302,164		333,003
Total		$4,742,131		$3,274,459		$61,154,676

December 31, 2000 (classified as a current asset at December 31, 1999)		$    500,000
December 31, 2001		500,000
		$1,000,000

		December 31									(Unaudited) Nine months ended September 30, 2000
		1997			1998			1999
Current:
Local		54,750			$      (4,647	)		$          —			$    142,763
Foreign		1,718,710			1,756,581			2,918,785			4,038,722
		1,773,460			1,751,934			2,918,785			4,181,485
Deferred:
Foreign		(557,703	)		(270,328	)		(110,336	)		(370,153	)
Provision for income taxes		$1,215,757			$1,481,606			$2,808,449			$3,811,332

		December					(Unaudited) Nine months ended September 30, 2000
		1998		1999
Allowance for doubtful accounts receivable		$  64,697		$145,781			$199,786
Expenses currently not deductible		223,027		216,962			440,854
Total current deferred tax assets		$287,724		$    2,743			$640,640
Fixed assets		$  53,239		$(54,917	)		$  13,704
Goodwill and non-compete agreement		20,936		164,410			188,045
Net operating loss of consolidated subsidiary		—		67,350			67,350
		74,175		176,843			269,099
Less: valuation allowance		—		(67,350	)		(67,350	)
Net non-current deferred tax assets		$  74,175		$109,493			$201,749

		For the year ended									(Unaudited) September 30,
		1997			1998			1999			1999			2000
Statutory rate		35.0	%		35.0	%		38.5	%		38.5	%		38.5	%
Indian tax holiday		(18.0	)		(24.4	)		(27.1	)		(27.5	)		(27.5	)
US state income taxes		2.4			2.1			2.0			2.0			2.0
Other		2.5			(0.7	)		1.4			1.4			1.4
Effective tax rate		21.9	%		12.0	%		14.8	%		14.4	%		14.4	%

		December 31,						(Unaudited) September 30, 2000
		1998			1999
Owned assets:
Land		$      699,746			$      706,067			$      706,067
Buildings		2,558,705			9,837,954			16,752,336
Furniture and fixtures		3,981,455			5,764,101			7,792,661
Office equipment		2,649,588			4,735,647			8,653,153
Computer equipment		9,445,925			9,710,441			10,427,261
Vehicles		264,963			225,287			238,062
Construction-in-progress		11,933,372			17,091,467			7,962,217
Leased Assets:
Land		956,801			956,801			956,801
Vehicles		—			230,986			230,986
Computer equipment		393,517			393,517			393,517
Office equipment		80,099			80,099			80,099
Total		32,964,171			49,732,367			54,193,140
Accumulated depreciation		(11,942,280	)		(15,135,437	)		(17,880,594	)
Net property, plant & equipment		$21,021,891			$34,596,930			$36,312,546

Owned assets
Buildings		40 years
Furniture and fixtures		7 years
Computer equipment		3 years
Office equipment		10 years
Vehicles		5 years

Property, plant and equipment		$      18,215
Goodwill		1,609,252
Non-compete agreement		630,000
		$2,257,467

Property, plant, and equipment		$    378,573
Goodwill		8,129,803
Other liabilities		(4,355,136	)
		$4,153,240

Property, plant, and equipment		$    235,694
Goodwill		5,995,486
Other liabilities		(6,180	)
		$6,225,000

		December 31,						(Unaudited) September 30, 2000
		1998			1999
Goodwill		$5,038,170			$5,730,678			$20,466,972
Non-compete agreement		630,000			630,000			630,000
Accumulated amortization		(1,126,628	)		(1,987,180	)		(2,933,242	)
Total		$4,541,542			$4,373,498			$18,163,730

		December 31,						(Unaudited) September 30, 2000
		1998			1999
Spectrum Corporate Services Limited      100,000 Equity Shares of $0.23 each (Rs. 10)		$    25,445			$    25,445			$        25,445
Industrial Development Bank of India      89,200 Equity Shares of $0.23 each (Rs. 10)		322,559			322,559			322,559
Unified Herbal.com Limited      15,582 shares of U.S.$0.0146 each (1 GB pence)		—			—			5,000,000
Expo 24-7.com Limited 333,945 shares of U.S. $1.46 each (1 GB pound)		—			—			6,566,387
Less: unrealized loss		(232,118	)		(232,615	)		(234,351	)
Total		$  115,886			$  115,389			$11,680,040

		December 31,				(Unaudited) September 30, 2000
		1998		1999
Taxes payable		$1,845,210		$3,264,232		$4,026,224
Other current liabilities		1,431,206		479,693		2,527,845
Unclaimed dividend		278,212		144,160		132,524
Dividend payable		1,227,216		—		2,241,037
Total		$4,781,844		$3,888,085		$8,927,630

		December 31,				Unaudited September 30, 2000
		1998		1999
Foreign currency term loans from IDBI under equipment      finance plan		$3,096,675		$        —		$          —
Columbia Savings Bank—loan		462,500		312,500		187,500
Bank of Baroda (New York)		1,125,000		937,500		726,563
Chase Manhattan Bank—loan		1,125,000		937,500		726,563
Cash credit from banks		984,048		—		—
Bank of Baroda—CIT acquisition loan		—		—		2,976,620
Chase Manhattan Bank—CIT acquisition loan		—		—		2,976,620
Royal Bank of Canada—CIT loans		—		—		3,040,373
Capital lease obligations		190,471		279,614		237,406
Total		6,983,694		2,467,114		10,871,645
Less: current portion		1,473,290		2,150,382		7,723,632
Long term debt and capital lease obligation		$5,510,404		$  316,732		$3,148,013

Year ending December 31
2000		$  171,155
2001		135,001
2002		52,228
2003		20,698
2004		3,169
Total minimum lease payments		382,251
Less: amount representing interest		(102,637	)
Present value of net minimum capital lease payments		279,614
Less: current portion of obligations under capital leases		(123,827	)
Obligations under capital leases		$  155,787

Year ending December 31,
2000		$2,025,000
2001		150,000
2002		12,500
2003		—
2004		—
Total maturities		$2,187,500

		Equity shares				Additional paid-in capital			Retained earnings			Accumulated other comprehensive (expense) income			Deferred stock based compensation			Total shareholders’ equity
		Number of Shares		Par value
Balance as of December 31, 1996		37,949,970		$11,977,221		$    3,011,655			$  9,556,736			$(1,571,482	)					$  22,974,130
Adjustments (1)		4,500,000		1,260,000		7,047,533			1,412,655			—						9,720,188
		42,449,970		13,237,221		10,059,188			10,969,391			(1,571,482	)					32,694,318
Cash dividends declared									(1,327,767	)								(1,327,767	)
Common stock				510														510
Issuance of warrants						4,348,093			(4,348,093	)								—
Currency translation adjustment/ gains     and losses on sale of investments												(1,236,752	)					(1,236,752	)
Net income									4,325,143									4,325,143
Balance as of December 31, 1997		42,449,970		13,237,731		14,407,281			9,618,674			(2,808,234	)					34,455,452
Cash dividends declared									(1,276,351	)								(1,276,351	)
Currency translation adjustment/ gains     and losses on sale of investments												(738,220	)					(738,220	)
Net income									10,838,800									10,838,800
Balance as of December 31, 1998		42,449,970		13,237,731		14,407,281			19,181,123			(3,546,454	)					43,279,681
Cash dividends declared									(1,696,613	)								(1,696,613	)
Common stock		22,050,030		5,067,801		6,052,640												11,120,441
Deferred stock-based compensation						2,696,551									(2,696,551	)		—
Currency translation adjustment/ gains     and losses on sale of investments												(395,789	)					(395,789	)
Amortization of stock based     compensation															532,065			532,065
Net income									15,800,557									15,800,557
Balance as of December 31, 1999		64,500,000		18,305,532		23,156,472			33,285,067			(3,942,243	)		(2,164,486	)		68,640,342
Cash dividends declared (unaudited)									(2,734,066	)								(2,734,066	)
Common stock—issue of ADS     (unaudited)		8,700,000		1,944,134		106,805,866												108,750,000
Currency translation adjustment/gains     and losses on sale of investments     (unaudited)												(3,826,912	)					(3,826,912	)
Advance from issue of stock options     (unaudited)																		—
ADS issue expenses (unaudited)						(9,787,953	)											(9,787,953	)
Amortization of stock based     compensation (unaudited)															1,838,157			1,838,157
Net income (unaudited)									23,994,479									23,994,479
Balance as of September 30, 2000     (unaudited)		73,200,000		$20,249,666		$120,174,385			$54,545,480			$(7,769,155	)		$(326,329	)		$186,874,047

(1)	Amounts reflect adjustments to consider acquisition of STI by STL as entities under common control in a manner similar to a pooling-of-interest.

Authorized Share Capital

Gratuity

Superannuation

		Total		Illinois office		Other offices		NJ office
Year ending December 31,
2000 (3 months)		$    221,629		$19,287		$22,342		$    180,000
2001		886,515		77,148		89,367		720,000
2002		797,148		77,148		—		720,000
2003		797,148		77,148		—		720,000
2004		732,858		12,858		—		720,000
2005		720,000				—		720,000
Thereafter		4,320,000				—		4,320,000
Total future minimum lease                payments		$8,475,298

Year ending December 31,
2000 (3 months)		$    119,154
2001		675,863
2002		262,091
Total future minimum lease payments		$1,057,108

ESOP for India Employees:

April 1, 2001		237,037		Options
April 1, 2002		312,960		Options
April 1, 2003		450,003		Options
Total		1,000,000

June 30, 2000		1,533,000		Options
July 31, 2000		467,000		Options
Total		2,000,000

ESOP (ADS-linked) for non- India Employees:

Date of grant:		June 20, 2000
Vesting period:		October 1, 2000 to July 1, 2003
Exercise period:		2 years 10 months from date of vesting

		Options		Weighted average exercise price		Options exercisable		Weighted average exercise price
Balance, December 31, 1998		0		$      0		—		—
Granted		3,000,000		8.85		—		—
Exercised		0				—		—
Cancelled		0				—		—
Balance, December 31, 1999		3,000,000		8.85		—		—
Granted		2,000,000		25.00		3,000,000		8.85
Exercised		—				—		—
Cancelled		—				—		—
Balance, September 30, 2000		5,000,000		$15.31		—		—

Range of prices		Number		Outstanding weighted average remaining life		Weighted average exercise price		Options Exercisable
								Number		Weighted average exercise price
$  8.39		2,000,000		1.58 years		8.39		0		0
9.77		1,000,000		3.59 years		9.77		0		0
$25.00		2,000,000		2.83 years		25.00		0		0

		1999
Reported income from continuing operations		$21,310
Pro forma income from continuing operations		19,767
Reported diluted earnings per share from continuing operations		0.33
Pro forma diluted earnings per share from continuing operations		0.31

		1999
Expected life of option (in years)		1.5415
Risk-free interest rate		5	%
Expected volatility of Silverline stock		100	%
Expected dividend yield on Silverline stock		—

		1999
Fair value of each option granted		$  3.98
Total number of options granted (in millions)		2.00
Total fair value of all options granted (in millions)		$11.90

		For the year ended						(Unaudited) Nine months ended September 30, 2000
		1997		1998		1999
Sales
USA and Europe		$38,817,520		$49,270,374		$73,508,762		$  80,040,143
Far East and Japan		6,886,092		9,586,073		13,049,135		18,245,397
India and other countries		1,065,015		1,363,011		1,019,011		2,165,340
Total		$46,768,627		$60,219,458		$87,576,908		$100,450,880
Total Assets
USA and Europe		$25,229,020		$32,747,633		$36,746,739		$105,014,139
Far East and Japan		—		—		—		—
India and other countries		31,995,258		36,527,515		53,063,253		123,494,768
Total		$57,224,278		$69,275,148		$89,809,992		$228,508,907

/s/    ARTHUR ANDERSEN LLP

ARTHUR ANDERSEN LLP

		September 30, 2000			December 31, 1999			December 31, 1998
		(unaudited)
ASSETS
Current assets:
Cash		$  4,911			$    611			$  677
Accounts receivable, net of allowance for doubtful accounts of                $1,481, $353 and $207, respectively		17,154			7,456			3,096
Unbilled services		8,782			3,680			900
Deferred tax assets		3,670			—			—
Other current assets		1,580			769			286
Total current assets		36,097			12,516			4,959
Property and equipment, net		8,500			2,863			816
Intangible assets, net		2,871			3,492			—
Other assets		739			9			—
Total assets		$48,207			$18,880			$5,775
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt		$      37			$    120			$  —
Note payable to Intelligroup		11,686			8,397			1,779
Lines of credit		9,921			—			—
Accounts payable		2,472			872			526
Accrued payroll and related costs		2,436			1,551			1,039
Accrued expenses and other liabilities		2,730			2,352			2,039
Total current liabilities		29,282			13,292			5,383
Long-term debt, net of current portion		580			618			—
Total liabilities		29,862			13,910			5,383
Preferred stock, $0.01 par value, 5,000,000 shares authorized,      800 shares of 6% Series A convertible preferred stock issued and      outstanding		7,280			—			—
Common stock warrants		690			—			—
Commitments
Shareholders’ equity:
Common stock, $.01 par value, 40,000,000 shares authorized,                17,510,883, 16,629,413 and 16,629,413 shares issued and                outstanding as of September 30, 2000 and December 31, 1999                and 1998		175			167			167
Additional paid-in capital		17,558			—			—
Intelligroup investment		—			7,083			1,186
Accumulated deficit		(7,378	)		(2,246	)		(985	)
Currency translation adjustment		20			(34	)		24
Total shareholders’ equity		10,375			4,970			392
Total liabilities and shareholders’ equity		$48,207			$18,880			$5,775

		For the nine months ended September 30,						For the year ended December 31, 1999			For the nine-month period ended December 31, 1998			For the year ended March 31, 1998
		2000			1999
		(unaudited)
Revenues		$59,287			$27,073			$39,795			$12,438			$8,995
Cost of sales		29,550			15,606			22,475			7,315			4,797
Gross profit		29,737			11,467			17,320			5,123			4,198
Selling, general and administrative expenses		35,062			9,797			17,605			5,106			3,812
Depreciation and amortization		1,862			630			1,131			102			133
Total operating expenses		36,924			10,427			18,736			5,208			3,945
Operating income (loss)		(7,187	)		1,040			(1,416	)		(85	)		253
Other income (expense), net		(879	)		(37	)		(80	)		(66	)		13
Income (loss) before income taxes		(8,066	)		1,003			(1,496	)		(151	)		266
Provision (benefit) for income taxes		(2,934	)		449			(235	)		401			519
Net income (loss)		$(5,132	)		$    554			$(1,261	)		$    (552	)		$  (253	)
Net income (loss) per common share—basic and      diluted		$  (0.30	)		$    0.03			$  (0.08	)		$  (0.03	)		$(0.02	)
Shares used in per share calculation of net income      (loss)—basic and diluted		17,236			16,629			16,629			16,629			16,629

		Common stock		Intelligroup investment			Additional paid-in- capital		Accumulated deficit			Accumulated other comprehensive income (loss)			Total shareholders’ equity and comprehensive income (loss)
Balance—March 31, 1997		$167		$  534			$    —		$    (180	)		$15			$    536
Net loss		—		—			—		(253	)		—			(253	)
Foreign currency translation		—		—			—		—			(68	)		(68	)
Comprehensive loss															(321	)
Net transfers from Intelligroup, Inc		—		26			—		—			—			26
Balance—March 31, 1998		167		560			—		(433	)		(53	)		241
Net loss		—		—			—		(552	)		—			(552	)
Foreign currency translation		—		—			—		—			77			77
Comprehensive loss															(475	)
Net transfers from Intelligroup, Inc		—		626			—		—			—			626
Balance—December 31, 1998		167		1,186			—		(985	)		24			392
Net loss		—		—			—		(1,261	)		—			(1,261	)
Foreign currency translation		—		—			—		—			(58	)		(58	)
Comprehensive loss															(1,319	)
Net transfers from Intelligroup, Inc		—		5,897			—		—			—			5,897
Balance—December 31, 1999		167		7,083			—		(2,246	)		(34	)		4,970
Net loss (unaudited)		—		—			—		(5,132	)		—			(5,132	)
Foreign currency translation     (unaudited)		—		—			—		—			54			54
Comprehensive loss (unaudited)															(5,078	)
Net transfers from Intelligroup, Inc.     (unaudited)		—		483			—		—			—			483
Sale of 831,470 shares of common     stock		8		—			9,992		—			—			10,000
Reclassification of Intelligroup     investment to additional paid-in     capital		—		(7,566	)		7,566		—			—			—
Balance—September 30, 2000     (unaudited)		$175		$  —			$17,558		$(7,378	)		$20			$10,375

		For the nine months ended September 30,						For the year ended December 31, 1999			For the nine-month period ended December 31, 1998			For the year ended March 31, 1998
		2000			1999
		(unaudited)
Cash flows from operating activities:
Net income (loss)		$  (5,132	)		$    554			$(1,261	)		$    (552	)		$    (253	)
Adjustments to reconcile net income (loss) to net cash used     operating activities:
Depreciation and amortization		1,862			630			1,131			102			133
Provision for doubtful receivables		1,489			115			189			140			127
Deferred taxes		(3,670	)		—			—			—			—
Changes in assets and liabilities, net of acquired business:
Accounts receivable		(11,186	)		(4,001	)		(3,766	)		(1,068	)		(1,066	)
Unbilled services		(5,102	)		(2,683	)		(2,662	)		(648	)		(248	)
Other current assets		(811	)		(23	)		(425	)		(174	)		(71	)
Other assets		(730	)		(17	)		(5	)		—			—
Accounts payable		1,600			(5	)		288			250			139
Accrued payroll and related costs		885			420			410			74			(32	)
Accrued expenses and other liabilities		378			1,777			8			1,410			418
Net cash used in operating activities		(20,417	)		(3,233	)		(6,093	)		(466	)		(853	)
Cash flows from investing activities:
Purchase of business, net of cash acquired		—			(2,186	)		(2,186	)		—			—
Capital expenditures		(6,878	)		(659	)		(2,175	)		(603	)		(7	)
Net cash used in investing activities		(6,878	)		(2,845	)		(4,361	)		(603	)		(7	)
Cash flows from financing activities:
Loans from Intelligroup		15,001			2,958			6,618			894			886
Repayment of loans		(11,833	)		(80	)		(109	)		(219	)		(302	)
Net borrowing under line of credit		9,921			—			—			—			—
Proceeds from sales of Series A preferred stock and warrants		7,970			—			—			—			—
Proceeds from sale of common stock		10,000			—			—			—			—
Net transfers from Intelligroup		483			2,870			3,937			626			26
Net cash provided by financing activities		31,542			5,748			10,446			1,301			610
Effect of exchange rate changes on cash and cash equivalents		53			(26	)		(58	)		77			(17	)
Increase (Decrease) in cash and cash equivalents		4,300			(356	)		(66	)		309			(267	)
Cash and cash equivalents, beginning of period		611			677			677			368			635
Cash and cash equivalents, end of period		$    4,911			$    321			$    611			$    677			$    368
Supplementary disclosures of cash flow information:
Cash paid for interest		$      322			$      55			$      81			$      17			$        6
Cash paid for income taxes		$        17			$        8			$    229			$    361			$      84

Interim Financial Information

Use of Estimates

Cash and Cash Equivalents

Revenue Recognition

Property and Equipment

Intangible Assets

Allowance for Doubtful Accounts

Recoverability of Long-Lived Assets

Stock-Based Compensation

Currency Translation

Concentrations

Income Taxes

Fair Value of Financial Instruments

Net Income (Loss) Per Share

		For the nine-month period ended December 31, 1998			For the year ended March 31, 1998
Revenues		$15,576,000			$12,393,000
Net loss		(571,000	)		(559,000	)
Net loss per common share— basic and diluted		$          (0.03	)		$          (0.03	)

Distribution Agreement

Services Agreement

Contribution Agreement

Space Sharing Agreement

Tax Sharing Agreement

Employment Agreements

Leases

For the years ended December 31,
2000		$    736,000
2001		635,000
2002		586,000
2003		551,000
2004		611,000
Thereafter		479,000
		$3,598,000

Benefit Plans

		For the periods ended
		December 31, 1999			December 31, 1998			March 31, 1998
Current
Federal		$(560,000	)		$163,000			$  76,000
State		(55,000	)		54,000			25,000
Foreign		363,000			386,000			450,000
Current		(252,000	)		603,000			551,000
Deferred
Federal		15,000			(37,000	)		(26,000	)
State		2,000			(9,000	)		(6,000	)
Deferred		17,000			(46,000	)		(32,000	)
Total		$(235,000	)		$557,000			$519,000

		December 31, 1999			December 31, 1998
Tax Deferred Assets:
Allowance for doubtful accounts		$  124,000			$    84,000
Vacation accrual		180,000			123,000
Foreign net operating loss carryforwards		81,000			75,000
Total deferred tax assets		385,000			282,000
Deferred Tax Liabilities:
Depreciation		(24,000	)		(4,000	)
Valuation allowance		(261,000	)		(198,000	)
Net deferred tax asset		$  100,000			$    80,000
Current		$  304,000			$  207,000
Non-current		57,000			71,000
Valuation		(261,000	)		(198,000	)
Net deferred tax asset		$  100,000			$    80,000

2000		$120,000
2001		73,000
2002		81,000
2003		89,000
2004		99,000
Thereafter		276,000
		$738,000

		September 30, 2000			December 31, 1999			December 31, 1998
Computers and software		$  7,800			$  2,839			$  595
Furniture and equipment		3,015			1,191			796
		10,815			4,030			1,391
Accumulated depreciation		(2,315	)		(1,167	)		(575	)
		$  8,500			$  2,863			$  816

		September 30, 2000		December 31, 1999		December 31, 1998
Accrued expenses		$2,107		$2,053		$1,779
Advanced billings		261		83		64
Income taxes payable		362		216		196
Total		$2,730		$2,352		$2,039

		Number of shares		Weighted average exercise price		Weighted average fair value
Options outstanding, December 31, 1998		—		—		—
Options granted, September 15, 1999		1,244,701		$2.52		$2.16
Options granted, October 1, 1999		1,450,010		2.52		2.16
Options granted, December 1, 1999		541,381		6.51		5.58
Options outstanding, December 31, 1999 (none            exercisable)		3,236,092		$3.19		$2.73

Net loss as reported		$(1,261,000	)
Net loss pro forma		$(1,625,000	)
Unaudited pro forma net loss per common share as reported — basic and      diluted		$(0.08	)
Unaudited pro forma net loss per common share as adjusted — basic and      diluted		$(0.10	)

For the nine-month period ended September 30, 2000		United States			Asia Pacific			Europe			India		Combined Total
Revenue		$40,906			$  7,559			$1,451			$  9,371		$59,287
Depreciation and amortization		1,332			87			9			434		1,862
Income (loss) from operations		(6,111	)		(4,394	)		(988	)		4,306		(7,187	)
Interest income		—			5			—			4		9
Interest expense		656			20			—			194		870
Other income (expense)		(22	)		(3	)		—			7		(18	)
Income (loss) before income taxes		(6,788	)		(4,412	)		(988	)		4,122		(8,066	)
Capital spending		3,125			253			109			3,391		6,878
Total assets		33,490			1,402			282			13,033		48,207
For the year ended December 31, 1999		United States			Asia Pacific			Europe			India		Combined Total
Revenue		$27,408			$11,324			$  —			$  1,063		$39,795
Depreciation & amortization		1,015			82			—			34		1,131
Income (loss) from operations		(2,734	)		848			(99	)		569		(1,416	)
Interest income		6			24			—			—		30
Interest expense		(77	)		(5	)		—			—		(82	)
Other income (expense)		—			(28	)		—			—		(28	)
Income (loss) before income taxes		(2,805	)		839			(99	)		569		(1,496	)
Capital spending		1,012			120			—			1,043		2,175
Total assets		14,032			3,410			39			1,399		18,880

For the nine-month period ended December 31, 1998		United States		Asia Pacific			Combined Total
Revenue		$6,020		$6,418			$12,438
Depreciation & amortization		33		69			102
Income (loss) from operations		411		(496	)		(85	)
Interest income		—		—			—
Interest expense		—		14			14
Other income (expense)		—		(52	)		(52	)
Income (loss) before income taxes		411		(562	)		(151	)
Capital spending		594		9			603
Total assets		2,968		2,807			5,775
For the year ended March 31, 1998		United States		Asia Pacific			Combined Total
Revenue		$2,100		$6,895			$  8,995
Depreciation & amortization		—		133			133
Income (loss) from operations		169		84			253
Interest income		—		1			1
Interest expense		—		10			10
Other income (expense)		—		22			22
Income (loss) before income taxes		170		96			266
Capital spending		—		7			7
Total assets		1,328		1,888			3,216

Sale of Common Stock

Sale of preferred stock and warrants

Borrowings

The Merger

/S / ARTHUR ANDERSEN LLP

ASSETS
		1998			1997
Current assets:
Cash		$    319,282			$      93,957
Accounts receivable, net of allowance for doubtful accounts of $36,000                and $44,000, respectively		781,845			656,670
Unbilled services		118,006			56,382
Prepaid expenses		47,510			9,070
Related-party note receivable		10,089			—
Income tax receivable		—			106,598
Deferred income tax asset		—			12,436
Total current assets		1,276,732			935,113
Furniture and equipment:
Computer equipment		748,467			622,520
Software		249,611			173,379
Office furniture and equipment		54,582			54,582
		1,052,660			850,481
Less accumulated depreciation		(617,930	)		(359,080	)
		434,730			491,401
Deferred income tax asset		3,923			—
		$1,715,385			$1,426,514
LIABILITIES AND SHAREHOLDERS’ EQUITY
		1998			1997
Current liabilities:
Line of credit		$          —			$      80,000
Current portion of long-term debt		61,887			42,652
Current portion of capital lease obligations		47,135			—
Accounts payable		57,687			88,241
Accrued payroll and related benefits		102,304			100,249
Accrued liabilities		27,078			70,604
Deferred revenue		133,633			163,047
Income tax payable		11,979			—
Deferred income tax liability		132,363			—
Total current liabilities		574,066			544,793
Long-term debt, net of current portion		690,464			767,958
Capital lease obligations, net of current portion		47,692			—
Deferred Income Tax Asset		—			15,211
COMMITMENTS AND CONTINGENCIES (Note 5)
Shareholders’ equity:
Common stock, $1 par value; 100,000 shares authorized, 40,000 shares                issued		40,000			40,000
Additional paid-in capital		514,013			274,975
Treasury stock; 22,000 shares at cost		(420,577	)		(420,577	)
Deferred compensation		(225,338	)		(25,021	)
Retained earnings		495,065			229,175
Total shareholders’ equity		403,163			98,552
		$1,715,385			$1,426,514

		1998			1997			1996
Revenues		$3,947,763			$3,397,713			$2,556,607
Cost of revenues		1,277,263			1,057,211			719,322
Gross margin		2,670,500			2,340,502			1,837,285
Operating expenses:
Research and development		230,120			288,319			—
Selling, general and administrative		1,920,171			2,047,078			1,433,280
Total operating expenses		2,150,291			2,335,397			1,433,280
Operating income		520,209			5,105			404,005
Interest income (expense):
Interest income		7,902			1,189			5,720
Interest expense		(84,281	)		(64,451	)		(16,207	)
Interest expense, net		(76,379	)		(63,262	)		(10,487	)
Income (loss) before (provision) benefit for income taxes		443,830			(58,157	)		393,518
(Provision) benefit for income taxes		(177,940	)		36,773			(160,647	)
Net income (loss)		$    265,890			$    (21,384	)		$    232,871

		Common Stock				Additional paid-in capital		Treasury stock					Deferred compensation			Retailed earnings			Total shareholders’ equity
		Shares		Amount				Shares		Amount
Balance, December 31, 1995		40,000		$40,000		$254,250		—		$        —			$  (17,245	)		$  17,688			$  294,693
Deferred compensation relating to     stock option grants		—		—		8,425		—		—			(8,425	)		—			—
Amortization of deferred     compensation		—		—		—		—		—			5,183			—			5,183
Net income		—		—		—		—					—			232,871			232,871
Balance, December 31, 1996		40,000		40,000		262,675		—		—			(20,487	)		250,559			532,747
Deferred compensation related to     stock options grants		—		—		12,300		—		—			(12,300	)		—			—
Amortization of deferred     compensation		—		—		—		—		—			7,766			—			7,766
Purchase of treasury stock		—		—		—		22,000		(420,577	)		—			—			(420,577	)
Net loss		—		—		—		—		—			—			(21,384	)		(21,384	)
Balance, December 31, 1997		40,000		40,000		274,975		22,000		(420,577	)		(25,021	)		229,175			98,552
Deferred compensation related to     stock option grants		—		—		239,038		—		—			(239,038	)		—			—
Amortization of deferred     compensation		—		—		—		—		—			38,721			—			38,721
Net income		—		—		—		—		—			—			265,890			265,890
Balance, December 31, 1998		40,000		$40,000		$514,013		22,000		$(420,577	)		$(225,338	)		$495,065			$  403,163

		1998			1997			1996
Cash flows from operating activities:
Net income (loss)		$265,890			$(21,384	)		$232,871
Adjustments to reconcile net income (loss) to net cash provided by (used in)      operating activities:
Depreciation		258,850			213,229			109,027
Deferred income taxes		125,665			(15,830	)		12,185
Amortization of deferred compensation		38,721			7,766			5,183
Changes in operating assets and liabilities:
Accounts receivable, net		(125,175	)		(198,505	)		(319,716	)
Unbilled services		(61,624	)		22,557			(51,425	)
Prepaid expenses		(38,440	)		(7,753	)		11,704
Accounts payable		(30,554	)		(1,667	)		65,351
Accrued payroll and related benefits		2,055			38,661			39,596
Accrued liabilities		(43,526	)		71,230			(6,642	)
Deferred revenue		(29,414	)		123,047			38,763
Income taxes payable/receivable		118,577			(240,948	)		144,251
Net cash provided by (used in) operating activities		481,025			(9,597	)		281,148
Cash flows from investing activities:
Purchase of furniture and equipment		(114,267	)		(344,609	)		(289,688	)
Cash flows from financing activities:
Net borrowings (repayments) on line of credit		(80,000	)		80,000			—
Proceeds from issuance of debt		—			863,973			125,000
Principal payments on debt		(58,259	)		(213,452	)		(35,865	)
Principal payments on capital lease obligations		(3,174	)		—			—
Purchase of treasury stock		—			(420,577	)		—
Net cash provided by (used in) financing activities		(141,433	)		309,944			89,135
Net increase (decrease) in cash		225,325			(44,262	)		80,595
Cash, beginning of year		93,957			138,219			57,624
Cash, end of year		$319,282			$  93,957			$138,219
Supplemental disclosure of cash flow information:
Cash paid for interest		$  77,902			$  60,395			$  16,207
Cash paid for income taxes		19,777			219,905			—

Nature of Operations

Use of Estimates

Fair Value of Financial Instruments

Concentration of Credit Risk and Significant Customers

Furniture and Equipment

Impairment of Long-Lived Assets

Revenue Recognition

Research and Development

Income Taxes

		Year ending December 31,
1999		$  61,877
2000		65,585
2001		72,842
2002		80,669
2003		89,337
Thereafter		382,031
		$752,351

		1998		1997			1996
Current:
Federal		$  45,268		$(18,136	)		$128,561
State		7,007		(2,807	)		19,901
		52,275		(20,943	)		148,462
Deferred:
Federal		118,995		(16,480	)		11,575
State		6,670		650			610
		125,665		(15,830	)		12,185
		$177,940		$(36,773	)		$160,647

		1998			1997			1996
Federal income tax at statutory rate		$150,902			$(19,773	)		$133,796
State income tax, net of federal income tax impact		14,646			(1,919	)		12,986
Non-deductible compensation expenses related to stock      option grants		14,443			2,897			1,933
Research and development income tax credits		(14,429	)		(18,078	)		—
Other		12,378			100			11,932
		$177,940			$(36,773	)		$160,647

		1998			1997
Deferred income tax assets:
Depreciation		$      3,923			$      —
Research and development income tax credits		36,565			28,830
		40,488			28,830
Deferred income tax liabilities:
Accrual to cash basis conversion		(168,928	)		(16,394	)
Depreciation		—			(15,211	)
		(168,928	)		(31,605	)
Net deferred income tax liability		$(128,440	)		$(2,775	)

Leases

Year ending December 31,		Capital lease obligations			Operating lease obligations
1999		$53,653			$122,177
2000		49,181			19,575
2001		677			—
		103,511			$141,752
Less interest		(8,684	)
		94,827
Less current portion		(47,135	)
		$47,692

Legal

Treasury Stock

Stock Options

		Options
Balance, December 31, 1995		1,400
Granted		500
Balance, December 31, 1996		1,900
Granted		200
Balance, December 31, 1997		2,100
Granted		1,150
Canceled		(50	)
Balance December 31, 1998.		3,200

		1998		1997			1996
Net income (loss) as reported		$265,890		$(21,384	)		$232,871
Net income (loss) pro forma		265,670		(21,428	)		232,756

P.H. TANG & CO. Certified Public Accountants Principal: Mr. P.H. Tang Associate: Mr. Sherman Chang

Main Office 3rd Floor, Rammon House, 101 Sai Yeung Choi Street South, Mongkok, Kowloon, Tel: 2398 1138    Fax: 2398 1289

Corporate Reconstruction & Insolvency Office 8th Floor, Gold & Silver Commercial Building, 12-18 Mercer Street, Central, Hong Kong Tel: 2815 5823    Fax: 2815 5987

/s/    P.H. TANG & CO.

Certified Public Accountants

		Note		2000 HK$			1999 HK$
Turnover		4		189,038,524			106,215,575
Direct cost				(167,038,311	)		(95,138,901	)
Gross profit				22,000,213			11,076,674
Other income		5		1,926,165			1,237,568
				23,926,378			12,314,242
Administrative and general expenses				(5,314,690	)		(2,904,258	)
Profit from operations		6		18,611,688			9,409,984
Finance costs		7		(66,421	)		(74,136	)
Profit before taxation				18,545,267			9,335,848
Taxation		9		(3,007,434	)		(1,450,232	)
Profit after taxation				15,537,833			7,885,616
Dividend paid
HK$0.995 per ordinary share				19,900,000			—

		Note		2000 HK$			1999 HK$
NON-CURRENT ASSETS
Property, plant and equipment		10		584,560			105,260
Investments		11		4,762,500			—
				5,347,060			105,260
CURRENT ASSETS
Accounts and other receivable				25,929,141			29,934,379
Bills receivable				18,692,360			—
Fixed deposits				813,914			1,563,262
Cash and bank balances				2,314,637			1,352,407
				47,750,052			32,850,048
CURRENT LIABILITIES
Accounts payable and accruals				(12,905,158	)		(11,062,180	)
Profits tax payable				(3,841,731	)		(1,845,907	)
Bank overdrafts				(2,638,927	)		(1,858,948	)
				(19,385,816	)		(14,767,035	)
NET CURRENT ASSETS				28,364,236			18,083,013
				33,711,296			18,188,273
CAPITAL AND RESERVE
Share capital		12		20,000,000			100,000
Retained profits		13		6,949,048			11,311,215
				26,949,048			11,411,215
NON-CURRENT LIABILITIES
Amount due to a shareholder				6,762,248			6,777,058
				33,711,296			18,188,273

		Note		2000 HK$			1999 HKS
NET CASH INFLOW FROM OPERATING ACTIVITIES		16		5,888,058			232,295
RETURN ON INVESTMENT AND SERVICING OF FINANCE
Interest received				130,886			126,262
Interest paid				(66,421	)		(74,136	)
Dividend paid				(19,900,000	)		—
TAXATION
Tax paid				(1,011,610	)		(210,549	)
INVESTING ACTIVITIES
Purchases of property, plant and equipment				(730,700	)		(61,508	)
Purchases of investments				(4,762,500	)		—
NET CASH (OUTFLOW)/INFLOW BEFORE FINANCING				(20,452,287	)		12,364
FINANCING
Issued of ordinary share capital				19,900,000			—
Amount advanced (to)/from shareholders				(14,810	)		125,580
				19,885,190			125,580
(DECREASE)/INCREASE IN CASH EQUIVALENTS				(567,097	)		137,944
Cash and cash equivalents at beginning of year				1,056,721			918,777
Cash and cash equivalent at end of year				489,624			1,056,721
ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS
Cash and bank balance				3,128,551			2,915,669
Bank overdrafts				(2,638,927	)		(1,858,948	)
				489,624			1,056,721

SSAP 1 (Revised)		Presentation of financial statements
SSAP 2 (Revised)		Net profit or loss for the period, fundamental errors and changes in accounting policies

a.  Recognition of revenue

i.    Rendering of services is based on the stage of completion of the transaction at the balance sheet date, provided that the amount of revenue, the costs incurred for the services as well as the estimated costs to completion can be measured reliably. The stage of completion of a transaction associated with the rendering of services is established by reference to the cost incurred to date as compared to the total costs to be incurred under the transaction.

ii. Bank interest income is recognised in the income statement when it is received.

iii. Consultancy fee income is recognised on the completion of the transactions in which the services are rendered.

iv. Permanent recruit is recognised in the income statement on receipt basis.

b.    Operating leases

c.    Foreign currencies

d.    Taxation

e.    Property, plant and equipment

i.  Depreciation

Depreciation is calculated to write off the cost over their estimated useful lives, on straight-line basis, at the annual rate of 20%.

ii.  Impairment of property, plant and equipment

The carrying amounts of the assets are reviewed to assess whether their recoverable amounts have declined below their carrying amounts. When such a decline has occurred, their carrying amount is reduced to their recoverable amount. Recoverable amount is the amount which the company expects to recover from the future use of the asset, including its residual value of disposal.

The amount of the reduction to recoverable amount is charged to the income statement, unless it reverses a previous revaluation increase, in which case it is charged directly against any related revaluation reserve to the extent that the reduction does not exceed the amount held in the revaluation reserve in respect of the same item or group of identical assets.

iii.  Gain or loss on disposal of property, plant and equipment

The gain or loss on disposal of fixed assets other than investment properties is the difference between the net sale proceeds and the carrying amount of the relevant assets and is recognised in the income statement.

f.    Investments

		2000 HK$		1999 HK$
Services income		189,038,524		106,215,575
5.    Other Income
Included in other revenue is net income from other investment as follows:
		2000 HK$		1999 HK$
Bank interest income		130,886		126,262
Consultancy fee income		5,000		522,884
Permanent recruit		1,640,717		567,157
Sundry income		149,562		21,265
		1,926,165		1,237,568
6.    Profit from Operations
Profit from operations is stated after charging the followings:
		2000 HK$		1999 HK$
Auditors’ remuneration		20,000		15,000
Depreciation		146,140		56,728
Loss on disposal of property, plant and equipment		105,260		—
Operating leases—land and buildings		478,819		213,636
Staff costs		2,467,628		1,564,164

		2000 HK$		1999 HK$
Bank overdraft interest		66,421		74,136

		2000 HK$		1999 HK$
Fees		—		—
Other emoluments		320,345		298,199
		320,345		298,199

		2000 HK$		1999 HK$
Hong Kong profits tax
current year		2,973,975		1,471,047
under/(over) provided in previous years		33,459		(20,815	)
		3,007,434		1,450,232

		Furniture and fixtures HK$
Cost
at 30.6.1999		306,400
additions		730,700
disposals		(306,400	)
at 30.6.2000		730,700
Accumulated depreciation
at 30.6.1999		201,140
charge for the year		146,140
written back		(201,140	)
at 30.6.2000		146,140
Net book value
at 30.6.2000		584,560
at 30.6.1999		105,260

		2000 HK$		1999 HK$
Unlisted shares, at cost (note a)		4,262,600		—
Project investment, at cost (note b)		500,000		—
		4,762,500		—

		2000 HK$		1999 HK$
Authorised
at 30.6.1999 100,000 ordinary shares of HK$1 each		100,000		100,000
increased on 26,2,2000 19,900,000 ordinary shares of HK$1                each		19,900,000		—
at 30.06.2000 20,000,000 ordinary shares of HK$1 each		20,000,000		100,000
Issued and fully paid-up:
at 30.6.1999 100,000 ordinary shares of HK$1 each		100,000		100,000
allotted on 26.2.2000 19,900,000 ordinary shares of HK$1                each		19,900,000		—
at 30.06.2000 20,000,000 ordinary shares of HK$1 each		20,000,000		100,000

		2000 HK$			1999 HK$
at 30.6.1999		11,311,215			3,425,599
Net profit for the year		15,537,833			7,885,616
Dividend paid		(19,900,000	)		—
at 30.6.2000		6,949,048			11,311,215

		2000 HK$		1999 HK$
Land and building
—expiring in the second to fifty year inclusive		474,000		—
—expiring within one year		81,600		191,148
		555,600		191,148

		2000 HK$			1999 HK$
Profit before taxation		18,545,267			9,335,848
Depreciation		146,140			56,728
Interest received		(130,888	)		(126,262	)
Interest paid		66,421			74,136
Loss on disposal of property, plant and equipment		105,260			—
(Increase)/Decrease in accounts receivable		(14,687,122	)		5,910,349
(Decrease)/Increase in accounts payables		1,842,978			(15,018,504	)
Net cash inflow from operating activities		5,888,058			232,295

For the Year Ended 30 June 2000

		2000 HK$		1999 HK$
Business trips		271,508		73,932
Consultancy fee		498,500		312,240
Consultants quarter		100,800		75,600
Consultants salaries and allowances		24,155,089		22,835,247
Project costs		142,012,414		71,841,882
		167,038,311		95,138,901
2.   ADMINISTRATION AND GENERAL EXPENSES
		2000 HK$		1999 HK$
Accountancy and secretarial fee		336,676		28,800
Advertising		229,097		111,756
Auditors’ remuneration		20,000		15,000
Bank charges		10,110		42,345
Business registration fee		2,573		2,573
Cleaning and sanitary		26,589		17,985
Commission paid		535,309		146,685
Depreciation		146,140		56,728
Directors’ quarter expenses		—		2,416
Directors’ salaries		320,345		295,783
Electricity and water		15,845		11,446
Entertainment		187,935		32,296
Insurance		48,606		48,176
Legal and professional		121,355		29,906
Local travelling		17,283		7,416
Loss on disposal of property, plant and equipment		105,260		—
Management and air conditioning charges		66,050		39,917
Medical allowance		5,810		6,483
Office rent and rates		235,539		219,036
Printing and stationery		111,925		91,864
Repairs and maintenance		10,200		2,500
Salaries and allowances		2,467,628		1,564,164
Staff messing		32,139		23,763
Sundry expenses		127,508		9,398
Telephone and fax		128,938		91,322
Tuition and training		5,830		6,500
		5,314,690		2,904,258

(i)  transferred, assigned, sold or otherwise disposed of any of the assets reflected on the Balance Sheet, or canceled any debts or claims, except in the ordinary course of business consistent with past practice;

(ii)  incurred any material obligation or liability (absolute, accrued, contingent or otherwise) except obligations with respect of SeraNova Preferred Stock and those incurred in the ordinary course of business;

(iii)  discharged or satisfied any Liens, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (x) liabilities shown or reflected on the Balance Sheet or (y) liabilities incurred since the date of the Balance Sheet in the ordinary course of business consistent with past practice;

(iv)  to the Knowledge of SeraNova experienced any change, or received any threat of any change, in SeraNova’s relations with, or any loss or threat of loss of, any significant suppliers, clients, partners or employees of SeraNova;

(v)  disposed of or failed to keep in effect any rights in, to or for the use of any material license or intellectual property;

(vi)  incurred any damage, destruction or loss, whether or not covered by insurance, having a Material Adverse Effect;

(vii)  suffered any operating loss or any extraordinary loss, or waived any rights of substantial value, or entered into any commitment or transaction not in the ordinary course of business where such loss, rights, commitment or transaction has or would have a Material Adverse Effect;

(viii)  made any general wage or salary increases in respect of personnel which it employs, or paid any bonuses to personnel outside the ordinary course of business consistent with past practice;

(ix)  mortgaged, pledged, subjected to lien, granted a security interest in, or otherwise encumbered itself, or any material portion of its assets or property, whether tangible or intangible;

(x)  made any single capital expenditure in excess of $100,000;

(xi)  authorized or agreed or otherwise become committed to do any of the foregoing; or

(xii)  prepared or filed any Tax Return inconsistent with past practice or, on any such Tax Return, taken any position, made any election, or adopted any method that is inconsistent with positions taken, elections made or methods used in preparing or filing similar Tax Returns in prior periods (including, without limitation, positions, elections or methods which would have the effect of deferring income).

(i)  any material (A) collective bargaining agreement or other contract with any labor union, (B) plan, program, practice, arrangement or agreement that provides for the (1) payment of severance, termination or similar type of compensation or benefits upon the termination, retirement or resignation of any employee or (2) medical, life insurance, pension or other benefits for employees or their affiliates upon retirement or termination of employment;

(ii)  any material covenant not to compete or other agreement, contract or commitment limiting or restraining SeraNova or its subsidiaries from engaging or competing in any products or lines of business with any Person;

(iii)  any material agreement, contract or commitment with any Affiliate, officer, director or employee of SeraNova or its affiliates or its subsidiaries (other than employment agreements arising by operation of law with SeraNova’ directors, officers and employees);

(iv)  any material lease or similar agreement under which SeraNova is a sublessor of, or makes available for use by any third party, any real property leased by SeraNova or its subsidiaries or any portion of premises otherwise occupied by SeraNova;

(v)  any material lease or similar agreement under which SeraNova or any of its subsidiaries is the lessee or lessor of, or holds or uses, any machinery, furniture, personalty, equipment, or other tangible personal property, contract, order or commitment for the future purchase or sale of materials, supplies, services, products or equipment (other than purchase contracts and orders in the ordinary course of business consistent with past practice and with an aggregate future liability not in excess of $100,000) or management, service, consulting or other similar type of contract;

(vi)  any material agreement, contract or instrument pursuant to, or under, which SeraNova or any of its subsidiaries has borrowed or loaned any money, including any note, bond, indenture or other evidence of indebtedness, or directly or indirectly guaranteed (including, through take-or-pay, keep-well or similar agreements or security agreements pledging assets as security for obligations of a third party) indebtedness, liabilities or obligations of others (other than endorsements for the purpose of collection in the ordinary course of business);

(vii)  any material agreement, contract or commitment under which any other Person has directly or indirectly guaranteed indebtedness, liabilities or obligations of SeraNova or any of its subsidiaries (other than endorsements for the purpose of collection in the ordinary course of business);

(viii)  any material mortgage, pledge, security agreement, deed of trust or other document granting a Lien (including liens upon properties acquired under conditional sales, capital leases or other title retention or security devices);

(ix)  any material agreement, contract or commitment (A) providing for the payment by SeraNova or any of its subsidiaries of any bonus or commission based on revenues, earnings, return on net assets or any other measure of performance of SeraNova or any of its subsidiaries or (B) providing for any bonus or other payment by SeraNova or any of its subsidiaries based on the sale of any portion of SeraNova or any of its subsidiaries or their assets;

(x)  any material other agreement, contract, lease, license, commitment or instrument to which SeraNova or any of its subsidiaries is a party, or by, or to which it, or any of its properties or assets is bound, or subject, which has an aggregate future liability in excess of $10,000;

(xi)  any material partnership or joint venture agreements;

(xii)  any material agreement, contract, commitment or other option relating to the sale or purchase of assets in excess of $10,000;

(xiii)  any material agreement, contract, commitment or other option relating to the purchase by SeraNova or any of its subsidiaries of any equity or debt interest in, or asset (other than purchases of assets in the ordinary course of business consistent with past practice) of any Person;

(xiv)  any material other agreement, contract, lease, license, commitment or instrument material to the business of SeraNova or any of its subsidiaries, or any agreement, contract, lease, license, commitment or instrument not made in the ordinary course of business (other than such agreements, contracts or commitments not made in the ordinary course of business which individually, or in the aggregate, do not represent aggregate future liabilities in excess of $10,000);

(xv)  any material marketing agreements; or

(xvi)  any material agreements providing for poison pills, parachute payments or agreements containing similar provisions.

(i)  adjust the terms of all outstanding SeraNova Stock Options issued under SeraNova Stock Option Plan and seek amendment to SeraNova’s other option agreements (each, as so adjusted, an “Adjusted Option”), whether vested or unvested, as necessary to provide that, at the Effective Time, each SeraNova Stock Option outstanding immediately prior to the Effective Time shall be amended and converted, on the same terms and conditions as were applicable under such SeraNova Stock Option, except as stated below, as follows (the “Option Adjustment”):

(A)  except in case of options covered by (C) below, each such SeraNova Stock Option to acquire shares of SeraNova Common Stock, except options held by persons who are not employees of SeraNova, will be converted into an option to acquire the number of Silverline ADSs determined by multiplying the number of shares of SeraNova Common Stock subject to such SeraNova Stock Option by the Common Stock Exchange Ratio (rounded up to the nearest whole share) at an exercise price determined by dividing the exercise price set forth in such SeraNova Stock Option by the Common Exchange Ratio (rounded up to the nearest whole cent), subject to a minimum exercise price which is equal to 90% of the market prices of Silverline ADS on the date of grant of options for Silverline ADSs;

(B)  make such other changes to the SeraNova Stock Option Plans as Silverline and SeraNova may agree are appropriate to give effect to the Merger.

(C)  with respect to any SeraNova Stock Option which, when converted as described in subparagraph (A) above, would have an exercise price per Silverline ADS which is less than the closing sale price of Silverline ADS’ on the Closing Date (the “In-the-Money Options”), SeraNova shall reach agreement with the holders of such In-the-Money Options, in form and substance reasonably satisfactory to Silverline, to either (i) immediately vest and execute a cashless exercise of the In-the-Money Options into Seranova’s common shares prior to the Effective Time, or (ii) surrender such In-the-Money Options at the Closing in exchange for options issued by Silverline to purchase Silverline ADS’ at an exercise price equal to the closing sale price of Silverline ADS’ on the Closing Date, such Silverline option to represent the right to purchase such increased number of Silverline ADS’ as shall (based on the Black Scholes formula and other reasonable objective valuation criteria as determined by investment bankers jointly selected by Silverline and SeraNova to make such determination) result in such option having the same value to the optionholder as such optionholder’s surrendered In-the-Money Option; and

(D)  enter into a settlement with Nagarajan Valluripalli and James E. Abbott, in form and substance and for consideration reasonably satisfactory to Silverline, pursuant to which Messrs. Valluripalli’s and Abbott’s options shall either immediately vest and be exercised prior to the Effective Time or be cancelled prior to the Effective Time.

If to Silverline, Acquisition or STI:

53 Knightsbridge Road

Piscataway, New Jersey 08756

Att.: Shankar Iyer

with a copy to:

Greenberg Traurig, LLP

200 Park Avenue

New York, New York 10166

Att: Rajiv Khanna, Esq.

If to SeraNova:

SeraNova, Inc.

499 Thornall Street

Edison, New Jersey 08837

Att: Rajkumar Koneru

with a copy to:

Carter, Ledyard & Milburn

2 Wall Street

New York, NY 10005

Att: James E. Abbott, Esq.

SILVERLINE TECHNOLOGIES LIMITED

/S /    RAVI SUBRAMANIAN

By:

Name:  Ravi Subramanian

Title: Chairman

SERA NOVA , INC .

/S /    RAJKUMAR KONERU

By:

Name:  Rajkumar Koneru

Title: Chairman and CEO

SILVERLINE ACQUISITION CORP .

/S /    SHANKAR IYER

By:

Name:  Shankar Iyer

Title: President

SILVERLINE TECHNOLOGIES , INC .

/S /    RAVI SUBRAMANIAN

By:

Name:  Ravi Subramanian

Title: Chairman

October 27, 2000

(i)

reviewed certain publicly available financial statements and other information of Silverline and SeraNova;

(ii)

reviewed certain internal financial statements and other financial and operating data concerning Silverline and SeraNova prepared by the managements of Silverline and SeraNova, respectively;

(iii)

discussed the past and current operations and financial condition and the prospects of Silverline, including information relating to certain strategic, financial and operational benefits anticipated from the Merger, with senior executives of Silverline;

(iv)

discussed the past and current operations and financial condition and the prospects of SeraNova, including information relating to certain strategic, financial and operational benefits anticipated from the Merger, with senior executives of SeraNova;

(v)

reviewed the pro forma impact of the Merger on the earnings per share of Silverline;

(vi)

reviewed the reported prices and trading activity for the Silverline ADS and SeraNova Shares;

(vii)

compared the financial performance of Silverline and SeraNova and the prices and trading activity of the Silverline ADS and SeraNova Shares with that of certain other publicly-traded companies and their securities;

(viii)

analyzed the contribution of revenues and earnings from Silverline and SeraNova to the combined company;

(ix)

reviewed and discussed with the senior managements of Silverline and SeraNova their strategic rationales for the Merger;

(x)

reviewed the draft Merger Agreement and certain related agreements; and

(xi)

performed such other financial studies, analyses, and investigations as we deemed appropriate.

Very truly yours,

/S /    PUNK, ZIEGEL & COMPANY, L.P.

Exhibit		Description
*2		Amended and Restated Agreement and Plan of Merger dated as of October 27, 2000, signed and executed on January 17, 2001, with retroactive effect from October 27, 2000, by and among the Registrant, Silverline Acquisition Corp., Silverline Technologies, Inc. and SeraNova, Inc., included as Annex A to the proxy statement/prospectus constituting Part I of this Registration Statement. The copy so included does not include the disclosure schedules supplementing the representations and warranties of SeraNova and the Registrant in Article III and Article IV, respectively, of the Agreement. The Registrant undertakes to furnish such disclosure schedule to the Commission upon its request.
3.1		Certificate of Incorporation of the Registrant, filed as Exhibit 3.3 to the Registrant’s Registration Statement No. 333-11984 and incorporated herein by reference.
3.2		Memorandum of Association of the Registrant, filed as Exhibit 3.2 to the Registrant’s Registration Statement No. 333-11984 and incorporated herein by reference.
3.3		Articles of Association of the Registrant, filed as Exhibit 3.1 to the Registrant’s Registration Statement No. 333-11984 and incorporated herein by reference.
4.1		Depository Agreement, among the Registrant and Morgan Guaranty Trust Company, and the beneficial owners from time to time of American Depositary Receipts issued thereunder, filed as Exhibit A to Registrant’s F-6 Registration Statement No. 333-12000 and incorporated herein by reference.
4.2		Credit Agreement, dated as of September 10, 1997, among the Registrant, The Chase Manhattan Bank and The Bank of Baroda, filed as Exhibit 10.2 to the Registrant’s Registration Statement No. 333-11984 and incorporated herein by reference.
*4.3		HSBC Bank USA commitment letter dated January 5, 2001.
*5.1		Opinion of Nishith Desai Associates, Indian counsel of the Registrant, regarding the validity of the equity shares of the Registrant being registered under this Registration Statement.
*8.1		Opinion of Nishith Desai Associates regarding certain Indian tax consequences of the merger.
*8.2		Opinion of Greenberg Traurig LLP regarding certain United States tax consequences of the merger.
10		Intercompany Agreement dated as of January 9, 1997, between the Registrant and Silverline Technologies, Inc., filed as Exhibit 10.1 to the Registrant’s Registration Statement No. 333-11984, and incorporated herein by reference.
*21		List of subsidiaries of the Registrant.

*	Being filed with this Amendment No. 1.

Exhibit		Description
*23.1		Consent of Deloitte Haskins and Sells, India (a member firm of Deloitte Touche Tohmatsu).
*23.2		Consent of Arthur Andersen LLP.
*23.3		Consent of Arthur Andersen LLP.
*23.4		Consent of Nishith Desai Associates.
**23.5		Consent of Punk Ziegel & Company L.P.
**23.6		Consent of P. H. Tang & Co.
24		Powers of Attorney (included in the signature page of the original filing of this Registration Statement).
*99.1		Form of proxy card.
*99.2		Inducement Agreement dated as of October 27, 2000 by and among Silverline Acquisition Corp., the Registrant and certain shareholders and option holders of SeraNova and amendment thereto.
*99.3		Inducement Agreement dated as of October 27, 2000 by and among SeraNova, Inc. and certain shareholders of the Registrant and amendment thereto.

*	Being filed with this Amendment No. 1.

**	Previously filed with the initial filing of this Registration Statement.

(1)

The undersigned Registrant hereby undertakes:

(a)

To file, during any period in which offers or sales are being made, a post-effective amendment this Registration Statement:

(i)

to include any prospectus required by section 10(a)(3) of the Securities Act, unless the information required to be included in such post-effective amendment is contained in periodic reports filed by the Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) and incorporated herein by reference;

(ii)

to reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment hereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement, unless the information required to be included in such post-effective amendment is contained in periodic reports filed by the Registrant pursuant to Section 13 or 15(d) of the Exchange Act and incorporated herein by reference. (Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the change in volume represents no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.);

(iii)

to include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement.

(b)

that, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(c)

to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(d)

to file a post-effective amendment to this registration statement to include any financial statements required by Item 8.A of Form 20-F at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Securities Act need not be furnished, provided that the Registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (d) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements.

(2)

The undersigned Registrant hereby undertakes that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this Registration Statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the applicable form.

(3)

The Registrant undertakes that every prospectus (i) that is filed pursuant to paragraph (2) immediately preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the Securities Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to this Registration Statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(4)

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 20 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(5)

The undersigned Registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in this Registration Statement when it became effective.

SILVERLINE TECHNOLOGIES LIMITED

/S / RAVI SUBRAMANIAN

By:

Ravi Subramanian

Chairman

Signature		Title
/S /  RAVI SUBRAMANIAN                                                                                                    Ravi Subramanian		Chairman of the Board of Directors and Authorized Representative in the United States
*                                                                                                        Krishna K. Subramanian		Vice Chairman of the Board of Directors and Executive for International Initiatives
*                                                                                                        Shankar Iyer		President and Chief Executive Officer (Principal Executive Officer) and Director
*                                                                                                        Venkatachalam K. Murthy		Senior Vice President and Chief Financial Officer (Principal Accounting Officer)
*                                                                                                        Arjan R. Daswani		Director
*                                                                                                        S.V. Mony		Director
*                                                                                                        P. Murari		Director
*                                                                                                        Vaidyanathan Panchapakesan		Director

Signature		Title
*                                                                                                        K. Mohan Subramanian		Wholetime Director
*                                                                                                        George R. Zoffinger		Director

Ravi Subramanian

as attorney-in-fact

Exhibit		Description
*2		Amended and Restated Agreement and Plan of Merger dated as of October 27, 2000, signed and executed on January 17, 2001, with retroactive effect from October 27, 2000, by and among the Registrant, Silverline Acquisition Corp., Silverline Technologies, Inc. and SeraNova, Inc., included as Annex A to the proxy statement/prospectus constituting Part I of this Registration Statement. The copy so included does not include the disclosure schedule supplementing the representations and warranties of SeraNova and the Registrant in Article III and Article IV, respectively, of the Agreement. The Registrant undertakes to furnish such disclosure schedule to the Commission upon its request.
3.1		Certificate of Incorporation of the Registrant, filed as Exhibit 3.3 to the Registrant’s Registration Statement on form F-1, Registration No. 333-11984, and incorporated herein by reference.
3.2		Memorandum of Association of the Registrant, filed as Exhibit 3.2 to the Registrant’s Registration Statement on form F-1, Registration No. 333-11984, and incorporated herein by reference.
3.3		Articles of Association of the Registrant, filed as Exhibit 3.1 to the Registrant’s Registration Statement on form F-1, Registration No. 333-11984, and incorporated herein by reference.
4.1		Depositary Agreement among the Registrant and Morgan Guaranty Trust Company, and the beneficial owners from time to time of American Depositary Receipts issued thereunder, filed as Exhibit          to Registrant’s F-6 Registration Statement No. 333-12000 and incorporated herein by reference.
4.2		Credit Agreement, dated as of September 10, 1997, among the Registrant, The Chase Manhattan Bank and The Bank of Baroda, filed as Exhibit 10.2 to the Registrant’s Registration Statement on form F-1, Registration No. 333-11984, and incorporated herein by reference.
*4.3		HSBC Bank USA commitment letter date January 5, 2001.
*5.1		Opinion of Nishith Desai Associates, Indian counsel of the Registrant, regarding the validity of the equity shares of the Registrant being registered under this Registration Statement.
*8.1		Opinion of Nishith Desai Associates regarding certain Indian tax consequences of the merger.
*8.2		Opinion of Greenberg Traurig LLP regarding certain United States tax consequences of the merger.
10		Intercompany Agreement dated as of January 9, 1997, between the Registrant and Silverline Technologies, Inc., filed as Exhibit 10.1 to the Registrant’s Registration Statement on form F-1, Registration No. 333-11984, and incorporated herein by reference.
*21		List of subsidiaries of the Registrant.
*23.1		Consent of Deloitte Haskins and Sells, India (a member firm of Deloitte Touche Tohmatsu).
*23.2		Consent of Arthur Andersen LLP.
*23.3		Consent of Arthur Andersen LLP.
*23.4		Consent of Nishith Desai Associates.
**23.5		Consent of Punk Ziegel & Company L.P.
**23.6		Consent of P. H. Tang & Co.
24		Powers of Attorney (included in the signature page of the original filing of this Registration Statement).
*99.1		Form of proxy card.
*99.2		Inducement Agreement dated as of October 27, 2000 by and among Silverline Acquisition Corp., the Registrant and certain shareholders and option holders of SeraNova and amendment thereto.
*99.3		Inducement Agreement dated as of October 27, 2000 by and among SeraNova, Inc. and certain shareholders of the Registrant and amendment thereto.

**	Previously filed with the initial filing of this Registration Statement.