10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

(Mark One)
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005 OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number 0-26996

INVESTORS FINANCIAL SERVICES CORP.

(Exact name of registrant as specified in its charter)

Delaware	04-3279817
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)
200 Clarendon Street
P.O. Box 9130
Boston, Massachusetts	02116
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:  (617) 937-6700

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 Par Value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x  Noo

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yeso  No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  Noo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   xAccelerated filero      Non-accelerated filero

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yeso  No x

The aggregate market value of common stock held by non-affiliates of the registrant was $2,431,820,932 based on the last reported sale price of $37.82 on The Nasdaq National Market on June 30, 2005 as reported by Nasdaq.

As of January 31, 2006, there were 65,332,641 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant will file a definitive Proxy Statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended December 31, 2005. Portions of such Proxy Statement are incorporated by reference in Part III.

PART I

ITEM 1. BUSINESS.

General

Unless otherwise indicated or unless the context requires otherwise, all references in this Report to “Investors Financial,” “we,” “us,” “our,” or similar references mean Investors Financial Services Corp., together with our subsidiaries. “Investors Bank” or the “Bank” means our subsidiary, Investors Bank & Trust Company, alone.

We provide a broad range of services to financial asset managers, such as mutual fund complexes, investment advisors, family offices, banks and insurance companies. We define these services as core services and value-added services. Our core services include middle office outsourcing, global custody, multicurrency accounting and fund administration. Our value-added services include securities lending, foreign exchange, cash management, performance measurement, institutional transfer agency, investment advisory services, lines of credit and brokerage and transition management services. At December 31, 2005, we provided services for approximately $1.8 trillion in net assets, including approximately $0.3 trillion of foreign net assets.

Investors Financial Services Corp. is a bank holding company. We were organized as a Delaware corporation in 1995. Our primary operating subsidiary is Investors Bank & Trust Company® which was founded in 1969 as a banking subsidiary of Eaton Vance Corp., an investment management firm. In 1995, we reorganized as a bank holding company, were spun-off to the stockholders of Eaton Vance and completed our initial public offering. We provide our services from offices in Boston, New York, Sacramento, Toronto, Dublin, London and the Cayman Islands.

Overview of the Asset Servicing Industry

Asset managers invest and manage the financial assets entrusted to them. They do so using a broad range of financial products, including mutual funds, alternative investment vehicles, unit investment trusts, separate accounts, variable annuities and other products that pool together money from multiple investors. Asset servicing companies like ours perform various back and middle office services for asset managers and the pooled financial products they sponsor, allowing asset managers to focus on core competencies such as product development and distribution. In addition, asset servicing companies like ours provide these back office services such as the third-party safekeeping of assets and administrative services to give investors more confidence in the integrity of their investments. The following discussion sets forth our view of the key drivers in today’s asset servicing industry.

Historical Financial Asset Growth.Despite the stock market declines of 2000 through 2002, over the past ten years growth in financial assets under management has remained strong. Factors driving this growth include an aging population, the privatization of retirement systems and the increased popularity of pooled investment products such as mutual funds. The total amount of U.S. financial assets held in mutual funds, life insurance companies, private pension funds and bank personal trust accounts was $17.3 trillion at December 31, 2004, up from $7.1 trillion in 1994, a compounded annual growth rate of approximately 9%. Mutual funds, one of the primary markets for our services, hold a large portion of the money invested in pooled investment vehicles. The U.S. mutual fund market has grown at a compounded annual growth rate of approximately 13% since 1994, and held approximately $7.8 trillion in assets at December 31, 2004.

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The following table presents U.S. financial assets, including mutual funds (Dollars in billions):

	December 31, 2004			December 31, 1994			Compounded Annual Growth Rate
U.S. Financial Assets
Mutual Funds		$	7,787		$	2,198		13	%
Life Insurance Companies		4,160			1,863			8
Private Pension Funds		4,444			2,352			7
Bank Personal Trusts and Estates		925			670			3
Total		$	17,316		$	7,083		9	%

Source: Federal Reserve Bank

Consolidation and Outsourcing Trends.Another important factor affecting the asset servicing industry is the consolidation of asset servicing providers. Since the early 1990s, a number of small and mid-size asset servicers have consolidated with larger service providers or divested their asset servicing operations to focus their finite resources on their core businesses. Also, numerous service providers have combined their operations with other companies. This ongoing consolidation has concentrated the industry around a smaller number of service providers and presents us with opportunities for growth as clients react to consolidation and review their relationships with existing providers. In addition, as consolidated financial institutions dispose of businesses that do not fit with their core services, we may see opportunities to acquire those business lines at a reasonable price.

The unique operational philosophy of a particular asset management organization determines its view of asset servicing. The majority of asset managers hire third parties to provide custody services. Some use more than one custodian in an attempt to foster cost reduction through competition. Large asset managers may have enough assets to justify the cost of providing in-house facilities to handle accounting, administration and transfer agency services. Other asset managers generally hire third parties to provide accounting, administration and transfer agency services in addition to custody services. Keeping abreast of developments like regulatory changes, Internet data delivery, compressed settlement cycles, and complex investment strategies, structures and instruments has forced significant increases in technology spending across the financial services industry. We believe that this increase in spending requirements has accelerated the pace at which asset managers outsource middle and back office operations to asset servicers.

Technology.Information technology is a driving force in the financial services industry. Asset managers are able to create innovative investment products using technological tools including:

·Access to data from world markets as a result of more powerful and affordable information processing power.

·The ability to send and receive large volumes of information almost instantly through widely dispersed communication networks.

·Timely on-line access to electronic information on security positions, prices and price shifts that facilitate activities, including on-line currency trading, indexing of assets, real time arbitrage and hedging through the use of derivative securities.

Asset servicers use technology as a competitive tool to deliver precise and functional information to asset managers. Technology also allows asset servicers to offer more value-added services, such as performance measurement. Examples of analytical tools used in performance measurement include reports showing time-weighted return, performance by sector and time-weighted return by sector.

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Complex Investment Products.Asset managers create different investment structures in an effort to capture efficiencies and appeal to investors with diverse means, risk tolerances, diversification requirements and time horizons. One innovative example of this is exchange traded funds, or ETFs. ETFs are securities that replicate an index and are traded on a national securities exchange, such as the New York Stock Exchange or the American Stock Exchange. Unlike investing in a conventional index mutual fund, investing in an ETF allows investors to buy and sell shares throughout the trading day at market prices. ETFs also offer potential tax efficiencies. According to an industry source, domestic ETF assets increased 31% to approximately $296 billion as of December 31, 2005 from approximately $226 billion as of December 31, 2004.

Alternative investments, including hedge funds, private equity funds, venture capital funds and commodity pools, are another example of complex investment products that have recently experienced dramatic growth. According to an industry source, hedge fund assets in particular have grown at an impressive rate for several years and total approximately $1.3 trillion at the end of 2005. Hedge fund assets have increased due to widening interest from institutional investors such as pension plans and endowments, as well as high net worth individuals. These asset pools often feature increasingly sophisticated trading strategies, financial instruments and product structures such as distressed debt, swaps and asset-backed securities that require more specialized operational support than traditional mutual funds.

In addition, a growing number of mutual funds have been structured as multi-class funds or as multi-manager funds in order to address the differing requirements and preferences of potential investors. Multi-class arrangements allow an investment company to sell interests in a single investment portfolio to separate classes of stockholders. Multi-manager funds have two or more investment managers, who may have different investing styles, managing the assets of one fund. Multi-manager funds offer investors diverse investment styles with a single investment.

Another product innovation is the master-feeder structure. In the master-feeder structure, one or more investment vehicles (the “feeder funds”) with identical investment objectives pool their assets in the common portfolio of a separate investment vehicle (the “master fund”). This structure permits each of the feeder funds to be sold to a separate target market or through a different distribution channel. The feeder fund, if it were a stand-alone fund, might not be large enough to support its operating costs. The feeder funds benefit from the economies of scale available to the larger pool of assets invested in the master fund.

International investing.   Asset managers have also expanded their reach in the global marketplace to capitalize on cross-border and multi-national marketing opportunities. This creates demand for asset servicing around the world and particularly for value-added services like foreign exchange. At December 31, 2005, we provided services for approximately $1.8 trillion in net assets, including approximately $0.3 trillion of foreign net assets.

Our Strategy

We believe that asset servicing companies operate most efficiently when bundling core services such as custody and accounting with value-added services such as securities lending and foreign exchange. We also believe that efficient integration of these services is critical to both service quality and profitability. The following discussion outlines the key components of our growth strategy:

Maintain Our Technological Expertise.One of our core strategies is to commit the necessary capital and resources to maintain our technological expertise. The asset servicing industry requires the technological capability to support a wide range of global security types, currencies and complex portfolio structures. Asset servicers must also maintain the telecommunications flexibility to support the diversity of global communications standards. Technological change creates opportunities for product differentiation and cost reduction.

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Our Fund Accounting and Custody Tracking System, or FACTS™, is a single integrated technology platform that combines our service offerings into one solution for customers and can accommodate rapid growth in net assets processed. FACTS provides the following functions in a single information system:

·Middle office outsourcing

·Custody

·Securities movement and control

·Portfolio accounting

·Multicurrency general ledger accounting

·Pricing

·Net asset value calculation

·Multi-class and multi-manager processing

·ETF processing

By consolidating these functions, we have eliminated redundancy in data capture and reduced the opportunity for clerical error.

The consolidation of functions available through FACTS allows us to assign a dedicated client team to provide a full suite of services to each account. We believe that this approach helps us to provide high quality service and to maintain better overall relationships with our clients.

The FACTS architecture also enables us to modify the system quickly. Rapid modifications allow us to constantly improve processing quality and efficiency and to implement service innovations for our clients quickly. We believe that the integrated nature of FACTS provides us with a competitive advantage by allowing us to respond quickly to the continuously changing technological demands of the financial services industry. We believe the separate systems used for different tasks by many other asset servicing providers may not provide the same advantages.

Maintain Our Expertise in Complex Products.Another of our core strategies is to maintain our strength in the rapidly growing area of complex investment products. We have developed expertise in servicing ETFs, various alternative investment structures, master-feeder funds and multi-managed funds. Because the design of FACTS allows us to effect modifications or enhancements quickly, we are able to respond rapidly to the systems requirements of complex structures.

Deliver Superior Service.We strive to deliver superior and innovative client service. We believe service quality is the key to maintaining and expanding existing client relationships and to attracting new clients. The consolidation of functions available through FACTS allows us to take an integrated approach to client servicing. We believe this approach is different from that employed by many of our competitors. We dedicate a single operations team to handle all tasks for a particular client. In addition, each client is assigned a client manager, independent of the operations team, to anticipate the client’s needs, to coordinate service delivery and to provide consulting support.

Cross-Sell Our Services.We believe that our strong client relationships provide opportunities to cross-sell value-added services to broaden our customer relationships. Many of our clients manage multiple pools of assets. Once an investment manager becomes a client, we believe that this client is more likely to select us to service more products, provide additional services, or both. If we are engaged to provide services for only certain pools of assets managed by our clients, we strive to expand the relationship to include more asset pools by providing superior client service. Also, some of our clients engage us to provide core services such as global custody and multicurrency accounting, but do not use us

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for value-added services such as foreign exchange or cash management. We target expanding these relationships through increasing the number of services provided for each client.

Service Offerings

We provide a broad range of services to financial asset managers, such as mutual fund complexes, investment advisors, family offices, banks and insurance companies. We think of these services in two groupings: core services and value-added services.

Core Services	Value-Added Services
·  Middle Office Outsourcing	·  Securities Lending
·  Global Custody	·  Foreign Exchange
·  Multicurrency Accounting	·  Cash Management
·  Fund Administration	·  Investment Advisory Services
	·  Performance Measurement
	·  Institutional Transfer Agency
	·  Lines of Credit
	·  Brokerage and Transition Management Services

Our value-added services help clients develop and execute their strategies, and evaluate and manage their risks, which we believe provides them with the opportunity to enhance their returns. We strive to maximize the use of our value-added services by our client base.

Fees charged for core services vary from client to client based on the value of assets processed, the number of securities held and the number of portfolio transactions. Generally, fees are billed to our clients monthly in arrears and, upon their approval, charged directly to their account. Fees charged for core services reflect the price sensitivity of the market for such services. Fees charged for value-added services reflect a more favorable pricing environment for us because we can increase activity in these areas without a necessarily proportionate increase in personnel or other resources. We also derive net interest income by investing cash balances that our clients leave on deposit with us. Our share of earnings from these investments is viewed as part of the total compensation that our clients pay us for servicing their assets.

The following is a description of the various services we offer:

Core Services

Middle Office Outsourcing.Middle office outsourcing services represent the tasks that need to be performed for financial asset managers after they have initiated a particular trade to ensure accurate and timely trade processing and communications to any party affected by the trades. We perform some or all of the following functions for our middle office outsourcing clients: trade operations management, settlements, portfolio and fund accounting, fund administration, cash management, reconciliation, corporate actions, tax reclaims and tax filings, performance measurement, broker performance and vendor data management.

Global Custody.Global custody entails the safekeeping of securities for clients and settlement of portfolio transactions. Our net assets processed have grown from $22 billion at October 31, 1990 to $1.8 trillion at December 31, 2005. At December 31, 2005, our foreign net assets processed totaled approximately $0.3 trillion.

In order to service our clients worldwide, we have established a network of global subcustodians in almost 100 markets. Since we do not have our own branches in these countries, we are able to operate in the foreign custody arena with minimal fixed costs, while our clients benefit from the ability to use a single custodian, Investors Bank, for all of their international investment needs.

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Multicurrency Accounting.Multicurrency accounting entails the daily recordkeeping for each account or investment vehicle, including the calculation of net asset value per share. In addition to providing these services to domestic-based accounts and investment vehicles, we also provide fund accounting services to clients in Europe and Canada, which we continue to view as areas of significant business opportunity.

Fund Administration.Fund administration services include management reporting, regulatory reporting, compliance monitoring, tax accounting and return preparation, partnership administration and chief compliance officer services and support. In addition to these ongoing services, we also provide fund start-up consulting services, which typically include assistance with product definition, service provider selection and fund structuring and registration. We have worked with a number of investment advisors to assist them in the development of new funds and other pooled investment vehicles.

Value-Added Services

Securities Lending.Securities lending involves the lending of clients’ securities to brokers and other institutions for a fee. Receipt of securities lending fees improves a client’s return on the underlying securities. We act as agent for our clients for both international and domestic securities lending services.

Foreign Exchange.We provide foreign exchange services to facilitate settlement of international securities transactions for funds and other accounts and to convert income payments denominated in a non-base currency to base dollars. By using us rather than a third-party foreign exchange bank to perform these functions, clients can reduce the amount of time spent coordinating currency delivery and monitoring delivery failures and claims.

Cash Management.We provide a number of investment options for cash balances held by our clients. Typically, we have a standing arrangement to sweep client balances into one or more investments, including deposit accounts, short-term funds and repurchase agreements. This allows our clients to conveniently maximize their earnings on idle cash balances.

Investment Advisory Services.The Bank acts as investment advisor to the Merrimac Master Portfolio, an open-end investment management company registered under the Investment Company Act of 1940. The portfolio currently consists of a series of six master funds in a master-feeder structure. The Merrimac Cash Portfolio, the Merrimac Prime Portfolio and the Merrimac U.S. Government Portfolio are subadvised by Lincoln Capital Fixed Income Management Company, LLC. The Merrimac Treasury Portfolio and the Merrimac Treasury Plus Portfolio are subadvised by M&I Investment Management Corp. The Merrimac Municipal Portfolio is subadvised by ABN AMRO Asset Management (USA) LLC. At December 31, 2005, the total net assets of the portfolio approximated $5.2 billion. The portfolio’s master funds serve as investment vehicles for seven domestic feeder funds and two offshore feeder funds whose shares are sold to institutional investors.

Performance Measurement.Performance measurement services involve the creation of systems and databases that enable asset managers to construct, manage and analyze their portfolios. Services include portfolio profile analysis, portfolio return analysis and customized benchmark construction. Performance measurement uses data already captured by FACTS to calculate statistics and report them to asset managers in a customized format.

Institutional Transfer Agency.Transfer agency encompasses shareholder recordkeeping and communications. We provide these services only to institutional clients with a small number of shareholder accounts or omnibus positions of retail shareholders.

Lines of Credit.We offer credit lines to our clients for the purpose of leveraging portfolios, covering overnight cash shortfalls and other borrowing needs. We do not conduct retail banking operations. At December 31, 2005, we had gross loans outstanding to clients of approximately $402 million, which represented approximately 3% of our total assets. The interest rates charged on the Bank’s loans are

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indexed to either the Prime rate or the Federal Funds rate. We have never had a loan loss. All loans are secured, or may be secured, by marketable securities and virtually all loans to individually managed account customers are due on demand.

Brokerage and Transition Management Services.In 2002, we began offering “introducing broker-dealer” services to clients by accepting customer orders, which we have elected to clear through a clearing broker-dealer. The clearing broker-dealer processes and settles customer transactions and maintains detailed customer records. This arrangement allows us to use the back office processing infrastructure of the clearing broker-dealer while earning a commission on trades executed on behalf of clients. Transition management services are designed to assist the process of moving a portfolio from one asset manager to another in as seamless a manner as possible. Components of these services include planning and customizing a strategy for the transition, conducting performance analysis and executing the transition in an efficient, risk-managed fashion. The brokerage services we offer do not include margin accounts, short selling or market making activities.

Sales, Marketing and Client Support

We employ a direct sales staff that targets potential market opportunities, including investment management companies, insurance companies, family offices, banks and investment advisors. Sales personnel are primarily based at our headquarters in Boston, and are given geographic area sales responsibility. We also have sales personnel located in Dublin, Toronto and London who are responsible for international markets. Included in the sales staff are individuals who are dedicated to marketing services to institutional accounts. Senior managers from all functional areas are directly involved in obtaining new clients, frequently working as a team with a sales professional.

In order to service existing clients, a separate team of client management professionals based in our Boston, New York, Toronto, Dublin and London offices provide dedicated client support. Each client is assigned a client manager responsible for the client’s overall satisfaction. The client manager is usually a senior professional with extensive industry experience who works with the client on designing new products and specific systems requirements, provides consulting support, anticipates the client’s needs and coordinates service delivery.

Financial information regarding our geographic reporting can be found in Note 21 of our Notes to Consolidated Financial Statements included in this Report.

Significant Clients

Barclays Global Investors, N.A. (“BGI”) accounted for approximately 18% of our consolidated net operating revenues for the year ended December 31, 2005, approximately 17% for the year ended December 31, 2004 and approximately 16% for the year ended December 31, 2003. No client other than BGI accounted for more than 10% of our net operating revenues for the years ended December 31, 2005, 2004 and 2003. See “Risk Factors—A material portion of our revenue is derived from our relationship with Barclays Global Investors, N.A. (“BGI”) and related entities.”

Software Systems and Data Center

Our business requires that we provide daily and periodic reports of asset accounting and performance, and provide measurement and analytical data to asset managers on-line on a real-time basis. To help us meet these requirements, our asset servicing operations are supported by sophisticated information technology. We receive vast amounts of information across a worldwide computer network. That information covers a wide range of global security types in various currencies and must be processed before system-wide updating and reporting.

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Our proprietary system, FACTS, is multi-tiered. FACTS uses personal computers linked to mainframe processing by means of local and wide area networks. This configuration combines the best features of each platform. FACTS uses the power and capacity of the mainframe, the data distribution capabilities of the network and the independence of personal computers. The fully functional microcomputer component of FACTS works independently of the mainframe throughout the processing cycle. This minimizes the amount of system-wide delay inherent in data processing. The FACTS configuration also allows for fully distributed processing capabilities within multiple geographic locations in an effective and efficient manner.

The integrated nature of the FACTS architecture allows us to effect modifications and enhancements quickly. Swift modifications and enhancements result in increased processing quality and efficiency for our clients. These modifications and enhancements also help us quickly implement service innovations for our clients. This integrated architecture helps differentiate us from our competitors. Technological enhancements and upgrades are an ongoing part of asset servicing that are necessary for asset administrators to remain competitive and to create information delivery mechanisms that add value to the information available as part of clearing and settling transactions.

Technology also helps us add value to the custody and fund accounting information we gather by processing client assets. We have developed a comprehensive suite of standardized data extracts and reports and created automated interfaces that allow our clients to access the full range of custody and fund accounting data. We have also developed interfaces that allow our clients to connect electronically with our host systems and access data collected from clearance and settlement transactions in multiple currencies. Through these information-sharing tools, we are better equipped to supplement our custody and accounting services with foreign exchange services and asset and transaction reporting and monitoring services. Electronic linkages also position us to respond quickly to client requests.

We use the Internet as a means to communicate with clients and external parties. We also provide secure value-added services to our clients over the Internet. We utilize a secure extranet environment that provides the authentication, access controls, intrusion detection, encryption and firewalls needed to ensure the protection of client information and assets. Internet-based applications provide our clients with secure electronic access to their data as well as flexible ad-hoc data query and reporting tools.

Our mainframe processing and mainframe disaster recovery capability is provided by Electronic Data Systems (“EDS”), located in Plano, Texas. In addition, International Business Machines (“IBM”), located in Armonk, New York, provides support for our network and hardware environments and our help desk services. By outsourcing these infrastructure support functions, we can focus our resources on systems development and minimize our capital investment in large-scale computer equipment. EDS and IBM offer us state-of-the-art computer products and services, access to which we could not otherwise afford, while removing the risk of product obsolescence. Due to their large and diverse customer bases, EDS and IBM can invest in the latest computer technology and spread the related costs over multiple users. We also receive the benefit of the continuing investment by EDS and IBM in their computer hardware. Under both contracts we are billed monthly for services provided by EDS or IBM on an as-used basis in accordance with a predetermined pricing schedule for specific products and services. Our current agreement with EDS is scheduled to expire on December 31, 2008. Our current agreement with IBM is scheduled to expire on June 30, 2011.

Each year we target spending approximately 18-20% of our consolidated net operating revenue on technology. Because of our relationships with EDS and IBM and our system architecture, we are able to devote the majority of our technology investments to development, rather than support or infrastructure.

Our trust processing services are provided by SEI Investments Company (“SEI”), located in Oaks, Pennsylvania. SEI is a global provider of asset management and investment technology solutions. We pay

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SEI certain monthly service fees based upon usage. Our current agreement with SEI is scheduled to expire on December 31, 2009.

Investors Bank maintains a comprehensive Business Continuity Plan (“BCP”). The program has been developed to comply with guidelines issued by various regulatory and industry bodies such as the Federal Financial Institutions Examination Council (“FFIEC”). The planning process begins with a business impact analysis which isolates critical business processes and determines their recoverability under various disruption scenarios. In addition to maintaining regional backup facilities for all offices, our locations are geographically diverse in order to allow recovery of essential functions at another location in the event of a widespread disruption. In 2005, BCP staff conducted over 100 different tests to ensure that our technology infrastructure, facilities and staff could respond and recover in a disaster.

Competition

We operate in a highly competitive environment in all areas of our business. Many of our competitors, including State Street Bank and Trust Company, JP Morgan Chase, The Bank of New York, Citigroup, Mellon and PNC, possess substantially greater financial and marketing resources than we do and process a greater amount of financial assets. Other competitive factors include technological advancement and flexibility, breadth of services provided and quality of service. We believe that we compete favorably in these categories.

Competition in the asset servicing industry, especially over the past decade, has impacted both pricing and margins in core services such as global custody. Partially offsetting this more competitive pricing environment is the development of new services that have higher margins. Our continuous investment in technology has permitted us to offer value-added services to clients, such as middle office outsourcing, performance measurement, securities lending and foreign exchange, on a global basis and at competitive prices. Technological evolution and service innovation have enabled us to generate additional revenue to offset competitive pricing in maturing service lines.

We believe that our size, commitment to technology development and enhancement and responsiveness to client needs provide the asset management industry with a very attractive asset servicing alternative to large money center banks and other asset servicers. As many of our competitors grow larger through acquisition, we believe that our customized and highly responsive service offerings become even more attractive. While consolidation within the investment management and asset servicing industries may adversely affect our ability to retain clients that have been acquired, it also creates opportunity for us as prospective clients review their relationships with existing service providers that are affected by acquisitions. In addition, consolidation among large financial institutions may enable us to acquire, at a reasonable price, asset servicing businesses that do not fit within the core focus of these newly consolidated financial institutions.

Intellectual Property

Our success is dependent upon our software development methodology and other intellectual property rights that we have developed and own, including FACTS. We rely on trade secret, copyright and trademark laws, and confidentiality agreements with employees and third parties to protect our proprietary technology, all of which offer only limited protection. There can be no assurance that the steps we take in this regard will be adequate to deter misappropriation of our proprietary information or that we will be able to detect unauthorized use. Furthermore, our intellectual property rights may be invalidated or our competitors may develop similar technology independently. In addition, effective copyright, trademark, trade secret and other protection may not be available in certain international markets that we service.

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Employees

On December 31, 2005, we had 3,252 employees. We maintain a professional development program for entry level staff. Successful completion of the program is required of most newly hired employees. This training program is supplemented by ongoing education on systems and technological developments and innovations, the financial services industry, the regulatory environment and our client base. This program is administered by experienced full-time trainers that continually enhance existing courses and develop new programs to match an evolving business environment.

None of our employees are covered by collective bargaining agreements and we believe our relations with our employees are good.

Regulation and Supervision

Virtually all aspects of our business and operations are regulated under state and federal law. In addition to the laws governing businesses and employers, we are subject to federal and state laws and regulations applicable to financial institutions and their parent companies. The operations of our securities broker affiliate, Investors Securities Services, LLC, are also subject to federal and state securities laws, as well as the rules of both the Securities and Exchange Commission (“SEC”) and the National Association of Securities Dealers, Inc. (“NASD”). The principal objective of state and federal banking laws is the maintenance of the safety and soundness of financial institutions and the federal deposit insurance system, the protection of consumers or classes of consumers and the furtherance of broad public policy goals, rather than the specific protection of stockholders of a bank or its parent company. Some of the significant statutory and regulatory provisions to which we and our subsidiaries are subject are described below. The description of these statutory and regulatory provisions is not complete and is qualified in its entirety by reference to the particular statutory or regulatory provision. Any change in applicable law or regulation may have a material effect on our business, prospects and operations, as well as those of our subsidiaries.

Investors Financial

General.As a registered Bank Holding Company (“BHC”), Investors Financial is subject to regulation under the Bank Holding Company Act of 1956, as amended (“BHCA”), and to inspection, examination and supervision by the Board of Governors of the Federal Reserve System (“FRB”) and by the Massachusetts Commissioner of Banks (“Commissioner”). We are required to file reports of our operations with, and are subject to examination by, the FRB and the Commissioner. The FRB has the authority to issue orders to BHCs to cease and desist from unsafe or unsound banking practices and violations of conditions imposed by, or violations of agreements with, the FRB. The FRB is also empowered to assess civil money penalties against companies or individuals who violate the BHCA or orders or regulations thereunder, to order termination of nonbanking activities of nonbanking subsidiaries of BHCs and to order termination of ownership and control of a nonbanking subsidiary by a BHC.

BHCA-Activities and Other Limitations.The BHCA prohibits a BHC from acquiring substantially all the assets of a bank or acquiring direct or indirect ownership or control of more than 5% of any class of the voting shares of any bank, BHC or savings association, or increasing such ownership or control of any bank, BHC or savings association, or merging or consolidating with any BHC without prior approval of the FRB. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (“Riegle-Neal”) permits adequately capitalized and adequately managed BHCs, as determined by the FRB, to acquire banks located in any state, subject to certain concentration limits and other conditions. Subject to certain conditions, Riegle-Neal also generally authorizes the interstate mergers of banks and, to a lesser extent, interstate branching, so long as the law of the host state specifically authorizes such action. Massachusetts law imposes certain approval requirements with respect to acquisitions by a BHC of certain banking institutions and to mergers of BHCs.

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Unless a BHC becomes a financial holding company (“FHC”) under the Gramm-Leach-Bliley Act of 1999 (“GLBA”), the BHCA also prohibits a BHC from acquiring a direct or indirect interest in or control of more than 5% of the voting securities of any company that is not a bank or a BHC and from engaging directly or indirectly in activities other than those of banking, managing or controlling banks or furnishing services to its subsidiary banks, except that it may engage in and may own shares of companies engaged in certain activities the FRB determined to be so closely related to banking or managing and controlling banks as to be a proper incident thereto. Before permitting a BHC to engage in such activities that are closely related to banking or making an investment in a company engaged in such activities, the FRB is required to weigh the expected benefit to the public, such as greater convenience, increased competition or gains in efficiency, against the possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests or unsound banking practices.

The GLBA permits a BHC that qualifies and elects to be treated as a FHC to engage in a significantly broader range of financial activities than BHCs, such as Investors Financial, that have not elected FHC status. “Financial activities” is broadly defined to include not only banking, insurance and securities activities, but also merchant banking and additional activities that the FRB, in consultation with the Secretary of the Treasury, determines to be financial in nature or incidental to such financial activities, or that the FRB determines to be complementary activities that do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally. To elect to become a FHC, a BHC, such as Investors Financial, must meet certain tests and file an election with the FRB. To qualify, all of a BHC’s subsidiary banks must be well-capitalized and well-managed, as measured by regulatory guidelines. In addition, each of the BHC’s banks must have been rated “satisfactory” or better in its most recent federal Community Reinvestment Act (“CRA”) evaluation. A BHC that elects to be treated as a FHC may face significant consequences if its banks fail to maintain the required capital and management ratings, including entering into an agreement with the FRB which imposes limitations on its operations. Investors Financial has not elected to become a FHC.

Capital Requirements.The FRB has adopted capital adequacy guidelines applicable to United States banking organizations. The FRB’s capital adequacy guidelines generally require BHCs to maintain total capital equal to 8% of total risk-adjusted assets and off-balance sheet items (the “Total Risk-Based Capital Ratio”), with at least 50% of that amount consisting of Tier 1, or core capital and the remaining amount consisting of Tier 2, or supplementary capital. Tier 1 capital for BHCs generally consists of the sum of common stockholders’ equity and perpetual preferred stock (subject to certain limitations), less goodwill and other nonqualifying intangible assets. Tier 2 capital generally consists of hybrid capital instruments, perpetual debt and mandatory convertible debt securities; perpetual preferred stock, not included as Tier 1 capital; term subordinated debt and intermediate-term preferred stock; and, subject to limitations, general allowances for loan and lease losses. Assets are adjusted under the risk-based guidelines to take into account different risk characteristics.

In addition to the risk-based capital requirements, the FRB requires BHCs to maintain a minimum leverage capital ratio of Tier 1 capital to its average total consolidated assets (the “Leverage Ratio”) of 3.0%. Total average consolidated assets for this purpose does not include goodwill and any other intangible assets and investments that the FRB determines should be deducted from Tier 1 capital. The FRB has announced that the 3.0% Leverage Ratio requirement is the minimum for the top-rated BHCs. All other BHCs are required to maintain a minimum Leverage Ratio of 4.0%. BHCs with supervisory, financial, operational or managerial weaknesses, as well as BHCs that are anticipating or experiencing significant growth, are expected to maintain capital ratios well above the minimum levels. Because we anticipate significant future growth, we will be required to maintain a Leverage Ratio of 4.0% or higher.

We are currently in compliance with both the Total Risk-Based Capital Ratio and the Leverage Ratio requirements, and management expects these ratios to remain in compliance with the FRB’s capital

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adequacy guidelines. At December 31, 2005, our Total Risk-Based Capital Ratio and Leverage Ratio were 18.50% and 5.95%, respectively.

In June 2004, the Basel Committee on Banking Supervision (“Basel Committee”) released the document “International Convergence of Capital Measurement and Capital Standards: A Revised Framework.”  The Framework, also referred to as Basel II, is designed to secure international convergence on regulations and standards governing the capital adequacy of internationally active banking organizations. In September 2005, the FFIEC (U.S. banking and thrift supervisory agencies) revised guidance on the timing and qualification process for U.S. banks that will become subject to Basel II. The new rules as applied in the U.S. are expected to become effective on January 1, 2009, subject to transitional parallel testing beginning on January 1, 2008. Although we are not required to be compliant with the new rules, we are in the process of developing an implementation program to achieve Basel II compliance. Ultimately, U.S. implementation of Basel II will depend on, and will be subject to, final regulations and related policies promulgated by the FFIEC supervisory agencies. We cannot predict the final form of the rules, nor their impact on our risk-based capital.

Control Acquisitions.The Change in Bank Control Act prohibits a person or group of persons from acquiring “control” of a depository institution or a depository institution holding company unless the FRB has been notified and has not objected to the proposal. Under a rebuttable presumption established by the FRB, the acquisition of 10% or more of a class of voting securities of a depository institution or depository institution holding company with a class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), would, under the circumstances set forth in the presumption, constitute the acquisition of control of the depository institution or a depository institution holding company. In addition, any company, as that term is broadly defined in the statute, would be required to obtain the approval of the FRB under the BHCA before acquiring 25% (5% in the case of an acquirer that is a BHC) or more of any class of voting securities of a bank or BHC or a savings association, or otherwise obtaining control or a controlling influence over such an institution.

Massachusetts Law.Investors Financial is also considered a BHC for purposes of Massachusetts law. Accordingly, we have registered with the Commissioner and are obligated to make reports to the Commissioner. Under Massachusetts law, any person that proposes to acquire, directly or indirectly, 25% or more of any class of voting securities of a company must give prior notice to the Massachusetts Commissioner of Banks, who may disapprove the transaction. Additionally, any company that is a BHC under Massachusetts law must obtain the approval of the Massachusetts Board of Bank Incorporation (“Massachusetts BBI”) before acquiring more than 5% of the voting stock of a company. As a general matter, however, the Commissioner does not rule upon or regulate the activities in which a BHC or its nonbank subsidiaries engage.

Cash Dividends.   FRB policy provides that a bank or a BHC generally should not maintain its existing rate of cash dividends on common stock unless the organization’s net income available to common shareholders over the past year has been sufficient to fully fund the dividends and the prospective rate of earnings retention appears consistent with the organization’s capital needs, asset quality and overall financial condition. FRB policy further provides that a BHC should not maintain a level of cash dividends to its shareholders that places undue pressure on the capital of bank subsidiaries, or that can be funded only through additional borrowings or other arrangements that may undermine the BHC’s ability to serve as a source of strength.

Source of Strength.FRB policy requires BHCs to serve as sources of financial and managerial strength to their subsidiary banks and, if necessary, to use available resources to provide adequate capital funds to its subsidiary banks during periods of financial stress or adversity and to maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks in a manner consistent with FRB policy. This support may be required at times when the BHC may not have the resources to provide it. Accordingly, Investors Financial is expected to commit resources to the Bank in circumstances where it might not do so absent such policy.

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Investors Bank

General.The Bank is subject to extensive regulation and examination by the Commissioner and the Federal Deposit Insurance Corporation (“FDIC”), which insures the Bank’s deposits, and to certain requirements established by the FRB. The federal and state laws and regulations which are applicable to banks regulate among other things, the scope of their business, their investments, their reserves against deposits, the timing of the availability of certain deposited funds and the nature and amount of and collateral for certain loans.

FDIC Insurance Premiums.The Bank currently pays deposit insurance premiums to the FDIC based on an assessment rate established by the FDIC for Bank Insurance Fund (“BIF”)-member institutions. The FDIC has established a risk-based premium system under which the FDIC classifies institutions based on their capital ratios and on other relevant information and generally assesses higher rates on those institutions that tend to pose greater risks to the federal deposit insurance funds. The Federal Deposit Insurance Act (“FDIA”) does not require the FDIC to charge all banks deposit insurance premiums when the ratio of deposit insurance reserves to insured deposits is maintained above specified levels. However, as a result of general economic conditions, it is possible that the ratio of deposit insurance reserves to insured deposits could fall below the minimum ratio that FDIA requires, which would result in the FDIC setting deposit insurance assessment rates sufficient to increase deposit insurance reserves to the required ratio. We cannot predict whether the FDIC will be required to increase deposit insurance assessments above their current levels.

In February 2006, Congress enacted the Federal Deposit Insurance Reform Act of 2005 (the “FDIR Act”). As a result of the passage of the FDIR Act, over the course of the next year, among other things: (i) the BIF will be merged with the FDIC’s Savings Association Insurance Fund creating the Deposit Insurance Fund (the “DIF”); (ii) the $100,000 per account insurance level will be indexed to reflect inflation; (iii) deposit insurance coverage for certain retirement accounts will be increased to $250,000; and (iv) a cap will be placed on the level of the DIF and dividends will be paid to banks once the level of the DIF exceeds the specified threshold.

Capital Requirements.The FDIC has promulgated regulations and adopted a statement of policy regarding the capital adequacy of state-chartered banks, which, like the Bank, are not members of the Federal Reserve System. These requirements are substantially similar to those adopted by the FRB regarding BHCs.

The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), identifies five capital categories for insured depository institutions (well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized) and requires the federal bank regulatory agencies to implement systems for “prompt corrective action” for insured depository institutions that do not meet minimum capital requirements within such categories. FDICIA imposes progressively more restrictive constraints on operations, management and capital distributions, depending on the category in which an institution is classified. Failure to meet the capital guidelines could also subject a banking institution to capital-raising requirements. An “undercapitalized” bank must develop a capital restoration plan, and its parent holding company must guarantee that bank’s compliance with the plan. The liability of the parent holding company under any such guarantee is limited to the lesser of 5% of the bank’s assets at the time it became “undercapitalized” or the amount needed to comply with the plan. Furthermore, in the event of the bankruptcy of the parent holding company, such guarantee would take priority over the parent’s general unsecured creditors. In addition, FDICIA requires the various regulatory agencies to prescribe certain non-capital standards for safety and soundness relating generally to operations and management, asset quality and executive compensation, and permits regulatory action against a financial institution that does not meet such standards.

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The various regulatory agencies have adopted substantially similar regulations that define the five capital categories identified by FDICIA, using the total risk-based capital, Tier 1 risk-based capital and leverage capital ratios as the relevant capital measures. Such regulations establish various degrees of corrective action to be taken when an institution is considered undercapitalized. Under the regulations, a “well-capitalized” institution must have a Tier 1 risk-based capital ratio of at least 6%, a total risk-based capital ratio of at least 10% and a leverage ratio of at least 5% and not be subject to a capital directive order. Regulators also must take into consideration (a) concentrations of credit risk; (b) interest rate risk (when the interest rate sensitivity of an institution’s assets does not match the sensitivity of its liabilities or its off-balance-sheet position); and (c) risks from non-traditional activities, as well as an institution’s ability to manage those risks, when determining the adequacy of an institution’s capital. This evaluation will be made as a part of the institution’s regular safety and soundness examination. At December 31, 2005, the Bank was deemed to be a well-capitalized institution.

The Community Reinvestment Act.   The Community Reinvestment Act (“CRA”) requires lenders to identify the communities served by the institution’s offices and other deposit-taking facilities and to make loans and investments and provide services that meet the credit needs of these communities. Regulatory agencies examine each of the banks and rate such institutions’ compliance with CRA as “Outstanding”, “Satisfactory”, “Needs to Improve” or “Substantial Noncompliance”. Failure of an institution to receive at least a “Satisfactory” rating could inhibit such institution or its holding company from undertaking certain activities, including engaging in activities newly permitted as a financial holding company under the GLBA and acquisitions of other financial institutions. The FRB and the FDIC must take into account the record of performance of banks in meeting the credit needs of the entire community served, including low- and moderate-income neighborhoods, before they approve certain bank acquisitions, mergers, branch establishments and other transactions proposed by banking organizations. Massachusetts has also enacted a similar statute that requires the Commissioner to evaluate the Bank’s performance in helping to meet the credit needs of its entire community and to take that record into account in considering certain applications. Management believes the Bank is currently in compliance with all CRA requirements.

Customer Information Security.The FDIC and other bank regulatory agencies have established standards for safeguarding nonpublic personal information about customers that implement provisions of the GLBA. Specifically, the Information Security Guidelines established by the GLBA require each financial institution, under the supervision and ongoing oversight of its Board of Directors or an appropriate Board committee, to develop, implement and maintain a comprehensive written information security program designed to ensure the security and confidentiality of customer information, to protect against anticipated threats or hazards to the security or integrity of such information and to protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer.

Privacy.   The GLBA requires financial institutions to implement policies and procedures regarding the disclosure of nonpublic personal information about consumers to nonaffiliated third parties. In general, the statute requires financial institutions to explain to consumers their policies and procedures regarding the disclosure of such nonpublic personal information, and, unless otherwise required or permitted by law, financial institutions are prohibited from disclosing such information except as provided in their policies and procedures.

USA Patriot Act.The USA Patriot Act of 2001 (the “USA Patriot Act”), designed to deny terrorists and others the ability to obtain anonymous access to the U.S. financial system, has significant implications for depository institutions, broker-dealers and other businesses involved in the transfer of money. The USA Patriot Act, together with the implementing regulations of various federal regulatory agencies, require financial institutions, including the Bank, to adopt and implement policies and procedures with respect to, among other things, anti-money laundering compliance, suspicious activity and currency transaction reporting, customer identity verification and customer risk analysis. The statute and its

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underlying regulations also permit information sharing for counter-terrorist purposes between federal law enforcement agencies and financial institutions, as well as among financial institutions, subject to certain conditions, and require federal banking agencies to evaluate the effectiveness of an applicant in combating money laundering activities when considering applications filed under Section 3 of the BHCA or the Bank Merger Act. Management believes that we are currently in compliance with all requirements prescribed by the USA Patriot Act and all applicable regulations.

Dividends.The FDIC has the authority to use its enforcement powers to prohibit a bank from paying dividends if, in its opinion, the payment of dividends would constitute an unsafe or unsound practice. Federal law also prohibits the payment of dividends by a bank that will result in the bank failing to meet its applicable capital requirements on a pro forma basis. Under Massachusetts law, the board of directors of a trust company, such as the Bank, may declare from “net profits” cash dividends no more often than quarterly, provided that there is no impairment to the trust company’s capital stock. Moreover, prior Commissioner approval is required if the total of all dividends declared by a trust company in any calendar year would exceed the total of its net profits for that year combined with its retained net profits for the previous two years, less any required transfer to surplus or a fund for the retirement of any preferred stock. These restrictions on the Bank’s ability to declare and to pay dividends may limit Investors Financial’s ability to pay dividends to its stockholders. We cannot predict future dividend payments of the Bank at this time.

Other Securities Law Issues.The GLBA requires a bank that acts as investment adviser to a registered investment company to register as an investment adviser or to conduct such advisory activities through a separately identifiable department or division of the bank so registered. Accordingly, the Bank furnishes investment advice to registered investment companies through a separately identifiable department or division of the Bank that is registered with the SEC as an investment adviser. Federal and state laws impose onerous obligations on registered investment advisers, including fiduciary duties, recordkeeping requirements and disclosure obligations. Currently, management believes that we are in compliance with these requirements.

Regulation of Investment Companies.Certain of our mutual fund and unit investment trust clients are regulated as “investment companies” as that term is defined under the Investment Company Act of 1940, as amended (the “ICA”), and are subject to examination and reporting requirements applicable to the services we provide. The provisions of the ICA and the regulations promulgated thereunder prescribe the type of institution which may act as a custodian of investment company assets, as well as the manner in which a custodian administers the assets in its custody. Because we serve as custodian for a number of our investment company clients, these regulations require, among other things, that we maintain certain minimum aggregate capital, surplus, and undivided profits. Additionally, arrangements between us and clearing agencies or other securities depositories must meet ICA requirements for segregation of assets, identification of assets and client approval. Currently, management believes we are in compliance with all minimum capital and securities depository requirements. Investment companies are also subject to extensive recordkeeping and reporting requirements. These requirements dictate the type, volume and duration of the recordkeeping we undertake, either in our role as custodian for an investment company or as a provider of administrative services to an investment company. Further, we must follow specific ICA guidelines when calculating the net asset value of a client mutual fund. Consequently, changes in the statutes or regulations governing recordkeeping and reporting or valuation calculations will affect the manner in which we conduct our operations.

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Availability of Filings

You may access, free of charge, copies of the following documents and related amendments, if any, in the Investor Relations section of our web site at www.ibtco.com:

1)Our Annual Reports on Form 10-K;

2)Our Quarterly Reports on Form 10-Q;

3)Our Current Reports on Form 8-K; and

4)Our Proxy Statement.

You may also access, free of charge, copies of the following corporate governance documents in the Investor Relations section of our web site at www.ibtco.com:

1)Our Code of Conduct;

2)Our Corporate Governance Guidelines;

3)Our Audit Committee Charter;

4)Our Nominating and Corporate Governance Committee Charter; and

5)Our Compensation Committee Charter.

We post these documents on our web site as soon as reasonably practicable after we file or furnish them electronically with or to the Securities and Exchange Commission or, in the case of the corporate governance documents, as soon as reasonably practical after material amendment. The information contained on our web site is not incorporated by reference into this document and should not be considered a part of this Report. Our web site address is included in this document as an inactive textual reference only.

Item 1A. Risk Factors.

Our operating results are subject to fluctuations in interest rates and the securities markets.

A significant portion of our fees is based on the market value of the assets we process. Accordingly, our operating results are subject to fluctuations in interest rates and securities markets as these fluctuations affect the market value of assets processed. Our net interest income is earned by investing depositors’ funds in our investment portfolio and, in small part, by making loans. A rising short-term interest rate environment, such as we are now experiencing, generally causes downward pressure on net interest income. Changes in the relationship between short-term and long-term interest rates, referred to as the yield curve, could also adversely affect the market value of, or the earnings produced by, our investment and loan portfolios, and thus could adversely affect our operating results. The current flat yield curve, where short-term rates have increased while long-term rates have failed to increase, has resulted in a decrease in our net interest margin that will continue to have a material impact on our net interest income.

Volatility in the equity markets can have a material effect on our asset-based fees. While reductions in asset servicing fees may be offset by increases in other sources of revenue, a sustained downward movement of the broad equity markets will likely have an adverse impact on our earnings.

Our growth depends in part on the ability of our clients to generate fund flows by selling their investment products to new and existing investors. Fluctuations in interest rates or the securities markets can lead to investors seeking alternatives to the investment offerings of our clients, which could result in a lesser amount of assets processed and correspondingly lower fees. For example, if the value of equity or fixed income assets held by our clients were to increase or decrease by 10% for a sustained period of time, we

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estimate currently that this market movement, by itself, would cause a corresponding change of less than 5% in our earnings per share.

In addition, we are experiencing narrower investment portfolio reinvestment spreads, which reduces our net interest income. If reinvestments spreads on the security types we purchase remain narrow, or become narrower, our net interest income will continue to be impacted negatively.

A material portion of our revenue is derived from our relationship with Barclays Global Investors, N.A. (“BGI”) and related entities.

As a result of our ongoing relationship with BGI’s iShares and Master Investment Portfolios, our assumption of the operations of the U.S. asset administration unit of BGI in 2001 and our servicing assets for Barclays Global Investors Canada, Ltd., BGI accounted for approximately 18%, 17% and 16% of our net operating revenue for the years ended December 31, 2005, 2004 and 2003, respectively. We recently renewed our U.S. asset administration outsourcing agreement with BGI and we expect that BGI will continue to account for a significant portion of our net operating revenue. We provide services to BGI under long-term contracts that may be terminated before the expiration of the contracts under certain circumstances that we have described in filings with the Securities and Exchange Commission (“SEC”), as described below. While we believe that our relationship with BGI is excellent, the loss of BGI’s business would cause our net operating revenue to decline significantly and would likely have an adverse effect on our quarterly and annual results.

The outsourcing agreement was renewed pursuant to an amendment (the “Amendment”) to the Custodial, Fund Accounting and Services Agreement between the Bank and BGI dated May 1, 2001 (the “Custodial Agreement”). Under the terms of the Amendment, the Custodial Agreement is extended through April 30, 2013. As provided in the Amendment, BGI may terminate the Custodial Agreement upon sixty days prior written notice:  (i) as to any underlying account if BGI fails to receive any consent required by law for the Bank to act as servicing agent for such account; (ii) as to any underlying account if the continued provision of services by the Bank to such account would be inconsistent with BGI’s fiduciary duties under applicable law; or (iii) as to the entire Custodial Agreement in the event a conservator or receiver is appointed for the Bank under applicable federal law. In addition, BGI may terminate the Custodial Agreement prior to April 30, 2013 if the Bank fails to meet a certain number of service level commitments for four consecutive months in any rolling twelve-month period or if the Bank materially breaches a material provision of the Custodial Agreement, in both cases subject to customary notice and opportunity to cure provisions.

Also, under the terms of the Amendment, the parties have agreed to assess the fee schedule and status of each party and of the industry 90 days prior to November 1, 2009 and to negotiate in good faith any appropriate amendments to the fee schedule arising from that assessment. If the parties are unable to agree on an amended fee schedule by November 1, 2009, BGI may terminate the Custodial Agreement. The Amendment also provides that the Bank will continue to service BGI for up to two years, or longer under certain circumstances, after expiration or termination by BGI of the Custodial Agreement.

We may incur losses due to operational errors.

The services that we provide require complex processes and interaction with numerous third parties. While we maintain sophisticated computer systems and a comprehensive system of internal controls, and our operational history has been excellent, from time to time we may make operational errors for which we are responsible to our clients. In addition, even though we maintain appropriate errors and omissions and other insurance policies, an operational error could result in a significant liability to us and may have a material adverse effect on our results of operations.

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We face significant competition from other financial services companies, which could negatively affect our operating results.

We are part of an extremely competitive asset servicing industry. Many of our current and potential competitors have longer operating histories, greater name recognition and substantially greater financial, marketing and other resources than we do. These greater resources could, for example, allow our competitors to develop technology superior to our own. In addition, we face the risk that large mutual fund complexes may build in-house asset servicing capabilities and no longer outsource these services to us. As a result, we may not be able to compete effectively with current or future competitors, which could result in a loss of existing clients or difficulty in gaining new clients.

We may incur significant costs defending legal claims.

We have been named in lawsuits in U.S. District Court in Massachusetts alleging, among other things, violations of securities laws. In addition, we have been named in a lawsuit in Massachusetts state court alleging, among other things, violations of a covenant of good faith and fair dealing in a contract. While we believe these claims are without merit, we cannot be sure that we will prevail in the defense of these claims. We are also party to other litigation and we may become subject to other legal claims in the future. Litigation is costly and could divert the attention of management. For a more detailed discussion of our ongoing lawsuits, please see Item 3. Legal Proceedings, in Part I of this report.

Our future results depend, in part, on successful integration of prior and possible future outsourcing transactions.

Integration of outsourcing transactions is complicated and frequently presents unforeseen difficulties and expenses which can affect whether and when a particular outsourcing transaction will be accretive to our earnings per share. Any future outsourcing transactions will present similar challenges. These outsourcing transactions can also consume a significant amount of management’s time.

The failure to properly manage our growth could adversely affect the quality of our services and result in the loss of clients.

We have experienced a period of rapid growth that has required the dedication of significant management and other resources. Continued growth could place a strain on our management and other resources. To manage future growth effectively, we must continue to invest in our operational, financial and other internal systems, and our human resources, which could affect our profitability.

We must hire and retain skilled personnel in order to succeed.

Qualified personnel, in particular managers and other senior personnel, are in great demand throughout the financial services industry. As a result, we could find it increasingly difficult to continue to attract and retain sufficient numbers of these highly skilled employees, which could affect our ability to attract and retain clients.

We may not be able to protect our proprietary technology.

Our proprietary technology is important to our business. We rely on trade secret, copyright and trademark laws and confidentiality agreements with employees and third parties to protect our proprietary technology, all of which offer only limited protection. These intellectual property rights may be invalidated or our competitors may develop similar technology independently. Legal proceedings to enforce our intellectual property rights may be unsuccessful, and could also be expensive and divert management’s attention.

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Our quarterly and annual operating results may fluctuate.

Our quarterly and annual operating results are difficult to predict and may fluctuate from quarter to quarter and annually for several reasons, including:

·The timing of commencement or termination of client engagements;

·Changes in interest rates, the relationship between different interest rates or equity values;

·The rate of net inflows and outflows of investor funds in the investment vehicles offered by our clients; and

·The timing and magnitude of share repurchases under our share repurchase plan.

Most of our expenses, such as employee compensation and rent, are relatively fixed. As a result, any shortfall in revenue relative to our expectations could significantly affect our operating results.

We are subject to extensive federal and state regulations that impose complex restraints on our business.

Federal and state laws and regulations applicable to financial institutions and their parent companies apply to us. Our primary regulators are the Federal Reserve Board (“FRB”), the Federal Deposit Insurance Corporation (“FDIC”), the Massachusetts Commissioner of Banks, the National Association of Securities Dealers, Inc. (“NASD”), and the State of Vermont Department of Banking, Insurance, Securities and Health Care Administration (“BISHCA”). Virtually all aspects of our operations are subject to specific requirements or restrictions and general regulatory oversight including the following:

·The FRB and the FDIC maintain capital requirements that we must meet. Failure to meet those requirements could lead to severe regulatory action or even receivership. We are currently considered to be “well-capitalized”;

·Under Massachusetts law, the Bank may be restricted in its ability to pay dividends to Investors Financial Services Corp., which may in turn restrict our ability to pay dividends to our stockholders;

·The FRB and the FDIC are empowered to assess monetary penalties against, and to order termination of activities by, companies or individuals who violate the law;

·The NASD maintains certain regulatory requirements that our securities broker affiliate, Investors Securities Services, LLC, must meet. Failure to meet those requirements could lead to severe regulatory action;

·BISHCA maintains certain regulatory requirements that our insurance captive affiliate, Investors Vermont Insurance Company, must meet. Failure to meet those requirements could lead to regulatory action; and

·Our international operations are subject to regulatory oversight by regulators in the jurisdictions in which we operate, including the Office of the Superintendent of Financial Institutions in Canada, the Irish Financial Services Regulatory Authority, the Cayman Islands Monetary Authority and the Financial Services Authority (“FSA”) in the United Kingdom. Failure to comply with applicable international regulatory requirements could result in regulatory action and impact our ability to provide services in those jurisdictions.

Banking law restricts our ability to own the stock of certain companies and also makes it more difficult for us to be acquired. Also, we have not elected financial holding company status under the federal Gramm-Leach-Bliley Act of 1999. This may place us at a competitive disadvantage with respect to other organizations.

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ITEM 2.PROPERTIES.

The following table provides certain summary information with respect to the principal properties that we leased as of December 31, 2005:

Location	Function	Sq. Ft.	Expiration Date
200 Clarendon Street, Boston, MA	Principal Executive Offices and Operations Center	387,127	2014
100 Huntington Avenue, Boston, MA	Operations Center	150,269	2014
1 Exeter Plaza, Boston, MA	Training Center	14,870	2007
800 Boylston Street, Boston, MA	Operations Center	24,715	2014
33 Maiden Lane, New York, NY	Operations Center	21,994	2011
980 Ninth Street, Sacramento, CA	Operations Center	53,580	2008
1277 Treat Boulevard, Walnut Creek, CA	Operations Center	18,921	2008
1 First Canadian Place, Toronto	Offshore Processing Center	17,790	2006
Iveagh Court, Dublin	Offshore Processing Center	67,183	2028*
17 Dominion Street, London	Offshore Processing Center	4,478	2010

*Pursuant to the terms of the contract, this lease can be terminated in 2013 by paying six months rent as compensation.

For more information, see Note 16 of the Notes to Consolidated Financial Statements.

ITEM 3.LEGAL PROCEEDINGS.

On June 27, 2003, we and an individual employee of ours were named in a lawsuit alleging, among other things, that we breached an implied covenant of good faith and fair dealing in a subadvisory contract with Opus Investment Management, Inc. (“Opus”) and that our individual employee engaged in a breach of fiduciary duties and tortious interference with a contract. Opus had been a subadviser to the Merrimac Funds, for which we act as investment adviser. Upon the expiration of Opus’s contract on June 1, 2003, the Merrimac Funds elected not to re-appoint Opus as subadviser. The lawsuit was filed in Superior Court in Worcester, Massachusetts and seeks unspecified damages. The lawsuit is currently in the discovery phase. We believe that the claims are without merit and intend to defend our rights vigorously. However, we cannot predict the outcome of this lawsuit at this time, and we can give no assurance that it will not affect our financial condition or results of operations in a materially adverse way.

In July 2000, two of our Dublin subsidiaries, Investors Trust & Custodial Services (Ireland) Ltd. (“ITC”) and Investors Fund Services (Ireland) Ltd. (“IFS”), received a plenary summons in the High Court, Dublin, Ireland. The summons named ITC and IFS as defendants in an action brought by the FTF ForexConcept Fund Plc (the “Fund”), a former client. The summons also named as defendants FTF Forex Trading and Finance, S.A., the Fund’s investment manager, Ernst & Young, LLP, the Fund’s auditors, and Dresdner Bank-Kleinwort Benson (Suisse) S.A., a trading counterparty to the Fund. The Fund is an investment vehicle organized in Dublin to invest in foreign exchange contracts. A total of approximately $4.7 million had been invested in the Fund. Most of that money was lost prior to the Fund’s closing to subscriptions in June 1999. In January 2001, ITC, IFS and the other defendants named in the plenary summons received a statement of claim by the Fund seeking unspecified damages allegedly arising from breach of contract, misrepresentation and breach of warranty, negligence and breach of duty of care, and breach of fiduciary duty, among others. We have notified our insurers and intend to defend this claim vigorously. Based on our investigation through December 31, 2005, we do not expect this matter to have a material adverse effect on our business, financial condition or results of operations.

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Investors Financial Services Corp. and five of its officers are named as defendants in three purported class action complaints that were filed on or about August 4, 2005, August 15, 2005 and September 30, 2005 in the United States District Court for the District of Massachusetts, Boston, Massachusetts. Among other things, the complaints filed on August 4, 2005 and August 15, 2005 assert that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 during the period October 15, 2003 until July 15, 2005. Among other things, the complaint filed on September 30, 2005 asserts that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 during the period July 16, 2003 until July 15, 2005. The allegations in the complaints predominantly relate to: (1) the Company’s October 2004 restatement of its financial results, and (2) the Company’s July 2005 revision of public guidance regarding its future financial performance. The complaints seek unspecified damages, interest, fees, and costs. We strongly believe that the lawsuits lack merit and we intend to defend against the claims vigorously. However, we cannot predict the outcome of the lawsuits at this time, and we can give no assurance that they will not materially adversely affect our financial condition or results of operations.

Investors Financial Services Corp. and nine of its officers and directors are named as defendants in two shareholder derivative complaints that were filed on or about September 22, 2005 and October 17, 2005 in the United States District Court for the District of Massachusetts, Boston, Massachusetts. Among other things, the complaints assert that the defendants are liable for breach of fiduciary duty, unjust enrichment, abuse of control, mismanagement, misappropriation of information, insider trading, and violation of Section 14(a) of the Securities Exchange Act of 1934. The complaint filed on September 22, 2005 also seeks reimbursement under the Sarbanes-Oxley Act of 2002. The allegations in the complaints predominantly relate to: (1) the Company’s October 2004 restatement of its financial results, and (2) the Company’s July 2005 revision of public guidance regarding its future financial performance. The complaints seek unspecified damages, attorneys’ fees, accountant and expert fees, and costs. We strongly believe that the lawsuits lack merit and we intend to defend against the claims vigorously. However, we cannot predict the outcome of the lawsuits at this time, and we can give no assurance that they will not materially adversely affect our financial condition or results of operations.

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PART II

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, AND ISSUER PURCHASE OF EQUITY SECURITIES AND RELATED STOCKHOLDER MATTERS.

PRICE RANGE OF COMMON STOCK AND DIVIDEND HISTORY AND POLICY

Our common stock is quoted on the Nasdaq National Market under the symbol “IFIN”. The following table sets forth, for the calendar periods indicated, the high and low sale prices for the common stock as reported by Nasdaq and dividends per share paid on the common stock.

	High		Low		Dividend
2005
First quarter	$	53.44	$	45.33	$	0.0200
Second quarter	51.05		36.05		0.0200
Third quarter	42.80		31.67		0.0200
Fourth quarter	40.98		30.64		0.0200
2004
First quarter	$	46.15	$	37.87	$	0.0175
Second quarter	44.75		34.68		0.0175
Third quarter	48.90		39.79		0.0175
Fourth quarter	50.40		35.00		0.0175

As of January 31, 2006, there were approximately 837 stockholders of record.

We currently intend to retain the majority of future earnings to fund the development and growth of our business. Our ability to pay dividends on our common stock may depend on the receipt of dividends from Investors Bank. In addition, we may not pay dividends on our common stock if we are in default under certain agreements that we entered into in connection with the sale of the 9.77% Capital Securities by Investors Capital Trust I. See Note 10 of our Notes to Consolidated Financial Statements included with this Report. Any dividend payments by Investors Bank are subject to certain restrictions imposed by federal law and by the Massachusetts Commissioner of Banks. See “Business—Regulation and Supervision” for additional information. Subject to regulatory requirements, we expect to pay an annual dividend to our stockholders, currently estimated to be in an amount equal to $0.09 per share of outstanding common stock (approximately $5.9 million based upon 65,052,637 shares outstanding as of December 31, 2005). We expect to declare and pay such dividend ratably on a quarterly basis.

The information required under this item regarding securities authorized for issuance under equity compensation plans is incorporated herein by reference to the section entitled “Stock Plans” contained in our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2005.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

In July 2005, we announced that our Board of Directors authorized a repurchase plan of up to $150.0 million of our common stock in the open market during the twelve months following the announcement. The repurchase plan expires in June 2006. For the three months ended December 31, 2005, there was no activity under this plan.

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ITEM 6.SELECTED FINANCIAL DATA.

The following table contains certain of our consolidated financial and statistical information, and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, our Consolidated Financial Statements and Notes to Consolidated Financial Statements, and other financial information appearing elsewhere in this Report. (Dollars in thousands, except per share and employee data):

	For the Year Ended December 31,
	2005			2004			2003(1)			2002			2001
Statement of Income Data(2):
Noninterest income	$	525,537		$	425,491		$	336,193		$	298,844		$	254,487
Net interest income	170,425			187,680			153,914			138,725			98,355
Net operating revenues	695,962			613,171			490,107			437,569			352,842
Operating expenses	460,109			398,383			344,921			341,395			289,176
Income before income taxes	235,853			214,788			145,186			96,174			63,666
Income taxes	76,035			72,826			52,765			28,737			18,980
Net income	$	159,818		$	141,962		$	92,421		$	67,437		$	44,686
Per Share Data(3):
Basic earnings per share	$	2.42		$	2.15		$	1.42		$	1.05		$	0.71
Diluted earnings per share	$	2.37		$	2.09		$	1.39		$	1.02		$	0.68
Dividends per share	$	0.08		$	0.07		$	0.06		$	0.05		$	0.04
Balance Sheet Data:
Total assets at end of period	$	12,096,393		$	11,167,825		$	9,223,178		$	7,214,740		$	5,297,913
Average Balance Sheet Data:
Interest-earning assets	$	11,364,656		$	9,770,924		$	7,556,061		$	5,769,971		$	4,376,947
Total assets	12,066,523			10,306,015			8,139,985			6,173,187			4,648,128
Total deposits	4,099,305			4,495,858			3,153,306			2,342,247			2,043,124
Junior subordinated debentures(4)	24,774			24,774			24,194			—			—
Trust preferred securities(4)	—			—			—			24,667			25,000
Common stockholders’ equity	758,552			625,964			483,923			395,101			307,565
Selected Financial Ratios:
Return on average equity	21.1		%	22.7		%	19.1		%	17.1		%	14.5		%
Return on average assets	1.3		%	1.4		%	1.1		%	1.1		%	1.0		%
Average common equity as a % of average assets	6.3		%	6.1		%	5.9		%	6.4		%	6.6		%
Dividend payout ratio(5)	3.4		%	3.3		%	4.3		%	4.9		%	5.9		%
Tier 1 capital ratio(6)	18.5		%	20.5		%	17.6		%	15.3		%	16.6		%
Leverage ratio(6)	6.0		%	5.9		%	5.4		%	5.4		%	5.8		%
Noninterest income as % of net operating income	75.5		%	69.4		%	68.6		%	68.3		%	72.1		%
Other Statistical Data:
Assets processed at end of period(7)	$	1,792,571,911		$	1,430,471,217		$	1,056,871,924		$	785,418,321		$	813,605,957
Employees at end of period	3,252			2,778			2,413			2,591			2,618

(1)Effective July 1, 2003, the Company adopted provisions of SFAS 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, which resulted in a reclassification of the trust preferred securities from mezzanine financing to liabilities. As such, interest expense associated with the trust preferred securities was reclassified to net interest income.

(2)All numbers shown in this table have been restated to reflect reclassifications related to Emerging Issues Task Force Issue No. 01-14, Income Statement Characterization of Reimbursements Received for “Out-of-pocket” Expenses Incurred.

(3)All numbers shown in this table have been restated to reflect the two-for-one stock split paid June 14, 2002, where applicable.

(4)Effective October 1, 2003, the Company adopted the provisions of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, which resulted in the deconsolidation of Investors Capital Trust I, the trust that holds the trust preferred securities.

(5)We intend to retain the majority of future earnings to fund development and growth of our business. We currently expect to pay cash dividends at an annualized rate of $0.09 per share subject to regulatory requirements. Refer to “Liquidity” included in Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information.

(6)Refer to “Capital Resources” included within Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information.

(7)Assets processed is the total dollar value of financial assets on the reported date for which we provide one or more of the following services: middle office outsourcing, global custody, multicurrency accounting, fund administration, securities lending, foreign exchange, cash management, performance measurement, institutional transfer agency, investment advisory services, lines of credit and brokerage and transition management services.

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ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion together with our Consolidated Financial Statements and related Notes to Consolidated Financial Statements, which are included elsewhere in this Report. The following discussion contains forward-looking statements that reflect plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. See “Certain Factors That May Affect Future Results” herein.

Overview

We provide asset administration services for the financial services industry through our wholly-owned subsidiary, Investors Bank & Trust Company. We provide core services and value-added services to a variety of financial asset managers, including mutual fund complexes, investment advisors, family offices, banks and insurance companies. Core services include middle office outsourcing, global custody, multicurrency accounting and fund administration. Value-added services include securities lending, foreign exchange, cash management, performance measurement, institutional transfer agency, investment advisory services, lines of credit and brokerage and transition management services. We have offices located in the United States, Ireland, Canada, the Cayman Islands and the United Kingdom with a vast global subcustodian network established to accommodate the international needs of our clients. At December 31, 2005, we provided services for approximately $1.8 trillion in net assets, including approximately $0.3 trillion in foreign net assets.

We grow our business by selling our services to new clients and by further penetrating our existing clients. We believe that we service approximately 10% of the assets managed by our existing clients, and we have traditionally achieved significant success in growing client relationships. Our ability to service new clients and expand our relationships with existing clients depends on our provision of superior client service. Our growth is also affected by conditions in the global securities markets, the interest rate environment, the regulatory environment for us and our clients and the success of our clients in marketing their products.

We derive our asset servicing revenue from providing core and value-added services. We derive our net interest income by investing the cash balances our clients leave on deposit with us. Since we price our service offerings on a bundled basis, our share of earnings from these investments is viewed as part of the total compensation that our clients pay us for servicing their assets. In establishing a fee structure for a specific client, we analyze all expected revenue and expenses. We believe net operating revenue (net interest income plus noninterest income) and net income are the most meaningful measures of our financial results.

As an asset administration services company, the amount of net operating revenue that we generate is impacted by overall market conditions, client activity and the prevailing interest rate environment. A significant portion of our core services revenue is based upon the amount of assets we process. As market values of underlying assets fluctuate, so will our revenue. We have managed this volatility by offering a tiered pricing structure for our asset-based fees. As asset values increase, the basis point fee is reduced for the incremental assets. When asset values decrease, revenue is only impacted at the then marginal rate. Many of our value-added services are transactional based, and we receive a fee for each transaction processed. We have continued to experience net interest margin compression during 2005 due to a relatively flat yield curve, lower reinvestment spreads and the liability sensitive nature of our balance sheet. Because we are a liability sensitive institution, as overnight interest rates rise, most of our liabilities reprice but our assets take longer to reprice due to the nature of their reset provisions (i.e., monthly, quarterly and annually). The lower interest rate spreads we experienced in 2005 were also due to the narrowing of market spreads on reinvestment and purchase opportunities for fixed and floating-rate investment assets. In 2006, we expect to see short-term rates continue to rise and a continued very flat yield curve.

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We remain focused on our sales efforts, prudent expense management and increasing our operating efficiency. These goals are complicated by the need to build infrastructure to support our growth, the need to maintain state-of-the-art systems and the need to retain and motivate our workforce.

In 2003, we settled a tax assessment with the Commonwealth of Massachusetts. In March 2003, a retroactive change in the Commonwealth of Massachusetts tax law disallowed a dividends received deduction taken by the Bank on dividends it had received since 1999 from a wholly-owned real estate investment trust. During the second quarter of 2003, we settled this disputed tax assessment with the Massachusetts Department of Revenue, agreeing to pay approximately 50% of the liability. As a result of this change in tax law, we recorded an additional state tax expense of approximately $7.2 million, net of federal income tax benefit, in 2003.

In our 2003 and 2004 earnings releases, we reported non-GAAP operating income and non-GAAP operating earnings per share information that exclude the effect of the state tax assessment settlement discussed above. We believe that non-GAAP operating earnings provide a more meaningful presentation of our 2003 results of operations because they do not include the one-time tax charge which was unrelated to our core operations. The following table presents a reconciliation between net income and earnings per share presented on the face of our Statements of Income and the non-GAAP measure of net operating income referenced in our earnings releases (Dollars in thousands, except per share data):

GAAP Earnings

	For the Year Ended
	December 31,
	2005		2004		2003
Income before taxes	$	235,853	$	214,788	$	145,186
Provision for income taxes	76,035		72,826		52,765
Net Income	$	159,818	$	141,962	$	92,421
Earnings per share:
Basic	$	2.42	$	2.15	$	1.42
Diluted	$	2.37	$	2.09	$	1.39

Non-GAAP Operating Earnings

	For the Year Ended
	December 31,
	2005		2004		2003
Income before taxes	$	235,853	$	214,788	$	145,186
Provision for income taxes	76,035		72,826		45,565		(1)
Net Income	$	159,818	$	141,962	$	99,621
Earnings per share:
Basic	$	2.42	$	2.15	$	1.53
Diluted	$	2.37	$	2.09	$	1.50

(1)Provision for income taxes for the year ended December 31, 2003 excludes a $7.2 million charge, net of federal income tax benefit, that resulted from a retroactive change in the Commonwealth of Massachusetts tax law enacted in the first quarter of 2003 and the Company’s subsequent settlement of the resulting tax assessment with the Massachusetts Department of Revenue. The effect of the exclusions is an increase in basic and diluted earnings per share of $0.11.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require us to make estimates and assumptions. We have

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identified the following accounting policies that, as a result of the complexities of the underlying accounting standards and operations involved, could result in significant changes to our consolidated financial condition or results of operations under different conditions or using different assumptions. Senior management has discussed these critical accounting policies with the Audit Committee.

Derivative Financial Instruments—Cash flow hedge accounting requires that we measure the changes in fair value of derivatives designated as hedges as compared to changes in expected cash flows of the underlying hedged transactions for each reporting period. This process involves the estimation of the expected future cash flows of hedged transactions. Interest rate swaps are valued using a nationally recognized swap valuation model. The LIBOR (London InterBank Offered Rate) curve in this model serves as the basis for computing the market value of the swap portfolio. If short-term interest rates increase, as they did during 2005, we would expect the swaps to gain in value. Conversely, if short-term interest rates decrease, we would expect there to be a corresponding decline in the market value of the swap portfolio. The measurement of fair value of our derivatives portfolio is based upon market interest rate curve and spreads.

Defined Benefit Pension Assumptions—Each fiscal year, we must assess and select the discount rate, compensation increase percentage and average return on plan assets assumptions in order to determine our net periodic pension cost and to project our benefit obligations under our defined benefit plans. The discount rate is based on the weighted-average yield on high-quality fixed-income investments that are expected to match the plan’s projected cash flows. The compensation increase percentage is based upon management’s current and expected salary increases. The average return on plan assets is based on the expected return on the plan’s current investment portfolio, which can reflect the historical returns of the various asset classes.

For the fiscal year ended December 31, 2005, the discount rate, compensation increase percentage and average return on plan assets used to determine net periodic pension cost for our qualified defined benefit pension plan were 5.80%, 4.00% and 8.50%, respectively. The discount rate was 0.45% lower than the rate at December 31, 2004 due to a retraction of the projected yield curve during the year. The compensation increase assumption at December 31, 2005 was slightly higher by 0.25% than at December 31, 2004 and the rate of return on plan assets of 8.50% has remained consistent with the prior year. Net periodic pension expense for the pension plan for 2005, excluding the effect of curtailment, was $0.8 million, as compared to $0.8 million for the year ended December 31, 2004. We expect the net periodic pension expense to be approximately $0.2 million in fiscal year 2006.

At December 31, 2005, the discount rate assumption used to project the benefit obligation for our nonqualified, unfunded, supplemental retirement plan, which covers certain employees, was 5.75%. The compensation increase percentage assumption ranged from 4.0% to 10.0% at December 31, 2005, which was consistent with the prior year. The net periodic pension expense for 2005 for the supplemental retirement plan, using a 5.80% discount rate and 4.00% compensation increase, was $4.3 million, as compared to $2.5 million for the year ended December 31, 2004. The net periodic pension expense is expected to be approximately $5.3 million in fiscal year 2006.

New Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards 123 (revised 2004), Share-Based Payment (“SFAS 123R”). SFAS 123R requires that compensation cost relating to share-based payment transactions be recognized in the financial statements, with measurement based upon the fair value of the equity or liability instruments issued. We currently use the intrinsic-value method to measure compensation cost related to our share-based transactions. SFAS 123R replaces SFAS 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees.

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In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB 107”), which expresses the views of the SEC regarding the interaction of SFAS 123R and certain SEC regulations and provides the SEC’s views regarding the valuation of share-based payment arrangements for public companies.

In April 2005, the SEC issued Release 2005-57, which delayed the effective date for SFAS 123R to reporting periods in the first fiscal year beginning after June 15, 2005. Accordingly, we adopted SFAS 123R on January 1, 2006, effective for financial periods in 2006. There was no impact to our financial condition or results of operations upon adoption.

In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20 and FASB Statement No. 3 (“SFAS 154”). SFAS 154 replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the accounting and reporting requirements for a change in accounting principle. SFAS 154 applies to all voluntary changes in an accounting principle, as well as to changes required by a new accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS 154 is effective for accounting changes and error corrections made in fiscal years beginning after December 15, 2005 and requires retrospective application to prior periods’ financial statements for most voluntary changes in an accounting principle, unless it is impracticable to do so.  We do not anticipate any material impact to our financial condition or results of operations as a result of the adoption of SFAS 154.

In February 2006, the FASB issued Statement of Financial Accounting Standards No. 155, Accounting for Certain Hybrid Instruments—an amendment of FASB Statements No. 133 and 140 (“SFAS 155”). SFAS 155 allows financial instruments that have embedded derivatives to be accounted for as a whole if the holder elects to account for the whole instrument on a fair value basis. SFAS 155 eliminates the need to bifurcate the derivative from its host, as previously required under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedge Accounting (“SFAS 133”). SFAS 155 also amends SFAS 133 by establishing a requirement to evaluate interests in securitized financial assets to determine whether they are free standing derivatives or whether they contain embedded derivatives that require bifurcation. SFAS 155 is effective for all hybrid financial instruments acquired or issued by the Company on or after January 1, 2007. The Company does not anticipate any material impact to its financial condition or results of operations as a result of the adoption of SFAS 155.

Certain Factors That May Affect Future Results

From time to time, information provided by us, statements made by our employees, or information included in our filings with the SEC (including this Form 10-K) may contain statements which are not historical facts, so-called “forward-looking statements,” which are made under Section 21E of the Securities Exchange Act of 1934 and which involve risks and uncertainties. These statements relate to future events or our future financial performance and are identified by words such as “may,” “could,” “should,” “expect,” “plan,” “intend,” “seek,” “anticipate,” “believe,” “estimate,” “potential,” or “continue” or other comparable terms or the negative of those terms. Forward-looking statements in this Form 10-K include certain statements regarding liquidity, growth rate, annual dividend payments, interest rate conditions, the shape of the yield curve, interest rate sensitivity, compliance with capital adequacy guidelines, loss exposure on lines of credit, the timing and effect on earnings of derivative gains and losses and the reclassification of net after-tax gains on derivative contracts, securities lending revenue, net interest income, operating expenses, including occupancy expenses and needs, transaction processing services expense, professional fee expense, compensation expense, travel and sales expense, investments in technology and compensation expense, pension plan and supplemental pension expense, depreciation expense, effective tax rate, investments in FHLBB capital stock, the effect on earnings of changes in equity values or fixed income, the effects of increased prepayments and reduced investment opportunities for our net interest income, our ability to execute our stock repurchase plan and the effect of certain legal claims against us. Our actual future results may differ significantly from those stated in any forward-looking

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statements. Factors that may cause such differences include, but are not limited to, the factors discussed in Item 1A of this Form 10-K. Each of these factors, and others, are discussed from time to time in our filings with the SEC.

Statements of Income

Comparison of Operating Results for the Years Ended December 31, 2005 and 2004.

Net income for the year ended December 31, 2005 was $159.8 million, up 13% from $142.0 million for the same period in 2004. The principal factors contributing to our net income growth were growth in asset servicing fees of 20% and increased gain on sale of investments. Net income growth was partially offset by a 15% increase in operating expenses (largely due to new business wins, additional headcount and technology requirements) and a 9% decrease in net interest income.

Fees and Other Revenue

The components of fees and other revenue are as follows (Dollars in thousands):

	For the Year Ended
	December 31,
	2005		2004		Change
Total asset servicing fees	$	509,059	$	423,200		20	%
Gain on sale of investments	12,397		234			*
Other operating income	4,081		2,057			98	%
Total fees and other revenue	$	525,537	$	425,491		24	%

*Percentage is not considered meaningful.

The largest components of asset servicing fees are custody, multicurrency accounting and fund administration, which increased 20% to $375.6 million for the year ended December 31, 2005 from $314.3 million for the same period in 2004. Custody, multicurrency accounting and fund administration fees are based in part on the value of assets processed. Assets processed is the total dollar value of financial assets on the reported date for which we provide one or more of the following services: middle office outsourcing, global custody, multicurrency accounting, fund administration, securities lending, foreign exchange, cash management, performance measurement, institutional transfer agency, investment advisory services, lines of credit and brokerage and transition management services.

The change in net assets processed includes the following components (Dollars in billions):

	For the Year Ended				For the Three Months Ended
	December 31, 2005				December 31, 2005
Net assets processed, beginning of period		$	1,430			$	1,734
Change in net assets processed:
Sales to new clients		159				—
Further penetration of existing clients		42				4
Lost clients		(11		)		—
Fund flows and market gain		173				55
Total change in net assets processed		363				59
Net assets processed, end of period		$	1,793			$	1,793

The majority of the increase in assets processed was due to sales to new and existing clients, the ability of our clients to develop and sell product, which generates fund flows that have a direct, positive impact on our business, and slightly higher asset values compared to a year ago. As indicated in the “Overview” section, our core services fees are generated by charging a fee based upon the value of assets processed. As market values or clients’ asset levels fluctuate, so will our revenue. Our tiered pricing structure, coupled with

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minimum and flat fees, allow us to manage this volatility to a certain extent. As asset values increase, the basis point fee typically lowers. When asset values decrease, revenue is only impacted by the asset decline at the then marginal rate.

If the value of equity or fixed income assets held by our clients were to increase or decrease by 10% for a sustained period of time, we estimate currently that this market movement, by itself, would cause a corresponding change of less than 5% in our earnings per share. Earnings per share do not track precisely to the value of the equity and fixed-income markets because conditions present in a market increase or decrease may generate offsetting increases or decreases in other revenue and expense items that are influenced by the value of the assets we administer. For example, increased market volatility often results in higher transaction fee revenue. Also, market value declines may result in increased interest income and sweep fee income as clients move larger amounts of assets into the cash management vehicles that we offer. In addition, our tiered pricing structure reduces the impact of volatility in asset values to a certain extent. However, there can be no assurance that any of these offsetting revenue and expense movements will occur during any future upturn or downturn in the equity or fixed-income markets, or that our tiered pricing structure will reduce the impact on us of a sustained change in asset values.

Transaction-driven income includes our value-added services, such as foreign exchange, cash management, securities lending and investment advisory services.

·Foreign exchange fees were $62.1 million for the year ended December 31, 2005, up 14% from the same period in 2004. The increase in foreign exchange fees is attributable to new business, increased volume of client activity and volatility in currency markets. Future foreign exchange income is dependent on the volume of new and existing client activity and overall volatility in the currencies traded.

·Cash management fees, which consist of sweep fees, were $37.6 million for the year ended December 31, 2005, up 42% from the same period in 2004. The increase is primarily due to higher balances placed by our clients in the cash management products we offer. Cash management revenue will continue to depend on the level of client balances maintained in the cash management products we offer. If our clients’ investment products continue to maintain higher cash balances than they did in comparable periods, we expect our cash management revenue to be positively impacted.

·Securities lending fees were $22.5 million for the year ended December 31, 2005, up 117% from the same period in 2004, primarily due to new business, higher volumes and improved market conditions. Securities lending transaction volume is positively affected by the market value of the securities on loan, merger and acquisition activity, increased IPO activity and a steeper short-end of the yield curve. If the capital markets continue to experience the aforementioned characteristics, it is likely that our securities lending revenue will continue to be positively impacted. If we experience a reduction in our securities lending portfolio, lower market values or compression of the spreads earned on our securities lending activity, our securities lending revenue will likely be negatively impacted.

·Investment advisory fees were $8.4 million for the year ended December 31, 2005, down 44% from the same period in 2004. The decrease in investment advisory fees is attributable to lower asset values in our proprietary Merrimac money market funds combined with advisory fee waivers on certain of the funds. Future investment advisory fee income is dependent upon the asset levels within the Merrimac money market funds, which are driven by overall market conditions, client activity and transaction volumes. We discontinued advisory fee waivers in the second quarter of 2005.

·Other service fees for the year ended December 31, 2005 were $2.8 million, up 5% from the same period in 2004. Other service fees include income earned on compliance advisory, brokerage and transition management services. The increase in 2005 was due to an increase in compliance and brokerage services.

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·Other operating income for the year ended December 31, 2005 was $4.1 million, up 98% from the same period in 2004. The increase is primarily due to an increase in the dividend rate on our holding of FHLBB stock.

During the year ended December 31, 2005 we sold municipal securities and U.S. Treasury securities held in our available for sale portfolio, resulting in the recognition of $12.4 million in gains. We sold these securities as part of a strategy to improve the after-tax yield of our municipal securities portfolio by replacing the sold municipal securities with those that offer a more attractive after-tax yield, as well as to capitalize on strong market conditions.

Net Interest Income

The following table presents the components of net interest income (Dollars in thousands):

	For the Year Ended December 31,
	2005		2004		Change
Interest income	$	447,705	$	313,149		43	%
Interest expense	277,280		125,469			121	%
Total net interest income	$	170,425	$	187,680		(9	)%

Net interest income is affected by the volume and mix of assets and liabilities and the movement and level of interest rates. The decrease in our net interest income was primarily driven by lower interest rate spreads, which was partially offset by growth in our investment portfolio. Lower interest rate spreads were due to increasing short-term interest rates without a concurrent increase in longer-term rates, which resulted in a relatively flat yield curve. Consequently, our interest-bearing liabilities, of which the majority is priced based on overnight floating rates, have repriced at higher rates faster than our interest-earning assets have repriced, resulting in a lower net interest margin. In addition, reinvestment and purchase spreads on fixed and floating-rate assets were lower than expected due to higher market demand, especially for shorter-term and floating-rate fixed income investments. Average investment security balances were up approximately $1.5 billion for the year ended December 31, 2005 compared to the same period in 2004.

The table below presents the changes in net interest income resulting from changes in the volume of interest-earning assets or interest-bearing liabilities and changes in interest rates for the year ended December 31, 2005 compared to the year ended December 31, 2004. Changes attributed to both volume and rate have been allocated based on the proportion of change in each category (Dollars in thousands):

	For the Year Ended December 31, 2005 vs. December 31, 2004
	Change Due to Volume				Change Due To Rate				Net
Interest-earning assets
Federal Funds sold and securities purchased under resale agreements		$	226			$	1,357		$	1,583
Investment securities		53,222				75,076			128,298
Loans		2,281				2,394			4,675
Total interest-earning assets		$	55,729			$	78,827		$	134,556
Interest-bearing liabilities
Deposits		$	(6,879	)		$	33,864		$	26,985
Borrowings		38,994				85,832			124,826
Total interest-bearing liabilities		$	32,115			$	119,696		$	151,811
Change in net interest income		$	23,614			$	(40,869	)	$	(17,255	)

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Amortization and accretion of debt securities purchased at a premium or discount are amortized or accreted into income using a method which approximates the constant effective yield method. We apply Statement of Financial Accounting Standard No. 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases (“SFAS 91”) for the amortization of premiums and accretion of discounts. In calculating the effective yield for securities that represent holdings of large numbers of similar loans for which prepayments are probable and the timing and amount of prepayments can be reasonably estimated, prepayments are anticipated using our actual three-month prepayment experience.

The amount of amortization or accretion to recognize in income is driven by the calculation of the constant effective yield. When calculating this yield, we assume that prepayments will continue from the analysis date to the date of the security’s expected maturity at our most recent three-month prepayment rate. The prepayment rate is updated monthly based on our previous three-month actual prepayment experience.

We utilize three-month prepayment rates to anticipate prepayments because such rates are based on our own actual prepayment experience and because we believe three-month rates are a better estimate of future experience than either one-month or six-month or longer rates. In the opinion of management, a one-month rate does not capture enough experience to predict future prepayment behavior and may create undue volatility in interest income due to one-time fluctuations in prepayment activity. Conversely, in the opinion of management, a six-month or longer rate would not capture enough volatility to predict future prepayment behavior.

If a difference arises between our estimated prepayments and our actual prepayments received, the constant effective yield is recalculated based on our actual payments to date and anticipated future payments. This monthly recalculation results in the carrying value of the security being adjusted to the amount that would have existed had the new effective yield been applied since the purchase date, and a corresponding charge or credit is recognized to interest income.

For securities that do not represent holdings of large numbers of similar loans for which prepayments are probable and the timing and amount of prepayments can be reasonably estimated, the associated premiums and discounts are amortized or accreted over their contractual term using the constant effective yield. Actual prepayment experience for such securities is reviewed monthly and a proportionate amount of premium or discount is recognized in income at that time such that the effective yield on the remaining portion of the securities continues unchanged.

As of and for the years ended December 31, 2005, 2004, and 2003, we anticipated prepayments on our mortgage-backed securities. All other securities, including Federal agency securities, state and political subdivisions, corporate debt, U.S. Treasury securities, and foreign government securities do not meet the SFAS 91 criteria for anticipating prepayments. Accordingly, no prepayments were anticipated for these securities.

In addition to investing in both variable and fixed-rate securities, we use derivative instruments to manage our exposure to interest rate risks. See the “Market Risk” section for more detailed information.

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Operating Expenses

Total operating expenses were $460.1 million in 2005, up 15% from 2004. The increase in total operating expenses was primarily due to increased compensation and benefits, technology and telecommunications, transaction processing services, travel and sales promotion, loss and loss adjustment expenses and other operating expenses, as detailed below. The components of operating expenses were as follows (Dollars in thousands):

	For the Year Ended December 31,
	2005		2004		Change
Compensation and benefits	$	250,459	$	205,728		22	%
Technology and telecommunications	54,732		49,816			10	%
Transaction processing services	49,873		42,159			18	%
Depreciation and amortization	31,578		32,124			(2	)%
Occupancy	26,490		29,032			(9	)%
Professional fees	13,380		15,346			(13	)%
Travel and sales promotion	6,825		5,470			25	%
Loss and loss adjustment expenses	5,837		924			*
Insurance	4,219		4,625			(9	)%
Other operating expenses	16,716		13,159			27	%
Total operating expenses	$	460,109	$	398,383		15	%

*Percentage is not considered meaningful

Compensation and benefits increased 22% from 2004 due to higher headcount and annual salary increases. Further increases in compensation expense in 2006 will be primarily dependant upon sales to new and existing clients, the full year impact of staff additions made in 2005 related to the overall growth of our business, annual salary increases and the full year effect of the adoption of SFAS 123R.

Technology and telecommunications expense increased 10% from 2004 as a result of increased infrastructure investments in 2005. The increase is also due to our outsourcing agreement with IBM, which we entered into in July of 2004. A portion of the increase is offset by lower compensation costs due to employees transferring to IBM. Also, increases in our processing volumes drove higher technology and telecommunications expense. Generally, we expect technology reinvestment to equal approximately 18-20% of net operating revenue each year, including related compensation costs.

Transaction processing services expense increased 18% from 2004 as a result of higher global asset values and transactions with our subcustodians. Future transaction processing servicing expense will be dependent on asset levels and the volume of client transaction activity.

Professional fees expense decreased 13% from 2004, primarily due to lower subadvisory expense associated with our Merrimac money market funds, resulting from lower average fund balances. Future professional fees are dependent upon changes in the value of the Merrimac portfolios and upon other business needs for outside professional services.

Travel and sales promotion expense increased 25% from 2004. Travel and sales promotion expense consists of expenses incurred by the sales force, client management staff and other employees in connection with sales calls on potential clients, as well as traveling to existing client sites and our foreign offices. The increases resulted from a higher level of travel to client sites, a higher level of sales calls to potential clients, attendance at industry conferences, and travel related to the establishment of our new European offices. Travel and sales expense may increase in 2006, dependent upon new business leads and other client and business needs.

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The increase in loss and loss adjustment expenses from 2004 to 2005 is due to a processing error identified during the fourth quarter of 2005.

Other operating expense increased 27% from 2004 primarily as a result of higher recruiting and staffing expense. We expect other operating expense to increase in 2006 due to staffing and recruiting costs as a result of the growth of our business.

Income Taxes

Income taxes were $76.0 million for the year ended December 31, 2005, up 4% from the same period in 2004. The increase in income taxes and the effective tax rate (excluding the effect of Accounting Principles Board Opinion No. 23, Accounting for Income Taxes—Special Areas (“APB 23”)) is primarily attributable to increased pretax earnings as well as a decrease in the percentage of tax-exempt income to pretax income. The increase in income taxes was partially offset by the reversal of a deferred income tax liability related to the undistributed earnings of our Irish subsidiaries. During the second quarter of 2005, we recognized the indefinite reversal provision of APB 23, which specifies that U.S. income taxes should not be recorded on the undistributed earnings of a foreign subsidiary if those undistributed earnings have been or will be invested indefinitely in that subsidiary. We have determined that the undistributed earnings of our Irish subsidiaries will be permanently invested in our Irish operations to support continued growth.

In 2006, we expect that our effective tax rate will approximate 34.5% of pretax income.

Comparison of Operating Results for the Years Ended December 31, 2004 and 2003.

Net income for the year ended December 31, 2004 was $142.0 million, up 54% from $92.4 million for the same period in 2003. The principal factors contributing to our net income growth were growth in asset servicing fees of 27% in addition to a 22% increase in net interest income. Net income growth was partially offset by a 16% increase in operating expenses, largely due to new business, additional headcount and technology requirements. Our income statement for the year ended December 31, 2003 reflects the net effect of the first quarter 2003 tax accrual and its later partial reversal resulting from our settlement with the Massachusetts Department of Revenue. Absent the effects of this tax matter, net income for the year ended December 31, 2004 increased 43% from net operating income for the same period in 2003. We provide a full reconciliation of this non-GAAP measure in the Overview of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Fees and Other Revenue

The components of fees and other revenue are as follows (Dollars in thousands):

	For the Year Ended December 31,
	2004		2003		Change
Total asset servicing fees	$	423,200	$	333,586		27	%
Other operating income	2,057		2,607			(21	)%
Gain on sale of investment	234		—			*
Total fees and other revenue	$	425,491	$	336,193		27	%

*Percentage is not considered meaningful

The largest components of asset servicing fees are custody, multicurrency accounting and fund administration, which increased 24% to $314.3 million for the year ended December 31, 2004 from $254.2 million for the same period in 2003.

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The change in net assets processed includes the following components (Dollars in billions):

	For the Year Ended December 31, 2004
Net assets processed, beginning of period		$	1,057
Change in net assets processed:
Sales to new clients		54
Further penetration of existing clients		37
Lost clients		(3		)
Fund flows and market gain		285
Total change in net assets processed		373
Net assets processed, end of period		$	1,430

The majority of the increase in assets processed was due to sales to new and existing clients, the ability of our clients to develop and sell product, which generates fund flows that have a direct, positive impact on our business, and higher asset values compared to a year ago.

·Foreign exchange fees were $54.5 million for the year ended December 31, 2004, up 49% from the same period in 2003. The increase in foreign exchange fees is attributable to new business, increased volume of client activity and volatility in currency markets.

·Cash management fees were $26.4 million for the year ended December 31, 2004, up 26% from the same period in 2003. The increase is primarily due to higher balances placed by our clients in the cash management products we offer.

·Investment advisory fees were $15.0 million for the year ended December 31, 2004, up 28% from the same period in 2003. The increase in investment advisory fees is attributable to increased average asset values of the Merrimac money market funds, an investment company for which we act as advisor, and where a portion of excess client cash balances are invested.

·Securities lending fees were $10.4 million for the year ended December 31, 2004, up 17% from the same period in 2003, primarily due to improved spreads and volumes.

Net Interest Income

The following table presents the components of net interest income (Dollars in thousands):

	For the Year Ended December 31,
	2004		2003		Change
Interest income	$	313,149	$	247,094		27	%
Interest expense	125,469		93,180			35	%
Total net interest income	$	187,680	$	153,914		22	%

The improvement in our net interest income was primarily due to balance sheet growth, driven by healthy client funding, partially offset by lower investment spreads.

During 2004 we employed a strategy of prepaying high-rate borrowings and replacing them with lower cost term funding in order to maintain our net interest margin. Prepayment fees incurred during 2004 were $6.8 million, compared to $3.1 million during 2003. This strategy combined with a rising interest rate environment during the second half of 2004 resulted in a 5 basis point increase in the average rate paid on interest-bearing liabilities to 1.39% for the year ended December 31, 2004 from 1.34% for the same period in 2003.

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The table below presents the changes in net interest income resulting from changes in the volume of interest-earning assets or interest-bearing liabilities and changes in interest rates for the year ended December 31, 2004 compared to the year ended December 31, 2003. Changes attributed to both volume and rate have been allocated based on the proportion of change in each category (Dollars in thousands):

	For the Year Ended December 31, 2004 vs. December 31, 2003
	Change Due to Volume			Change Due To Rate				Net
Interest-earning assets
Fed funds sold and securities purchased under resale agreements		$	275		$	66		$	341
Investment securities		69,525			(4,821		)	64,704
Loans		1,057			(47		)	1,010
Total interest-earning assets		$	70,857		$	(4,802	)	$	66,055
Interest-bearing liabilities
Deposits		$	17,767		$	(6,865	)	$	10,902
Borrowings		5,311			16,076			21,387
Total interest-bearing liabilities		$	23,078		$	9,211		$	32,289
Change in net interest income		$	47,779		$	(14,013	)	$	33,766

Operating Expenses

Total operating expenses were $398.4 million in 2004, up 16% from 2003. The growth in our cost structure was largely driven by the new business that we won during 2004, which required us to invest in headcount and technology. The components of operating expenses were as follows (Dollars in thousands):

	For the Year Ended December 31,
	2004		2003		Change
Compensation and benefits	$	205,728	$	186,932		10	%
Technology and telecommunications	49,816		38,914			28	%
Transaction processing services	42,159		33,299			27	%
Depreciation and amortization	32,124		27,971			15	%
Occupancy	29,032		29,218			(1	)%
Professional fees	15,346		11,189			37	%
Travel and sales promotion	5,470		4,822			13	%
Loss and loss adjustment expenses	924		799			16	%
Insurance	4,625		3,203			44	%
Other operating expenses	13,159		8,574			53	%
Total operating expenses	$	398,383	$	344,921		16	%

Compensation and benefits increased $18.8 million, or 10%, from 2003. Salaries increased due to higher headcount and annual merit raises. These increases were partially offset by employee costs that shifted to technology and telecommunications expense as part of our outsourcing arrangement with IBM that we initiated in the summer of 2004.

Technology and telecommunications expense increased $10.9 million, or 28%, from 2003 as a result of increased infrastructure investments in 2004. As mentioned previously, we entered into an agreement with IBM in the summer of 2004 to outsource certain technical infrastructure services. Service expense under this agreement was $9.5 million during 2004, which included initial start-up costs. The costs of these

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services were partially offset by decreases in other technology and telecommunications expenses, as the services were previously performed internally or by other service providers.

Transaction processing services expense increased 27% from 2003 as a result of higher global asset values and transactions with our subcustodians.

Depreciation and amortization expense increased 15% from 2003. This increase resulted from the completion of capitalized software projects in late 2003 and early 2004 and their placement into service. This increase was partially offset by fully depreciated equipment from our 2001 assumption of BGI’s North American asset administration unit.

Professional fees expense increased 37% from 2003, primarily due to increased fees associated with the Merrimac money market funds. The Merrimac fees are asset based and grew along with the assets of the portfolios during 2004. Also in 2004, we incurred additional technical consulting fees as we hired external consultants to assist with technology initiatives.

Travel and sales promotion expense increased 13% from 2003.

Insurance expense was up 44% from 2003. In May 2003, our five-year fixed-rate insurance policy expired, resulting in increased premiums.

Other operating expense increased 53% from 2003. The primary contributors to the increase included higher regulatory assessments due to higher deposit liabilities, higher recruiting expense due to increased staffing needs, increased advertising expense and increased miscellaneous office expense due to the overall growth of our business.

Income Taxes

Income taxes were $72.8 million for the year ended December 31, 2004, up 38% from the same period in 2003. This increase is attributable to a 48% increase in pretax earnings for the year ended December 31, 2004 from the same period in 2003.

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The following tables present average balances, interest income and expense, and yields earned or paid on the major categories of assets and liabilities for the periods indicated (Dollars in thousands):

	Year Ended December 31, 2005								Year Ended December 31, 2004								Year Ended December 31, 2003
	Average Balance			Interest		Average Yield/Cost			Average Balance			Interest		Average Yield/Cost			Average Balance			Interest		Average Yield/Cost
Interest-earning assets
Federal Funds sold and securities purchased under resale agreements	$	66,926		$	2,250		3.36	%	$	52,544		$	667		1.27	%	$	30,236		$	326		1.08	%
Investment securities:(1)
Mortgage-backed securities	8,034,870			315,845			3.93		6,677,678			221,248			3.31		5,065,472			170,700			3.37
Federal agency securities	2,333,005			89,864			3.85		2,084,988			53,977			2.59		1,675,520			46,455			2.77
State and political securities	465,451			21,217			4.56		490,621			22,300			4.55		437,182			20,477			4.68
Other securities	230,832			9,267			4.01		299,529			10,370			3.46		220,199			5,559			2.52
Total investment securities	11,064,158			436,193			3.94		9,552,816			307,895			3.22		7,398,373			243,191			3.29
Loans(2)	233,572			9,262			3.97		165,564			4,587			2.77		127,452			3,577			2.81
Total interest-earning assets	11,364,656			447,705			3.94		9,770,924			313,149			3.20		7,556,061			247,094			3.27
Allowance for loan losses	(100		)						(100		)						(100		)
Noninterest-earning assets(4)	701,967								535,191								584,024
Total assets	$	12,066,523							$	10,306,015							$	8,139,985
Interest-bearing liabilities
Deposits:
Demand	$	24,470		$	866		3.54	%	$	—		$	—		0.00	%	$	—		$	—		0.00	%
Savings	3,428,223			74,391			2.17		3,947,865			49,622			1.26		2,667,034			39,809			1.49
Time	80,729			2,449			3.03		68,594			1,099			1.60		1,356			10			0.74
Securities sold under repurchase agreements(3)	5,244,614			142,681			2.72		4,162,132			54,376			1.31		3,278,555			29,371			0.90
Junior subordinated debentures(4)/ trust preferred securities	24,774			2,420			9.77		24,774			2,420			9.77		24,194			2,364			9.77
Other borrowings(5)	1,643,948			54,473			3.31		841,708			17,952			2.13		1,008,036			21,626			2.15
Total interest-bearing liabilities	10,446,758			277,280			2.65		9,045,073			125,469			1.39		6,979,175			93,180			1.34
Noninterest-bearing liabilities:
Demand deposits	305,289								252,246								241,594
Savings	61,745								72,536								130,747
Noninterest-bearing time deposits	198,849								154,617								112,575
Other liabilities	295,330								155,579								191,971
Total liabilities	11,307,971								9,680,051								7,656,062
Equity	758,552								625,964								483,923
Total liabilities and equity	$	12,066,523							$	10,306,015							$	8,139,985
Net interest income				$	170,425							$	187,680							$	153,914
Net interest margin(6)							1.50	%							1.92	%							2.04	%
Average interest rate spread(7)							1.29	%							1.81	%							1.93	%
Ratio of interest-earning assets to interest-bearing liabilities							108.79	%							108.02	%							108.27	%

(1)Average yield/cost on available for sale securities is based on amortized cost.

(2)Average yield/cost on demand loans includes only performing loan balances. During the years ended December 31, 2005, 2004 and 2003 there were no non-performing loan balances.

(3)Interest expense includes penalties of $2.9 million in 2004 for prepayment of two term repurchase agreements.

(4)Effective October 1, 2003, the Company adopted the provisions of FIN 46 (revised December 2003), which resulted in the deconsolidation of Investors Capital Trust I, the trust that holds the trust preferred securities.

(5)Interest expense includes contractual prepayment penalties of $3.9 million and $3.1 million in 2004 and 2003, respectively, for prepayment of certain FHLBB borrowings.

(6)Net interest income divided by total interest-earning assets.

(7)Yield on interest-earning assets less rate paid on interest-bearing liabilities.

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Financial Condition

At December 31, 2005, our total assets were $12.1 billion, up 8% from December 31, 2004. Average interest-earning assets increased $1.6 billion, or 16%, for the year ended December 31, 2005 compared to the same period last year. Our asset growth was primarily funded by increases in average external borrowings, including repurchase agreements, of approximately $1.6 billion for the year ended December 31, 2005.

Investment Portfolio

The income we derive from our investment portfolio is generated primarily by investing client cash balances and is a component of our asset processing business. In addition, we use the investment portfolio to secure open positions at securities clearing institutions in connection with our custody services. The following table summarizes our investment portfolio as of the dates indicated (Dollars in thousands):

	December 31,
	2005		2004		2003
Securities held to maturity:
Mortgage-backed securities	$	4,342,254	$	3,543,961	$	2,272,030
Federal agency securities	2,305,331		2,274,665		1,906,554
State and political subdivisions	114,345		124,091		127,632
Total securities held to maturity	$	6,761,930	$	5,942,717	$	4,306,216
Securities available for sale:
Mortgage-backed securities	$	3,766,101	$	3,854,900	$	3,611,980
State and political subdivisions	392,391		404,909		355,828
Corporate debt	200,692		176,546		175,816
US Treasury securities	—		118,688		113,701
Federal agency securities	—		—		29,609
Foreign government securities	10,536		10,462		9,703
Total securities available for sale	$	4,369,720	$	4,565,505	$	4,296,637

The $0.8 billion, or 14%, increase in our held to maturity securities portfolio from December 31, 2004 to December 31, 2005 is primarily due to investment security purchases allowing us to utilize our capital, while maintaining an acceptable risk profile. Our investment security purchases primarily consisted of floating interest rate mortgage-backed securities which offer an attractive yield and reprice as interest rates increase. Our held to maturity portfolio securities are purchased with the intent and ability to hold to maturity and are not viewed as our primary source of funds to satisfy liquidity needs.

Our available for sale securities portfolio decreased $0.2 billion, or 4% from December 31, 2004 to December 31, 2005. The decrease was mainly due to sales of U.S. Treasuries and municipal securities during 2005 and investment security maturities and prepayments, partially offset by purchases of investment securities. Our investment security purchases primarily included mortgage-backed securities and municipal securities. We believe that purchasing these securities allows us to take advantage of attractive yields and cash flows which aligns with our asset and liability strategy. Refer to the gap analysis under the “Market Risk” section for additional details regarding the matching of our interest-earning assets and interest-bearing liabilities.

The average balance of our investment securities for the year ended December 31, 2005 was $11.1 billion, with an average yield of 3.94%, compared to an average balance of $9.6 billion with an average yield of 3.22% during the same period in 2004. The increase in yield is primarily due to our variable-rate securities repricing at higher interest rates. Anticipating prepayments in calculating the constant effective yield for mortgage-backed securities may result in more monthly earnings volatility due to the impact of

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changing interest rates and the resulting adjustments to the amount of amortization. A rising rate environment will generally decrease the rate of prepayments, which may have the effect of lengthening the expected maturity of mortgage-backed securities. Accordingly, the amount of amortization recognized each period will decline, but the same total net premium will be spread over a longer time horizon, thereby increasing net income in the then current period. In a decreasing rate environment, the rate of prepayments generally increases, which may have the effect of shortening the expected maturity of the mortgage-backed securities and therefore increasing the amount of amortization, thereby decreasing net income in the then current period. We do not expect changes to our amount of amortization resulting from anticipating prepayments to have a material effect on our future reported financial results or financial condition.

Prepayment cash flow levels on our Federal agency securities increased in 2005, which we believe were attributable to the expiration of borrower prepayment penalties, increased refinancing and loan payoff activity. Mortgaged-backed security prepayment cash flow levels also increased for most of 2005, primarily attributable to increased refinancing opportunities.

We invest in mortgage-backed securities and Federal agency securities to increase the total return of the investment portfolio. Mortgage-backed securities and Federal agency bonds generally have a higher yield than U.S. Treasury securities due to credit and prepayment risk. Credit risk results from the possibility that a loss may occur if a counterparty, such as the Federal agency issuing the securities, is unable to meet the terms of the contract. Credit risk related to mortgage-backed securities and Federal agency bonds is substantially reduced by payment guarantees and credit enhancements. Prepayment risk results from the possibility that changes in interest rates and other economic factors will result in investment securities being paid off earlier than the scheduled maturity date. Refer to the “Market Risk” section for additional details regarding our net interest income simulation model, which includes the impact of changes in interest rates, and therefore prepayment risk, on our net interest income.

We invest in AAA rated, insured municipal securities to generate stable, tax advantaged income. Municipal securities generally have lower stated yields than Federal agency and U.S. Treasury securities, but their after-tax yields are comparable. Municipal securities are subject to call risk. Call risk is similar to prepayment risk and results from the possibility that fluctuating interest rates and other factors may result in the exercise of the call option by the issuing municipality prior to the maturity date of the bond.

The carrying value, weighted-average yield, and contractual maturity of our securities held to maturity at December 31, 2005 are reflected in the following table (Dollars in thousands):

	Years
	Under 1						1 to 5						5 to 10					Over 10
	Amount			Yield			Amount			Yield			Amount		Yield			Amount		Yield
Mortgage-backed securities		$	118		6.31	%		$	21,127		4.90	%	$	3,993		6.23	%	$	4,317,016		4.80	%
Federal agency securities		—			—			3,814			4.90		237,101			4.78		2,064,416			4.48
State and political subdivisions		3,754			6.33			3,844			5.33		13,286			4.82		93,461			4.97
Total securities held to maturity		$	3,872		6.33	%		$	28,785		4.96	%	$	254,380		4.81	%	$	6,474,893		4.70	%

The carrying value, weighted-average yield, and contractual maturity of our securities available for sale at December 31, 2005 are reflected in the following table (Dollars in thousands):

	Years
	Under 1						1 to 5					5 to 10					Over 10
	Amount			Yield			Amount		Yield			Amount		Yield			Amount		Yield
Mortgage-backed securities		$	—		0.00	%	$	56,861		4.90	%	$	486		6.23	%	$	3,708,754		4.34	%
State and political subdivisions		498			4.45		66,697			4.71		102,365			4.05		222,831			3.78
Corporate debt		—			—		—			—		—			—		200,692			5.10
Foreign government		—			—		10,536			3.82		—			—		—			—
Total securities available for sale		$	498		4.45	%	$	134,094		4.72	%	$	102,851		4.06	%	$	4,132,277		4.35	%

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Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Loan Portfolio

Our loan portfolio increased $267.8 million, or 199%, from 2004 to 2005 primarily due to an increase in loans to mutual funds.

The following table summarizes our loan portfolio for the dates indicated (Dollars in thousands):

	December 31,
	2005			2004			2003			2002			2001
Loans to mutual funds	$	286,144		$	22,520		$	104,954		$	49,372		$	50,359
Loans to individuals	81,392			69,402			67,641			76,263			164,443
Loans to others	34,934			42,708			27,035			18,202			17,411
	402,470			134,630			199,630			143,837			232,213
Less: allowance for loan losses	(100		)	(100		)	(100		)	(100		)	(100		)
Net loans	$	402,370		$	134,530		$	199,530		$	143,737		$	232,113
Floating rate	$	402,458		$	134,618		$	199,618		$	143,825		$	232,189
Fixed rate	12			12			12			12			24
Gross loans	$	402,470		$	134,630		$	199,630		$	143,837		$	232,213

We make loans to individually managed account customers and to mutual funds and other pooled product clients. We offer overdraft protection and lines of credit to our clients for the purpose of funding redemptions, covering overnight cash shortfalls, leveraging portfolios and meeting other client borrowing needs. The majority of loans to individually managed account customers are written on a demand basis, bear variable interest rates tied to the Prime rate or the Federal Funds rate and are fully secured by liquid collateral, primarily freely tradable securities held in custody by us for the borrower. We monitor the value of collateral daily to ensure the amount of collateral held by us exceeds the loan balance by a certain threshold. Loans to mutual funds and other pooled product clients include unsecured lines of credit that may, in the event of default, be collateralized at our option by securities held in custody by us for those clients. Loans to individually managed account customers, mutual funds and other pooled product clients also include advances that we make to certain clients pursuant to the terms of our custody agreements with those clients to facilitate securities transactions and redemptions.

At December 31, 2005, our only lending concentrations that exceeded 10% of total loan balances were the lines of credit to mutual fund clients discussed above. These loans were made in the ordinary course of business on the same terms and conditions prevailing at the time for comparable transactions.

We periodically issue lines of credit and advances to our mutual fund clients to help those clients with security transactions. The President of one of our clients is a related party to James M. Oates, a member of our Board of Directors. At December 31, 2005, we had total contractual agreements for $150.0 million of committed lines of credit with two mutual funds within the related party complex (the “mutual funds”). The primary source of repayment of the loans is the proceeds from the sale of investments in the normal course of the mutual funds’ business. As part of the agreement, the mutual funds are required to segregate and maintain specific collateral for us equal to 200% of the lines of credit. At December 31, 2005, loans due from the mutual funds totaled $125.0 million. There were no loans outstanding from any related party mutual fund complex at December 31, 2004.

In January 2006, we entered into a $30.0 million committed line of credit agreement with a series of trusts (“the trusts”). Edward F. Hines, a member of our Board of Directors, is a trustee of the trusts and is a partner in the firm that manages the assets held in the trusts. The line of credit is secured by assets of the

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trusts, which assets are held by Investors Bank as custodian. The primary source of repayment of the loans is the proceeds from the sale of investments in the normal course of the trusts’ business.

The terms and conditions of our contractual agreements with the mutual funds and trusts discussed above, including collateral requirements, lending limits and fees, are consistent with other lending clients that have similar composition, size and overall business relationships with us. Also, Mr. Oates and Mr. Hines abstain from voting on any board matter involving the proposed transactions with the mutual funds and trusts, respectively, discussed above.

Our loan portfolio credit performance has been excellent. There have been no loan charge-offs in the history of our Company. It is our policy to place a loan on nonaccrual status when either principal or interest becomes 60 days past due and the loan’s collateral is not sufficient to cover both principal and accrued interest. As of December 31, 2005, there were no loans on nonaccrual status, no loans greater than 90 days past due, and no troubled debt restructurings. Although virtually all of our loans are fully collateralized with freely tradable securities, management recognizes some credit risk inherent in the loan portfolio, and has an allowance for loan losses of $0.1 million at December 31, 2005, a level which has remained consistent for the past five years. This amount is not allocated to any particular loan, but is intended to absorb any risk of loss inherent in the loan portfolio. Management actively monitors the loan portfolio and the underlying collateral and regularly assesses the adequacy of the allowance for loan losses.

Deposits

Total deposits were $5.0 billion at December 31, 2005, down 7% from December 31, 2004. The decrease in our deposit balances is a result of our clients being more fully invested in the equity and fixed income markets.

Time deposits with balances greater than $100,000 totaled $230.1 million and $257.6 million at December 31, 2005 and 2004, respectively. All time deposits had a maturity of less than three months at December 31, 2005 and 2004.

Repurchase Agreements and Short-Term and Other Borrowings

Asset growth was funded in part by increased securities sold under repurchase agreements. Repurchase agreements increased $0.5 billion, or 13%, from December 31, 2004 to December 31, 2005. The majority of our repurchase agreements are with clients who prefer a more collateralized form of deposit. Repurchase agreements provide for the sale of securities for cash coupled with the obligation to repurchase those securities on a set date or on demand. We use repurchase agreements, including client repurchase agreements, because they provide a lower cost source of funding than other short-term borrowings and allow our clients the extra benefit of collateralization of their deposits. The average balance of securities sold under repurchase agreements for the year ended December 31, 2005 was $5.2 billion with an average cost of approximately 2.72%, compared to an average balance of $4.2 billion and an average cost of approximately 1.31% for the same period in 2004. The increase in the average cost of repurchase agreements was due to higher short-term interest rates in 2005 compared to 2004. The average cost of securities sold under repurchase agreements for the year ended December 31, 2004 included penalties of $2.9 million for the prepayment of two term repurchase agreements. These penalties were incurred to employ an asset and liability strategy in which we replaced high rate borrowings with lower cost term funding. There were no prepayment penalties for the year ended December 31, 2005.

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The following table represents information regarding our securities sold under repurchase agreements (Dollars in thousands):

	December 31,				December 31,				December 31,
	2005				2004				2003
Outstanding at end of period		$	4,797,868			$	4,255,497			$	3,258,001
Maximum outstanding at any month end		5,972,855				4,749,456				3,546,131
Average balance for the year		5,244,614				4,162,132				3,278,555
Weighted-average rate at end of period		3.55		%		1.98		%		1.09		%
Weighted-average rate for the period		2.72		%		1.31		%		0.90		%

Short-term and other borrowings increased $0.8 billion, or 128%, from December 31, 2004 to December 31, 2005. We use short-term and other borrowings to offset the variability of deposit flow. The average balance of short-term and other borrowings for the year ended December 31, 2005 was $1.6 billion with an average cost of approximately 3.31%, compared to an average balance of $0.8 billion and an average cost of approximately 2.13% for the same period in 2004.  The increase in the average cost of short-term and other borrowings was due to an increase in short-term rates during 2005 compared to 2004. The average cost of borrowings for the year ended December 31, 2004 included penalties of $3.9 million for the prepayment of certain FHLBB borrowings. As discussed above, these penalties were incurred to employ an asset and liability strategy in which we replaced high rate borrowings with lower cost term funding. There were no prepayment penalties for the year ended December 31, 2005.

The following table represents information regarding our Federal Funds purchased (Dollars in thousands):

	December 31,				December 31,				December 31,
	2005				2004				2003
Outstanding at end of period		$	810,511			$	344,491			$	697,855
Maximum outstanding at any month end		1,603,757				739,038				697,855
Average balance for the year		1,298,684				491,170				432,490
Weighted-average rate at end of period		4.25		%		1.94		%		0.99		%
Weighted-average rate for the period		3.33		%		1.45		%		1.14		%

Market Risk

Our clients, in the course of their financial asset management, maintain cash balances, which they can deposit with us on a short-term basis in interest-bearing accounts or client repurchase agreements. We either directly invest these cash balances to earn interest income, or place these deposits in third-party vehicles and remit a portion of the earnings on these investments to our clients after deducting a fee as our compensation for investing clients’ funds in these investment vehicles. In the conduct of these activities, we are subject to market risk.

Market risk is the risk of an adverse financial impact from changes in market prices and interest rates. The level of risk we assume is a function of our overall strategic objectives and liquidity needs, client requirements and market volatility. The active management of market risk is integral to our operations. The objective of interest rate sensitivity management is to provide sustainable net interest income under various economic conditions.

Our balance sheet is primarily subject to interest rate risk, which is the risk of loss due to movements in interest rates. Prepayment risk, which is the risk that changes in interest rates and other economic factors will result in investment securities being paid off earlier than the scheduled maturity date, is inherent in our investment securities, mainly our mortgage-backed securities and Federal agency bond portfolios. Prepayment levels for mortgage-backed securities are primarily driven by changes in interest

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rates. Prepayment levels for Federal agency securities are driven by a number of factors, including expiration of prepayment penalty provisions, the economic condition of the borrower, borrower refinancing alternatives, and interest rates.

Our Board of Directors has set asset and liability management policies that define the overall framework for managing interest rate sensitivity, including accountabilities and controls over investment activities. These policies delineate investment limits and strategies that are appropriate, given our liquidity and regulatory requirements. For example, we have established a policy limit stating that projected net interest income over the next twelve months will not be impacted by more than 10% given a change in interest rates of up to 200 basis points (+ or -) over twelve months. Each quarter, our Board of Directors reviews our asset and liability positions, including simulations of the effect of various interest rate scenarios on our capital.

The day-to-day responsibility for oversight of the Asset and Liability Management function has been delegated by our Board of Directors to our Asset and Liability Committee (“ALCO”). ALCO is a senior management committee consisting of the Chief Executive Officer, the President, the Chief Financial Officer, the Chief Risk Officer and members of the Treasury function. ALCO meets twice monthly. Our primary tool in managing interest rate sensitivity is an income simulation model. Key assumptions in the simulation model include the timing of cash flows, which include forecasted prepayment speeds that are based on market and industry data, maturities and repricing of financial instruments, changes in market conditions, capital planning and deposit sensitivity. The model assumes that the composition of our interest-sensitive assets and liabilities will change over the period being measured. The model also assumes that the change in interest rates is a parallel shift of the yield curve across all maturities. These assumptions are inherently uncertain, and as a result, the model cannot precisely predict the effect of changes in interest rates on our net interest income. Actual results may differ from simulated results due to the timing, magnitude and frequency of interest rate changes and changes in market conditions and management strategies.

The results of the income simulation model as of both December 31, 2005 and 2004 indicated that an upward shift of interest rates by 200 basis points over a twelve-month period would result in a reduction in projected net interest income of  approximately 7%, which is within our 10% policy limit. We also simulate a 200 basis point rate reduction over a twelve-month period. This modified simulation would result in an increase in projected net interest income of approximately 1% at December 31, 2005 and would have approximately 0% impact at December 31, 2004, both within our 10% policy limit.

We also use gap analysis as a secondary tool to manage our interest rate sensitivity. Gap analysis involves measurement of the difference in asset and liability repricing on a cumulative basis within a specified time frame. A positive gap indicates that more interest-earning assets than interest-bearing liabilities mature in a time frame, and a negative gap indicates the opposite. By seeking to minimize the net amount of assets and liabilities that could reprice in the same time frame, we attempt to reduce the risk of significant adverse effects on net interest income caused by interest rate changes. As shown in the cumulative gap position in the table presented below, at December 31, 2005, interest-bearing liabilities repriced faster than interest-earning assets in the short term. Generally speaking, during a period of falling interest rates, net interest income would be higher than it would have been until interest rates stabilize. During a period of rising interest rates, net interest income would be lower than it would have been until interest rates stabilize. Other important determinants of net interest income are the shape of the yield curve, general rate levels, reinvestment spreads, balance sheet growth and mix, and interest rate spreads. We continue to run a closely matched balance sheet by investing the majority of our assets in short duration, variable-rate securities and adding interest rate swaps against client liabilities, including client repurchase agreements.

We manage the structure of interest-earning assets and interest-bearing liabilities by adjusting their mix, yield, maturity and/or repricing characteristics based on market conditions. Client deposits and

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repurchase agreements, which are predominantly short term, are our primary sources of funds. Short-term wholesale funding is used to replace temporary deposit outflows and support balance sheet growth. We also use term borrowings and interest rate swap agreements to augment our management of interest rate risk. The effect of the swap agreements is to lengthen both a forecasted series of fixed-rate overnight liabilities incurred at different daily fixed rates and short-term variable-rate liabilities into longer-term fixed-rate liabilities. The weighted-average fixed-payment rates were 3.51% and 3.09% at December 31, 2005 and 2004, respectively. Variable-interest payments received are currently indexed to the overnight Federal Funds rate. At December 31, 2005 and 2004, the weighted-average rate of variable market-indexed interest payment obligations to the Company were 4.00% and 2.22%, respectively. The remaining terms of swaps range from 0 to 30 months. These contracts had net fair values of approximately $24.2 million and $1.5 million at December 31, 2005 and 2004, respectively.

The following table presents the repricing schedule for our interest-earning assets and interest-bearing liabilities at December 31, 2005 (Dollars in thousands):

	Within			Three			Six			One
	Three			To Six			To Twelve			Year to			Over Five
	Months			Months			Months			Five Years			Years			Total
Interest-earning assets(1):
Investment securities(2,3)	$	6,422,257		$	605,630		$	948,944		$	2,706,315		$	469,115		$	11,152,261
Loans—variable-rate	394,158			8,300			—			—			—			402,458
Loans—fixed rate	—			12			—			—			—			12
Total interest-earning assets	6,816,415			613,942			948,944			2,706,315			469,115			11,554,731
Interest-bearing liabilities:
Demand deposit accounts	85,157			—			—			—			—			85,157
Savings accounts	4,137,272			—			—			58,214			—			4,195,486
Time deposits	55,124			—			—			—			—			55,124
Interest rate contracts	(1,735,000		)	120,000			265,000			1,350,000			—			—
Securities sold under repurchase agreements	4,047,868			100,000			150,000			500,000			—			4,797,868
Short-term and other borrowings	1,306,649			—			50,000			—			—			1,356,649
Junior subordinated debentures	—			—			—			24,774			—			24,774
Total interest-bearing liabilities	7,897,070			220,000			465,000			1,932,988			—			10,515,058
Net interest-sensitivity gap during the period	$	(1,080,655	)	$	393,942		$ 483,944			$	773,327		$	469,115		$	1,039,673
Cumulative gap	$	(1,080,655	)	$	(686,713	)	$	(202,769	)	$	570,558		$	1,039,673
Interest-sensitive assets as a percent of interest-sensitive liabilities (cumulative)	86.32		%	91.54		%	97.64		%	105.43		%	109.89		%
Interest-sensitive assets as a percent of total assets (cumulative)	56.35		%	61.43		%	69.27		%	91.64		%	95.52		%
Net interest-sensitivity gap as a percent of total assets	(8.93		)%	3.26		%	4.00		%	6.39		%	3.88		%
Cumulative gap as a percent of total assets	(8.93		)%	(5.68		)%	(1.68		)%	4.72		%	8.59		%

(1)Adjustable rate assets are included in the period in which interest rates are next scheduled to adjust rather than in the period in which they are due. Fixed-rate loans are included in the period in which they are scheduled to be repaid.

(2)Mortgage-backed securities are included in the pricing category that corresponds with the earlier of their first repricing date or principal paydown schedule generated from industry sourced prepayment projections.

(3)Excludes $21.3 million of unsettled securities purchases and $41.9 million of net unrealized losses as of December 31, 2005.

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Liquidity

Liquidity represents the ability of an institution to meet present and future financial obligations through either runoff due to prepayments, asset sales, maturity of existing assets or the acquisition of additional funds through liability management. For a financial institution such as ours, these obligations arise from the withdrawals of deposits, the payment of operating expenses, and the inclusion of capital expenditures for fixed assets and leasehold improvements.

Our primary sources of liquidity include cash and cash equivalents, Federal Funds sold, new deposits, short-term borrowings, interest and principal payments on securities held to maturity and available for sale, fees collected from asset administration clients, FHLBB borrowings and Federal Reserve Discount Window borrowings. As a result of our management of liquid assets and our ability to generate liquidity through liability funds, management believes that we maintain overall liquidity sufficient to meet our depositors’ needs, to satisfy our operating requirements and to fund the payment of an anticipated annual cash dividend of $0.09 per share of outstanding common stock for 2006 (approximately $5.9 million based upon 65,052,637 shares outstanding as of December 31, 2005).

Our ability to pay dividends on common stock may depend on the receipt of dividends from the Bank. Any dividend payments by the Bank are subject to certain restrictions imposed by the Massachusetts Commissioner of Banks. During all periods presented in this report, the Company did not require dividends from the Bank in order to fund the Company’s own dividends. In addition, we may not pay dividends on our common stock if we are in default under certain agreements entered into in connection with the sale of our Capital Securities. The Capital Securities were issued in 1997 by Investors Capital Trust I, a Delaware statutory business trust sponsored by us, and qualify as Tier 1 capital under the capital guidelines of the Federal Reserve.

In July 2005, we announced that our Board of Directors authorized us to repurchase up to $150.0 million of our common stock in the open market over the next twelve months. The purchase of our common stock has been funded primarily by a dividend from the Bank to the Company. We do not expect the stock purchase program to have a material impact on our liquidity position, our risk-based capital ratios, including our leverage capital ratio, or our ability to pay dividends on our common stock. As of December 31, 2005, we have repurchased $70.7 million of our common stock.

We have informal borrowing arrangements with various counterparties. Each counterparty has agreed to make funds available to us at the Federal Funds overnight rate. Each counterparty may terminate its arrangement at any time and is under no contractual obligation to provide us with requested funding. Our borrowings under these arrangements are typically on a short-term basis. We cannot be certain, however, that such funding will be available. Lack of availability of liquid funds could have a material adverse impact on our operations.

We also have Master Repurchase Agreements in place with various counterparties. Each counterparty has agreed on an uncommitted basis to make funds available to us at various rates in exchange for collateral consisting of marketable securities.

On April 19, 2004, the FHLBB implemented a new capital structure mandated for all Federal Home Loan Banks subject to the Gramm-Leach-Bliley Act of 1999 and regulations that were subsequently promulgated in 2001 by the FHLBB’s regulator, the Federal Housing Finance Board. The Bank’s capital stock investment in the FHLBB totaled $50.0 million as of December 31, 2005. The $50.0 million capital stock investment includes both a $25.0 million membership component and a $25.0 million activity-based component. Under the new capital plan, FHLBB capital stock investments require a five-year advance notice of withdrawal. Recent changes to the FHLBB capital plan have resulted in an increased borrowing capacity. The Bank’s $50.0 million capital stock investment in the FHLBB provides an overnight borrowing capacity of up to $833.0 million. The amount outstanding under this arrangement at December 31, 2005

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was $546.0 million. Additional borrowing is available to the Bank based on prescribed collateral levels and increased investment in FHLBB capital stock. The Bank currently has no plans to increase its investment in FHLBB capital stock.

The following table details our contractual obligations as of December 31, 2005 (Dollars in thousands):

	Payments due by period
			Less than 1		1-3		4-5		More than
	Total		year		years		years		5 years
Contractual obligations
Debt obligations(1)	$	1,356,649	$	1,356,649	$	—	$	—		$	—
Repurchase agreements	4,797,868		4,297,868		500,000		—			—
Junior subordinated debentures(2)	24,000		—		24,000		—			—
Operating lease obligations	218,542		32,186		54,048		45,876			86,432
Total	$	6,397,059	$	5,686,703	$	578,048	$	45,876		$	86,432

(1)Debt obligations presented are variable in nature and do not include interest amounts.

(2)These securities ultimately mature in 2027, however; we have the right to redeem the securities as early as 2007.

	Payments due by period
			Less than 1		1-3		4-5		More than
	Total		year		years		years		5 years
Other commitments
Unused commitments to lend	$	898,879	$	892,179	$	—	$	6,700		$	—
Fixed price purchase contracts	97,539		97,539		—		—			—
Other	147,994		30,800		61,288		47,016			8,890
Total	$	1,144,412	$	1,020,518	$	61,288	$	53,716		$	8,890

Included in the Other commitments line presented above are contracts in which we are obligated to utilize the data processing services of Electronic Data Systems through December 31, 2008, SEI Investments Company through December 31, 2009 and International Business Machines Corporation through June 30, 2011. The commitments to pay for these services are based upon transaction volumes and include inflationary price clauses.

Capital Resources

Historically, we have financed our operations principally through internally generated cash flows. We incur capital expenditures for furniture, fixtures, capitalized software and miscellaneous equipment needs. We lease office space and computing equipment through operating leases. Capital expenditures have been incurred and leases entered into on an as-required basis, primarily to meet our growing operating needs. As a result, our capital expenditures were $33.1 million and $23.6 million for the year ended December 31, 2005 and 2004, respectively. For the year ended December 31, 2005, capital expenditures were comprised of approximately $19.0 million in capitalized software and projects in process, $13.6 million in fixed assets and $0.5 million in leasehold improvements. For the year ended December 31, 2004, capital expenditures were comprised of approximately $15.4 million in capitalized software and projects in process, $7.9 million in fixed assets and $0.3 million in leasehold improvements.

Stockholders’ equity at December 31, 2005 was $772.9 million, up 9% from 2004, primarily due to net income earned, net of our stock repurchase program. The ratio of average stockholders’ equity to average assets remained constant at approximately 6% for December 31, 2005 and 2004.

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In July 2005, we announced that our Board of Directors has authorized us to repurchase up to $150.0 million of our common stock in the open market over the next twelve months. We do not expect our stock purchase program to have a material impact on our capital resources, such as maintaining risk-based capital ratios in excess of capital adequacy guidelines and our ability to pay dividends on our common stock. As of December 31, 2005, we have repurchased $70.7 million of our common stock.

The FRB has adopted capital adequacy guidelines applicable to United States banking organizations. The FRB’s capital adequacy guidelines generally require bank holding companies (“BHCs”) to maintain total capital equal to 8% of total risk-adjusted assets and off-balance sheet items (the “Total Risk-Based Capital Ratio”), with at least 50% of that amount consisting of Tier 1, or core capital, and the remaining amount consisting of Tier 2, or supplementary capital. Tier 1 capital for BHCs generally consists of the sum of common stockholders’ equity and perpetual preferred stock (subject to certain limitations), less goodwill and other nonqualifying intangible assets. Tier 2 capital generally consists of hybrid capital instruments, perpetual debt and mandatory convertible debt securities; perpetual preferred stock, not included as Tier 1 capital; term subordinated debt and intermediate-term preferred stock; and, subject to limitations, general allowances for loan and lease losses. Assets are adjusted under the risk-based guidelines to take into account different risk characteristics.

In addition to the risk-based capital requirements, the FRB requires BHCs to maintain a minimum leverage capital ratio of Tier 1 capital to its average total consolidated assets (the “Leverage Ratio”) of 3.0%. Total average consolidated assets for this purpose does not include goodwill and any other intangible assets and investments that the FRB determines should be deducted from Tier 1 capital. The FRB has announced that the 3.0% Leverage Ratio requirement is the minimum for the top-rated BHCs. All other BHCs are required to maintain a minimum Leverage Ratio of 4.0%. BHCs with supervisory, financial, operational or managerial weaknesses, as well as BHCs that are anticipating or experiencing significant growth, are expected to maintain capital ratios well above the minimum levels. Because we anticipate significant future growth, we will be required to maintain a Leverage Ratio of 4.0% or higher.

We are currently in compliance with both the Total Risk-Based Capital Ratio and the Leverage Ratio requirements, and management expects these ratios to remain in compliance with the FRB’s capital adequacy guidelines. At December 31, 2005, our Total Risk-Based Capital Ratio and Leverage Ratio were 18.50% and 5.95%, respectively.

Off Balance Sheet Arrangements

Lines of Credit—At December 31, 2005, we had commitments to mutual funds and individuals under collateralized open lines of credit totaling $1.1 billion, against which $240.3 million in loans were drawn. The credit risk involved in issuing lines of credit is essentially the same as that involved in extending demand loans. We do not anticipate any loss as a result of these lines of credit.

Securities Lending—On behalf of our clients, we lend securities to creditworthy broker-dealers. In certain circumstances, we may indemnify our clients for the fair market value of those securities against a failure of the borrower to return such securities. We require the borrowers to provide collateral in an amount equal to, or in excess of, 102% of the fair market value of U.S. dollar-denominated securities borrowed and 105% of the fair market value of non-U.S. dollar-denominated securities borrowed. The borrowed securities are revalued daily to determine whether additional collateral is necessary. As guarantor, we are required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. We measure the fair value of our indemnification obligation by marking our securities lending portfolio to market on a daily basis and comparing the value of the portfolio to the collateral holdings position. The fair value of the indemnification obligation to be recorded would be the deficiency of collateral as compared to the value of the securities out on loan.

48

With respect to the indemnified securities lending portfolio, the cash and U.S. government securities held by us as collateral at December 31, 2005 totaled $7.7 billion while the fair value of the portfolio totaled approximately $7.4 billion. Given that the value of the collateral held was in excess of the value of the securities that we would be required to replace if the borrower defaulted and failed to return such securities, our indemnification obligation was zero and no liability was recorded.

All securities loans are categorized as overnight loans. The maximum potential amount of future payments that we could be required to make would be equal to the market value of the securities borrowed. Since the securities loans are overcollateralized by 2% (for U.S. dollar denominated securities) to 5% (for non-U.S. dollar-denominated securities) of the fair market value of the loan made, the collateral held by us would be used to satisfy the obligation. In addition, each borrowing agreement includes “set-off” language that allows us to use any excess collateral on other loans to that borrower to cover any collateral shortfall of that borrower. However, there is a potential risk that the collateral would not be sufficient to cover such an obligation if the security on loan increased in value between the time the borrower defaulted and the time the security is “bought-in.”  In those instances, we would “buy-in” the security using all available collateral and a loss would result from the difference between the value of the security “bought-in” and the value of the collateral held. We have never experienced a broker default.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The information required by this item is contained in the “Market Risk” section in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as part of this Report.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The information required by this item is contained in the financial statements and schedules set forth in Item 15(a) under the captions “Consolidated Financial Statements” and “Financial Statement Schedules” as a part of this Report.

ITEM 9A.CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As of December 31, 2005, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Our disclosure controls and procedures are the controls and other procedures that we designed to ensure that we record, process, summarize and report in a timely manner the information we must disclose in reports that we file or submit to the Securities and Exchange Commission and that the information required to be disclosed is accumulated and communicated to our principal executive and principal financial officers as appropriate to allow timely decisions regarding required disclosure. Kevin J. Sheehan, our Chairman and Chief Executive Officer, and John N. Spinney, Jr., our Senior Vice President and Chief Financial Officer, reviewed and participated in this evaluation. Based on this evaluation, Messrs. Sheehan and Spinney concluded that, as of December 31, 2005, our disclosure controls and procedures were effective.

49

REPORT OF MANAGEMENT TO THE BOARD OF DIRECTORS AND STOCKHOLDERS

March 2, 2006

To the Board of Directors and Stockholders:

Internal Control

Management is responsible for establishing and maintaining effective internal control over financial reporting, including safeguarding of assets, for financial statements in conformity with accounting principles generally accepted in the United States of America. The internal control contains monitoring mechanisms, and actions are taken to correct deficiencies identified. There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.

Management has made a comprehensive review, evaluation and assessment of the Company’s internal control over financial reporting, including safeguarding of assets, for financial presentations in conformity with accounting principles generally accepted in the United States of America as of December 31, 2005, including controls over the preparation by Investors Bank & Trust Company (a wholly-owned banking subsidiary of the Company) of the schedules equivalent to the basic financial statements in accordance with the Federal Financial Institutions Examination Council Instructions for Consolidated Reports of Condition and Income for Schedules RC, RI and RI-A (the “Call Report Instructions”). This assessment was based on criteria for effective internal control over financial reporting, including safeguarding of assets, described in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has concluded that the Company maintained effective internal control over financial reporting, including safeguarding of assets, presented in conformity with accounting principles generally accepted in the United States of America as of December 31, 2005.

The Audit Committee of the Board of Directors is comprised entirely of outside directors who are independent of the Company’s management; it includes members with banking or related management experience, has access to its own outside counsel, and does not include representatives of any large customers of the institution. The Audit Committee is responsible for recommending to the Board of Directors the selection of independent auditors. It meets periodically with management, the independent auditors, and the internal auditors to ensure that they are carrying out their responsibilities. The Audit Committee is also responsible for performing an oversight role by reviewing and monitoring the financial, accounting and auditing procedures of the Company in addition to reviewing the Company’s financial reports. The independent auditors and the internal auditors have full and free access to the Audit Committee, with or without the presence of management, to discuss the adequacy of internal control over financial reporting and any other matters which they believe should be brought to the attention of the Audit Committee.

Deloitte & Touche, LLP, an Independent Registered Public Accounting Firm, which has audited and reported on the consolidated financial statements contained in this Form 10-K, has issued their report dated March 2, 2006 on management’s assessment with respect to the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005.

50

Compliance With Laws and Regulations

Management is also responsible for ensuring compliance with the federal laws and regulations concerning loans to insiders and the federal and state laws and regulations concerning dividend restrictions, both of which are designated by the Federal Deposit Insurance Corporation (“FDIC”) as safety and soundness laws and regulations.

Management assessed its compliance with the designated safety and soundness laws and regulations and has maintained records of its determinations and assessments as required by the FDIC. Based on this assessment, management believes that the Bank has complied, in all material respects, with the designated safety and soundness laws and regulations for the year ended December 31, 2005.

/s/ KEVIN J. SHEEHAN

Kevin J. Sheehan

Chairman and Chief Executive Officer

/s/ JOHN N. SPINNEY, JR.

John N. Spinney, Jr.

Senior Vice President and Chief Financial Officer

51

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Investors Financial Services Corp.

We have audited management's assessment, included in the accompanying Report of Management, that Investors Financial Services Corp. and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Because management's assessment and our audit were conducted to meet the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA), management's assessment and our audit of the Company's internal control over financial reporting included controls over the preparation by Investors Bank & Trust Company (a wholly owned banking subsidiary of the Company) of the schedules equivalent to the basic financial statements in accordance with the Federal Financial Institutions Examination Council Instructions for Consolidated Reports of Condition and Income for Schedules RC, RI and RI-A (the “Call Report Instructions”).  The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.  Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.  Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing, and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances.  We believe that our audit provides a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.  Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management's assessment that the Company maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Also, in our opinion, the Company maintained, in all

52

material respects, effective internal control over financial reporting as of December 31, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have not examined and, accordingly, we do not express an opinion or any other form of assurance on management's statement referring to compliance with laws and regulations.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2005 of the Company and our report dated March 2, 2006 expressed an unqualified opinion on those financial statements.

DELOITTE & TOUCHE LLP

Boston, Massachusetts
March 2, 2006

53

PART III

ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information required under this item is incorporated herein by reference to the information in the sections entitled “Directors and Executive Officers,” “Election of Directors” and “Compensation and Other Information Concerning Directors and Executive Officers” contained in our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2005.

ITEM 11.EXECUTIVE COMPENSATION.

The information required under this item is incorporated herein by reference to the information in the section entitled “Compensation and Other Information Concerning Directors and Officers” contained in our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2005.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required under this item is incorporated herein by reference to the information in the section entitled “Management and Principal Holders of Voting Securities” contained in our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2005.

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required under this item is incorporated herein by reference to the information in the section entitled “Certain Relationships and Related Transactions” contained in our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2005.

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information required under this item is incorporated herein by reference to the information in the section entitled “Ratification of Selection of Independent Registered Public Accounting Firm” contained in our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2005.

54

PART IV

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)1.      Consolidated Financial Statements.

For the following consolidated financial information included herein, see Index on Page F-1:

Report of Independent Registered Public Accounting Firm.

Consolidated Balance Sheets as of December 31, 2005 and December 31, 2004.

Consolidated Statements of Income and Comprehensive Income for the Years Ended December 31, 2005, 2004 and 2003.

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2005, 2004 and 2003.

Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003.

Notes to Consolidated Financial Statements.

2.Financial Statement Schedules.

None.

3.List of Exhibits.

Exhibit No.	Description
3.1(6)	Certificate of Incorporation of the Company
3.2(3)	Certificate of Amendment of Certificate of Incorporation of the Company
3.3(5)	Certificate of Amendment of Certificate of Incorporation of the Company
3.4(8)	Certificate of Amendment of Certificate of Incorporation of the Company
3.5(9)	Certificate of Amendment of Certificate of Incorporation of the Company
3.6(6)	Amended and Restated Bylaws of the Company
4.1(6)	Specimen certificate representing the common stock of the Company
10.1(7)*	Amended and Restated 1995 Stock Plan
10.2(7)*	Amended and Restated 1995 Non-Employee Director Stock Option Plan
10.3(11)*	2005 Equity Compensation Plan
10.4(6)	Information Technology Services Contract between the Company and Electronic Data Systems, Inc., dated September 20, 1995
10.5(1)	Lease Agreement between the Company and John Hancock Mutual Life Insurance Company, dated November 13, 1995, for the premises located at 200 Clarendon Street, Boston, Massachusetts
10.6(11)	Amendment to Lease between Investors Financial Services Corp. and 100 & 200 Clarendon LLC (successors to the John Hancock Mutual Life Insurance Company), dated January 1, 2005
10.7(9)*	1997 Employee Stock Purchase Plan, as amended
10.8(2)	Amended and Restated Declaration of Trust among the Company and the Trustees named therein, dated January 31, 1997
10.9(2)	Indenture between the Company and The Bank of New York, dated January 31, 1997
10.10(2)	Common Securities Guarantee Agreement by the Company as Guarantor, dated January 31, 1997

55

10.11(2)	Capital Securities Guarantee Agreement between the Company as Guarantor and The Bank of New York as Capital Securities Guarantee Trustee, dated January 31, 1997
10.12(4)	First Amendment, effective January 1, 2000 to Information Technology Services Contract between the Company and Electronic Data Systems, Inc. dated September 20, 1995
10.13(4)*	Amended and Restated Employment Agreement between the Company and Kevin Sheehan
10.14(4)*	Change of Control Employment Agreement between the Company and Kevin Sheehan
10.15(4)*	Amended and Restated Employment Agreement between the Company and Michael Rogers
10.16(4)*	Change of Control Employment Agreement between the Company and Michael Rogers
10.17(4)*	Amended and Restated Employment Agreement between the Company and Edmund Maroney
10.18(4)*	Change of Control Employment Agreement between the Company and Edmund Maroney
10.19(4)*	Amended and Restated Employment Agreement between the Company and Robert Mancuso
10.20(4)*	Change of Control Employment Agreement between the Company and Robert Mancuso
10.21(4)*	Amended and Restated Employment Agreement between the Company and John Henry
10.22(4)*	Change of Control Employment Agreement between the Company and John Henry
10.23(6)*	Change of Control Employment Agreement between the Company and John N. Spinney, Jr.
10.24(7)*	Employment Agreement between the Company and John N. Spinney, Jr.
10.25(9)	Information Technology Services Agreement dated July 1, 2004 between the Company and International Business Machines Corporation.
10.26(10)	Stock Option Agreement dated November 15, 2004 between the Company and Kevin J. Sheehan
10.27(10)*	Stock Option Agreement dated November 15, 2004 between the Company and Kevin J. Sheehan
10.28(10)*	Stock Option Agreement dated November 15, 2004 between the Company and Michael F. Rogers
10.29(10)*	Stock Option Agreement dated November 15, 2004 between the Company and Michael F. Rogers
10.30(10)*	Stock Option Agreement dated November 15, 2004 between the Company and Edmund J. Maroney
10.31(10)*	Stock Option Agreement dated November 15, 2004 between the Company and Edmund J. Maroney
10.32(10)*	Stock Option Agreement dated November 15, 2004 between the Company and John N. Spinney, Jr.
10.33(10)*	Stock Option Agreement dated November 15, 2004 between the Company and Robert D. Mancuso
10.34**	Amended and Restated Trust 3000 Service Agreement between the Company and SEI Investments Company dated July 1, 2004.

56

10.35	Lease agreement between the Company and Copley Place Associates, LLC dated August 2, 1999, as amended.
21.1	Subsidiaries of the Company
23.1	Consent of Deloitte & Touche LLP
24.1	Power of Attorney (see Power of Attorney and Signature Page of this Report).
31.1	Certificate of Kevin J. Sheehan, Chief Executive Officer
31.2	Certificate of John N. Spinney, Jr., Chief Financial Officer
32.1	Certification of Kevin J. Sheehan, Chief Executive Officer, and John N. Spinney, Jr., Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1)Previously filed as an exhibit to Form 10-K for the fiscal year ended October 31, 1995.

(2)Previously filed as an exhibit to Form 10-K for the fiscal year ended December 31, 1996 (File No. 000-26996).

(3)Previously filed as an exhibit to Form 10-Q for the fiscal quarter ended March 31, 2000.

(4)Previously filed as an exhibit to Form 10-K for the fiscal year ended December 31, 2000.

(5)Previously filed as an exhibit to the Company’s Registration Statement on Form S-8 filed with the Commission on November 5, 2001 (File No. 333-72786).

(6)Previously filed as an exhibit to Form 10-K for the fiscal year ended December 31, 2001.

(7)Previously filed as an exhibit to Form 10-K for the fiscal year ended December 31, 2002.

(8)Previously filed as an exhibit to Form 10-Q for the fiscal quarter ended June 30, 2003.

(9)Previously filed as an exhibit to Form 10-Q for the fiscal quarter ended June 30, 2004.

(10)Previously filed as an exhibit to Form 10-K for the fiscal year ended December 31, 2004.

(11)Previously filed as an exhibit to Form 10-Q for the fiscal quarter ended March 31, 2005.

*Indicates a management contract or a compensatory plan, contract or arrangement.

**Confidential treatment requested pursuant to rule 24b-2 promulgated under the Securities Exchange Act of 1934.

(b)Exhibits.

The Company hereby files as part of this Form 10-K the exhibits listed in Item 15(a)(3) above. Exhibits which are incorporated herein by reference can be inspected and copied at the public reference facilities maintained by the Securities and Exchange Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C.

(c)Financial Statement Schedules.

None.

57

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Boston, Massachusetts on the 2nd day of March, 2006.

INVESTORS FINANCIAL SERVICES CORP.
By:	/s/ KEVIN J. SHEEHAN
	Kevin J. Sheehan
	Chief Executive Officer and Chairman of the Board

POWER OF ATTORNEY AND SIGNATURES

We, the undersigned officers and directors of Investors Financial Services Corp., hereby severally constitute and appoint Kevin J. Sheehan and Michael F. Rogers, and each of them singly, our true and lawful attorneys, with full power to them and each of them singly, to sign for us in our names in the capacities indicated below, all amendments to this report, and generally to do all things in our names and on our behalf in such capacities to enable Investors Financial Services Corp. to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in the capacities indicated on the 2nd day of March, 2006.

	Signature		Title(s)
/s/ KEVIN J. SHEEHAN		Chief Executive Officer and Chairman of the Board
Kevin J. Sheehan		(Principal Executive Officer); Director
/s/ MICHAEL F. ROGERS		President
Michael F. Rogers
/s/ JOHN N. SPINNEY, JR.		Senior Vice President and Chief Financial Officer
John N. Spinney, Jr		(Principal Financial Officer and Principal Accounting Officer)
/s/ RICHARD P. BOYATZI		Director
Richard P. Boyatzi
/s/ FRANK B. CONDON, JR.		Director
Frank B. Condon, Jr.
/s/ ROBERT B. FRASER		Director
Robert B. Fraser

58

/s/ EDWARD F. HINES	Director
Edward F. Hines
/s/ THOMAS P. MCDERMOTT	Director
Thomas P. McDermott
/s/ JAMES M. OATES	Director
James M. Oates
/s/ JOHN I. SNOW III	Director
John I. Snow III
/s/ PHYLLIS S. SWERSKY	Director
Phyllis S. Swersky

59

INVESTORS FINANCIAL SERVICES CORP.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of December 31, 2005 and December 31, 2004		F-3
Consolidated Statements of Income and Comprehensive Income for the Years Ended December 31, 2005, 2004 and 2003		F-4
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2005, 2004 and 2003		F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003		F-6
Notes to Consolidated Financial Statements		F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Investors Financial Services Corp.:

We have audited the accompanying consolidated balance sheets of Investors Financial Services Corp. and subsidiaries (collectively, the “Company”) as of December 31, 2005 and 2004, and the related consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2005 and 2004, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 2, 2006 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

DELOITTE & TOUCHE LLP

Boston, Massachusetts
March 2, 2006

F-2

INVESTORS FINANCIAL SERVICES CORP.
CONSOLIDATED BALANCE SHEETS
December 31, 2005 and 2004 (Dollars in thousands, except per share data)

	December 31,				December 31,
	2005				2004
Assets
Cash and due from banks		$	79,637			$	49,059
Securities held to maturity (including securities pledged of $4,529,421 and $4,021,625 at December 31, 2005 and 2004, respectively) (approximate fair value of $6,725,729 and $5,937,462 at December 31, 2005 and 2004, respectively) (Note 3)		6,761,930				5,942,717
Securities available for sale (including securities pledged of $2,997,958 and $2,312,410 at December 31, 2005 and 2004, respectively) (Note 3)		4,369,720				4,565,505
Nonmarketable equity securities (Note 3)		50,000				50,000
Loans, less allowance for loan losses of $100 at December 31, 2005 and 2004 (Note 4)		402,370				134,530
Accrued interest and fees receivable		119,583				89,292
Equipment and leasehold improvements, less accumulated depreciation of $59,156 and $61,017 at December 31, 2005 and 2004, respectively (Note 5)		69,401				67,883
Goodwill		79,969				79,969
Other assets		163,783				188,870
Total Assets		$	12,096,393			$	11,167,825
Liabilities and Stockholders’ Equity
Liabilities:
Deposits (Note 6):
Demand		$	537,558			$	690,308
Savings		4,224,908				4,448,405
Time		230,124				257,669
Total deposits		4,992,590				5,396,382
Securities sold under repurchase agreements (Note 7)		4,797,868				4,255,497
Short-term and other borrowings (Note 8)		1,356,649				594,681
Due to brokers for open trades payable		21,293				5,475
Junior subordinated deferrable interest debentures (Note 10)		24,774				24,774
Accrued taxes and other expenses		45,077				54,967
Other liabilities		85,284				123,787
Total liabilities		11,323,535				10,455,563
Commitments and contingencies (Note 16)		—				—
Stockholders’ Equity:
Preferred stock, par value $0.01 (shares authorized: 1,000,000; issued: none in 2005 and 2004)		—				—
Common stock, par value $0.01 (shares authorized: 175,000,000; issued: 65,052,637 and 66,595,349 in 2005 and 2004, respectively)		672				667
Surplus		286,265				272,536
Deferred compensation		(311		)		(572		)
Retained earnings		572,549				418,034
Accumulated other comprehensive (loss) income, net		(13,369		)		23,888
Treasury stock, at cost (2,124,669 and 73,235 shares in 2005 and 2004, respectively)		(72,948		)		(2,291		)
Total stockholders’ equity		772,858				712,262
Total Liabilities and Stockholders’ Equity		$	12,096,393			$	11,167,825

See Notes to Consolidated Financial Statements.

F-3

INVESTORS FINANCIAL SERVICES CORP.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Years Ended December 31, 2005, 2004 and 2003 (Dollars in thousands, except per share data)

	December 31,				December 31,				December 31,
	2005				2004				2003
Fees and Other Revenue:
Asset servicing fees:
Core service fees		$	375,596			$	314,272			$	254,225
Value-added service fees		133,463				108,928				79,361
Total asset servicing fees		509,059				423,200				333,586
Gain on sale of investments		12,397				234				—
Other operating income		4,081				2,057				2,607
Total fees and other revenue		525,537				425,491				336,193
Interest income		447,705				313,149				247,094
Interest expense		277,280				125,469				93,180
Net interest income		170,425				187,680				153,914
Net operating revenue		695,962				613,171				490,107
Operating Expenses:
Compensation and benefits		250,459				205,728				186,932
Technology and telecommunications		54,732				49,816				38,914
Transaction processing services		49,873				42,159				33,299
Depreciation and amortization		31,578				32,124				27,971
Occupancy		26,490				29,032				29,218
Professional fees		13,380				15,346				11,189
Travel and sales promotion		6,825				5,470				4,822
Losses and loss adjustment expenses		5,837				924				799
Insurance		4,219				4,625				3,203
Other operating expenses		16,716				13,159				8,574
Total operating expenses		460,109				398,383				344,921
Income Before Income Taxes		235,853				214,788				145,186
Provision for income taxes (Note 9)		76,035				72,826				52,765
Net Income		$	159,818			$	141,962			$	92,421
Basic Earnings Per Share		$	2.42			$	2.15			$	1.42
Diluted Earnings Per Share		$	2.37			$	2.09			$	1.39
Weighted-Average Basic Shares		66,139,323				66,179,286				65,098,960
Weighted-Average Diluted Shares		67,473,804				67,916,217				66,475,462
Comprehensive Income:
Net income		$	159,818			$	141,962			$	92,421
Other comprehensive (loss) income (Note 12):
Net unrealized investment loss		(46,054		)		(7,854		)		(12,963		)
Net unrealized derivative instrument gain		8,745				13,031				12,019
Cumulative translation adjustment		52				846				577
Other comprehensive (loss) income		(37,257		)		6,023				(367		)
Comprehensive income		$	122,561			$	147,985			$	92,054

See Notes to Consolidated Financial Statements.

F-4

INVESTORS FINANCIAL SERVICES CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Years Ended December 31, 2005, 2004, and 2003 (Dollars in thousands, except per share data)

	December 31,				December 31,				December 31,
	2005				2004				2003
Common shares
Balance, beginning of year		66,595,349				65,436,788				64,775,042
Exercise of stock options		394,018				1,114,051				548,069
Common stock issuance		114,704				91,237				129,371
Common stock repurchased		(2,051,434		)		(46,727		)		(15,694		)
Balance, end of year		65,052,637				66,595,349				65,436,788
Treasury shares
Balance, beginning of year		73,235				26,508				10,814
Common stock repurchased		2,051,434				46,727				15,694
Balance, end of year		2,124,669				73,235				26,508
Common stock
Balance, beginning of year		$	667			$	655			$	648
Exercise of stock options		4				12				6
Common stock issuance		1				—				1
Balance, end of year		$	672			$	667			$	655
Surplus
Balance, beginning of year		$	272,536			$	242,662			$	233,337
Exercise of stock options		7,775				16,056				2,971
Tax benefit from stock options		2,087				10,651				3,008
Common stock issuance		3,867				3,355				3,386
Stock option forfeiture		—				(188		)		(40		)
Balance, end of year		$	286,265			$	272,536			$	242,662
Deferred compensation
Balance, beginning of year		$	(572	)		$	(1,076	)		$	(1,599	)
Stock option forfeiture		—				188				40
Amortization of deferred compensation		261				316				483
Balance, end of year		$	(311	)		$	(572	)		$	(1,076	)
Retained earnings
Balance, beginning of year		$	418,034			$	280,701			$	192,184
Net income		159,818				141,962				92,421
Cash dividend, $0.08, $0.07 and $0.06 per share in the years ended December 31, 2005, 2004 and 2003, respectively		(5,303		)		(4,629		)		(3,904		)
Balance, end of year		$	572,549			$	418,034			$	280,701
Accumulated other comprehensive (loss) income, net
Balance, beginning of year		$	23,888			$	17,865			$	18,232
Net unrealized investment loss		(46,054		)		(7,854		)		(12,963		)
Net unrealized derivative instrument gain		10,473				12,990				11,785
Amortization of transition-related adjustment		—				—				234
Amortization of terminated interest rate swap agreements		(1,728		)		41				—
Cumulative translation adjustment		52				846				577
Balance, end of year		$	(13,369	)		$	23,888			$	17,865
Treasury stock
Balance, beginning of year		$	(2,291	)		$	(550	)		$	—
Common stock repurchased (2,051,434 shares at an average price of $34.44 in 2005 and 46,727 shares at an average price of $37.24 in 2004)		(70,657		)		(1,741		)		(550		)
Balance, end of year		$	(72,948	)		$	(2,291	)		$	(550	)
Total Stockholders’ Equity		$	772,858			$	712,262			$	540,257

See Notes to Consolidated Financial Statements.

F-5

INVESTORS FINANCIAL SERVICES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2005, 2004 and 2003 (Dollars in thousands)

	December 31,				December 31,				December 31,
	2005				2004				2003
Cash Flows From Operating Activities:
Net income		$	159,818			$	141,962			$	92,421
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed loss of unconsolidated subsidiary		28				28				8
Depreciation and amortization		31,578				32,124				27,971
Amortization of deferred compensation		261				316				483
Amortization of premiums on securities, net of accretion of discounts		49,578				40,743				39,200
Gain on sale of investments		(12,397		)		(234		)		—
Deferred income taxes		(6,944		)		2,997				5,651
Changes in assets and liabilities:
Accrued interest and fees receivable		(30,291		)		(16,476		)		(5,555		)
Other assets		25,409				(89,667		)		(29,878		)
Accrued taxes and other expenses		(9,890		)		2,745				21,465
Other liabilities		5,833				106,795				6,221
Net cash provided by operating activities		212,983				221,333				157,987
Cash Flows From Investing Activities:
Proceeds from paydowns/maturities of securities available for sale		1,400,359				1,392,295				1,608,656
Proceeds from paydowns/maturities of securities held to maturity		1,628,989				1,410,133				1,902,187
Proceeds from sale of securities available for sale		376,143				25,041				—
Purchases of securities available for sale		(1,649,167		)		(1,704,293		)		(2,666,066		)
Purchases of securities held to maturity		(2,489,882		)		(3,078,456		)		(2,794,414		)
Net increase (decrease) in due to brokers for open trades payable		15,818				5,475				(286,843		)
Net (increase) decrease in loans		(267,840		)		65,000				(55,793		)
Purchases of equipment, leasehold improvements and software		(33,068		)		(23,559		)		(29,495		)
Net cash used in investing activities		(1,018,648		)		(1,908,364		)		(2,321,768		)
Cash Flows From Financing Activities:
Net (decrease) increase in demand deposits		(152,750		)		355,485				(49,638		)
Net (decrease) increase in time and savings deposits		(251,042		)		833,779				923,838
Net increase in securities sold under repurchase agreements		542,371				997,496				956,027
Net increase (decrease) in short-term and other borrowings		761,968				(503,406		)		356,980
Proceeds from exercise of stock options		7,779				16,068				2,977
Proceeds from issuance of common stock		3,868				3,355				3,387
Common stock repurchase		(70,657		)		(1,741		)		(550		)
Dividends paid to stockholders		(5,303		)		(4,629		)		(3,904		)
Net cash provided by financing activities		836,234				1,696,407				2,189,117
Effect of exchange rates on changes in cash		9				(6		)		(215		)
Net Increase In Cash and Due From Banks		30,578				9,370				25,121
Cash and Due From Banks, Beginning of Year		49,059				39,689				14,568
Cash and Due From Banks, End of Year		$	79,637			$	49,059			$	39,689
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest		$	270,121			$	121,542			$	91,858
Cash paid for income taxes		$	68,664			$	77,819			$	39,859

See Notes to Consolidated Financial Statements.

F-6

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2005, 2004 and 2003

1. Description of Business

Investors Financial Services Corp. (‘IFSC’) provides asset administration services for the financial services industry through its wholly-owned subsidiary, Investors Bank & Trust Company (‘the Bank’). As used herein, the defined term “the Company” shall mean IFSC together with the Bank and its domestic and foreign subsidiaries. The Company provides core services and value-added services to a variety of financial asset managers, including mutual fund complexes, investment advisors, family offices, banks and insurance companies. Core services include middle office outsourcing, global custody, multicurrency accounting and fund administration. Value-added services include securities lending, foreign exchange, cash management, performance measurement, institutional transfer agency, investment advisory services, lines of credit and brokerage and transition management services. The Company is subject to regulation by the Federal Deposit Insurance Corporation (‘FDIC’), the Federal Reserve Board of Governors (‘FRB’), the Office of the Commissioner of Banks of the Commonwealth of Massachusetts (‘Commissioner’), the Securities and Exchange Commission (‘SEC’), the National Association of Securities Dealers, Inc. (‘NASD’), the Office of the Superintendent of Financial Institutions in Canada, the Irish Financial Services Regulatory Authority, the State of Vermont Department of Banking, Insurance, Securities & Health Care Administration and the Financial Services Authority (‘FSA’) in the United Kingdom.

2. Summary of Significant Accounting Policies

Basis of Presentation—The consolidated financial statements include the accounts of the Company and its domestic and foreign subsidiaries. All significant intercompany accounts and transactions have been eliminated.

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Certain amounts in the prior years’ financial statements have been reclassified to conform to the current year’s presentation.

Revenue Recognition

Asset servicing revenue—The Company recognizes revenue from asset servicing and investment advisory services based on contractual terms signed by the Company’s clients. Generally, revenue is accrued by multiplying average or month-end net assets by contracted rates. Asset servicing revenue is considered earned daily as transactions are processed or services are provided.

Value-added services—The Company recognizes revenue from its value-added services, such as foreign exchange, securities lending and cash management services, based on the specific type of transaction processed. Value-added services revenue is considered earned daily as transactions are processed or services are provided.

Interest income—The Company recognizes and accrues income on its interest-earning assets as earned using a method which approximates the constant effective yield method.

F-7

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

2. Summary of Significant Accounting Policies (Continued)

Cash and Cash Equivalents—For purposes of reporting cash flows, the Company defines cash and cash equivalents to include cash, due from banks, and interest-bearing deposits.

Securities—The Company classifies all equity securities that have readily determinable fair values and all investments in debt securities into one of three categories. Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held to maturity and carried at amortized cost. Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and carried at fair value, with unrealized gains and losses included in earnings. All other debt and equity securities not classified as either held to maturity or trading are classified as available for sale and carried at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income.

Nonmarketable securities consist of stock of the Federal Home Loan Bank of Boston (‘FHLBB’) and are carried at cost and redeemable at par value. The Company is required to hold this stock under its borrowing arrangement with the FHLBB.

An investment is considered impaired if the fair value of the investment is less than its cost. The Company recognizes an impairment charge if, based on the facts and circumstances, management determines the impairment to be other than temporary. For example, the Company will record an other than temporary impairment charge on a debt security if it is determined that it is probable that the Company will be unable to recover all amounts due under the contractual obligations of the security.

Amortization and accretion of debt securities purchased at a premium or discount are amortized or accreted into income using a method which approximates the constant effective yield method. The Company applies Statement of Financial Accounting Standard No. 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases (‘SFAS 91’) for the amortization of premiums and accretion of discounts. In calculating the effective yield for securities that represent holdings of large numbers of similar loans for which prepayments are probable and the timing and amount of prepayments can be reasonably estimated, prepayments are anticipated using the Company’s actual three-month prepayment experience.

The amount of amortization or accretion to recognize in income is driven by the calculation of the constant effective yield. When calculating this yield, the Company assumes that prepayments will continue from the analysis date to the date of the security’s expected maturity at its most recent three-month prepayment rate. The prepayment rate is updated monthly based on the Company’s previous three-month actual prepayment experience.

The Company utilizes three-month prepayment rates to anticipate prepayments because such rates are based on its own actual prepayment experience and because the Company believes three-month rates are a better estimate of future experience than either one-month or six-month or longer rates. In the opinion of management, a one-month rate does not capture enough experience to predict future prepayment behavior and may create undue volatility in interest income due to one-time fluctuations in prepayment activity. Conversely, in the opinion of management, a six-month or longer rate would not capture enough volatility to predict future prepayment behavior.

If a difference arises between the Company’s estimated prepayments and its actual prepayments received, the constant effective yield is recalculated based on the Company’s actual payments to date and

F-8

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

2. Summary of Significant Accounting Policies (Continued)

anticipated future payments. This monthly recalculation results in the carrying value of the security being adjusted to the amount that would have existed had the new effective yield been applied since the purchase date, and a corresponding charge or credit is recognized to interest income.

For securities that do not represent holdings of large numbers of similar loans for which prepayments are probable and the timing and amount of prepayments can be reasonably estimated, the associated premiums and discounts are amortized or accreted over their contractual term using the constant effective yield. Actual prepayment experience for such securities is reviewed monthly and a proportionate amount of premium or discount is recognized in income at that time such that the effective yield on the remaining portion of the securities continues unchanged.

As of and for the years ended December 31, 2005, 2004, and 2003, the Company anticipated prepayments on its mortgage-backed securities. All other securities, including Federal agency securities, state and political subdivisions, corporate debt, U.S. Treasury securities and foreign government securities, do not meet the SFAS 91 criteria for anticipating prepayments. Accordingly, no prepayments were anticipated for these securities.

Loans—Interest on loans is credited to income as earned using a method which approximates the effective yield method, and interest is only accrued if deemed collectible. Accrual of interest on loans is discontinued when management determines that collection of interest is not probable, or when a loan is both greater than 60 days delinquent and the loan’s collateral is not sufficient to cover both principal and accrued interest. Interest income on impaired loans is recognized after all past due principal and interest has been repaid and the Company expects repayment of the remaining contractual principal and interest, or when an improvement in the condition of the loan has occurred that would warrant resumption of interest accruals. Other loan fees and charges, including service costs for the prepayment of loans, delinquent charges and other miscellaneous loan services, are recorded as income when collected.

Equipment, Leasehold Improvements and Capitalized Software Costs—Equipment and leasehold improvements are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the assets which range from three to seven years, and for leasehold improvements over the lesser of the useful life or the life of the lease. For costs incurred to develop computer software for internal use, the Company capitalizes costs incurred during the application and development stage, which includes costs to design the software configuration and interfaces, coding, installation and testing. Costs incurred during the preliminary and post-implementation stages are expensed as incurred. Capitalized software costs are amortized over the estimated useful life of the project, which can range from three to five years.

Long-Lived Assets—Long-lived assets to be held and used by the Company are reviewed on a quarterly basis to determine whether any events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. For long-lived assets to be held and used, the Company bases its evaluation on such impairment indicators as the nature of the assets, the further economic benefit of the assets, any historical or future profitability measurements, as well as other external market conditions or factors that may be present. During the years ended December 31, 2005 and 2004, the Company’s analysis indicated there were no material impairments of its long-lived assets.

F-9

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

2. Summary of Significant Accounting Policies (Continued)

Income Taxes—Income tax expense is based on estimated taxes payable or refundable on a tax return basis for the current year and the changes in deferred tax assets and liabilities during the year. Deferred tax assets and liabilities are established for temporary differences between the accounting bases and the tax bases of the Company’s assets and liabilities at enacted tax rates expected to be in effect when the amounts related to such temporary differences are realized or settled. If the Company determines that it is “more likely than not” that some portion or all of a deferred tax asset will not be realized, the Company records a valuation allowance in accordance with the provisions of Statement of Financial Accounting Standard No. 109, Accounting for Income Taxes (‘SFAS 109’).

The Company recorded a one-time benefit of approximately $7 million in the second quarter of 2005 related to the recognition of the indefinite reversal provision of Accounting Principles Board Opinion No. 23, Accounting for Income Taxes—Special Areas (‘APB 23’). The indefinite reversal provision of APB 23 specifies that U.S. income taxes should not be accrued on the undistributed earnings of a foreign subsidiary if those earnings have been or will be invested indefinitely in that subsidiary’s operations. The Company had previously accrued U.S. income taxes on the undistributed earnings of its Irish subsidiaries. In the second quarter of 2005, the Company recognized the indefinite reversal provision of APB 23 due to the projected capital needs of its Irish subsidiaries necessary to support continued growth. As such, the Company will no longer record U.S. income taxes on the undistributed earnings of its Irish subsidiaries.

Translation of Foreign Currencies—The Company translates the financial statements of its foreign operations into U.S. dollars. Where the functional currency is not the U.S. dollar, assets and liabilities are translated into U.S. dollars at period-end exchange rates, while income and expenses are translated using average rates for the period. The resulting translation adjustments are recorded as a component of accumulated other comprehensive income (‘OCI’) in stockholders’ equity.

For foreign operations where the functional currency is the U.S. dollar, the local currency financial statements are remeasured into U.S. dollars using period-end exchange rates for monetary assets and liabilities, exchange rates in effect on the date of acquisition for non-monetary assets and liabilities (such as premises and equipment and the related depreciation), and the average exchange rates during the period for income and expenses. The resulting exchange gains or losses are recorded in current period income.

Derivative Financial Instruments—Derivative financial instruments are recorded in the Company’s balance sheets at fair value as other assets or other liabilities, depending on the rights and obligations under the contracts. The Company utilizes derivative financial instruments primarily for balance sheet asset and liability management purposes. Changes in the fair value of a derivative that is designated and qualifies as a cash flow hedge are reported in OCI, net of taxes, to the extent the hedge is highly effective. The ineffective portion, which is the extent to which the changes in the fair value of the derivative exceed the changes in the variability of the expected future cash flows of the hedged item (on an absolute basis), is reported in net interest income. Changes in the fair value of a derivative that is designated and qualifies as a fair value hedge are reported in net interest income, along with the change in the fair value of the hedged item attributable to the risk hedged. The changes in fair value of a derivative that do not qualify as a hedge are recognized in earnings.

F-10

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

2. Summary of Significant Accounting Policies (Continued)

Hedge accounting is discontinued prospectively if a) the hedging relationship no longer meets the hedging criteria, b) the derivative expires, is sold or terminated, or the hedged item no longer exists, or c) the Company removes the hedge designation. When hedge accounting is discontinued under cash flow hedge accounting, the component of OCI related to the discontinued hedge is amortized to net interest income over the remaining term of the derivative financial instrument. Under fair value hedge accounting,  when a hedge is discontinued, the hedged item is no longer adjusted for changes in fair value and the existing basis adjustment is amortized to net interest income. If cash flow hedge accounting is discontinued due to the probability that the forecasted transaction will not occur within the specified period, gains and losses accumulated in OCI related to that hedge are recognized immediately in net interest income.

The Company enters into interest rate derivative contracts that are designated as cash flow hedges of variable-rate liabilities. The unrealized gains or losses related to these contracts are reported in other assets and other liabilities on the Company’s consolidated balance sheets.

The Company also enters into fixed price purchase contracts that are designed to hedge the variability of the consideration to be paid for the purchase of investment securities. By entering into these contracts, the Company is fixing the price to be paid at a future date for certain investment securities. The changes in fair value of these fixed price contracts are included as a component of OCI. The unrealized gains and losses are included in other assets and other liabilities on the Company’s consolidated balance sheets.

The Company enters into foreign exchange contracts with clients and enters into matched or offsetting positions with either another client or a financial institution. These contracts are subject to market value fluctuations in foreign currencies. Gains and losses from such fluctuations are netted and recorded as an adjustment to asset servicing fees in the Company’s consolidated statements of income. Unrealized gains or losses resulting from purchases and sales of foreign exchange contracts are included within the respective other assets and other liabilities categories on the Company’s consolidated balance sheets. Foreign exchange contracts with the same counterparty are netted in the Company’s consolidated balance sheets when a master netting agreement exists.

Securities Sold Under Repurchase Agreements—The Company enters into sales of securities under agreements to repurchase as a low cost source of funding for its operations. These agreements are treated as secured borrowings, and the obligations to repurchase securities sold are reflected as liabilities in the consolidated balance sheets. Securities pledged as collateral under agreements to repurchase are reflected as assets in the accompanying consolidated balance sheets.

F-11

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

2. Summary of Significant Accounting Policies (Continued)

Share-based Compensation—The Company measures compensation expense for share-based compensation plans using the intrinsic value method. The intrinsic value method measures compensation cost as the amount by which the fair market value of the Company’s common stock exceeds the option exercise price on the measurement date, which is typically the date of grant. Generally, options granted have an exercise price equivalent to the fair market value of the common stock at the measurement date. Accordingly, no compensation cost has been recorded. If share-based compensation were recognized using the fair value method, stock options would be valued at grant date using the Black-Scholes valuation model and the resulting compensation costs would have decreased net income as indicated below (Dollars in thousands, except per share data):

	December 31, 2005				December 31, 2004				December 31, 2003
Net income as reported		$	159,818			$	141,962			$	92,421
Deduct: Total share-based employee compensation expense determined under fair value method for all awards, net of related tax effects		(19,832		)		(15,146		)		(10,467		)
Pro forma net income		$	139,986			$	126,816			$	81,954
Earnings per share:
Basic-as reported		$	2.42			$	2.15			$	1.42
Basic-pro forma		2.12				1.92				1.26
Diluted-as reported		$	2.37			$	2.09			$	1.39
Diluted-pro forma		2.07				1.87				1.23

The fair value of each option grant was estimated on the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions for options granted in the years ended December 31, 2005, 2004 and 2003, respectively: an average assumed risk-free interest rate of 4.55%, 3.08% and 2.37%, an expected life of four years, an average expected volatility of 41.04%, 50.49% and 55.86%, and average dividend yield of 0.20%, 0.16% and 0.20%.

Earnings Per Share—Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the year. Diluted EPS adjusts Basic EPS to reflect the potential dilution that could occur if contracts to issue common stock (such as employee stock options) were exercised into common stock that then shared in the earnings of the Company.

F-12

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

2. Summary of Significant Accounting Policies (Continued)

Reconciliation from Basic EPS to Diluted EPS is as follows (Dollars in thousands, except per share data):

			Weighted-Average		Per Share
	Income		Shares		Amount
December 31, 2005
Basic EPS
Income available to common stockholders	$	159,818		66,139,323		$	2.42
Dilutive effect of common equivalent shares of stock options	—			1,334,481		(0.05		)
Diluted EPS	$	159,818		67,473,804		$	2.37
December 31, 2004
Basic EPS
Income available to common stockholders	$	141,962		66,179,286		$	2.15
Dilutive effect of common equivalent shares of stock options	—			1,736,931		(0.06		)
Diluted EPS	$	141,962		67,916,217		$	2.09
December 31, 2003
Basic EPS
Income available to common stockholders	$	92,421		65,098,960		$	1.42
Dilutive effect of common equivalent shares of stock options	—			1,376,502		(0.03		)
Diluted EPS	$	92,421		66,475,462		$	1.39

For the years ended December 31, 2005, 2004 and 2003, there were 733,015 options, 29,451 options, and 3,517,655 options which were not considered dilutive for EPS calculations, respectively.

F-13

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003.

2. Summary of Significant Accounting Policies (Continued)

Guarantees—On behalf of its clients, the Company lends securities to creditworthy broker-dealers. In certain circumstances, the Company may indemnify its clients for the fair market value of those securities against a failure of the borrower to return such securities. The Company requires the borrowers to provide collateral in an amount equal to, or in excess of, 102% of the fair market value of U.S. dollar-denominated securities borrowed and 105% of the fair market value of non-U.S. dollar-denominated securities borrowed. The borrowed securities are revalued daily to determine whether additional collateral is necessary. As guarantor, the Company is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The Company measures the fair value of its indemnification obligation by marking its securities lending portfolio to market on a daily basis and comparing the value of the portfolio to the collateral holdings position. The fair value of the indemnification obligation to be recorded would be the deficiency of collateral as compared to the value of the securities out on loan.

Goodwill—Inaccordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (‘SFAS 142’), the Company ceased amortization of goodwill effective January 1, 2002. The Company reviews goodwill for impairment on an annual basis, or if events or changes in circumstances indicate it would be more likely than not that the fair value of the goodwill would be reduced below its carrying value. As of December 31, 2005, there was no impairment of goodwill.

New Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (‘FASB’) issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (‘SFAS 123R’). SFAS 123R requires that compensation cost relating to share-based payment transactions be recognized in the financial statements, with measurement based upon the fair value of the equity or liability instruments issued. The Company currently uses the intrinsic-value method to measure compensation cost related to its share-based transactions. SFAS 123R replaces SFAS 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees.

In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (‘SAB 107’), which expresses the views of the SEC regarding the interaction of SFAS 123R and certain SEC regulations and provides the SEC’s views regarding the valuation of share-based payment arrangements for public companies.

In April 2005, the SEC issued Release 2005-57, which delayed the effective date for SFAS 123R to reporting periods in the first fiscal year beginning after June 15, 2005. Accordingly, the Company adopted SFAS 123R on January 1, 2006, effective for financial periods in 2006. There was no impact to the financial condition or results of operations of the Company upon adoption.

In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections-a replacement of APB Opinion No. 20 and FASB Statement No. 3 (‘SFAS 154’). SFAS 154 replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the accounting and reporting requirements for a change in accounting principle. SFAS 154 applies to all voluntary changes in an accounting principle, as well as to changes required by a new accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS 154 is effective for

F-14

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003.

2. Summary of Significant Accounting Policies (Continued)

accounting changes and error corrections made in fiscal years beginning after December 15, 2005 and requires retrospective application to prior periods’ financial statements for most voluntary changes in an accounting principle, unless it is impracticable to do so. The Company does not anticipate any material impact to its financial condition or results of operations as a result of the adoption of SFAS 154.

In February 2006, the FASB issued Statement of Financial Accounting Standards No. 155, Accounting for Certain Hybrid Instruments-an amendment of FASB Statements No. 133 and 140 (‘SFAS 155’). SFAS 155 allows financial instruments that have embedded derivatives to be accounted for as a whole if the holder elects to account for the whole instrument on a fair value basis. SFAS 155 eliminates the need to bifurcate the derivative from its host, as previously required under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedge Accounting (‘SFAS 133’). SFAS 155 also amends SFAS 133 by establishing a requirement to evaluate interests in securitized financial assets to determine whether they are free standing derivatives or whether they contain embedded derivatives that require bifurcation. SFAS 155 is effective for all hybrid financial instruments acquired or issued by the Company on or after January 1, 2007. The Company does not anticipate any material impact to its financial condition or results of operations as a result of the adoption of SFAS 155.

3. Securities

Amortized cost amounts and fair values of securities are summarized as follows as of December 31, 2005 (Dollars in thousands):

Held to Maturity	Amortized Cost		Unrealized Gains			Unrealized (Losses)				Fair Value
Mortgage-backed securities	$	4,342,254		$	11,420		$	(29,818	)	$	4,323,856
Federal agency securities	2,305,331			1,560			(23,914		)	2,282,977
State and political subdivisions	114,345			4,646			(95		)	118,896
Total	$	6,761,930		$	17,626		$	(53,827	)	$	6,725,729

Available for Sale	Amortized Cost		Unrealized  Gains			Unrealized (Losses)				Fair Value
Mortgage-backed securities	$	3,810,797		$	3,882		$	(48,578	)	$	3,766,101
State and political subdivisions	388,789			5,515			(1,913		)	392,391
Corporate debt	201,499			736			(1,543		)	200,692
Foreign government securities	10,539			—			(3		)	10,536
Total	$	4,411,624		$	10,133		$	(52,037	)	$	4,369,720

F-15

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003.

3. Securities (Continued)

Amortized cost amounts and fair values of securities are summarized as follows as of December 31, 2004 (Dollars in thousands):

Held to Maturity	Amortized Cost		Unrealized Gains			Unrealized (Losses)				Fair Value
Mortgage-backed securities	$	3,543,961		$	13,269		$	(7,802	)	$	3,549,428
Federal agency securities	2,274,665			1,658			(18,443		)	2,257,880
State and political subdivisions	124,091			6,090			(27		)	130,154
Total	$	5,942,717		$	21,017		$	(26,272	)	$	5,937,462

Available for Sale	Amortized Cost		Unrealized Gains			Unrealized (Losses)				Fair Value
Mortgage-backed securities	$	3,848,255		$	21,596		$	(14,951	)	$	3,854,900
State and political subdivisions	384,859			20,110			(60		)	404,909
Corporate debt	177,201			911			(1,566		)	176,546
US Treasury securities	113,843			4,845			—			118,688
Foreign government securities	10,302			160			—			10,462
Total	$	4,534,460		$	47,622		$	(16,577	)	$	4,565,505

Excluded from the above tables are nonmarketable equity securities, which consisted of stock of the FHLBB at December 31, 2005 and 2004. On April 19, 2004, the FHLBB implemented a new capital structure mandated for all Federal Home Loan Banks subject to the Gramm-Leach-Bliley Act of 1999 and regulations that were subsequently promulgated in 2001 by the FHLBB’s regulator, the Federal Housing Finance Board. The Bank’s capital stock investment in the FHLBB totaled $50.0 million as of December 31, 2005. The $50.0 million capital stock investment includes both a $25.0 million membership component and a $25.0 million activity-based component. Under the new capital plan, FHLBB capital stock investments require a five-year advance notice of withdrawal. Recent changes to the FHLBB capital plan have resulted in an increased borrowing capacity. The Bank’s $50.0 million capital stock investment in the FHLBB provides an overnight borrowing capacity of up to $833.0 million. The amount outstanding under this arrangement at December 31, 2005 was $546.0 million. Additional borrowing is available to the Bank based on prescribed collateral levels and increased investment in FHLBB capital stock. The Bank currently has no plans to increase its investment in FHLBB capital stock.

The amortized cost amounts and fair values of securities by contractual maturity are as follows (Dollars in thousands):

	December 31, 2005
Held to Maturity	Amortized Cost			Fair Value
Due within one year		$	3,872	$	3,938
Due from one to five years		28,785		28,806
Due five years up to ten years		254,380		254,656
Due after ten years		6,474,893		6,438,329
Total		$	6,761,930	$	6,725,729

F-16

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003.

3. Securities (Continued)

	December 31, 2005
Available for Sale	Amortized Cost			Fair Value
Due within one year		$	492	$	498
Due from one to five years		132,358		134,094
Due five years up to ten years		101,183		102,851
Due after ten years		4,177,591		4,132,277
Total		$	4,411,624	$	4,369,720

During the year ended 2005, the Company sold eighty-five securities classified as available for sale totaling $376.1 million, using the specific identification method. The total book value of the securities sold were $363.7 million, resulting in gross realized gains of $12.4 million. During the year ended December 31, 2004, the Company sold one security classified as available for sale totaling $25.0 million, using the specific identification method. The book value of the security was $24.8 million resulting in a gross realized gain of $0.2 million. There were no sales of securities during the year ended December 31, 2003.

The carrying value of securities pledged amounted to approximately $7.5 billion at December 31, 2005 and $6.3 billion at December 31, 2004. Securities are pledged primarily to secure clearings with other depository institutions, secure repurchase agreements and secure outstanding FHLBB borrowings.

On a quarterly basis the Company reviews its investment portfolio on a security by security basis for any investment that may be other than temporarily impaired. In its evaluation, the Company considers the length of time the security has been impaired, the severity of the impairment, the financial condition and future prospects of the issuer, and the Company’s ability and intent to hold the security to maturity or until it recovers in value.

The unrealized losses related to the Company’s investment in mortgage-backed and Federal agency securities are attributable to changes in market interest rates. The contractual cash flows of these securities are guaranteed by agencies of the U.S. government, including government sponsored agencies. As a result, the Company’s exposure to the credit risk of these securities is minimal. At December 31, 2005, there were 320 mortgage-backed and Federal agency securities that were in unrealized loss positions. The market value decline as a percentage of amortized cost for the Company’s mortgage-backed and Federal agency securities portfolio was less than 2% at December 31, 2005. The Company has the intent and ability to hold these securities until forecasted recovery, which may in some cases be maturity. The Company does not consider these investments to be other than temporarily impaired at December 31, 2005.

Corporate debt securities include trust preferred securities (‘trups’) issued by reputable financial institutions. The credit ratings of the underlying issuers range from A1 to Aa3 ratings. The Company holds senior tranches of these issuances and believes that it will recover all contractual payments. The unrealized losses related to the trups portfolio are due to changes in credit spreads. At December 31, 2005, there were five corporate debt securities that were in unrealized loss positions. The Company has the intent and ability to hold these securities until forecasted recovery, and does not consider these investments to be other than temporarily impaired at December 31, 2005.

F-17

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003.

3. Securities (Continued)

Unrealized losses related to the Company’s investments in state and political subdivisions securities were due to changes in market interest rates. The Company reviewed the investment securities credit ratings, which were all Aaa. At December 31, 2005, there were five state and political subdivisions investment securities in an unrealized loss position. Given the minimal amount of unrealized losses and the limited amount of credit exposure, the Company does not consider these investments to be other than temporarily impaired at December 31, 2005.

The following table represents the information about the Company’s temporarily impaired investments at December 31, 2005 (Dollars in thousands):

	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Mortgage-backed securities	$	4,566,743		$	43,821	$	1,486,521		$	34,575	$	6,053,264		$	78,396
Federal agency securities	1,443,951			10,809		883,807			13,105		2,327,758			23,914
Corporate debt	—			—		47,911			1,543		47,911			1,543
State and political subdivisions	146,147			1,856		8,173			152		154,320			2,008
Foreign	10,536			3		—			—		10,536			3
Total temporarily impaired securities	$	6,167,377		$	56,489	$	2,426,412		$	49,375	$	8,593,789		$	105,864

The following table represents the information about the Company’s temporarily impaired investments at December 31, 2004 (Dollars in thousands):

	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Mortgage-backed securities	$	2,518,100		$	15,704	$	545,709		$	7,049	$	3,063,809		$	22,753
Federal agency securities	1,446,223			12,332		518,045			6,111		1,964,268			18,443
Corporate debt	—			—		47,894			1,566		47,894			1,566
State and political subdivisions	5,565			15		6,025			72		11,590			87
Total temporarily impaired securities	$	3,969,888		$	28,051	$	1,117,673		$	14,798	$	5,087,561		$	42,849

F-18

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003.

4. Loans

Loans consist of demand loans to custody clients of the Company, including individuals, not-for-profit institutions and mutual fund clients. The loans to mutual funds and other pooled product clients include lines of credit and advances pursuant to the terms of the custody agreements between the Company and those clients to facilitate securities transactions and redemptions. Almost all of the Company’s commitments to fund loans are at variable rates. Generally, the loans are, or may be, in the event of default, collateralized with marketable securities held by the Company as custodian. Although virtually all of our loans are fully collateralized with freely tradable securities, management recognizes some credit risk inherent in the loan portfolio, and has an allowance for loan losses of $0.1 million at December 31, 2005, a level which has remained consistent for the past five years. This amount is not allocated to any particular loan, but is intended to absorb any risk of loss inherent in the loan portfolio. Management actively monitors the loan portfolio and the underlying collateral and regularly assesses the adequacy of the allowance for loan losses. There were no impaired loans, non-performing loans, or loans on nonaccrual status at December 31, 2005 and 2004. In addition, there were no loan charge-offs or recoveries during the years ended December 31, 2005, 2004 and 2003. Loans are summarized as follows (Dollars in thousands):

	December 31,				December 31,
	2005				2004
Loans to mutual funds		$	286,144			$	22,520
Loans to individuals		81,392				69,402
Loans to others		34,934				42,708
		402,470				134,630
Less allowance for loan losses		(100		)		(100		)
Total		$	402,370			$	134,530

The Company had unused commitments to lend of approximately $898.9 million and $978.8 million at December 31, 2005 and 2004, respectively. The terms of these commitments are similar to the terms of outstanding loans.

The Company periodically issues lines of credit and advances to its mutual fund clients to help those clients with security transactions. The President of one of those clients is a related party to James M. Oates, a member of the Company’s Board of Directors. As of December 31, 2005, the Company had total contractual agreements for $150.0 million of committed lines of credit with two mutual funds within the related party complex (the “mutual funds”). The primary source of repayment of the loans is the proceeds from the sale of investments in the normal course of the mutual funds’ business. As part of the agreement, the mutual funds are required to segregate and maintain specific collateral for the Company equal to 200% of the lines of credit. At December 31, 2005, loans due from the mutual funds totaled $125.0 million. There were no loans outstanding from any related party mutual fund complex at December 31, 2004. Total interest and commitment fee revenue from the mutual funds for the years ended December 31, 2005 and 2004 was $2.7 million and $0.4 million, respectively. There was no interest or commitment fee revenue on any related party loans for the year ended December 31, 2003.

In January 2006, the Company entered into a $30.0 million committed line of credit agreement with a series of trusts (“the trusts”). Edward F. Hines, a member of the Company’s Board of Directors, is a trustee of the trusts and is a partner in the firm that manages the assets held in the trusts. The line of credit

F-19

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003.

4. Loans (Continued)

is secured by assets of the trusts, which assets are held by Investors Bank as custodian. The primary source of repayment of the loans is the proceeds from the sale of investments in the normal course of the trusts’ business.

The terms and conditions of the Company’s contractual agreements with the mutual funds and trusts discussed above, including collateral requirements, lending limits and fees, are consistent with other lending clients that have similar composition, size and overall business relationships with the Company. Also, Mr. Oates and Mr. Hines abstain from voting on any board matter involving the proposed transactions with the mutual funds and trusts, respectively, discussed above.

5. Equipment and Leasehold Improvements

The major components of equipment and leasehold improvements are as follows (Dollars in thousands):

	December 31, 2005				December 31, 2004
Furniture, fixtures and equipment		$	112,310			$	113,204
Leasehold improvements		16,247				15,696
Total		128,557				128,900
Less accumulated depreciation and amortization		(59,156		)		(61,017		)
Equipment and leasehold improvements, net		$	69,401			$	67,883

Included in furniture, fixtures and equipment were capitalized internal software costs of $73.3 million and $75.3 million at December 31, 2005 and 2004, respectively. Depreciation expense was $29.4 million, $30.1 million and $26.1 million for the years ended December 31, 2005, 2004 and 2003, respectively. Amortization expense was $2.2 million, $2.0 million and $1.9 million for the years ended December 31, 2005, 2004 and 2003, respectively.

F-20

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

6. Deposits

The following is a summary of deposit balances by type (Dollars in thousands):

	December 31, 2005			December 31,  2004
Interest-bearing deposits:
Demand		$	85,157		$	—
Savings		4,195,486			4,362,895
Time		55,124			97,669
Total interest-bearing deposits		4,335,767			4,460,564
Noninterest-bearing deposits:
Demand		452,401			690,308
Savings		29,422			85,510
Time		175,000			160,000
Total noninterest-bearing deposits		656,823			935,818
Total		$	4,992,590		$	5,396,382

Time deposits with balances greater than $100,000 totaled $230.1 million and $257.6 million at December 31, 2005 and 2004, respectively. All time deposits had a maturity of less than three months at December 31, 2005 and 2004. The aggregate amounts of overdraft deposits that have been reclassified as loan balances were $162.2 million and $41.6 million at December 31, 2005 and 2004, respectively.

7. Securities Sold Under Repurchase Agreements

Information on the Company’s repurchase agreements and the corresponding securities pledged as collateral is as follows (Dollars in thousands):

	Mortgage-backed securities					Federal agency securities					Repurchase Agreements
	Amortized Cost			Fair Value		Amortized Cost			Fair Value		Amortized Cost			Rate
Maturity of Repurchase Agreements:
Overnight		$	1,739,883	$	1,733,766		$	1,456,234	$	1,440,022		$	3,024,835	3.40	%
2 to 30 days		754,483		741,199			—		—			734,967		4.21	%
30 to 90 days		262,471		260,189			—		—			195,530		4.40	%
Over 90 days		769,395		761,467			—		—			842,536		3.34	%
Total		$	3,526,232	$	3,496,621		$	1,456,234	$	1,440,022		$	4,797,868

Approximately $4.9 billion and $4.3 billion of securities were pledged to collateralize repurchase agreements as of December 31, 2005 and 2004, respectively. The weighted-average interest rate paid on repurchase agreements was 2.72% and 1.31% for the years ended December 31, 2005 and 2004, respectively.

F-21

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

8. Short-term and Other Borrowings

   The components of short-term and other borrowings are as follows (Dollars in thousands):

	December 31, 2005			December 31, 2004
Federal Funds purchased		$	810,511		$	344,491
Federal Home Loan Bank of Boston overnight advances		400,000			—
Federal Home Loan Bank of Boston short-term advances		146,000			200,000
Federal Home Loan Bank of Boston long-term advances		—			50,000
Treasury, Tax and Loan account		138			190
Total		$	1,356,649		$	594,681

For the years ended December 31, 2005 and 2004, maturities on FHLBB advances ranged from overnight to September 2006. The Company has borrowing arrangements with the FHLBB, which have been utilized on an overnight, short-term and long-term basis to satisfy funding requirements. The aggregate amounts of these borrowing arrangements at December 31, 2005 and 2004 were $0.8 billion and $0.6 billion, respectively, of which $0.5 billion and $0.3 billion, respectively, were utilized at December 31, 2005 and 2004. Approximately $2.4 billion and $1.6 billion of securities were pledged to collateralize these advances as of December 31, 2005 and 2004, respectively. The weighted-average interest rate paid on short-term and other borrowings was 3.31% and 2.13% for the years ended December 31, 2005 and 2004, respectively.

9. Income Taxes

The components of income tax expense are as follows (Dollars in thousands):

	December 31, 2005				December 31, 2004				December 31, 2003
Current:
Federal		$	76,533			$	62,690			$	32,752
State		5,420				5,892				14,310
Foreign		1,026				1,247				52
Total current		82,979				69,829				47,114
Deferred:
Federal		(9,543		)		3,413				5,989
State		1,788				94				(338		)
Foreign		811				(510		)		—
Total deferred		(6,944		)		2,997				5,651
Total income taxes		$	76,035			$	72,826			$	52,765

F-22

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

9. Income Taxes (Continued)

Differences between the effective income tax rate and the federal statutory rates are as follows:

	December 31, 2005			December 31, 2004			December 31, 2003
Federal statutory rate		35.00	%		35.00	%		35.00	%
State income tax rate, net of federal benefit		2.00			1.81			6.25
Tax-exempt income, net of disallowance		(2.89	)		(3.61	)		(4.89	)
Foreign taxes		0.83			—			—
Undistributed foreign earnings		(4.12	)		—			—
Other		1.41			0.71			(0.01	)
Effective tax rate		32.23	%		33.91	%		36.35	%

At December 31, 2005, the Company had a foreign non-capital loss carryforward of approximately $1.6 million, which begins to expire in 2009. In accordance with the provisions of SFAS 109, the Company believes that it is more likely than not that the deferred tax asset of $0.6 million will not be realized. As a result, a valuation allowance for the entire deferred tax asset amount has been recorded.

The Company provides U.S. federal income taxes on the unremitted earnings of foreign subsidiaries, except to the extent that such earnings are permanently reinvested outside the United States. At December 31, 2005, there were accumulated unremitted earnings of certain foreign subsidiaries of $27.7 million. Pursuant to the provisions of APB 23, the Company has not provided for U.S. federal income taxes or foreign withholding taxes on these earnings since it is the Company’s current intention to permanently reinvest those earnings outside of the U.S. If the capital in these subsidiaries had been temporarily invested, a U.S. deferred tax liability of $6.9 million would have been recorded.

In March 2003, a retroactive change in the Commonwealth of Massachusetts tax law disallowed a dividends received deduction taken by the Bank on dividends it had received since 1999 from a wholly-owned real estate investment trust. During the second quarter of 2003, the Company settled this disputed tax assessment with the Massachusetts Department of Revenue, agreeing to pay approximately 50% of the liability. As a result of this retroactive change in tax law, the Company recorded an additional state tax expense of approximately $7.2 million, net of federal income tax benefit, in 2003.

F-23

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

9. Income Taxes (Continued)

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities consist of the following (Dollars in thousands):

	December 31, 2005				December 31, 2004
Deferred tax assets:
Securities available for sale		$	16,622			$	—
Employee benefit plans		7,094				3,883
Other		3,691				1,350
Deferred tax assets		27,407				5,233
Valuation allowance		(565		)		—
Total deferred tax assets		26,842				5,233
Deferred tax liabilities:
Unrealized hedging gain		(13,224		)		(2,306		)
Depreciation and amortization		(10,698		)		(9,882		)
Undistributed income of foreign subsidiaries		(69		)		(6,160		)
Pension plan		(1,196		)		(1,172		)
Securities available for sale		—				(10,162		)
Total deferred tax liabilities		(25,187		)		(29,682		)
Net deferred tax asset (liability)		$	1,655			$	(24,449	)

10. Company Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Junior  Subordinated Deferrable Interest Debentures of the Company

On January 31, 1997, Investors Capital Trust I (“ICTI”), a trust sponsored and wholly-owned by the Company, issued $25 million in 9.77% Trust Preferred Securities (the “Capital Securities”), the proceeds of which were invested by the trust in the same aggregate principal amount of the Company’s newly issued 9.77% Junior Subordinated Deferrable Interest Debentures due February 1, 2027 (the “Junior Subordinated Debentures”). The Capital Securities have a call date of February 1, 2007. The $25 million aggregate principal amount of the Junior Subordinated Debentures represents the sole asset of ICTI. The Company has guaranteed, on a subordinated basis, distributions and other payments due on the Capital Securities (the “Guarantee”). The Guarantee, when taken together with the Company’s obligations under (i) the Junior Subordinated Debentures; (ii) the indenture pursuant to which the Junior Subordinated Debentures were issued; and (iii) the Amended and Restated Declaration of Trust governing ICTI, constitutes a full and unconditional guarantee of ICTI’s obligations under the Capital Securities. No other subsidiary of the Company guarantees these Capital Securities. Certain of the Company’s subsidiaries may require prior approval of the Commissioner of Banks of the Commonwealth of Massachusetts if the total dividends for a calendar year would exceed net profits for the year combined with retained net profits for the previous two years. These restrictions on the ability to pay dividends to the Company may restrict the Company’s ability to pay dividends to its shareholders.

Effective October 1, 2003, the Company adopted provisions of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (“FIN 46”). As a result of the adoption of FIN 46, the Company was required to deconsolidate ICTI, the wholly-owned trust that issued the Capital

F-24

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

10. Company Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Junior  Subordinated Deferrable Interest Debentures of the Company (Continued)

Securities. Therefore, the Company presents in its consolidated financial statements junior subordinated debentures as a liability and its investment in ICTI as a component of other assets. The income for the three months during 2003 that ICTI was not consolidated is considered immaterial.

11. Stockholders’ Equity

As of December 31, 2005, the Company’s capital stock consisted of authorized 1,000,000 shares of preferred stock and 175,000,000 shares of common stock, all with a par value of $0.01 per share.

At the Annual Meeting of Stockholders of the Company held on April 13, 2004, stockholders approved an increase in the number of authorized shares of common stock from 100,000,000 to 175,000,000. On May 5, 2004, the Company amended its Certificate of Incorporation to increase the number of authorized shares of common stock to 175,000,000. These shares are available for issuance for general corporate purposes as determined by the Company’s Board of Directors.

The Company has four equity incentive plans: the Amended and Restated 1995 Stock Plan (“Stock Plan”), the Amended and Restated 1995 Non-Employee Director Stock Option Plan (“Director Plan”), the 1997 Employee Stock Purchase Plan (“ESPP”) and the 2005 Equity Incentive Plan, which was approved by the stockholders on April 14, 2005 (the “2005 Plan”). The 2005 Plan supersedes both the Stock Plan and the Director Plan, both of which continue in effect only with regard to options outstanding under those plans. Pursuant to the terms of the 2005 Plan, awards under the 2005 Plan may include incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units and performance units, qualified performance-based awards, and stock grants. There were no amendments to any plans during the year ended December 31, 2005.

Effective with the start of the 2005 Plan, 45,703 shares of the Director Plan and 3,439,197 shares of the Stock Plan were transferred to the 2005 Plan. On April 14, 2005, the shareholders authorized an additional 2,000,000 shares of common stock for issuance under the 2005 Plan.

Of the shares authorized for issuance under the 2005 Plan at December 31, 2005, 4,104,013 were available for grant as of that date. No options were granted to consultants during the years ended December 31, 2005, 2004 and 2003.

At the Annual Meeting of Stockholders of the Company held on April 13, 2004, stockholders approved an amendment to the Company’s ESPP to increase the number of shares of common stock that may be issued thereunder from 1,120,000 to 1,620,000.

The Company has recorded deferred compensation of $0.3 million and $0.6 million at December 31, 2005 and 2004, respectively. Amortization of deferred compensation was $0.3 million, $0.3 million and $0.5 million for the years ended December 31, 2005, 2004 and 2003, respectively.

F-25

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

11. Stockholders’ Equity (Continued)

A summary of option activity under the Director Plan, Stock Plan and 2005 Plan are as follows:

	December 31, 2005						December 31, 2004						December 31, 2003
	Shares			Weighted- Average Exercise Price			Shares			Weighted- Average Exercise Price			Shares			Weighted- Average Exercise Price
Outstanding at beginning of year		5,929,352			$	28		6,547,086			$	24		6,621,157			$	22
Granted		1,518,580			39			902,558			41			737,399			34
Exercised		(454,146	)		22			(1,396,211	)		20			(654,230	)		9
Canceled		(74,470	)		35			(124,081	)		32			(157,240	)		32
Outstanding at end of year		6,919,316			31			5,929,352			28			6,547,086			24
Outstanding and exercisable at year end		6,510,182						4,949,879						4,712,586

The following table summarizes information about stock options outstanding at December 31, 2005:

			Options Outstanding							Options Exercisable
Range of Exercise Prices			Number Outstanding at December 31, 2005		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price			Number Exercisable at December 31, 2005		Weighted- Average Exercise Price
	$	0-10		669,684		2.4 years		$	6		669,684		$	6
	10-20			692,239		3.2		11			692,239		11
	20-30			68,620		4.9		25			65,530		25
	30-40			4,588,428		7.2		35			4,259,461		35
	40-50			893,932		8.3		41			816,855		41
	50-60			6,413		5.2		51			6,413		51
				6,919,316		6.5		31			6,510,182		30

Under the terms of the ESPP, the Company may issue up to 1,620,000 shares of common stock pursuant to the exercise of nontransferable options granted to participating employees. The ESPP permits eligible employees to purchase up to 8,000 shares of common stock per payment period, subject to limitations provided by Section 423(b) of the Internal Revenue Code, through accumulated payroll deductions. The purchases are made twice a year at a price equal to the lesser of (i) 90% of the market value of the common stock on the first business day of the payment period (rounded to the next quarter-dollar), or (ii) 90% of the market value of the common stock on the last business day of the payment

F-26

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

11. Stockholders’ Equity (Continued)

period (rounded to the next quarter-dollar). The payment periods consist of two six-month periods, January 1 through June 30 and July 1 through December 31.

A summary of the ESPP shares is as follows:

	December 31,
	2005		2004		2003
Total shares available under the Plan, beginning of year	636,267		227,504		356,875
Approved increase in shares available	—		500,000		—
Issued at June 30	(54,862	)	(47,681	)	(70,606	)
Issued at December 31	(59,842	)	(43,556	)	(58,765	)
Total shares available under the plan, end of year	521,563		636,267		227,504

During the year ended December 31, 2005, the purchase prices of the stock were $34.25 and $33.25, or 90% of the market value of the common stock on the last business day of the payment period ending June 30, 2005 and December 31, 2005, respectively.

During the year ended December 31, 2004, the purchase prices of the stock were $35.00 and $38.75, or 90% of the market value of the common stock on the first business day of the payment periods ending June 30, 2004 and December 31, 2004, respectively.

During the year ended December 31, 2003, the purchase prices of the stock were $25.50 and $27.00, or 90% of the market value of the common stock on the first business day of the payment periods ending June 30, 2003 and December 31, 2003, respectively.

In July 2005, the Company announced that its Board of Directors authorized a repurchase plan of up to $150.0 million of the Company’s common stock in the open market over the twelve months following the announcement. The plan expires in June 2006. During the year ended December 31, 2005, the Company repurchased $70.7 million of its common stock.

F-27

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

12. Comprehensive Income

Comprehensive income represents the change in equity of the Company during a period from transactions and other events and circumstances from non-shareholder sources. It includes all changes in equity during a period except those resulting from investments by shareholders and distributions to shareholders. The Company’s other comprehensive income and related tax effects for the years ended December 31, 2005, 2004 and 2003 are as follows (Dollars in thousands):

	Pre-tax			Tax (Expense)				After-tax
	Amount			Benefit				Amount
2005
Unrealized losses on securities:
Unrealized holding losses arising during the period	$	(60,552	)		$	21,481		$	(39,071	)
Less: reclassification adjustment for gains included in net income	12,397				(5,185		)	7,212
Net unrealized holding losses arising during the period	(72,949		)		26,666			(46,283		)
Other	394				(165		)	229
Net unrealized losses	(72,555		)		26,501			(46,054		)
Net unrealized derivative instrument gain	18,002				(7,529		)	10,473
Amortization of terminated interest rate swap agreements	(2,970		)		1,242			(1,728		)
Currency translation adjustment	52				—			52
Other comprehensive income	$	(57,471	)		$	20,214		$	(37,257	)
2004
Unrealized losses on securities:
Unrealized holding losses arising during the period	$	(9,168	)		$	3,202		$	(5,966	)
Less: reclassification adjustment for gains included in net income	234				(82		)	152
Net unrealized holding losses arising during the period	(9,402		)		3,284			(6,118		)
Other	(2,671		)		935			(1,736		)
Net unrealized losses	(12,073		)		4,219			(7,854		)
Net unrealized derivative instrument gain	19,984				(6,994		)	12,990
Amortization of terminated interest rate swap agreements	63				(22		)	41
Currency translation adjustment	846				—			846
Other comprehensive income	$	8,820			$	(2,797	)	$	6,023
2003
Unrealized losses on securities:
Unrealized holding losses arising during the period	$	(18,006	)		$	6,046		$	(11,960	)
Other	(1,542		)		539			(1,003		)
Net unrealized losses	(19,548		)		6,585			(12,963		)
Net unrealized derivative instrument gain	17,663				(5,878		)	11,785
Amortization of transition-related adjustment	361				(127		)	234
Currency translation adjustment	577				—			577
Other comprehensive income	$	(947	)		$	580		$	(367	)

F-28

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

13. Employee Benefit Plans

Pension Plan—The Company has a trusteed, noncontributory, qualified defined benefit pension plan (‘Pension Plan’) covering substantially all of its employees who were hired before January 1, 1997. The benefits are based on years of service and the employee’s compensation during employment. Generally, the Company’s funding policy is to contribute annually the maximum amount that can be deducted for federal income tax purposes. Contributions are intended to provide not only for benefits attributed to  service to date, but also for benefits expected to be earned in the future. The plan document was amended in December 2001 and December 2004 to freeze benefit accruals for certain highly compensated participants. Effective January 1, 2006, no further Pension Plan benefit will accrue on behalf of any Pension Plan participant, and effective December 31, 2005, all Pension Plan participant’s accounts were frozen. The Company uses a December 31 measurement date for this plan.

Supplemental Retirement Plan—The Company also has a nonqualified, unfunded, supplemental retirement plan (‘SERP’) which was established in 1994 and covers certain employees and pays benefits that supplement any benefits paid under the Pension Plan. Benefits under the SERP are generally based on compensation not includable in the calculation of benefits to be paid under the Pension Plan. The plan document was amended in April 2000 to eliminate the compensation cap and include bonuses and commissions of certain employees. The Company uses a December 31 measurement date for this plan.

The following table sets forth the status of the Company’s Pension Plan and SERP (Dollars in thousands):

	December 31, 2005							December 31, 2004
	Pension Plan				SERP			Pension Plan				SERP
Change in benefit obligation:
Benefit obligation at beginning of year		$	22,141		$	23,543			$	18,050		$	15,500
Service cost		744			1,788				927			953
Interest cost		1,143			1,475				1,110			969
Actuarial loss		249			1,057				3,282			6,121
Benefits paid		(1,100		)	(287		)		(1,228		)	—
Curtailments		(6,360		)	—				—			—
Projected benefit obligation at the end of the year		16,817			27,576				22,141			23,543
Change in plan assets:
Assets at the beginning of the year		17,185			—				17,246			—
Employer contributions		—			287				—			—
Actual return		803			—				1,167			—
Benefits paid		(1,100		)	(287		)		(1,228		)	—
Assets at the end of the year		16,888			—				17,185			—
Funded status		71			(27,576		)		(4,956		)	(23,543		)
Unrecognized net transition (asset) obligation		(28		)	10				(67		)	15
Unrecognized prior service cost		—			2,294				(296		)	2,439
Unrecognized net loss		2,817			12,902				8,668			12,787
Net amount recognized		$	2,860		$	(12,370	)		$	3,349		$	(8,302	)

F-29

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

13. Employee Benefit Plans (Continued)

Amounts recognized in the consolidated balance sheet consist of the following (Dollars in thousands):

	December 31, 2005						December 31, 2004
	Pension Plan			SERP			Pension Plan			SERP
Prepaid benefit cost		$	2,860	$	—			$	3,349	$	—
Accrued benefit cost		—		(18,074		)		—		(14,019		)
Intangible assets		—		2,304				—		2,454
Accumulated other comprehensive income		—		3,400				—		3,263
Net amount recognized		$	2,860	$	(12,370	)		$	3,349	$	(8,302	)

The accumulated benefit obligation for the Pension Plan was $16.8 million and $16.0 million at December 31, 2005 and 2004, respectively. The accumulated benefit obligation for the SERP was $18.1 million and $14.0 million at December 31, 2005 and 2004, respectively.

Net periodic pension cost for the Company’s Pension Plan and SERP included the following components (Dollars in thousands):

	December 31, 2005						December 31, 2004
	Pension Plan				SERP		Pension Plan				SERP
Service cost—benefits earned / benefit obligations		$	744		$	1,788		$	927		$	953
Interest cost on projected benefit obligations		1,143			1,475			1,110			969
Expected return on plan assets		(1,435		)	—			(1,450		)	—
Curtailment gain		(275		)	—			—			—
Net amortization and deferral		313			1,092			240			591
Net periodic pension cost		$	490		$	4,355		$	827		$	2,513

The weighted-average discount rate and the rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligations were as follows:

	December 31, 2005					December 31, 2004
	Pension Plan			SERP		Pension Plan			SERP
Discount rate		5.75	%	5.75	%		5.80	%	5.80	%
Rate of compensation increases		4.00		4.00-10.00			4.00		4.00-10.00

The weighted-average discount rate, rate of increase in future compensation levels and expected rate of return on plan assets used in determining the net periodic pension cost were as follows:

	December 31, 2005						December 31, 2004
	Pension Plan			SERP			Pension Plan			SERP
Discount rate		5.80	%		5.80	%		6.25	%		6.25	%
Rate of compensation increases		4.00			4.00			3.75			3.75
Expected rate of return on plan assets		8.50			—			8.50			—

The Company has utilized an expected rate of return on plan assets of 8.50%, which is consistent with the weighted-average of the historical return indices for specific portfolio assets.

F-30

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

13. Employee Benefit Plans (Continued)

The Company’s Pension Plan allocation by asset category is as follows:

Asset Category	December 31, 2005			December 31, 2004
Cash and short-term investments		1.3	%		0.5	%
Equity securities		68.4			69.2
Debt securities		30.3			30.3
Total		100.0	%		100.0	%

The Company’s core investment objectives for the Pension Plan are long-term capital appreciation and growth of income, while protecting the principal value of trust assets from long-term permanent loss and, within reason, from large short-term fluctuations. The approved investment policies of the trust anticipate fixed income investments to compose 25-55% and equity securities to compose 45-75% of the total portfolio. Cash equivalents may be used to provide liquidity, income and stability to the portfolio.

Cash and short-term investments represent money market funds at December 31, 2005 and 2004. Equity securities supply current income and growth through market appreciation. The Company invests in quality companies with securities that are readily marketable. The equity securities portfolio is diversified with no more than 10% of the portfolio invested in any one particular industry at December 31, 2005 and 2004. Debt securities offer a source of current income and reduce the variability of the portfolio’s total market value. Fixed income investments were limited to issues by the United States Government and its agencies, and investment grade corporate bonds at December 31, 2005 and 2004. The Pension Plan was in full compliance with the approved pension objectives and policies for the years ended December 31, 2005 and 2004. At December 31, 2005 and 2004, the pension did not hold any securities of the Company.

The Company does not expect to contribute to its Pension Plan during 2006.

At December 31, 2005 and 2004, the SERP remained an unfunded plan. The Company does not expect to contribute to the SERP during 2006.

The following table shows the expected future benefit payments for the next ten years (Dollars in thousands):

	Pension Plan			SERP
2006		$	244	$	167
2007		290		171
2008		315		175
2009		376		180
2010		407		188
2011 - 2015		3,003		1,410

Employee Savings Plan—The Company sponsors a qualified defined contribution employee savings plan covering substantially all employees. The Company matches employee contributions to the plan up to specified amounts. The total cost of this plan to the Company was $3.7 million for the year ended December 31, 2005 and $3.2 million for the years ended December 31, 2004 and 2003.

F-31

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

14. Off Balance Sheet Financial Instruments

Lines of Credit—At December 31, 2005, the Company had commitments to mutual funds and individuals under collateralized open lines of credit totaling $1.1 billion, against which $240.3 million in loans were drawn. The credit risk involved in issuing lines of credit is essentially the same as that involved in extending demand loans. The Company does not anticipate any loss as a result of these lines of credit.

Securities Lending—On behalf of its clients, the Company lends securities to creditworthy broker-dealers. In certain circumstances, the Company may indemnify its clients for the fair market value of those securities against a failure of the borrower to return such securities. The Company requires the borrowers to provide collateral in an amount equal to, or in excess of, 102% of the fair market value of U.S. dollar-denominated securities borrowed and 105% of the fair market value of non-U.S. dollar-denominated securities borrowed. The borrowed securities are revalued daily to determine whether additional collateral is necessary. As guarantor, the Company is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The Company measures the fair value of its indemnification obligation by marking its securities lending portfolio to market on a daily basis and comparing the value of the portfolio to the collateral holdings position. The fair value of the indemnification obligation to be recorded would be the deficiency of collateral as compared to the value of the securities out on loan.

With respect to the indemnified securities lending portfolio, the cash and U.S. government securities held by the Company as collateral at December 31, 2005 totaled $7.7 billion, while the fair value of the portfolio totaled approximately $7.4 billion. Given that the collateral held was in excess of the value of the securities that the Company would be required to replace if the borrower defaulted and failed to return such securities, the Company’s indemnification obligation was zero and no liability was recorded.

All securities loans are categorized as overnight loans. The maximum potential amount of future payments that the Company could be required to make would be equal to the market value of the securities borrowed. Since the securities loans are overcollateralized by 2% (for U.S. dollar- denominated securities) to 5% (for non-U.S. dollar-denominated securities) of the fair market value of the loan made, the collateral held by the Company would be used to satisfy the obligation. In addition, each borrowing agreement includes “set-off” language that allows the Company to use any excess collateral on other loans to that borrower to cover any collateral shortfall of that borrower. However, there is a potential risk that the collateral would not be sufficient to cover such an obligation if the security on loan increased in value between the time the borrower defaulted and the time the security is “bought-in.”  In those instances, the Company would “buy-in” the security using all available collateral and a loss would result from the difference between the value of the security “bought-in” and the value of the collateral held. The Company has never experienced a broker default.

15. Derivative Financial Instruments

Interest Rate Contracts—Interest rate contracts involve an agreement with a counterparty to exchange cash flows based on an underlying interest rate index. A swap agreement involves the exchange of a series of interest payments, either at a fixed or variable-rate, based upon the notional amount without the exchange of the underlying principal amount. The Company’s exposure from these interest rate contracts results from the possibility that one party may default on its contractual obligation when the contracts are in a gain position. The Company has experienced no terminations by counterparties of interest rate swaps. Credit risk is limited to the positive fair value of the derivative financial instrument, which is significantly

F-32

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

15. Derivative Financial Instruments (Continued)

less than the notional value. As of December 31, 2005, the positive fair value related to the Company’s interest rate contracts was approximately $24.3 million.

The Company enters into pay-fixed/receive-floating interest rate swap agreements. These instruments have been designated as cash flow hedges of variable-rate liabilities and a forecasted series of fixed-rate overnight liabilities incurred at different daily fixed rates (thereby resulting in a variable interest expense pattern). The contractual or notional amounts of the interest rate swap agreements held by the Company were approximately $1.9 billion and $1.6 billion at December 31, 2005 and 2004, respectively. These contracts had net fair values of approximately $24.2 million and $1.5 million at December 31, 2005 and 2004, respectively. These fair values are included in the respective other assets and other liabilities categories on the Company’s consolidated balance sheets. See also Note 17 for additional information on the fair value of the interest rate contracts.

For the years ended December 31, 2005 and 2004, the Company recognized net pre-tax gains of $3.5 million and $4.1 million, respectively, which represented the total ineffectiveness for all cash flow hedges. For the year ended December 31, 2003, total ineffectiveness related to cash flow hedges had an insignificant impact on earnings.

As of December 31, 2005, the Company expects that approximately $9.3 million of deferred net after-tax gains on derivative contracts included in other comprehensive income will be reclassified to net interest income within the next twelve months. This expectation is based on the net discounted cash flows from existing cash flow hedging derivatives, as well as the amortization of gains from the terminated cash flow hedging derivatives.

Foreign Exchange Contracts—Foreign exchange contracts involve an agreement to exchange the currency of one country for the currency of another country at an agreed-upon rate and settlement date. Foreign exchange contracts consist of spot, forward and swap contracts. Spot contracts call for the exchange of one currency for another and usually settle in two business days. Forward contracts call for the exchange of one currency for another at a date beyond spot. In a currency swap, the holder of a currency transacts simultaneously both a spot and a forward transaction in that currency for an equivalent amount of another currency to get temporary liquidity in the currency owned. The Company’s risk from foreign exchange contracts results from the possibility that one party may default on its contractual obligation or from movements in exchange rates. Credit risk is limited to the positive market value of the derivative financial instrument, which is significantly less than the notional value. The notional value of the Company’s foreign exchange contracts at December 31, 2005 and 2004 was $6.3 billion and $6.9 billion, respectively. As of December 31, 2005, the Euro foreign exchange contracts represented approximately 57% of the of the notional value outstanding. As of December 31, 2004, the British Pound foreign exchange contracts represented approximately 43% of the notional value outstanding. Unrealized gains or losses resulting from purchases and sales of foreign exchange contracts are included within the respective other assets and other liabilities categories on the Company’s consolidated balance sheets. Unrealized gains in other assets were $20.8 million and $99.6 million at December 31, 2005 and 2004, respectively. Unrealized losses in other liabilities were $19.7 million and $98.5 million at December 31, 2005 and 2004, respectively. See also Note 17 for additional information on the fair value of the Company’s foreign exchange contracts. Foreign exchange contracts with the same counterparty are netted in the Company’s consolidated balance sheets when a master netting agreement exists. These contracts have not been designated as hedging instruments; therefore, all changes in fair value are included in asset servicing fees.

F-33

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

15. Derivative Financial Instruments (Continued)

Other—The Company also enters into fixed price purchase contracts that are designed to hedge the variability of the consideration to be paid for the purchase of investment securities. By entering into these contracts, the Company is fixing the price to be paid at a future date for certain investment securities. At December 31, 2005 and 2004, the Company had $97.5 million and $672.2 million, respectively, of fixed price purchase contracts outstanding to purchase investment securities. Changes in fair value of these cash flow hedges are included as a component of other comprehensive income.

16. Commitments and Contingencies

Restrictions on Cash Balances—The Company is required to maintain certain average cash reserve balances. The average required reserve balance with the Federal Reserve Bank (‘FRB’) for the two-week period including December 31, 2005 was approximately $51.9 million. In addition, the Company’s balance sheet includes deposits totaling $43.9 million, which were pledged to secure clearings with depository institutions at December 31, 2005.

Lease Commitments—Minimum future commitments on noncancelable operating leases at December 31, 2005 were as follows (Dollars in thousands):

Fiscal Year Ending	Bank Premises			Equipment			Total
2006		$	28,502		$	3,684	$	32,186
2007		27,734			1,847		29,581
2008		23,959			508		24,467
2009		22,935			5		22,940
2010		22,935			1		22,936
2011 and beyond		86,432			—		86,432
Total		$	212,497		$	6,045	$	218,542

Total rent expense was approximately $29.2 million, $33.4 million and $36.1 million for the years ended December 31, 2005, 2004 and 2003, respectively.

In December 2005, the Company renewed its five-year service agreement with Electronic Data Systems (‘EDS’), which now expires December 31, 2008. Under the terms of the agreement, EDS provides data processing services to the Company, which has agreed to pay certain monthly service fees based on usage. Service expense under this contract was $7.3 million, $8.3 million and $7.7 million for the years ended December 31, 2005, 2004 and 2003, respectively.

In 2004, the Company renewed its agreement with SEI Investments Company (‘SEI’), which now expires on December 31, 2009. Under the terms of this agreement, SEI provides data processing services to the Company, which has agreed to pay certain monthly service fees based upon usage. Service expense under this contract was $5.3 million, $5.0 million and $4.9 million for the years ended December 31, 2005, 2004 and 2003, respectively.

In 2004, the Company signed a service agreement with International Business Machines Corporation (‘IBM’). Under the terms of this agreement, IBM provides support for our network and hardware environments and our help desk services. We have agreed to pay certain monthly services fees based upon

F-34

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

16. Commitments and Contingencies (Continued)

usage. This agreement expires June 30, 2011. Service expense under this contract was $13.7 million and $9.5 million for the years ended December 31, 2005 and 2004, respectively.

Contingencies—Assets held by the Company in a fiduciary capacity are not included in the consolidated balance sheets since these items are not assets of the Company. Management conducts regular reviews of its fiduciary responsibilities and considers the results in preparing its consolidated financial statements. In the opinion of management, there were no contingent liabilities at December 31, 2005 that were material to the consolidated financial position or results of operations of the Company.

On June 27, 2003, the Company and an individual employee of the Company were named in a lawsuit alleging, among other things, that the Company breached an implied covenant of good faith and fair dealing in a subadvisory contract with Opus Investment Management, Inc. (‘Opus’), and that the individual employee of the Company engaged in a breach of fiduciary duties and tortious interference with a contract. Opus had been a subadviser to the Merrimac Funds, for which the Company acts as investment adviser. Upon the expiration of Opus’s contract on June 1, 2003, the Merrimac Funds elected not to re-appoint Opus as subadviser. The lawsuit was filed in Superior Court in Worcester, Massachusetts and seeks unspecified damages. The lawsuit is currently in the discovery phase. The Company believes that the claims are without merit and intends to vigorously defend the rights of the Company. However, the Company cannot predict the outcome of this lawsuit at this time, and the Company can give no assurance that it will not affect the Company’s financial condition or results of operations in a materially adverse way.

In July 2000, two of the Company’s Dublin subsidiaries, Investors Trust & Custodial Services (Ireland) Ltd. (‘ITC’) and Investors Fund Services (Ireland) Ltd. (‘IFS’), received a plenary summons in the High Court, Dublin, Ireland. The summons named ITC and IFS as defendants in an action brought by the FTF ForexConcept Fund Plc (the ‘Fund’), a former client. The summons also named as defendants FTF Forex Trading and Finance, S.A., the Fund’s investment manager, Ernst & Young, LLP, the Fund’s auditors, and Dresdner Bank-Kleinwort Benson (Suisse) S.A., a trading counterparty to the Fund. The Fund is an investment vehicle organized in Dublin to invest in foreign exchange contracts. A total of approximately $4.7 million had been invested in the Fund. Most of that money was lost prior to the Fund’s closing to subscriptions in June 1999.

In January 2001, ITC, IFS and the other defendants named in the plenary summons received a statement of claim by the Fund seeking unspecified damages allegedly arising from breach of contract, misrepresentation and breach of warranty, negligence and breach of duty of care, and breach of fiduciary duty, among others. The Company has notified its insurers and intends to defend this claim vigorously. Based on its investigation through December 31, 2005, the Company does not expect this matter to have a material adverse effect on its business, financial condition or results of operations.

Investors Financial Services Corp. and five of its officers are named as defendants in three purported class action complaints that were filed on or about August 4, 2005, August 15, 2005, and September 30, 2005 in the United States District Court for the District of Massachusetts, Boston, Massachusetts. Among other things, the complaints filed on August 4, 2005 and August 15, 2005 assert that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 during the period October 15, 2003 until July 15, 2005. Among other things, the complaint filed on September 30, 2005 asserts that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 during the period

F-35

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

16. Commitments and Contingencies (Continued)

July 16, 2003 until July 15, 2005. The allegations in the complaints predominantly relate to: (1) the Company’s October 2004 restatement of its financial results, and (2) the Company’s July 2005 revision of public guidance regarding its future financial performance. The complaints seek unspecified damages, interest, fees, and costs. We strongly believe that the lawsuits lack merit and we intend to defend against the claims vigorously. However, we cannot predict the outcome of the lawsuits at this time, and we can give no assurance that they will not materially adversely affect our financial condition or results of operations.

Investors Financial Services Corp. and nine of its officers and directors are named as defendants in two shareholder derivative complaints that were filed on or about September 22, 2005 and October 17, 2005 in the United States District Court for the District of Massachusetts, Boston, Massachusetts. Among other things, the complaints assert that the defendants are liable for breach of fiduciary duty, unjust enrichment, abuse of control, mismanagement, misappropriation of information, insider trading, and violation of Section 14(a) of the Securities Exchange Act of 1934. The complaint filed on September 22, 2005 also seeks reimbursement under the Sarbanes-Oxley Act of 2002. The allegations in the complaints predominantly relate to: (1) the Company’s October 2004 restatement of its financial results, and (2) the Company’s July 2005 revision of public guidance regarding its future financial performance. The complaints seek unspecified damages, attorneys’ fees, accountant and expert fees, and costs. We strongly believe that the lawsuits lack merit and we intend to defend against the claims vigorously. However, we cannot predict the outcome of the lawsuits at this time, and we can give no assurance that they will not materially adversely affect our financial condition or results of operations.

17. Fair Value of Financial Instruments

The carrying amount and estimated fair value of financial instruments are as follows (Dollars in thousands):

	December 31, 2005				December 31, 2004
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial Assets:
Cash and due from banks	$	79,637	$	79,637	$	49,059	$	49,059
Securities held to maturity	6,761,930		6,725,729		5,942,717		5,937,462
Securities available for sale	4,369,720		4,369,720		4,565,505		4,565,505
Loans, net of allowance	402,370		402,370		134,530		134,530
Interest rate contracts	24,251		24,251		1,849		1,849
Foreign exchange contracts	20,805		20,805		99,576		99,576
Financial Liabilities:
Deposits	$	4,992,590	$	4,992,590	$	5,396,382	$	5,396,382
Securities sold under repurchase agreements	4,797,868		4,736,958		4,255,497		4,197,590
Short-term and other borrowings	1,356,649		1,356,649		594,681		594,411
Interest rate contracts	101		101		310		310
Foreign exchange contracts	19,665		19,665		98,531		98,531

F-36

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

17. Fair Value of Financial Instruments (Continued)

The fair value estimates presented herein are based on pertinent information available to management at December 31, 2005 and 2004. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been significantly revalued for the purposes of these consolidated financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

The Company uses the following methods and assumptions to determine the fair value of selected financial instruments:

Short-term financial assets and liabilities—For financial instruments with a short or no stated maturity, prevailing market rates and limited credit risk, carrying amounts approximate fair value. Those financial instruments include cash and due from banks, loans and deposits.

Securities, available for sale and held to maturity—Fair values were based on prices obtained from an independent nationally recognized pricing service, or in the absence of such, prices were obtained directly from selected broker-dealers.

Securities sold under repurchase agreements and short-term and other borrowings—Fair values of the Company’s long-term borrowings and long-term repurchase agreements were based on quoted market prices, when available, and prevailing market rates for borrowings of similar terms. Carrying amounts for short-term borrowings and short-term repurchase agreements approximate fair value due to the short-term nature of these instruments.

Interest rate contracts—Fair values were based on the estimated amount that the Company would receive or pay to terminate the swap agreements, taking into account the current interest rates and the creditworthiness of the swap counterparties.

Foreign exchange contracts—Fair values were based on quoted market prices of comparable instruments. Foreign exchange contracts have been reduced by offsetting balances with the same counterparty where a master netting agreement exists.

18. Regulatory Matters

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined)

F-37

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

18. Regulatory Matters (Continued)

to average assets (as defined). Management believes, as of December 31, 2005, that the Company and the Bank meet all capital adequacy requirements to which they are subject.

As of December 31, 2005, the most recent notification from the Federal Deposit Insurance Corporation categorized the Company and the Bank as well-capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, the Company and the Bank must maintain minimum Total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Company’s or the Bank’s category.

The following table presents the capital ratios for the Company and the Bank (Dollars in thousands):

										To Be Well-
										Capitalized Under
					For Capital					Prompt Corrective
	Actual				Adequacy Purposes					Action Provisions
	Amount		Ratio		Amount		Ratio			Amount		Ratio
As of December 31, 2005:
Total Capital
(to Risk-Weighted Assets-the Company)	$	731,833	18.50	%	$	316,553		8.00	%	N/A		N/A
Total Capital
(to Risk-Weighted Assets-the Bank)	$	720,113	18.21	%	$	316,349		8.00	%	$	395,436	10.00	%
Tier 1 Capital
(to Risk-Weighted Assets-the Company)	$	731,733	18.49	%	$	158,276		4.00	%	N/A		N/A
Tier 1 Capital
(to Risk-Weighted Assets-the Bank)	$	720,013	18.21	%	$	158,174		4.00	%	$	237,262	6.00	%
Tier 1 Capital
(to Average Assets-the Company)	$	731,733	5.95	%	$	491,685		4.00	%	N/A		N/A
Tier 1 Capital
(to Average Assets-the Bank)	$	720,013	5.86	%	$	491,549		4.00	%	$	614,437	5.00	%
As of December 31, 2004:
Total Capital
(to Risk-Weighted Assets-the Company)	$	636,219	20.54	%	$	247,782		8.00	%	N/A		N/A
Total Capital
(to Risk-Weighted Assets-the Bank)	$	618,166	19.98	%	$	247,572		8.00	%	$	309,465	10.00	%
Tier 1 Capital
(to Risk-Weighted Assets-the Company)	$	636,119	20.54	%	$	123,891		4.00	%	N/A		N/A
Tier 1 Capital
(to Risk-Weighted Assets-the Bank)	$	618,066	19.97	%	$	123,786		4.00	%	$	185,679	6.00	%
Tier 1 Capital
(to Average Assets-the Company)	$	636,119	5.85	%	$	435,080		4.00	%	N/A		N/A
Tier 1 Capital
(to Average Assets-the Bank)	$	618,066	5.68	%	$	435,017		4.00	%	$	543,772	5.00	%

F-38

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003.

18. Regulatory Matters (Continued)

Under Massachusetts law, trust companies such as the Bank, like national banks, may pay dividends no more often than quarterly, and only out of net profits and to the extent that such payments will not impair the Bank’s capital stock and surplus account. Moreover, prior Commissioner approval is required if the total dividends for a calendar year would exceed net profits for that year combined with retained net profits for the previous two years. These restrictions on the ability of the Bank to pay dividends to the Company may restrict the ability of the Company to pay dividends to its stockholders.

The operations of the Company’s securities broker affiliate, Investors Securities Services, LLC (‘ISS’), are subject to federal and state securities laws, as well as the rules of both the SEC and the NASD. Management believes, as of December 31, 2005, that ISS is in material compliance with all of the foregoing requirements to which it is subject.

The operations of the Company’s captive insurance affiliate, Investors Vermont Insurance Company (‘IVIC’), are subject to the laws and regulations of the State of Vermont Department of Banking, Insurance, Securities and Health Care Administration. Management believes, as of December 31, 2005, that IVIC is in material compliance with all of the foregoing requirements to which it is subject.

In June 2004, the Basel Committee on Banking Supervision (‘Basel Committee’) released the document “International Convergence of Capital Measurement and Capital Standards: A Revised Framework”. The Framework, also referred to as Basel II, is designed to secure international convergence on regulations and standards governing the capital adequacy of internationally active banking organizations. In September 2005, the FFIEC (U.S. banking and thrift supervisory agencies) revised guidance on the timing and qualification process for U.S. banks that will become subject to Basel II. The new rules as applied in the U.S. are expected to become effective on January 1, 2009, subject to transitional parallel testing beginning on January 1, 2008. Although the Company is not required to be compliant with the new rules, the Company is in the process of developing an implementation program to achieve Basel II compliance. Ultimately, U.S. implementation of Basel II will depend on, and will be subject to, final regulations and related policies promulgated by the FFIEC supervisory agencies. The Company cannot predict the final form of the rules, nor their impact on the Company’s risk-based capital.

F-39

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003.

19. Net Interest Income

The components of interest income and interest expense are as follows (Dollars in thousands):

	December 31,
	2005		2004		2003
Interest income:
Federal Funds sold and securities sold under repurchase agreements	$	2,250	$	667	$	326
Investment securities held to maturity and available for sale	436,193		307,895		243,191
Loans	9,262		4,587		3,577
Total interest income	$	447,705	$	313,149	$	247,094
Interest expense:
Deposits	$	77,706	$	50,721	$	39,819
Securities sold under repurchase agreements	142,681		54,376		29,371
Short-term and other borrowings	54,473		17,952		21,626
Junior subordinated debentures	2,420		2,420		2,364
Total interest expense	$	277,280	$	125,469	$	93,180
Net interest income	$	170,425	$	187,680	$	153,914

20. Selected Quarterly Financial Data (unaudited) (Dollars in thousands, except per share data):

	First		Second		Third		Fourth
Year Ended December 31, 2005	Quarter		Quarter		Quarter		Quarter
Noninterest income	$	120,176	$	128,676	$	131,215	$	145,470
Interest income	98,055		108,103		114,512		127,035
Interest expense	50,442		66,057		76,471		84,310
Operating expenses	104,792		113,237		116,130		125,950
Income before income taxes	62,997		57,485		53,126		62,245
Income taxes	22,049		13,358		17,894		22,734
Net income	40,948		44,127		35,232		39,511
Basic earnings per share	0.61		0.66		0.54		0.61
Diluted earnings per share	0.60		0.64		0.53		0.60

	First		Second		Third		Fourth
Year Ended December 31, 2004	Quarter		Quarter		Quarter		Quarter
Noninterest income	$	106,770	$	109,741	$	100,572	$	108,408
Interest income	73,636		69,140		80,474		89,899
Interest expense	25,215		27,065		32,207		40,982
Operating expenses	100,134		100,700		94,491		103,058
Income before income taxes	55,057		51,116		54,348		54,267
Income taxes	18,504		17,120		18,214		18,988
Net income	36,553		33,996		36,134		35,279
Basic earnings per share	0.56		0.51		0.54		0.54
Diluted earnings per share	0.54		0.50		0.53		0.52

F-40

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003.

21. Geographic Reporting and Service Lines

The Company does not utilize segment information for internal reporting as management views the Company as one segment. The following represents net operating revenue by geographic area and long-lived assets (including goodwill) by geographic area (Dollars in thousands):

	Net Operating Revenue						Long-Lived Assets
	For the Years Ended December 31,						December 31			December 31
Geographic Information	2005		2004		2003		2005			2004
United States	$	653,305	$	579,168	$	468,724		$	141,810		$	141,801
Ireland	37,061		28,835		18,601			6,325			5,930
Canada	5,427		4,989		2,579			385			121
Cayman Islands	166		179		203			—			—
United Kingdom	3		—		—			850			—
Total	$	695,962	$	613,171	$	490,107		$	149,370		$	147,852

Barclays Global Investors, N.A. (‘BGI’) accounted for 18%, 17% and 16% of the Company’s consolidated net operating revenues for the years ended December 31, 2005, 2004 and 2003, respectively. No client other than BGI accounted for more than 10% of the Company’s consolidated net operating revenues in the years ended December 31, 2005, 2004 and 2003.

The following represents the Company’s asset servicing fees by service line (Dollars in thousands):

	For the Years Ended
	December 31,
Asset servicing fees by service lines:	2005		2004		2003
Core service fees:
Custody, multicurrency accounting and fund administration	$	375,596	$	314,272	$	254,225
Value-added service fees:
Foreign exchange	62,107		54,466		36,501
Cash management	37,592		26,396		20,884
Securities lending	22,536		10,385		8,903
Investment advisory	8,442		15,020		11,777
Other service fees	2,786		2,661		1,296
Total value-added service fees	133,463		108,928		79,361
Total	$	509,059	$	423,200	$	333,586

F-41

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

22. Financial Statements of Investors Financial Services Corp. (Parent Only)

The following represents the separate condensed financial statements of IFSC (Dollars in thousands):

Statements of Income	December 31,  2005				December 31, 2004				December 31, 2003
Equity in undistributed income of bank subsidiary		$	99,809			$	144,595			$	95,088
Equity in undistributed income of nonbank subsidiary		—				—				278
Equity in undistributed loss of unconsolidated nonbank subsidiary		(28		)		(28		)		(8		)
Dividend income from bank subsidiary		63,000				—				—
Dividend income from nonbank subsidiaries		—				—				57
Dividend income from unconsolidated nonbank subsidiary		76				76				19
Interest expense on junior subordinated deferrable interest debentures		(2,420		)		(2,420		)		(2,420		)
Operating expenses		(2,254		)		(1,703		)		(2,214		)
Income tax benefit		1,635				1,442				1,621
Net Income		$	159,818			$	141,962			$	92,421

F-42

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

22. Financial Statements of Investors Financial Services Corp. (Parent Only) (Continued)

Balance Sheets	December 31, 2005				December 31, 2004
Assets:
Cash		$	10,303			$	14,312
Investments in bank subsidiary		785,138				720,501
Investments in nonbank subsidiaries		710				738
Receivable due from bank subsidiary		1,991				2,035
Other assets		709				650
Total Assets		$	798,851			$	738,236
Liabilities and Stockholders’ Equity:
Liabilities:
Accrued expenses		$	62			$	43
Payable due to nonbank subsidiary		1,157				1,157
Subordinated debt		24,774				24,774
Total liabilities		25,993				25,974
Stockholders’ Equity:
Common stock		672				667
Surplus		286,265				272,536
Deferred compensation		(311		)		(572		)
Retained earnings		572,549				418,034
Accumulated other comprehensive (loss) income, net		(13,369		)		23,888
Treasury stock		(72,948		)		(2,291		)
Total stockholders’ equity		772,858				712,262
Total Liabilities and Stockholders’ Equity		$	798,851			$	738,236

F-43

INVESTORS FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2005, 2004 and 2003

22. Financial Statements of Investors Financial Services Corp. (Parent Only) (Continued)

Statements of Cash Flows	December 31, 2005				December 31, 2004				December 31, 2003
Cash flows from operating activities:
Net income		$	159,818			$	141,962			$	92,421
Adjustments to reconcile net income to net cash used by operating activities:
Amortization of deferred compensation		261				316				483
Amortization of premium expense		28				28				195
Change in assets and liabilities:
Receivable due from bank subsidiary		44				(376		)		942
Income tax receivable		(98		)		484				(484		)
Other assets		13				(8		)		(861		)
Payable due to nonbank subsidiary		—				—				1,155
Accrued expenses		19				(13		)		14
Equity in undistributed income of bank subsidiary		(99,809		)		(144,595		)		(95,088		)
Equity in undistributed income of nonbank subsidiary		—				—				(278		)
Equity in undistributed loss of unconsolidated nonbank subsidiary		28				28				8
Net cash provided by operating activities		60,304				(2,174		)		(1,493		)
Cash flows from financing activities:
Proceeds from exercise of stock options		7,779				16,068				2,977
Proceeds from issuance of common stock		3,868				3,355				3,387
Common stock repurchased		(70,657		)		(1,741		)		(550		)
Dividends paid		(5,303		)		(4,629		)		(3,904		)
Net cash used in financing activities		(64,313		)		13,053				1,910
Net (decrease) increase in cash and due from banks		(4,009		)		10,879				417
Cash and due from banks, beginning of year		14,312				3,433				3,016
Cash and due from banks, end of year		$	10,303			$	14,312			$	3,433

F-44

EX-10.34

Exhibit 10.34

AMENDED AND RESTATED TRUST 3000 SERVICE AGREEMENT

SEI Investments Company (formerly SEI Corporation) (“SEIIC”), a Pennsylvania corporation, currently having its principal place of business at One Freedom Valley Drive, Oaks, Pennsylvania 19456 and Investors Bank & Trust Company (“Customer”), a Massachusetts corporation having its principal place of business at 200 Clarendon Street, Boston, Massachusetts 02110, entered into a certain Trust 3000 Service Agreement, dated the 1^ST day of July, 1991 (as amended to date, most recently on November 21, 2003, the “Original Agreement”), pursuant to which, among other things, SEIIC agreed to provide certain trust processing and reporting services for Customer and its customers through the TRUST 3000 System.

SEIIC previously assigned to SEI Global Services, Inc. (“SEI”) all of SEIIC’s rights and obligations under the Original Agreement (such assignment did not relieve SEIIC from any of such obligations).

SEI and Customer (collectively the “Parties”, individually, a “Party”) now desire to amend and restate the Original Agreement in its entirety effective as of July 1, 2004 (the “Designated Date”).  However, notwithstanding such amendment and restatement, the provisions of the Original Agreement shall continue to govern the respective rights and obligations of the SEIIC and Customer that arose or accrued prior to the Designated Date; and the provisions of this Agreement shall govern the respective rights and obligations of the Parties that arise and accrue from and after the Designated Date.

  NOW THEREFORE, in consideration of the premises, and the covenants, representations and warranties contained herein, and intending to be legally bound hereby, SEI and Customer agree as follows:

SECTION 1.  SERVICES PROVIDED AND EQUIPMENT SPECIFICATION

1.01. TRUST 3000 Service. Subject to the terms and conditions of this Agreement, SEI agrees to provide Customer and Customer agrees to purchase the use of the TRUST 3000 Service for its trust department and custody department accounts existing on the date hereof and for future trust department and custody department accounts to the extent permitted by Section 4.01. As used herein, TRUST 3000 Service shall mean the products and services offered by SEI and purchased by Customer hereunder, for managing and processing trust accounts of financial institutions, as specified in Exhibit A attached hereto and as described in the User Manuals for the functions specified on such Exhibit, some of which products and services are currently provided through the operation of SEI’s TRUST 3000 System.  The SEI Trust 3000 System means the proprietary computer systems and components utilized by SEI from time to time to provide certain of the SEI Trust 3000 Service hereunder.  SEI shall provide the TRUST 3000 Service in accordance with the Performance Standards set forth

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

in Exhibit B except as otherwise provided in this Agreement.

If Customer requires applications or processing outside of the levels specified, SEI shall make reasonable efforts to provide such processing service upon agreement by SEI and Customer of the additional fees due for such increased levels, such fees not to exceed SEI’s prevailing rates  for such services, which shall not exceed the fees generally charged by SEI to similarly situated customers, determined by relative size (based on number of accounts on the Trust 3000 System) and usage of the Trust3000 Service.

It is understood and agreed that SEI shall have the right to engage other persons or entities to provide any portion of the Trust3000 Service.  Customer understands and agrees that SEI has sole responsibility and liability, subject to the limitations of liability set forth in this Agreement, for furnishing the Trust 3000 Service, and agrees that Customer shall look solely to SEI for the provision of the Trust 3000 Service; and that persons or entities providing any of the Trust 3000 Service, whether as supplier agent or subcontractor, shall have no liability to Customer for Trust3000 Service.

1.02. Equipment. Customer shall be responsible for obtaining and maintaining network-compatible terminal, print and telecommunication equipment for use in conjunction with the TRUST 3000 Service.

1.03 License Grant to the Trust 3000 System. SEI hereby grants to Customer during the Term of this Agreement a non-exclusive, personal and limited license to use the Trust 3000 System solely in connection with the accounts as contemplated by this Agreement.  Customer shall not sublicense, assign, lease, distribute, or otherwise transfer the Trust 3000 System or Customer’s right to use the Trust 3000 System to any other person or entity.

SECTION 2. TERM OF AGREEMENT

 2.01. Basic Term.  The Basic Term of this Agreement shall begin as of the Designated Date and shall conclude on December 31, 2009.  Thereafter, the Agreement shall automatically renew as provided in Section 2.02 of the Agreement.  As of the Designated Date, this Agreement amends and restates the Original Agreement in its entirety and supersedes the Original Agreement, in all respects, notwithstanding any provisions to the contrary.

2.02. Renewal Term. This Agreement shall automatically remain in full force and effect for a three (3) year Renewal Term, and for three (3) year Renewal Terms thereafter, unless terminated as provided in Section 2.03 of the Agreement.

2.03. Termination. Customer or SEI may elect to terminate this Agreement on the last day of the Basic Term or any Renewal Term by notifying the other Party hereto in writing, not less than one hundred and eighty (180) calendar days prior to the expiration date.

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

2.04. Early Termination.

(A) Early Termination During the Basic Term/Renewal Term – Notice and Buyout Amount to be Paid.  In the event Customer desires to terminate this Agreement at any time during the Basic Term or any Renewal Term, Customer may terminate this Agreement provided:  (1) Customer is not in material breach of this Agreement at the time such notice of termination is given; (2) Customer gives SEI no less than [/*/ CONFIDENTIAL TREATMENT REQUESTED] calendar days prior written notice of such termination (such notice may be referred to as the “Termination Notice”); and (3) Customer pays the Buyout Amount defined below, at the time such Termination Notice is given.  In addition, Customer agrees to pay all other amounts set forth in Section 9.01.2. The “Buyout Amount” means the dollar amount achieved through the calculations set forth in (1) through (5) below:

(1)the Minimum Monthly TRUST 3000 Core Fee in effect at the time the Termination Notice is given, plus

(2) all other monthly Subsystem fees in effect at the time the Termination Notice is given; the sum of (1) and (2) shall be multiplied by

(3) the number of months remaining on the Basic Term or the Renewal Term, as applicable; the product of such multiplication shall be present value discounted (“PVD”) by the amount set forth in (4) below;

(4) the PVD shall equal the time value of money for the period of time commencing when Customer pays the Buyout Amount, continuing until the end of the Basic Term or Renewal Term, as applicable, (without taking into consideration any additional Renewal Terms of this Agreement), at an interest rate equal to the short term Fed Funds rate in effect, in the Wall Street Journal, on the date such Termination Notice is given.

(5) Finally, the amount determined under paragraph (4) shall be multiplied by the applicable percentage (“Applicable Percentage”) as follows:

If the date of the Termination Notice is prior to December 31, 2006, the Applicable Percentage shall be [/*/ CONFIDENTIAL TREATMENT REQUESTED];

If the date of the Termination Notice is between January 1, 2007  and December 31, 2008, the Applicable Percentage shall be [/*/ CONFIDENTIAL TREATMENT REQUESTED]; and

If the date of the Termination Notice is after December 31, 2008 (including during any Renewal Term), the Applicable Percentage shall be [/*/ CONFIDENTIAL TREATMENT REQUESTED].

An example of the calculation of the Buyout Amount is provided below:

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

Notwithstanding anything in this Agreement to the contrary, Customer may terminate certain Subsystems (as specifically identified in Exhibit A) without terminating the Agreement and without payment of any early termination fee or Buyout Amount.

Payment of the Buyout Amount, and the other amounts specified in Section 9.01.2, shall be SEI’s sole and exclusive remuneration in connection with Customer’s exercise of Customer’s termination of the Agreement under this Section 2.04.  The foregoing is not intended to limit any rights or remedies that SEI may have for enforcement of Customer’s obligations hereunder.

(B) Payment of Buyout Amount if Customer Continues TRUST 3000 System Retrieval. Notwithstanding anything contained to the contrary in Section (A) above, in the event Customer terminates this Agreement as provided in Section (A) above, but Customer desires to continue to use the TRUST 3000 System for retrieval purposes for a period of time which is equal to, or less than, [/*/ CONFIDENTIAL TREATMENT REQUESTED] from the effective date of termination, Customer may pay the Buyout Amount as calculated in Section (A) above, in monthly installments.  The monthly installments will commence on the effective date of termination, and continue for each month Customer uses the TRUST 3000 System for retrieval purposes. Each installment shall equal the Buyout Amount divided by the number of months which Customer desires to continue to use the TRUST 3000 System for retrieval. In no event shall the Buyout Amount be prorated for a period of time greater than [/*/ CONFIDENTIAL TREATMENT REQUESTED] from the effective date of termination.

2.05. Other Grounds for Termination. In addition to termination rights specified above, the Parties shall have the right to terminate this Agreement as specified below:

(A) Termination for Insolvency. A Party may terminate this Agreement if the other Party (a) files a voluntary petition in bankruptcy (b) becomes, the subject of any involuntary petition in bankruptcy or proceedings related to its liquidation, insolvency, or the appointment of a receiver or similar officer for it, which proceedings, if involuntary, are not dismissed within ninety (90) calendar days.

(B) Termination for Cause.

1)In the event SEI fails to achieve the Performance Standards set forth in Exhibit B for [/*/ CONFIDENTIAL TREATMENT REQUESTED] consecutive months or [/*/ CONFIDENTIAL TREATMENT REQUESTED] months (non-consecutive) in any [/*/ CONFIDENTIAL TREATMENT REQUESTED] month period, Customer shall have the right to terminate the Agreement provided that Customer shall have given notice to SEI of its failure

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

to comply with the Performance Standards within thirty (30) calendar days after any month for which the Performance Standards are not achieved.

2)Customer shall have the right to terminate the Agreement in the event that the SEI data center is inoperative and SEI is unable to provide the Trust 3000 Service for [/*/ CONFIDENTIAL TREATMENT REQUESTED] consecutive hours during any consecutive business days other than due to an event or circumstance subject to Section 10.05 of this Agreement; provided, however, that SEI will be deemed to be providing the Trust 3000 Service for purposes hereof if  it has implemented its then current SEI Disaster Recovery Plan (the current version (as of the Designated Date) is attached as Exhibit D) in accordance with its terms.  The foregoing shall not be intended to limit or otherwise affect SEI’s obligation to provide normal recovery procedures or any other disaster recovery services as described SEI’s Disaster Recovery Plan.

3)Either SEI or Customer may terminate this Agreement if a Default of the other Party is not cured during the applicable cure period set forth below in this Section 2.05 (B)(3). “Default” shall mean a breach by a Party (the “Breaching Party”) which results in the other Party experiencing a substantial deprivation of the benefit of this Agreement, provided that such breach, if curable, is: (i) not cured by the Breaching Party within thirty (30) calendar days after the Breaching Party has received written notice of such material breach; or (ii) if the material breach is one that could not reasonably be cured within thirty (30) calendar days; (y) the failure by the Breaching Party to adopt, within thirty (30) calendar days after receiving notice of such breach, a plan to cure such breach within a time period not longer than sixty (60) calendar days after receipt of such notice of the breach, or (z) the failure by the Breaching Party to cure such breach within such sixty (60) calendar day period. The provisions of this Section 2.05 (B)(3)are not intended to limit Customer’s right to dispute any Fees in accordance with Section 3.03 of this Agreement.

4)Exercise of Section 2.05 Termination. In order to exercise its right of termination under this Section 2.05 (hereinafter a “Section 2.05 Termination”), the terminating Party must, within 60 calendar days after the date that such Party first became aware or reasonably should have become aware of its right of termination under this Section 2.05, provide the other Party with written notice (a “Section 2.05 Notice”) specifying the scheduled date on which the termination of this Agreement is to occur, which date shall not be less than one hundred eighty (180) calendar days after the date of the Section 2.05 Notice nor more than one (1) year after the date of the Section 2.05 Notice; and the terminating Party must not be in material breach of this Agreement at the time it provides such Section 2.05 Notice.

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

If Customer terminates this Agreement under Section 2.05(B) Customer shall have no obligation to pay SEI the Buyout Amount, but Customer shall be obligated to pay the other amounts specified in Section 9.01.2.  If SEI terminates this Agreement under Section 2.05(B) Customer shall have to pay SEI the Buyout Amount and the other amounts specified in Section 9.01.2.

SECTION 3.  PAYMENT OF FEES AND OTHER EXPENSES

3.01. Fees. Customer agrees to pay to SEI the fees specified in Exhibit A, as such fees may be adjusted from time to time hereunder pursuant to this Agreement (collectively, the “Fees”). Upon Customer’s request, SEI will provide Customer with reasonable back-up support for the invoices.

3.02. Terms. Customer agrees to pay SEI the Fees in advance for each month commencing on the first day of the Basic Term (except that activity based fees will be billed in arrears), each such payment to be due thirty (30) calendar days after the date of Customer’s receipt of the invoice.  Customer agrees to pay interest on all amounts past due at the rate of one percent (1%) per month, if such rate is permitted by law, or otherwise at the highest rate permitted by law, provided, however, that no interest will be due on amounts disputed by Customer in good faith and on reasonable grounds.

3.03. Disputed Amounts. In the event Customer in good faith disputes all or any portion of any SEI invoice, Customer shall promptly notify SEI thereof and shall include in such written notice the amount that Customer so disputes and its reason for such dispute. Customer shall also pay that portion of any such invoice that it does not dispute and shall do so within thirty (30) calendar days after receipt of invoice.  Upon receipt of Customer’s dispute notice, SEI and Customer will work together in good faith to resolve such dispute in a prompt and mutually acceptable manner.  Customer will pay any disputed amounts no later than thirty (30) calendar days after the dispute relative to such amounts have been resolved.

3.04. Taxes.  Customer agrees to pay all state and local sales, use, property or other taxes (except for any personal property taxes on property SEI’s owns or leases, for franchise and privilege taxes on SEI’s business, gross receipts taxes to which SEI is subject, and for income taxes based on SEI’s income), which may be accessed against SEI or Customer or Customer’s customers with respect specifically to this Agreement, the Trust 3000 Service or any equipment provided by SEI hereunder.  At its option, SEI may include such taxes in its invoices in which event Customer shall pay to SEI the taxes so invoiced.

3.05. Adjustment of Fees. At any time after December 31, 2004, SEI may increase the Fees set forth in Exhibit A hereto, provided that SEI provides Customer no less than sixty (60) calendar days advance written notice of such increase (“Fee Increase Notification”), in an amount not to exceed the lesser of: (i) [/*/ CONFIDENTIAL TREATMENT REQUESTED] percent ([/*/ CONFIDENTIAL TREATMENT

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

REQUESTED]%); or (ii) the percentage increase in the CPI since the Designated Date, with respect to the first increase, and since the date of the last increase, with respect to the second and any subsequent increases (the “CPI Percentage Increase”); provided, however, in the event the CPI Percentage Increase is greater than [/*/ CONFIDENTIAL TREATMENT REQUESTED] percent ([/*/ CONFIDENTIAL TREATMENT REQUESTED]%), the amount of the excess of the CPI Percentage Increase over [/*/ CONFIDENTIAL TREATMENT REQUESTED] percent ([/*/ CONFIDENTIAL TREATMENT REQUESTED]%) may be applied to increase the fees payable hereunder in any subsequent year to the extent the CPI Percentage Increase in such year is less than [/*/ CONFIDENTIAL TREATMENT REQUESTED] percent ([/*/ CONFIDENTIAL TREATMENT REQUESTED]%).  In no event shall there be more than one increase in any [/*/ CONFIDENTIAL TREATMENT REQUESTED] period.  As used herein, the term “CPI” means the Unadjusted Consumer Price Index, as published in the Summary Data from the Consumer Price Index News Release by the Bureau of Labor Statistics, U.S. Department of Labor, For All Urban Consumers (CPI-U).  In the event the Bureau of Labor Statistics stops publishing the CPI or substantially changes its content and format, Customer and SEI will substitute another comparable index published at least annually by a mutually agreeable source.

Notwithstanding the foregoing, SEI will not increase the Fees, as set forth above, during the period from [/*/ CONFIDENTIAL TREATMENT REQUESTED] through [/*/ CONFIDENTIAL TREATMENT REQUESTED].  However, during this period, SEI may send out a Fee Increase Notification that may provide for an increase in the Fees which will take effect after [/*/ CONFIDENTIAL TREATMENT REQUESTED].  Further, with respect to the first adjustment effective after [/*/ CONFIDENTIAL TREATMENT REQUESTED], such adjustment shall not exceed the lesser of: (i) [/*/ CONFIDENTIAL TREATMENT REQUESTED] percent ([/*/ CONFIDENTIAL TREATMENT REQUESTED]%); or (ii) the percentage increase in the CPI since [/*/ CONFIDENTIAL TREATMENT REQUESTED].

Notwithstanding the above, SEI may at any time upon no less than sixty (60) calendar days written notice increase the Fees applicable to telecommunication services and other Third Party Services indicated on Exhibit A attached hereto provided, however, that (1) such increases shall not exceed the corresponding percentage fee increase to SEI from the applicable Third Party Vendors; and (2) Customer will be permitted to terminate a Third Party Service, without payment of any early termination fees related to such terminated Third Party Service(s) , if the increase for such Third Party Service exceeds [/*/ CONFIDENTIAL TREATMENT REQUESTED] percent ([/*/ CONFIDENTIAL TREATMENT REQUESTED]%) in any calendar year.  In order to so terminate a Third Party Service, Customer must provide written notice to SEI of its intent to terminate the applicable Third Party Service within ninety (90) calendar days after receiving notice of the Third Party Service price increase from SEI that caused the increase to exceed such [/*/ CONFIDENTIAL TREATMENT REQUESTED]% threshold.

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

3.06. Renegotiation of Fees upon Significant Loss of Trust Accounts. In the event during the term of this Agreement, Customer’s trust accounts shall decline in an amount equal to or greater than [/*/ CONFIDENTIAL TREATMENT REQUESTED] percent ([/*/ CONFIDENTIAL TREATMENT REQUESTED]%) less than those trust accounts levels existing as of the Designated Date, and providing such decline in accounts is not due to a sale or other transfer of accounts, then in such event, upon written request of Customer, SEI agrees to discuss in good faith with Customer an adjustment of the Fees payable pursuant to Exhibit A attached hereto.  It is understood that such discussion shall not be intended as an obligation for SEI to reduce the Fees (and that any such reduction in accounts could actually result in the increase in certain Fees and the decrease of other Fees), but rather an obligation to engage in good faith discussions.  In no event shall SEI have any to engage in any such negotiations more than one (1) time during the term of this Agreement.  The foregoing shall not be construed to permit Customer to circumvent or reduce Customer’s obligations with respect to a Termination for Convenience.

SECTION 4.  COVENANTS OF CUSTOMER

4.01 Limitations on Use of TRUST 3000 Service.

4.01.01Customer agrees that it shall not permit the Trust 3000 Service to be used by or for any person or entity, or for the accounts of any person or entity, except for Customer, its Affiliates (domiciled in the United States or Canada only) or custody clients of Customer (domiciled in the United States or Canada) (collectively, the Affiliates and custody clients of Customer may be referred to as “Customer Customers”).  In connection with its receipt of Services, each of the Customer Customers shall observe and comply with, and Customer shall be responsible for such observance and compliance, all of the applicable provisions of this Agreement to be observed and performed by Customer in connection with the receipt of services hereunder (other than the obligation to pay Fees and indemnification obligations, which shall remain the obligations of Customer), and each of Customer Customers shall be deemed to have accepted this obligation by its receipt of services hereunder.

4.01.02In the event that Customer or any Customer Customers acquire additional accounts, as a result of a merger, stock acquisition, purchase or other transaction, Customer may use the Trust 3000 Service for such acquired accounts, further provided such acquired accounts have substantially similar processing characteristics as the accounts being processed under this Agreement at the time of such acquisition and that such acquired accounts will be processed on the same database as Customer’s

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

other Accounts, it being understood that to the extent that conversion services are required to be performed by SEI, Customer shall pay SEI for such services. If such acquired accounts do not have substantially similar processing characteristics as the accounts being processed under this Agreement at the time of such acquisition, Customer and/or Customer Customers may use the Trust 3000 Service in connection with such accounts; provided, however, appropriate adjustments are made to the provisions of this Agreement, to reflect, among other things, the conversion of such acquired accounts to the TRUST 3000 System, the conversion fee associated with the conversion of such accounts, and any significant differences between the processing characteristics of such acquired accounts and the previously existing Accounts.  “Affiliate” is any company which controls, is controlled by, or under common control with, a Party, and “control” is defined as owning 50% or more of such entity.  The parties agree to discuss in good faith and make mutually agreed upon modifications to the Performance Standards to reflect any adverse impact to the Performance Standards caused, or anticipated to be caused, by the addition of such acquired accounts.

4.02. Customer represents and warrants to SEIIC and SEI that after reasonable inquiry, it (i) is not aware of any default by either SEIIC or Customer of any the terms, conditions or provisions of the Original Agreement and (ii) has no claim against SEIIC and SEI under the Original Agreement.

4.03. INTENTIONALLY OMITTED

4.04. INTENTIONALLY OMITTED

4.05. Limitation of Use of Materials. Customer shall not copy or reproduce or furnish to others, in any manner, any manuals, user documentation or other materials provided by SEI to Customer under this Agreement except for copies made by Customer solely for its internal use and the use by Customer’s Customers to the extent permitted by Section 4.01.

4.06. Customer Data.  Customer shall be solely responsible for the accuracy and completeness of any data or other information provided by or on behalf of Customer to SEI pursuant to this Agreement, and for the correctness of the format in which the data or other information is presented.

4.07. Copyright Notices.  Customer agrees to preserve any copyright and trade secret notices of SEI on materials where such notices appear.

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

4.08. Proprietary Rights. Customer agrees and acknowledges that:  the TRUST 3000 System, the TRUST 3000 Service and related documentation, together with all other data and materials, all software codes, trade secrets, design concepts, discoveries, ideas, enhancements, improvements and inventions related thereto (“Proprietary Information”) supplied by SEI to Customer pursuant to this Agreement:  (i) are the exclusive property of SEI and shall remain so; (ii) are confidential and proprietary trade secrets of SEI, protected by law, and of substantial value to SEI, and may not  be used or disclosed without the written consent of SEI, except as contemplated by the terms of this Agreement.

SECTION 5.  COVENANTS OF SEI

5.01 Confidentiality of Customer Data.

SEI shall have access to Customer Data solely to the extent SEI requires such access to such data to provide the Trust 3000 Service. “Customer Data” shall mean, in or on any media or form of any kind: (i) all data and summarized data related to Customer and Customer’s Customers that is entered into software or equipment on behalf of Customer and Customer’s Customers and all data derived from such data (regardless of whether or not owned by Customer, generated or compiled by Customer, and including any such data on any deconversion tapes provided to Customer), and (ii) all other Customer-owned records, data, data files, input materials, reports, forms, and other such items that may be received, computed, processed, or stored by SEI, or by any of its subcontractors, in the performance of the Trust 3000 Service under this Agreement.  SEI may only access and process Customer Data in connection herewith or as directed by Customer in writing and may not otherwise modify Customer Data, merge it with other data, commercially exploit it, or otherwise use such data, other than as specified herein or as directed by Customer in writing.  SEI understands and agrees that nothing contained in this Agreement shall affect any ownership right, title, or interest in Customer Data and Customer owns all copyright, trademark, trade secrets, and other proprietary rights in the Customer Data.

SEI agrees that all copyrightable aspects of such Customer Data shall be considered “work made for hire” within the meaning of the Copyright Act of 1976, as amended.  SEI hereby assigns to Customer exclusively all right, title, and interest in and to the Customer Data and to all copyright or other proprietary rights therein that it may obtain, without further consideration, free from any claim, lien for balance due, or rights of retention thereto on the part of SEI.  SEI also acknowledges that the Parties do not intend SEI to be a joint author of the Customer Data within the meaning of the Copyright Act of 1976, as amended, and that in no event shall SEI be deemed a joint author thereof.

SEI agrees to keep the Customer Data free and clear of all liens and encumbrances.  SEI shall notify Customer promptly of the unauthorized possession, use or knowledge of Customer’s Data, or any other Confidential Information of Customer.

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

5.02. Security Precautions.

5.02.1 SEI agrees to provide and take security precautions so that access to the data stored in the TRUST 3000 System by Customer is available only to persons utilizing the user numbers and passwords assigned to Customer.

5.02.2 SEI further agrees to follow file, safekeeping, and backup procedures that may be required of SEI by law or rule or regulation of the Federal Deposit Insurance Corporation or the Comptroller of the Currency, or that are standard in the data processing industry for services similar to those provided by SEI.

5.03. Access by Customer.  SEI agrees to grant the internal auditors of Customer and other personnel authorized by Customer reasonable access to SEI’s facilities, and to books and records related to the provision of services contemplated by this Agreement.  SEI agrees to grant federal and other governmental and banking agencies, when required by law or authorized by Customer, access to records of Customer held by SEI.

5.04. SEI’s Right to Make Changes. In order to improve the quality of service to Customer, SEI reserves the right to make changes at any time in rules of operation, Customer identification procedures, and type of terminal equipment used or to be used in the TRUST 3000 System, provided that no such changes shall reduce the functionality of the system or shall conflict with or make inconsistent any of the terms or provisions of this Agreement.  SEI will give Customer reasonable advance notice of any such change.

5.05. Save of Customer Data. SEI will prepare and preserve magnetic tapes containing Customer’s complete data base (the “Save Tapes”) to protect Customer from the loss of data in event of fire or other event which destroys data kept at SEI’s data center.  The Save Tapes will include daily tapes, end of month tapes and end of year tapes, as set forth on Exhibit C. SEI shall deliver the Save Tapes to a location other than SEI’s data center.  SEI will have no responsibility for furnishing Customer Save Tapes in addition to those so made.  SEI shall have no obligation to retain any Save Tape whose data has been incorporated into a later Save Tape.

In addition, SEI shall perform back-ups of Customer’s complete data bases at least daily to facilitate efficient recovery of Customer’s data should processing problems occur at SEI’s Data Center.  These daily backups shall be stored in a manner as SEI determines is appropriate to provide timely recovery of data lost at the data center.

5.06. Legislative Enhancements. Modifications required to be made to the TRUST 3000 Service in order to comply with changes in federal banking laws or regulations will be made available to Customer.  Each such change shall be made and implemented as soon as practicable, and in any event by such time as the change may be necessary as required by law.  The development of new software modules or major changes to existing software modules required to comply with federal laws or regulations will be made available to Customer at a price equal to the total time and materials

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

required to implement such additions prorated on an equitable basis among all affected TRUST 3000 customers.  SEI shall charge Customer a pro-rata portion of the costs incurred by SEI for the development and implementation of such additions based on the number of accounts subject to this Agreement, relative to the total number of accounts processed by SEI for other customers of SEI that are affected by such additions.  To the extent modifications are required to comply with Securities and Exchange Commission Regulations that do not apply to SEI’s Customer base in general, SEI will use reasonable efforts in good faith to make such modifications by such time as they may be required by law or regulation provided Customer shall have given SEI prompt notification of the need for such modification and provided Customer shall have agreed to pay the cost thereof.

5.07. Third Party Services. SEI agrees to provide to Customer services from external third party sources (“Third Party Services”).  Such Third Party Services, if any, are referenced in Exhibit A. SEI warrants and represents that it has obtained from such third party vendors (“Third Party Vendors”) the rights to provide such Third Party Services to Customer.  To the extent that any such Third Party Services are provided to Customer hereunder, Customer agrees that such Third Party Services are proprietary to the Third Party Vendors; such Third Party Services are provided by the Third Party Vendors on an “AS IS WITH ALL FAULTS” basis for Customer’s internal use and as normally required on statements, reports, screens and other documents necessary to support Customer’s Customers and shall not be redistributed to other third parties; the Third Party Vendors MAKE NO WARRANTIES, EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY, FITNESS, OR ANY OTHER MATTER with respect to such Third Party Services; and the Third Party Vendors shall not be liable for any damages suffered by Customer in the use of such Third Party Services, including liability for any incidental, consequential or similar damages.  Notwithstanding the foregoing, if any Third Party Vendor fails to provide the Third Party Services to be provided by such Third Party Vendor, SEI shall (1) assert any claims that it may have against such Third Party Vendor under SEI’s agreement with such Third Party Vendor with respect to such failure (and any recovery related to such claim shall inure to Customer), and (2) use commercially reasonable efforts to cause such Third Party Vendor to perform the applicable Third Party Services.

SEI shall indemnify, defend, and hold the Customer harmless from and against any and all claims, losses and liabilities that are related to any claim by any Third Party Vendor that is based upon an alleged breach by SEI of any agreement with that Third Party Vendor, except to the extent such breach arises out of Customer’s breach of this Agreement.  Customer shall indemnify, defend, and hold SEI harmless from and against any and all claims, losses and liabilities that are related to any such claim to the extent such breach arises out of Customer’s breach of this Agreement.  Each of the Parties shall comply with the indemnification procedures set forth in Section 10.13 of this Agreement.

It is further understood and agreed that access to any Third Party Service may be withdrawn by SEI upon termination of SEI’s right to redistribute specific product

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

offerings by such Third Party Vendors.  SEI shall promptly notify Customer of any product offerings to be withdrawn or any significant change in any product once such withdrawal or change is known by SEI, and SEI shall make an appropriate adjustment to the Fees to reflect any such withdrawal of any Third Party Service by SEI.

5.08. Insurance. SEI shall carry an employee fidelity bond and EDP errors and omissions insurance and miscellaneous professional liability insurance at levels not less than [/*/ CONFIDENTIAL TREATMENT REQUESTED] per incident with reasonable deductibles. SEI shall procure the commercial general liability insurance that provides limits of not less than [/*/ CONFIDENTIAL TREATMENT REQUESTED] ($[/*/ CONFIDENTIAL TREATMENT REQUESTED]).  The commercial general liability policy shall include the following coverage: (i) premises and operations; (ii) products/completed operations; (iii) contractual liability; (iv) personal injury and advertising injury liability; and (v) severability of interest clause.

SEI shall maintain a policy of workers’ compensation coverage for no less than the minimum statutory amount required for the State or States in which SEI employees are performing Trust 3000 Service on Customer’s behalf, and employers’ liability coverage for not less than [/*/ CONFIDENTIAL TREATMENT REQUESTED] Dollars ($[/*/ CONFIDENTIAL TREATMENT REQUESTED]) per occurrence for all employees of SEI engaged in the performance of Services under this Agreement.

5.09. Disaster Recovery. SEI agrees to provide disaster recover service to enable Customer to resume processing capabilities in the event of a disaster at SEI’s data processing facility.  The timeframe for recovery, the processing levels and the other disaster recovery services provided by SEI will be in accordance with the then current SEI Disaster Recovery Plan.  A copy of the current version of the Client’s Copy of the SEI Disaster Recovery Plan is attached as Exhibit D. SEI shall provide Customer with an updated copy of the Client’s Copy of the SEI Disaster Recovery Plan promptly after any material changes to the Disaster Recovery Plan or upon Customer’s request.  SEI shall not modify the Disaster Recovery Plan so as to reduce in any significant way, the benefits and protections provided to Customer under such Disaster Recovery Plan as of the Designated Date.   SEI shall provide such disaster recovery services at all times without regard to any Force Majeure Event (except to the extent and only to the extent that a Force Majeure Event also impacts the disaster recovery plan).

5.10 Client’s Customers. In addition to SEI’s obligations with respect to the treatment of Customer’s Confidential Information contained in Section 6 of this Agreement, SEI agrees that it shall not use any of Customer Data or any Confidential Information of Customer to solicit as direct customers of SEI any of Customer’s customers.

SECTION 6.  CONFIDENTIALITY/PROPRIETARY INFORMATION

6.01 Confidential Information. “Confidential Information” means (i) with respect to

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

Customer, all Customer Data; (ii) with respect to SEI, the Proprietary Information and the provisions of this Agreement; and (iii) with respect to each Party, any of the Disclosing Party’s proprietary or confidential information including, without limitation, technical data; trade secrets; know-how; business processes; product plans; product designs; service plans; services; customer lists and customers; markets; software; developments; inventions; processes; formulas; technology; designs; drawings; and marketing, distribution or sales methods and SEI Systems; sales and profit figures or other financial information that is disclosed, directly or indirectly, to a Party (in such capacity the “Recipient”) by or on behalf of the other Party (in such capacity, the “Disclosing Party”), whether in writing, orally or by other means and whether or not such information is marked as confidential.  However, “Confidential Information” does not include any of the information that: (i) prior to disclosure hereunder by the Disclosing Party, was generally known to the public; (ii) after disclosure hereunder by the Disclosing Party, becomes known to the public through no act or omission of the Recipient or any of its representatives (iii) the Recipient can demonstrate by written records was previously known by it or was independently developed by or for it without use of the Confidential Information; or (iv) is, or becomes available to the Recipient on a non-confidential basis from another Person that, to the Recipient’s knowledge, is not prohibited from disclosing such information to the Recipient by a legal, contractual or fiduciary obligation to the Disclosing Party.

6.02 Non-Disclosure Obligations. All Confidential Information of a Disclosing Party shall be held in confidence by the Recipient, to the same extent, and in at least the same manner, as the Recipient protects its own confidential and proprietary information of a similar nature, which shall in no event be less than a commercially reasonable standard of care.  Except as specifically permitted by this Agreement the Recipient shall not disclose, publish, release, transfer, or otherwise make available, any Confidential Information of the Disclosing Party, in any form to, or for the use or benefit of, any Person, without the Disclosing Party’s consent.

6.03 Permitted Use and Disclosure. Notwithstanding the foregoing, the Recipient shall be permitted to use and to disclose the Disclosing Party’s Confidential Information to its officers, agents, subcontractors and employees (collectively, the “Permitted Employees and Consultants” who have agreed in writing to maintain the confidentiality of the Confidential Information, to the extent that such use and disclosure is necessary or appropriate for the performance of the Recipient’s obligations under this Agreement and/or as needed to conduct Recipient’s business.  The obligations contained in this Section 6 shall not restrict any disclosure by any Recipient as required by any applicable law, or by order of any court or government agency; provided that to the extent reasonably possible (and so long as not prohibited by law) such Recipient gives prompt notice to the Disclosing Party of such order, such that the Disclosing Party may (i) interpose an objection to such disclosure, (ii) take action to assure confidential handling of the Confidential Information, or (iii) take such other action as it deems appropriate to protect the Confidential Information.

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

6.04 Additional Obligations of Customer.

Customer shall not use any of SEI’s Confidential Information to create or attempt to create, nor permit others to create or attempt to create, in whole or in part, the Trust 3000 System. In addition, Customer agrees to preserve any copyright and trade secret notices of SEI on materials where such notices appear.  Customer shall immediately notify SEI of the unauthorized possession, use or knowledge of any item supplied to Customer pursuant to this Agreement.

Customer shall not copy or reproduce in any manner any manuals, user documentation or other materials provided by SEI to Customer under this Agreement except for copies made by Customer solely for its internal use by Permitted Employees and Consultants.

6.05 Compliance with Gramm-Leach-Bliley Act. In connection with the activities contemplated by this Agreement, each Party shall comply with all applicable provisions of the Gramm-Leach-Bliley Act (as such Act may be amended from time to time), including, without limitation, applicable provisions regarding the sharing or disclosure of Nonpublic Personal Information (as such term is defined in the Gramm-Leach-Bliley Act).

6.06 Unauthorized Acts.  In the event of any unauthorized use or disclosure by the Recipient of any Confidential Information of the Disclosing Party, the Recipient shall promptly (i) notify the Disclosing Party of the unauthorized use or disclosure; (ii) take all reasonable actions to limit the adverse effect on the Disclosing Party of such unauthorized use or disclosure; and (iii) take all reasonable action to protect against a recurrence of the unauthorized use or disclosure.

6.07 Return of Confidential Information. Upon the written request of the Disclosing Party after the termination of this Agreement, the Recipient shall, at the option of the Recipient, return or destroy all Confidential Information of the Disclosing Party that is then in the possession or control of the Disclosing Party, provided, however, the Recipient may retain such Confidential Information of the Disclosing Party as may be necessary or appropriate for the Recipient to comply with reasonable legal, accounting, regulatory and archival concerns.  Notwithstanding the foregoing, SEI shall have no obligation to return or destroy Confidential Information of

Customer that resides on the Trust3000 System or in save tapes of SEI.  Upon the Disclosing Party’s written request, the Recipient shall promptly certify in writing its compliance with this Section 6.07.

6.08 Equitable Relief. Each Party acknowledges that the unauthorized disclosure of the Disclosing Party’s Confidential Information may cause irreparable injury to the Disclosing Party and that, in the event of a violation or threatened violation of any

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obligations of the Recipient regarding such Confidential Information, the Disclosing Party may have no adequate remedy at law. In such event, the Disclosing Party shall be entitled to seek enforcement of each such obligation by temporary or permanent injunctive, or mandatory relief obtained in any court of competent jurisdiction, without the necessity of the posting of any bond or other security, and without prejudice to any other rights and remedies which may be available to the Disclosing Party at law or in equity.

SECTION 7.  WARRANTY

7.01. Warranty. SEI hereby warrants that it owns the TRUST 3000 System and has all the necessary authority to enter into this Agreement and provide the Trust 3000 Service described herein.  SEI also warrants that the TRUST 3000 System will perform substantially as described in the Users Manuals for the functions specified on Exhibit A.

Except as expressly stated herein, SEI MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE TRUST 3000 SYSTEM OR THE TRUST 3000 SERVICE OR ANY SERVICE PROVIDED HEREUNDER, ITS MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

7.02 Remedy for Breach. SEI hereby indemnifies and agrees to hold harmless and defend Customer from any claims brought against Customer based upon a defect in SEI’s title to, or power to grant Customer the use of, the Trust 3000 Service or any trademark, copyright, or patent infringement with respect to the Trust 3000 Service except to the extent such breach arises out of Customer’s breach of this Agreement.  Customer shall indemnify, defend, and hold SEI harmless from and against any and all claims, losses and liabilities that are related to any such claim to the extent such breach arises out of Customer’s breach of this Agreement.  Each of the Parties shall comply with the indemnification procedures set forth in Section 10.13 of this Agreement.

7.03 Custom Enhancements or Modifications to the Trust 3000 Service.

7.03.1Subject to the limitations set forth below and the notice, control, cooperation and limitations contained in Section 10.13, SEI will indemnify and hold harmless Customer and defend at SEI’s sole expense, and, at its option, may contest and/or settle, any claim, suit, or proceeding brought against Customer to the extent that it is based on an assertion that any custom enhancements or modifications to the TRUST 3000 Service performed by SEI (or SEI’s delegate) on behalf of Customer (collectively such enhancements and modifications may be referred to as “Custom Enhancement/Work”) infringes any United States patent, or copyright, or infringes on any trade secret or proprietary right, of any third party.  Should any Custom Enhancement/Work become the subject of any such claim, suit, or proceeding, SEI shall have

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the right, at SEI’s option and expense (i) promptly procure for Customer the right to continue using the Custom Enhancement/Work; or (ii) promptly replace or modify the Custom Enhancement/Work with a non-infringing version of Custom Enhancement/Work with substantially equivalent function and performance. If neither such option is available to SEI on commercially reasonable terms, then SEI may terminate the services that are the subject of such claim, suit, or proceeding and make an appropriate reduction in Fees payable hereunder. The remedies set forth in this Section 7.03.1, together with SEI’s indemnification obligations under this Section 7.03.1, shall be Customer’s sole and exclusive remedies with respect to any claims that any Custom Enhancement/Work, infringes or misappropriates any third-party intellectual property right.

7.03.2Notwithstanding the provisions of Section 7.03.1, and subject to the notice, control, cooperation and limitations contained in Section 10.13, Customer will indemnify and hold harmless SEI, and defend at Customer’s sole expense, and, at its option, may contest and/or settle, any claim, suit, or proceeding brought against SEI or Customer (and SEI will not be obligated to defend or settle and will not be liable for any related expenses or costs) to the extent any suit or proceeding results from: (i) SEI’s compliance with Customer’s design, content, specifications or instructions; (ii) modification of the Custom Enhancement/Work by a party other than SEI who is not working at or under SEI’s direction; or (iii) the use of the Custom Enhancement/Work or any part thereof furnished hereunder in combination with any other software or product, other than the Trust3000 Service, where the infringement would not have occurred but for such combination.

7.03.3Each of the Parties shall comply with the indemnification procedures set forth in Section 10.13 of this Agreement.

7.03.4All references to the “Trust 3000 Services Agreement” in any Work Authorization(s) executed after the date of this Agreement, shall mean this Agreement, as this Agreement may be amended from time to time.

7.03.5With respect to suspension or termination of any project covered by a Work Authorization, notwithstanding anything contained in any Work Authorization to the contrary, it is understood that SEI shall have the right to re-estimate the costs associated with the project covered by such Work Authorization, if work on such project is

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resumed after 60 days from the date Customer made the election to suspend the work (unless a shorter period of time is indicated in the applicable Work Authorization).  In addition, it is understood that if work is terminated under any Work Authorization, SEI will only bill Customer for work that has actually been performed through the date that work was terminated, plus any applicable travel and living expenses (if applicable).

7.03.6In the event that Customer terminates work on a project covered by a Work Authorization due solely to SEI’s uncured material breach of this Agreement or the applicable Work Authorization, Customer reserves the right to dispute payment of SEI’s fees due under such Work Authorization.

SECTION 8.  LIMITATION OF LIABILITY

8.01         Except as otherwise provided below in this Section 8, the cumulative liability of each Party hereunder for all claims relating to this Agreement, shall be limited to (a) monetary damages not to exceed the amount of [/*/ CONFIDENTIAL TREATMENT REQUESTED] payable hereunder, and, in addition, with respect to SEI, the correction, re-creation, or restoration of any incorrect, missing, incomplete, or unreadable reports.

8.02         SEI shall have no liability for errors, omissions or malfunctions in SOUCE 3000, the transmission of SOURCE 3000 and any user manuals and documentation associated with SOURCE 3000 other than its obligation, upon receipt of notice from Customer, to endeavor to correct any such errors, omissions or malfunctions.  SEI shall have no liability for temporary delays, breakdowns or interruptions in SOURCE 3000, howsoever caused.  Customer’s exclusive remedy, and SEI’s entire liability, for direct damages incurred by Customer for any and all causes relating to Source 3000, whether for breach of this Agreement, negligence, or otherwise, shall in the aggregate not exceed [/*/ CONFIDENTIAL TREATMENT REQUESTED] average billing to Customer over the [/*/ CONFIDENTIAL TREATMENT REQUESTED] months preceding the month in which the damage or injury is alleged to have occurred, but if Customer has not utilized SOURCE 3000 for [/*/ CONFIDENTIAL TREATMENT REQUESTED] months preceding such date, then over such fewer number of preceding months that Customer has utilized SOURCE 3000.

8.03         THE FOREGOING LIMITATIONS SHALL NOT APPLY TO: (A) LOSSES SUBJECT TO INDEMNIFICATION UNDER THIS AGREEMENT, (B) LIABILITY ARISING AS A RESULT OF A FAILURE TO COMPLY WITH THE CONFIDENTIALITY OBLIGATIONS CONTAINED IN THIS AGREEMENT, (C) CUSTOMER’S FAILURE TO PAY ANY AMOUNTS DUE OR OWING UNDER

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

THIS AGREEMENT, (D) ANY DAMAGES FOR BODILY INJURY (INCLUDING DEATH) AND DAMAGES TO REAL PROPERTY FOR WHICH A PARTY IS LEGALLY LIABLE, (E) LOSSES ARISING FROM A PARTY’S WILLFUL MISCONDUCT.

8.04 IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR SIMILAR DAMAGES OF ANY KIND, INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS, LOSS OF BUSINESS OR INTERRUPTION OF BUSINESS, WHETHER SUCH LIABILITY IS PREDICATED ON CONTRACT, STRICT LIABILITY OR ANY OTHER THEORY.

Notwithstanding anything in this Agreement to the contrary, the following shall be considered direct damages and neither Party shall assert that they are indirect, incidental, special, or consequential damages or lost profits: [/*/ CONFIDENTIAL TREATMENT REQUESTED].  The intention of the foregoing is to avoid any doubt on how those types of damages should be classified under this Agreement.  However, the foregoing is not intended to be exclusive or exhaustive.

SECTION 9.  TERMINATION

9.01 Obligations Upon Expiration or Termination of Agreement.

9.01.1 Deconversion Services.

Upon Customer’s request in connection with the expiration or termination of this Agreement under Section 2, SEI will provide Customer with the deconversion services described on Exhibit E and Customer will pay to SEI the fees for such services as set forth on Exhibit E. All such amounts to be due thirty (30) calendar days after the date of Customer’s receipt of the invoice.  Customer agrees to pay interest on all amounts past due at the rate of one percent (1%) per month, if such rate is permitted by law, or otherwise at the highest rate permitted by law, provided, however, that no interest will be due on amounts disputed by Customer in good faith and on reasonable grounds.

9.01.2 Payment of Fees.

In addition to any Buyout Amount that may be payable to SEI under this Agreement, Customer shall pay SEI (A) the Fees for products and services provided prior to the effective date of expiration or termination; (B) any termination fees imposed on SEI by third parties to the extent directly relating to such termination (except in the event of a termination under Section 2.03 or a termination by Customer under 2.05, in which case

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Customer shall not have to pay for any termination fees imposed on SEI by Third Party Vendors to the extent directly relating to such termination); and (C) any fees for deconversion or other post-termination services which Customer may request and SEI may provide including those specified in Section 2.04 B (post termination TRUST 3000 System Retrieval), this Section 9, and Exhibit E. All such amounts to be due thirty (30) calendar days after the date of Customer’s receipt of the invoice.

Customer agrees to pay interest on all amounts past due at the rate of one percent (1%) per month, if such rate is permitted by law, or otherwise at the highest rate permitted by law, provided, however, that no interest will be due on amounts disputed by Customer in good faith and on reasonable grounds.

In addition, Customer will be obligated to reimburse SEI for any charges for telecommunication services and other third-party provided services as referenced in Exhibit A incurred by SEI on Customer’s behalf with respect to services provided prior to the termination of this Agreement.   Customer acknowledges that there is a time lag between the time that certain services are provided until the time that SEI bills for such services, and that SEI invoices certain of such services up to ninety (90) calendar days after the date services are provided.

9.01.3 Return of Confidential Information.

The Parties shall comply with the provisions of Section 6.07 of this Agreement in connection with the return of Confidential Information of the other Party.

SECTION 10.  GENERAL PROVISIONS

10.01 Notice. Except as expressly otherwise stated herein, all notices, requests, consents, approvals, or other communications provided for, or given under, this Agreement, shall be in writing and shall be deemed to have been duly given and received (a) when delivered personally, or (b) if delivered by a reputable commercial overnight carrier (e.g., Federal Express), one business day after delivery to such carrier, or (c) if delivered by certified or registered U.S. mail, postage prepaid and return receipt requested, seven business days after mailing; in each case sent to the Party to be notified at the address for such Party set forth below, or at such other address of which such Party has provided notice in accordance with the provisions of this Section:

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

Notices to Customer shall be addressed as follows:

Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02117
Attention: Senior Director, Institutional Custody

with a copy to the attention of Customer’s General Counsel addressed as follows:

Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02117
Attention: General Counsel

Notices to SEI shall be addressed as follows:

SEI Global Services, Inc.

One Freedom Valley Drive
Oaks, PA 19456
Attention: Vice President, National Bank Marketing

with a copy to the attention of Customer’s General Counsel addressed as follows:

SEI Global Services, Inc.
One Freedom Valley Drive
Oaks, PA 19456
Attention: General Counsel

10.02. Counterparts. This Agreement may be executed in any number of counterparts and any Party hereto may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument.  This Agreement shall become binding when one or more counterparts taken together shall have been executed and delivered by the parties.  It shall not be necessary in making proof of this Agreement or any other counterparts hereof to product or account for any of the other counterparts.

10.03. Agreement for Sole Benefit of SEI and Customer. This Agreement is for the sole and exclusive benefit of SEI and Customer and shall not be deemed to be for the direct or indirect benefit of the clients or customers of Customer.  The clients or customers of Customer shall not be deemed to be third party beneficiaries of this Agreement or have any other contractual relationship with SEI by reason of this

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

Agreement, and each Party hereto agrees to indemnify and hold harmless the other Party from any claims of its customers against the other Party including any attendant expenses and reasonable attorneys’ fees, based on this Agreement or the services provided hereunder.

10.04. Assignment. Customer shall have the right to assign or delegate all or part of its rights, responsibilities or duties hereunder to any wholly-owned direct or indirect subsidiary of Investors Financial Services Corp. upon the provision of notice to SEI, but no such assignment shall relieve Customer of its obligations under this Agreement.  Such assignment shall be valid only so long as the assignee or delegatee remains a wholly-owned subsidiary of Investors Financial Services Corp.  In addition to its rights under Sections 1.01 and 5.07, SEI shall have the right to assign or delegate all or part of its rights, responsibilities, or duties hereunder to SEI Investments Company or any wholly-owned direct or indirect subsidiary of SEI Investments Company, upon the provision of prior written notice to Customer, but no such assignment shall relieve SEI of its obligations under this Agreement.  Such assignment or delegation will be valid only so long as the assignee or delegatee remains a wholly-owned direct or indirect subsidiary of SEI Investments Company.  Any other assignment or delegation (including, without limitation, any assignment, transfer, or delegation by operation of law in connection with a merger or otherwise) by either Party hereto shall require the prior written approval of the other Party hereto (which shall not be unreasonably withheld or delayed), other than an assignment by SEI of the contract rights to receive payments for collateral security.

10.05. Force Majeure. If a Force Majeure Event is the material contributing cause of a Party’s failure to perform any of its obligations hereunder (other than the obligation to pay for any amounts owed), such obligations, after notification by such Party to the other Party, shall be deemed suspended to the extent such obligations are directly affected by such Force Majeure Event, until the Force Majeure Event has ended and a reasonable period of time for overcoming the effects thereof has passed; provided, however, that if a Force Majeure Event results in SEI being unable to perform during any extended period any or all of the Trust 3000 Service in accordance with the terms hereof Customer shall be entitled to a share of SEI’s resources devoted to returning SEI to full performance of all Trust 3000 Service hereunder, that is equal to or greater than that of SEI’s similarly-situated customers.  Both Parties shall use commercially reasonable efforts to minimize delays that occur due to a Force Majeure Event.  Other than as set forth above, neither Party shall be excused from those obligations not affected by a Force Majeure Event (including disaster recovery services unless also affected by such Force Majeure Event), and if the Force Majeure Event is predominantly caused by either Party’s failure to comply with any of its obligations under this Agreement or by either Party’s negligence or omission, there shall be no relief from any of that Party’s obligations under this Agreement.

“Force Majeure Event shall mean a catastrophic act of God, act of governmental body or military authority, epidemic, riot or civil disturbance, war, sabotage, or accidents beyond

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

the reasonable control of the non-performing Party.  Notwithstanding the foregoing, “Force Majeure Event” expressly excludes the following: any event that non-performing Party could reasonably have prevented by testing by the non-performing Party either required to be performed pursuant to the Trust 3000 Service or necessary to provide the Trust 3000 Service, work-around, or other exercise of commercially reasonable diligence; any event resulting from any strike, walkout, or other labor shortage of the non-performing Party; and any failure of any systems, facilities, or hardware that could have been prevented by testing either required to be performed pursuant to the Trust 3000 Service or necessary to provide the Trust 3000 Service. The occurrence of a Force Majeure Event does not limit or otherwise affect SEI’s obligation to provide normal recovery procedures or any other disaster recovery services as described in SEI’s Disaster Recovery Plan.

10.06. Governing Law. This Agreement will be governed in accordance with the laws of the Commonwealth of Massachusetts without regard to its conflict of law principles or laws.

10.07. Heading.  All section headings contained in this Agreement are for convenience of reference only, do not form a part of this Agreement and shall not affect in any way the meaning of interpretation of this Agreement.  Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the contract requires.

10.08. Contents of Agreement. This Agreement and its Exhibit(s) set forth the entire understanding of the parties hereto with respect to the transactions contemplated hereby.  It shall not be amended or modified except by written instrument duly execute by each of the parties hereto.  Any and all previous agreements and understandings between the parties regarding the subject matter hereof, whether written or oral, are superseded by this Agreement.

10.09. Waiver. Any term or provision of this Agreement may be waived at any time by the Party entitled to the benefit thereof by written instrument executed by such Party.  No failure of either Party hereto to exercise any power or right granted hereunder, or to insist upon strict compliance with any obligation hereunder, and no custom or practice of the parties with regard to the terms of performance hereof, shall constitute a waiver of the rights of such Party to demand full and exact compliance with the terms of this Agreement.

10.10. Severability. In the event that any provision of this Agreement shall be found in violation of public policy or illegal or unenforceable in law or equity, such finding shall in no event invalidate any other provision of this Agreement.

10.11. Dispute Resolution. Any dispute about a significant problem arising under this Agreement that may have a material adverse impact on a Party (a “Problem”) shall

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

be resolved using procedures described in this Section.  As soon as a Problem is recognized by the Party that may be materially and adversely affected, such Party shall provide notice of the Problem to the other Party’s Representative.  The Representatives of the Parties shall attempt to promptly resolve the Problem.  The Representatives for each Party are:

For SEI: SEI Senior Relationship Manger (as of the Designated Date, the SEI Senior
Relationship Manger is [/*/ CONFIDENTIAL TREATMENT REQUESTED])

For Customer: [/*/ CONFIDENTIAL TREATMENT REQUESTED]

The Parties may change the Representatives by giving written notice of any change in
Representatives.

The Issue Notification should, at a minimum, contain the following information, (i) description of the Problem, (ii) its impact on quality and schedule of any deliverables, (iii) suggested resolutions, and, (iv) time frame for issue resolution. Once a Problem has been raised, Representatives should attempt in good faith to reach a resolution within two (2) weeks.

If despite the Parties good faith efforts, a dispute cannot be resolved through the procedure provided in Section, either Party shall have the right to commence any legal proceeding as permitted by law.  Nothing in this Section shall prohibit a Party from pursuing injunctive or other relief if such relief is required to protect the interests of such Party.

10.12. Substitution of Party. As of the Designated Date, SEI Global Services, Inc. shall for all purposes with respect to this Agreement replace SEI Investments Company as a party to this Agreement and SEI Global Services, Inc. (and not SEI Investments Company) shall, from the Designated Date forward, have all of the rights and obligations of SEI Investments Company under this Agreement.  As of the Designated Date, the term “SEI” as used in this Agreement shall mean SEI Global Services, Inc.  Notwithstanding the foregoing, such substitution does not relieve SEI Investments Company from any obligations hereunder.

10.13 Indemnification Procedures.  If any claim is commenced against a Party entitled to indemnification under this Agreement (the “Indemnified Party”), notice thereof will be given to the Party that is obligated to provide indemnification (the “Indemnifying Party”) as promptly as practicable.  If, after such notice, the Indemnifying Party acknowledges that this Agreement applies with respect to such claim, then the Indemnifying Party will be entitled, if it so elects, in a notice promptly delivered to the Indemnified Party, but in no event less than ten (10) calendar days prior to the date on which a response to such claim is due, to immediately take control of the defense and

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

investigation of such claim and to employ and engage attorneys reasonably acceptable to the Indemnified Party to handle and defend the same, at the Indemnifying Party’s sole cost and expense.  The Indemnified Party will cooperate, at the cost of the Indemnifying Party, in all reasonable respects with the Indemnifying Party and its attorneys in the investigation, trial and defense of such claim and any appeal arising therefrom; provided, however, that the Indemnified Party may, at its own cost and expense, participate, through its attorneys or otherwise, in such investigation, trial and defense of such claim and any appeal arising therefrom. No settlement of a claim that involves a remedy other than the payment of money by the Indemnifying Party will be entered into without the consent of the Indemnified Party.  After notice by the Indemnifying Party to the Indemnified Party of its election to assume full control of the defense of any such claim, the Indemnifying Party will not be liable to the Indemnified Party for any legal expenses incurred thereafter by such Indemnified Party in connection with the defense of that claim.  If the Indemnifying Party does not assume full control over the defense of a claim subject to such defense, the Indemnifying Party may participate in such defense, at its sole cost and expense, and the Indemnified Party will have the right to defend the claim in such manner as it may deem appropriate, at the cost and expense of the Indemnifying Party.

10.14. Survival. The following shall survive the expiration or termination of this Agreement: (i) the provisions of Sections 6, 8, 9 and 10 in their entirety, and Sections 3.03, 3.04, 4.01.01, 4.02, 4.05, 4.07, 4.08, 5.01, 5.02.1, 5.07, 5.10, 7.01, 7.02, 7.03.1, 7.03.2 and 7.03.3.

SECTION 11.  EXHIBITS

11.01. Exhibits.  The following additional exhibits listed below and attached hereto are also incorporated herein by reference:

Exhibit A             Trust3000 Service/Fees

Exhibit B              Performance Standards

Exhibit C              Record Retention

Exhibit D              Client’s Copy of the SEI Disaster Recovery Plan

Exhibit E              Deconversion Services

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

EACH PARTY HERETO ACKNOWLEDGES THAT EACH PARTY RESPECTIVELY HAS READ THIS AGREEMENT, UNDERSTANDS ITS TERMS, AND AGREES TO BE LEGALLY BOUND HEREBY.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed in their respective names by their duly authorized representatives as of the Designated Date.

SEI GLOBAL SERVICES, INC.

BY:

TITLE:

INVESTORS BANK & TRUST COMPANY

BY:

TITLE

[/*/ CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

EX-10.35

Exhibit 10.35

COPLEY PLACE

BOSTON, MASSACHUSETTS

OFFICE LEASE

to

INVESTORS BANK & TRUST COMPANY

FROM THE OFFICE OF:

Goulston & Storrs, P.C.

400 Atlantic Avenue

Boston, Massachusetts 02110-3333

OFFICE LEASE

COPLEY PLACE

BOSTON, MASSACHUSETTS

TABLE OF CONTENTS

			PAGE
1.	BASIC DATA		1
2.	HABENDUM; TERM		4
3.	POSSESSION		4
4.	BASE RENT		6
5.	ADDITIONAL RENT		7
	A.	Definitions	7
		Base Year	7
		Base Year Operating Expenses	7
		Calendar Year	7
		Tenant’s Proportionate Share	7
		Taxes	8
		Operating Expenses	8
	B.	Expense Adjustment	13
	C.	Adjustment for Services Not Rendered by Landlord	14
6.	USE OF PREMISES		15
7.	CONDITION OF PREMISES		15
8	SERVICES		16
	A.	List of Services	16
	B.	Billing for Electricity	18
	C.	Interruption of Services	18
	D.	Charges for Services	19
	E.	Energy Conservation	20
9.	REPAIRS; HAZARDOUS MATERIALS		20
10.	ADDITIONS AND ALTERATIONS		22
11.	COVENANT AGAINST LIENS		27
12.	INSURANCE		27
	A.	Waiver of Subrogation	27
	B.	Coverage	28
	C.	Avoid Action Increasing Rates	29
13.	FIRE OR CASUALTY		29
14.	WAIVER OF CLAIMS - INDEMNIFICATION		35

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15.	NONWAIVER		36
16.	CONDEMNATION		36
17.	ASSIGNMENT AND SUBLETTING		37
18.	SURRENDER OF POSSESSION		39
19.	HOLDING OVER		40
20.	ESTOPPEL CERTIFICATE		41
21.	SUBORDINATION		42
22.	CERTAIN RIGHTS RESERVED BY LANDLORD		44
23.	RULES AND REGULATIONS		46
24.	LANDLORD’S REMEDIES		47
25.	EXPENSES OF ENFORCEMENT		51
26.	COVENANT OF QUIET ENJOYMENT		51
27.	INTENTIONALLY OMITTED		51
28.	REAL ESTATE BROKER		51
29.	UNDERLYING LEASES		52
30.	NOTICE TO MORTGAGEE AND GROUND LESSOR		53
31.	ASSIGNMENT OF RENTS		53
32.	PERSONAL PROPERTY TAXES		55
33.	MISCELLANEOUS		55
	A.	Rights Cumulative	55
	B.	Interest	55
	C.	Terms	55
	D.	Binding Effect	55
	E.	Lease Contains All Terms	56
	F.	Delivery for Examination	56
	G.	No Air Rights	56
	H.	Kitchen Equipment	56
	I.	Intentionally Omitted	56
	J.	Transfer of Landlord’s Interest	56
	K.	Landlord’s Title	57
	L.	Prohibition Against Recording	57
	M.	Captions	57
	N.	Covenants and Conditions	57
	O.	Only Landlord/Tenant Relationship	57
	P.	Application of Payments	58

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	Q.	Definition of Landlord		58
	R.	Time of Essence		58
	S.	Governing Law		58
	T.	Partial Invalidity		58
	U.	Size of Premises		58
34.	NOTICES			58
35.	LIMITATION ON LANDLORD’S LIABILITY			60
36.	LANDLORD’S DESIGNATED AGENT			60
37.	PARKING			61
38.	SIGNAGE			61
39.	CONSTRUCTION ALLOWANCE			61
40.	EXTENSION OPTION			62
41.	EXPANSION OPTION; RIGHT OF FIRST OFFER			64
42.	SATELLITE DISH; GENERATOR			71
43.	COMPETITIVE USES			72
	Exhibit A-1		Plan of Area A
	Exhibit A-2		Plan of Area B
	Exhibit B		Work Letter
	Exhibit C		Rules and Regulations
	Exhibit D		Cleaning Specifications
	Exhibit E		Expansion Space

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OFFICE LEASE

COPLEY PLACE

BOSTON, MASSACHUSETTS

THIS INSTRUMENT is an Agreement of Lease in which the Landlord and the Tenant are the parties hereinafter named, and which relates to space in the Office Section of Copley Place (hereinafter referred to as the “Office Section”) located at 100 Huntington Avenue, Boston, Suffolk County, Massachusetts (the project known as Copley Place, including without limitation the hotel portions thereof, plazas, pedestrian bridges, service areas and all other common areas, together with all present and future easements, additions, improvements, air rights and other rights appurtenant thereto, is hereinafter referred to as the “Property”), subject to the covenants, terms, provisions and conditions of this Lease. The “Office Section” means that portion of the building (the “Building”) located at the aforesaid address consisting of seven (7) levels of office area containing approximately 845,000 square feet of rentable floor area. The Building also contains retail shopping, restaurant, parking and other facilities, which are not included within the Office Section. The Building does not, however, include the hotel or residential portions of the Property or the pedestrian bridges.

In consideration thereof, Landlord and Tenant covenant and agree as follows:

1.BASIC DATA.

The following sets forth basic data and, where appropriate, constitutes definitions of the terms hereinafter listed.

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Date:	August 2, 1999
Landlord:	COPLEY PLACE ASSOCIATES, LLC,
	a Delaware limited liability company
Present Mailing Address of Landlord:	c/o Overseas Management, Inc.
	Two Copley Place, Suite 100
	Boston, Massachusetts 02116-6502
Tenant:	INVESTORS BANK & TRUST COMPANY,
	a Massachusetts trust company
Present Mailing Address of Tenant:	John Hancock Tower
	200 Clarendon Street
	Boston, Massachusetts 02116
Area A Commencement Date:	Subject to Paragraph 3 hereof, January 1, 2000.
Area B Commencement Date:	Subject to Paragraph 3 hereof, January 1, 2000.
Area A Rent	Ninety (90) days after the Commencement Date:
	Area A Commencement Date.
Area B Rent	Ninety (90) days after the Commencement Date:
	Area B Commencement Date.
Termination Date:	October 30, 2007, unless sooner terminated as provided in this Lease.
Base Rent:	Replaced per 2nd Amendment

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Base Year:	Replaced in 2nd Amendment
Base Year Operating Expenses:	Replaced in 2nd Amendment
Tenant’s Proportionate Share:	Replaced per 2nd Amendment
Use:	General office purposes.
Premises:	Replaced per 2nd Amendment

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Common Areas:	Those portions of the Property not leased to any tenant, but for the benefit of the Property and its tenants, such as landscaped areas, malls, pedestrian walkways, escalators, elevators, stairwells and bridges, restrooms, service areas and the like.
Guarantor of Tenant’s Obligations:	None.
Security Deposit:	None.
Broker:	CB Richard Ellis-N.E. Partners, L.P. doing business in Massachusetts as CB Richard Ellis-N.E. Partners Limited Partnership and Insignia/ESG, Incorporated.

2.HABENDUM; TERM.

To have and to hold the Premises for the term commencing on the Area A Commencement Date and ending on the Termination Date, and the right to use the Common Areas during such term in common with others entitled thereto. The Term of this Lease (hereinafter referred to as the “Term”) shall commence on the Area A Commencement Date specified in Paragraph 1 hereof and end on the Termination Date, specified in Paragraph 1 hereof unless sooner terminated as provided herein.

3.POSSESSION.

A.In the event Landlord is unable to deliver possession of Area A on the date originally designated as the Area A Commencement Date or of Area B on the date originally designated as the Area B Commencement Date on the applicable commencement date by reason of the holding over or retention of possession by any tenant or occupant, or for any other reason, this Lease shall nevertheless continue in force and effect, but the Area A Commencement Date and/or the Area B Commencement Date, as the case may be, shall be correspondingly deferred until Landlord can so deliver

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Area A and/or Area B. The obligation of Tenant to begin paying Rent for Area A shall commence on the Area A Rent Commencement Date and for Area B shall be on the Area B Rent Commencement Date. In the event Area A or Area B will not be delivered in the condition required hereunder on the date initially designated as the Area A Commencement Date or the Area B Commencement Date, respectively, Landlord shall give Tenant at least five (5) business days’ advance written notice of the date on which Landlord expects the deferred Area A Commencement Date and/or Area B Commencement Date will occur. In the event the Area A Commencement Date has not occurred by January 15, 2000, Landlord shall pay to Tenant fifty percent (50%) of any holdover rent paid by the current tenant with respect to the period January 16, 2000 through the day immediately preceding the Area A Commencement Date, in excess of the Base Rent and Additional Rent payable at the rate paid in the final month of the Term then expired; and in the event the Area A Commencement Date has not occurred by February 15, 2000, Tenant may, by notice to the Landlord given no later than February 20, 2000, terminate this Lease and in such event all obligations of the Landlord to the Tenant and the Tenant to the Landlord with respect to this Lease shall be of no further force or effect. Furthermore, in the event the Area B Commencement Date has not occurred by January 15, 2000, Landlord shall pay to Tenant fifty percent (50%) of any holdover rent paid by the current tenant with respect to the period January 16, 2000 through the day immediately preceding the Area B Commencement Date, in excess of the Base Rent and Additional Rent payable at the rate paid in the final month of the Term then expired; and in the event the Area B Commencement Date has not occurred by February 15, 2000, Tenant may, by notice to the Landlord given no later than February 20, 2000, terminate this Lease as to Area B and in such event, the Base Rent shall not increase by reason of the addition of Area B and Tenant’s proportionate share of Operating Expenses shall not increase by reason of the addition of Area B, and all obligations of the Landlord to the Tenant and the Tenant to the Landlord with respect to Area B shall be of no further force or effect.

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B.If the current lease of the Tenant of Area A and/or Area B terminates prior to the Commencement Date originally designated herein for such Area, Tenant shall have the right to enter the Premises or any part thereof prior to the applicable Commencement Date (which Tenant may not do without prior written notice to Landlord and providing Landlord with evidence of insurance as required hereunder as if the Commencement Date had occurred), such entry shall be at Tenant’s sole risk and without interference to any work then being performed in the Building by Landlord or other tenants or occupants, and all of the covenants and conditions of this Lease shall be binding upon the parties hereto with respect to such whole or part of the Premises, except the Base Rent and any other charges shall not commence until the dates provided above.

C.The occurrence of any of the events described in this Paragraph 3 shall not accelerate or defer the Termination Date.

4.BASE RENT.

Tenant shall pay to Landlord or Landlord’s agent without notice or demand at the present mailing address of Landlord, or at such other place as Landlord may from time to time designate in writing, in coin or currency which, at the time of payment, is legal tender for private or public debts in the United States of America, the Base Rent specified in Paragraph 1 hereof in the equal monthly installments specified in Paragraph 1 hereof in advance on or before the first day of each and every month during the Term, without any abatement (except as specifically provided herein), counterclaim, set-off or deduction whatsoever. If the Term for Area A and/or Area B commences other than on the first day of a month or ends other than on the last day of the month, the Base Rent for such month shall be prorated. The prorated Base Rent for the portion of the month in which the Term commences shall be paid on the first day of the first full month during the Term.

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5.ADDITIONAL RENT.

In addition to paying the Base Rent specified in Paragraph 4 hereof, Tenant shall pay as “Additional Rent” the amounts determined pursuant to Sub-Paragraphs B and C of this Paragraph 5. The Base Rent and the Additional Rent are sometimes herein collectively referred to as the “Rent”. All amounts due under this Paragraph as Additional Rent shall be payable for the same periods and in the same manner, time and place as the Base Rent, without any abatement (except as specifically provided herein), counterclaim, set-off or deduction whatsoever. Without limitation on other obligations of Tenant which shall survive the expiration of the Term, the obligations of Tenant to pay the Additional Rent provided for in this Paragraph 5 shall survive the expiration of the Term for a period of two years. For any partial Calendar Year, Tenant shall be obligated to pay only a pro rata share of the Additional Rent, based on the number of days of the Term falling within such Calendar Year.

A.Definitions. As used in this Paragraph 5, the terms:

(i)“Base Year” shall mean the calendar year specified in Paragraph 1 hereof.

(ii)“Base Year Operating Expenses” shall mean the sum specified in Paragraph 1 hereof.

(iii)“Calendar Year” shall mean each calendar year in which any part of the Term falls, through and including the year in which the Term expires.

(iv)‘Tenant’s Proportionate Share” shall mean the percentage specified in Paragraph 1 hereof, being the percentage calculated by dividing the rentable area contained in the Premises from time to time by 802,750 (being 95% of the

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rentable square foot area of the Office Section), rentable area to be determined by Landlord on a uniform basis for the tenants of the Office Section.

(v)“Taxes” shall mean all real estate taxes and assessments, special or otherwise, levied or assessed upon or with respect to the Building or any part thereof and Common Areas which Landlord determines in its sole judgment to be for the benefit of the Building and ad valorem taxes for any personal property of Landlord used in connection therewith. Landlord’s determination of which Common Areas benefit the Building shall not be revised adversely to Tenant for purposes of determining Taxes included in Operating Expenses. Should the Commonwealth of Massachusetts, or any political subdivision thereof, or any other governmental authority having jurisdiction over the Building, (a) impose a tax, assessment, charge or fee, which Landlord shall be required to pay, by way of substitution for or as a supplement to such real estate taxes and ad valorem personal property taxes, or (b) impose an income or franchise tax or a tax on rents in substitution for or as a supplement to a tax levied against the Building or any part thereof and/or the personal property used in connection with the Building or any part thereof, all such taxes, assessments, fees or charges (hereinafter defined as “in lieu of taxes”) shall be deemed to constitute Taxes hereunder. Taxes shall also include, in the year paid, all reasonable fees and costs incurred by Landlord in seeking to obtain a reduction of, or a limit on the increase in, any Taxes, regardless of whether any reduction or limitation is obtained. Except as hereinabove provided with regard to “in lieu of taxes”. Taxes shall not include any inheritance, estate, succession, transfer, gift, franchise, net income or capital stock tax.

(vi)“Operating Expenses” shall mean (a) Taxes and (b) all expenses, costs and disbursements of every kind and nature, paid or incurred by Landlord in operating, owning, managing, leasing, repairing and maintaining the Office Section, the Building, the Property and their appurtenances as such Taxes,

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expenses, costs and disbursements are allocated to the Office Section by the Landlord in its reasonable judgment (which allocation shall remain consistent for the Base Year and each Calendar Year of the Term) or as the same are incurred directly in the operation of Office Section, including but without limitation: premiums for fire, casualty, liability and such other insurance as Landlord may from time to time maintain; security expenses; compensation and all fringe benefits, workmen’s compensation insurance premiums and payroll taxes paid by Landlord to, for or with respect to all persons engaged in operating, maintaining, or cleaning; steam, water, sewer, electric, gas, telephone, and other utility charges not billed directly to tenants by Landlord or the utility; expenses incurred in connection with the central plant furnishing heating, ventilating and air conditioning to the Office Section (and to the Building and the Property where and to the extent such expenses of the Building and the Property are otherwise allocable to the Office Section), which expenses may include a reasonable fee paid to the operator of such central plant; costs of lighting, ventilating, (including maintaining and repairing ventilating fans and fan rooms); making routine repairs to and maintenance of underground roadways (and the access ramps servicing such roadways) and railroad platforms and railroad rights of way (including track); costs of repairing and maintaining fire protection systems relating to the underground roadways, access ramps, railroad platforms and railroad rights of way to the extent the same are required of Landlord by separate agreement running with the Property and binding the Property whether currently in effect or arising from obligations and commitments currently in effect; costs of building and cleaning supplies and equipment (including rental); cost of maintenance, cleaning and repairs; cost of snow plowing or removal, or both, and care of interior and exterior landscaping; payments to independent contractors under contracts for cleaning, operating, management, maintenance and repair (which payments may be to affiliates of Landlord provided such are at competitive rates); all other expenses paid in connection with cleaning, operating, management, maintenance and repair of, or are otherwise allocable to, the Office Section; costs

9

of any Qualified Capital Improvements (as hereinafter defined) as reasonably amortized by Landlord, with interest on the unamortized amount at the rate of the greater of (i) 12% per annum or (ii) 2% per annum above the base rate of interest charged from time to time by The First National Bank of Boston (but in no event at a rate which is more than the highest lawful rate allowable in The Commonwealth of Massachusetts), to the extent the cost of the particular capital improvement exceeds the amount of insurance proceeds, if any, received by Landlord on account of damage to the particular Qualified Capital Improvement. As used in this Lease, “Qualified Capital Improvement” shall mean a capital improvement or replacement of such capital improvement which is intended to reduce or stabilize Operating Expenses in any Calendar Year below or at the Operating Expense which would have been incurred in the absence of such capital improvement. The term “capital improvement” does not include expenses for equipment of a capital nature incurred in connection with operation, repair and maintenance of the Building if such equipment is not a part of the Building structure or systems and, instead, is used to maintain or repair Building structure or systems. Operating Expenses shall not, however, include the following:

a.Costs of alterations of any tenant’s premises for a particular tenant;

b.Principal or interest payments on loans secured by mortgages or trust deeds on the Building and/or on the Property;

c.That portion of any costs incurred in connection with the making of repairs or replacements which are the lease obligation of another tenant or occupant of the Property;

d.Advertising, marketing, promotional, public relations or brokerage fees, commissions or expenditures;

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e.Financing and refinancing costs in respect of any mortgage or security interest placed upon the Property or any portion thereof, including payments of principal, interest, finance or other charges, and any points and commissions in connection therewith;

f.Interest or penalties for any late or failed payments by Landlord under any contract or agreement (but any such interest or penalties resulting from Tenant’s failure to pay when and as due Tenant’s share of Operating Expenses shall be the direct responsibility of Tenant and shall be Additional Rent due within ten (10) days of Landlord’s billing Tenant therefor);

g.Rent or other charges payable under any ground or underlying lease;

h.Costs of electrical or other utilities services furnished directly to any premises or other tenants of the Property where such utility is separately metered to the premises or such tenant pays a separate charge therefor;

i.Costs incurred in connection with Landlord’s preparation, negotiation, dispute resolution and/or enforcement of leases, including court costs and attorneys’ fees and disbursements in connection with any summary proceeding to dispossess any tenant, or incurred in connection with disputes with prospective tenants, employees, consultants, management agents, leasing agents, purchasers or mortgagees or arising from matters which are excluded from Operating Expenses;

j.Costs of any additions to or expansions of the Property;

k.The cost of environmental monitoring, compliance, testing and remediation performed in, on, about and around the Property;

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1.Depreciation;

m.Costs or expenses for items to the extent theretofore reimbursed to Landlord by insurance proceeds;

n.Costs of repairs, restoration or replacements occasioned by fire or other casualty or caused by the exercise of the right of eminent domain, whether or not insurance proceeds or condemnation award proceeds are recovered or adequate for such purposes except that the deductible amount under insurance coverage shall be included in Operating Expenses;

o.An amount equal to all amounts received by Landlord (i) through proceeds of insurance to the extent the proceeds are compensation for expenses which previously were included in Operating Expenses hereunder, or (ii) as rebates or credits toward costs and expenses previously included in Operating Expenses hereunder; and

p.Costs (including, without limitation, attorneys’ fees and disbursements) incurred in connection with any judgment, settlement or arbitration award resulting from any tort liability; and

r.Costs of capital improvements or replacements except to the extent specifically to be included under this Section 5A(vi).

If less than 95% of the Office Section’s rentable area shall have been occupied by tenant(s) at any time during any Calendar Year, components of Operating Expenses which vary with the level of occupancy shall be determined for such Calendar Year to be an amount equal to the like expense which would normally be expected to be incurred (taking into account periods during which

12

occupancy exceeded 95% during such Calendar Year) had such occupancy been 95% throughout such Calendar Year.

B.Expense Adjustment. Replaced per 2^nd amendment. The Expense Adjustment Amount with respect to each Calendar Year shall be paid in monthly installments, in an amount estimated from time to time by Landlord in good faith and communicated by written notice to Tenant, which estimate may be revised to reflect, without limitation, increases in Taxes during any period. Landlord shall cause to be kept books and records showing Operating Expenses in accordance with an appropriate system of accounts and accounting practices consistently maintained. Within twelve (12) months after the close of each Calendar Year, Landlord shall cause the amount of the Expense Adjustment Amount for such Calendar Year to be computed based on Operating Expenses for such Calendar Year and Landlord shall deliver to Tenant a statement of such amount and Tenant shall pay any deficiency to Landlord as shown by such statement within thirty (30) days after receipt of such statement. If the total of the estimated monthly installments paid by Tenant during any Calendar Year exceed the actual Expense Adjustment Amount due from Tenant for such Calendar Year, such amount shall be refunded by Landlord within thirty (30) days of the delivery of the statement to Tenant, provided Tenant is not then in monetary default hereunder or in other than monetary default beyond applicable periods of notice and cure. Tenant shall have the right to audit Landlord’s books and records relating to Operating Expenses incurred during the Term provided such audit shall be conducted by professional auditors; may occur not more often than once in a year; shall be conducted within twelve months (plus any period for which Landlord defers the audit as provided in this sentence) of receipt of a statement of Operating Expense Adjustment for the Calendar Year being audited; shall be conducted during regular business hours of Landlord on not less than fifteen (15) business days’ notice and may be deferred by Landlord by notice given at least ten (10) business days before the date

13

proposed by Tenant, for up to three (3) months to a date convenient to Landlord. In the event the results of such audit disclose an overcharge of Tenant, Landlord shall promptly refund the amount of such overcharge to Tenant. In addition, if as a result of such audit, Operating Expenses are found to be overstated by more than ten percent (10%), Landlord shall pay to Tenant, Tenant’s reasonable cost of conducting such audit. Delay in computation of the Expense Adjustment Amount or failure to deliver a statement of such amount shall not be deemed a default hereunder or a waiver of Landlord’s right to collect the Expense Adjustment Amount. In computing the Expense Adjustment Amount, the following provisions relating to Taxes shall be applicable: The amount of any refund of Taxes received by Landlord shall be credited against Taxes for the Calendar Year in which such refund is received; provided, however, that in the event Landlord receives a refund of Taxes after the Termination Date (as the same may be accelerated or extended as provided elsewhere in this Lease) which refund relates to a Calendar Year during the Term hereof, the amount of such refund fairly allocable to Tenant shall be refunded to Tenant by Landlord within ninety (90) days of Landlord’s receipt of same (net of Tenant’s allocated share of the cost of obtaining such refund and the cost, if any, of making such refund); and further provided that if Tenant expands into space formerly occupied by other tenants, which expansion space becomes subject to this Lease, Tenant shall not be entitled to any refund or credit with respect to such expansion space in connection with a refund or abatement of Taxes for periods prior to Tenant’s occupancy of such expansion space. All references to Taxes “for” a particular Calendar Year shall be deemed to refer to Taxes due and payable during such Calendar Year without regard to when such Taxes are assessed or levied.

C.Adjustment For Services Not Rendered by Landlord. Tenant acknowledges that if after the Base Year Landlord is not furnishing any particular work or service the cost of which was included in Base Year Operating Expenses and if performed by Landlord would be included in Operating Expenses, to any tenant who has undertaken to perform such work or service in lieu of the performance thereof by Landlord, Operating Expenses shall be deemed for the purpose of determining the

14

Expense Adjustment Amount to be increased by an amount equal to the additional Operating Expenses which would reasonably have been incurred during such period by Landlord if it had at its own expense furnished such work or service to such tenant.

6.USE OF PREMISES.

Tenant shall use and occupy the Premises in accordance with law; and solely as an office and for no other purpose or purposes.

7.CONDITION OF PREMISES.

The Premises are demised to Tenant and Tenant accepts the same “as-is” and all work necessary to prepare the Premises for Tenant’s occupancy shall be performed at Tenant’s sole cost and expense, in accordance with the applicable provisions of this Lease. Notwithstanding the foregoing, (i) Landlord agrees that all systems serving the Premises shall be in good and operational condition on the applicable Commencement Date, (ii) the Premises will be delivered in compliance with all applicable code requirements, laws, regulations and ordinances applicable to the delivery of unfinished, undemolished space except as to compliance with ADA bathroom and fire requirements which are Tenant’s responsibility in full floor usage and except for the wallboard adjacent to the atrium area of the Building which is not in compliance with the fire code; provided, however, that the reasonable cost of bringing the wallboard to code shall be reimbursed by Landlord (separate from and outside of the Landlord Base Allowance) to Tenant promptly after Tenant submits its bill for such work to Landlord together with reasonable evidence of the completion thereof, and (iii) the Landlord represents, warrants and covenants that the Common Areas and portions of the Property which are not leased or leaseable will at all times on and after the Area A Commencement Date as to Area A and the Area B Commencement Date as to Area B be in compliance with all code requirements, laws, regulations and ordinances including without limitation ADA, OSHA and the Clean Air Act which must be complied with for general office uses so as to assure

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Tenant uninterrupted use of the Premises without the imposition of fees or penalties or incurrence of liability by reason of such noncompliance. In no event shall Landlord be obligated to cause compliance of the Premises with ADA requirements noted above. No promise of Landlord to alter, remodel or improve the Premises, the Office Section or the Building and no representation by Landlord or its agents respecting the condition of the Premises, the Office Section or the Building have been made to Tenant or relied upon by Tenant other than as may be contained in this Lease or in any written amendment hereto signed by Landlord and Tenant. Tenant shall have the right, upon reasonable notice and during hours as will minimally interfere with the business of the current occupant of Area B (and consistent with reasonable security policies of the current occupant), to cause the Landlord to arrange with the current occupant of Area B for access to Area B prior to the Area B Commencement Date to permit cabling within Area B so as to coordinate cabling work with the installation of cabling in Area A. All costs of such cabling shall be the responsibility of Tenant under the Work Letter.

8.SERVICES.

A.List of Services.

Landlord shall provide the following services, the costs of which are included within Operating Expenses, on all days during the Term except Sundays and holidays (but for purposes hereof, “holidays” shall not include days on which the New York Stock Exchange is operating), unless otherwise stated, and subject to all governmental rules, regulations and guidelines applicable thereto:

(i)Heating and air conditioning in the Premises during the normal heating and air-conditioning seasons, from Monday through Friday, during the period from 8 a.m. to 6 p.m. and on Saturday during the period from 8 a.m. to 1 p.m. in accordance with the following standards: In all areas of the Premises, an indoor temperature of 70° to 74°F dry bulb and 30% relative humidity on a year

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round basis regardless of outdoor temperature with fresh air of not less than 0.25 cubic feet per minute for each square foot of useable area in the Premises provided Tenant does not exceed a heat load of six (6) watts per rentable square foot and an occupancy level of not more than one person for each 125 rentable square feet in the Premises, but subject to Tenant’s failure to properly design its heating and air-conditioning system distribution within the Premises. Tenant will pay for all heating and air-conditioning requested and furnished prior to or following such hours at rates to be established from time to time by Landlord. Currently, after-hours HVAC is available at a rate of $45.00 per hour per floor. Requests for any additional services shall be in writing and delivered to Landlord not later than 2 p.m. of the previous day.

(ii)Adequate electrical wiring and facilities for standard building lighting fixtures provided by Landlord and for Tenant’s incidental uses (it being understood that Tenant is to bear the cost of replacement of all lamps, tubes, ballasts and starters for lighting fixtures in the Premises); provided that (a) the connected electrical load for lighting and incidental use equipment does not exceed an average of three watts per square foot of the Premises; (b) the electricity so furnished for incidental uses will be at a nominal 120 volts and no electrical circuit for the supply of such incidental use will have a current capacity exceeding 20 amperes; and (c) such electricity will be used only for equipment and accessories normal to office usage. If Tenant’s requirements for electricity for lighting and incidental uses are in excess of those set forth in the preceding sentence, Landlord reserves the right to require Tenant to install the conduit, wiring and other equipment necessary to supply electricity for such excess incidental use requirements at Tenant’s expense.

(iii)City water from the regular Building outlets for drinking, lavatory and toilet purposes.

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(iv)Janitorial services as delineated in Exhibit D attached hereto.

(v)Window washing of the inside and outside of windows in the Building’s perimeter walls as may be situated in the Premises as delineated in Exhibit D attached hereto.

(vi)Non-exclusive automatic passenger elevator service at all times.

(vii)Non-exclusive freight elevator service subject to scheduling by Landlord. Landlord will schedule reasonable use of the freight elevator for Tenant’s move into and out of the Premises, which use shall provide Tenant with sufficient periods of uninterrupted use to permit its reasonably orderly construction and move into the Premises, subject to reasonable limitations and interruptions for use by other tenants.

B.Billing for Electricity.

Landlord shall submeter Tenant’s use of all electrical service to the Premises (other than the electrical service necessary for Landlord to fulfill its obligation to provide heating and air conditioning as provided in Paragraph 8A(i) hereof) or shall determine such usage through an intellimeter or similar device. Tenant shall pay Landlord as further Additional Rent, in monthly installments at the time prescribed for monthly installments, the cost of such electrical usage. Tenant’s obligation for electricity usage by Tenant during the Term shall survive the termination of this Lease and/or Tenant’s right to occupancy of all or any part of the Premises.

C.Interruption of Services.

Tenant agrees that except as provided in this Subparagraph C, Landlord shall not be liable in damages, by abatement of Rent or otherwise, for failure to furnish or delay in

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furnishing any service, or for any diminution in the quality or quantity thereof, when such failure or delay or diminution is occasioned, in whole or in part, by repairs, renewals, or improvements, by any strike, lockout or other labor trouble, by inability to secure electricity, gas, water, or other fuel at the Building after reasonable effort so to do, by any accident or casualty whatsoever, by act or default of Tenant or other parties, or by any other cause beyond Landlord’s reasonable control; and such failures or delays or diminution shall never be deemed to constitute an eviction or disturbance of Tenant’s use and possession of the Premises or relieve Tenant from paying Rent or performing any of its obligations under this Lease. Notwithstanding anything in this Lease to the contrary, if as a result of a cessation limited to utilities or interruption of utilities or access which Landlord is required to provide hereunder for any other reason other than (i) reasons arising as a result of negligence, willful misconduct on the part of Tenant or any of Tenant’s contractors, agents or employees or breach of this Lease by Tenant, (ii) reasons arising out of Tenant’s use and occupancy of the Premises, (iii) any other reason within the reasonable control of Tenant, Tenant is unable to use all or a portion of the Premises for its business purposes for a period of seven (7) consecutive days, the Base Rent and Additional Rent relating to periods subsequent to such seven (7) day period and thereafter due hereunder shall abate until Tenant is again able to use such portion of the Premises for its business purposes. In the event such interruption or cessation continues for more than thirty (30) consecutive days and materially affects Tenant’s use and occupancy of the Premises, Tenant shall have the right to terminate this Lease by notice to Landlord within ten (10) days of the expiration of such thirty (30) day period.

D.Charges for Services.

Charges for any service for which Tenant is required to pay, from time to time hereunder, including but not limited to hoisting services or after hours lighting, heating or air conditioning shall be due and payable at the same time as the installment of Rent with which they are billed, or if billed separately, shall be due and payable as further Additional Rent within thirty (30) days after such billing. If Tenant shall fail to make

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payment for any such services within applicable periods of notice and cure, Landlord may, without notice to Tenant, in addition to any and all other remedies available under this Lease or otherwise, discontinue any or all of such services and such discontinuance shall not be deemed to constitute an eviction or disturbance of Tenant’s use and possession of the Premises or relieve Tenant from paying Rent or performing any of its other obligations under this Lease.

E.Energy Conservation.

Notwithstanding anything to the contrary in this Paragraph 8 or elsewhere in this Lease, Landlord shall have the right to institute such policies, programs and measures as may be necessary or desirable, in Landlord’s reasonable discretion, for the conservation and/or preservation of energy or energy related services if consistent with similar programs instituted generally in first-class office buildings in Boston (to the extent the systems of such office buildings are not otherwise compliant with conservation and preservation goals generally accepted), or as may be required to comply with any applicable codes, rules and regulations, whether mandatory or (but only if instituted by first-lass Boston office buildings whose systems are not otherwise compliant) voluntary.

9.REPAIRS; HAZARDOUS MATERIALS.

Tenant will, at Tenant’s own expense, keep the Premises, including all improvements, fixtures and furnishings therein, in good order, repair and condition at all times during the Term, reasonable wear and tear excepted (and Tenant shall not be obligated hereunder for damage to the Premises arising from Building damage arising from fire or other casualty), and Tenant shall promptly and adequately repair all damage to the Premises and replace or repair all damaged or broken glass, fixtures and appurtenances. If Tenant does not do so after notice and expiration of applicable cure periods, Landlord may, but shall not be obligated to, make such repairs and replacements, and Tenant shall pay Landlord the cost thereof, including a percentage of the cost thereof

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(to be uniformly established for the Office Section) sufficient to reimburse Landlord for all overhead, general conditions, fees and other costs or expenses arising from Landlord’s involvement with such repairs and replacements forthwith upon being billed for same. Landlord may, but shall not be required to, enter the Premises at all reasonable times upon reasonable advance notice (and at any time in emergency situations) to make such repairs, alterations, improvements and additions to the Premises, to the Office Section or the Building or to any equipment located in the Office Section or the Building as Landlord shall desire or deem necessary or as Landlord may be required to do by governmental authority or court order or decree. Nothing contained herein shall impose any obligation on Tenant to maintain, repair or replace any systems serving or passing through the Premises (including without limitation the HVAC, electrical, plumbing, life safety and security systems). Landlord shall be responsible for the same, subject to reimbursement of the cost thereof as a component of Operating Expenses.

Tenant shall not (either with or without negligence) cause or permit the escape, disposal or release of any biologically or chemically active or hazardous substances, or materials (collectively the “Hazardous Materials”). Tenant shall not allow the storage or use of Hazardous Materials in any manner not sanctioned by law or by the highest standards prevailing in the industry for the storage and use of such Hazardous Materials, not allow to be brought into the Building any Hazardous Materials except to use in the ordinary course of Tenant’s business. Without limitation, Hazardous Materials shall include those described in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq., any applicable state or local laws and the regulations adopted under these acts. If any lender or governmental agency shall ever require testing to ascertain whether or not there has been any release of Hazardous Materials by Tenant, then the reasonable costs thereof shall be reimbursed by Tenant to Landlord upon demand as additional charges if such requirement applies to the Premises. In addition, Tenant shall execute affidavits, representations and the like from time to time at Landlord’s request concerning Tenant’s

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best knowledge and belief regarding the presence of Hazardous Materials on the Premises provided such are in form and substance reasonably acceptable to Tenant. In all events, Tenant shall indemnify Landlord in the manner elsewhere provided in this Lease from any release of Hazardous Materials on the Premises occurring while Tenant is in possession (unless caused by Landlord, its agents, employees, contractors or other tenants of the Property) or elsewhere if caused by Tenant or persons acting under Tenant. The within covenants shall survive the expiration or earlier termination of the Term.

10.ADDITIONS AND ALTERATIONS.

A.Tenant shall not, without the prior written consent of Landlord, make any alterations, improvements or additions to the Premises subsequent to initial construction, the approval conditions for which are set forth in the Work Letter; provided, however, Landlord’s consent shall not be required with respect to nonstructural alterations, improvements or additions below finished ceilings costing less than $12,000 to implement and Landlord shall not unreasonably withhold its consent to other nonstructural alterations which do not materially adversely affect Building Systems. Tenant shall in all events provide at least five (5) business days’ notice to Landlord of any alterations, improvements or additions (with a summary description of the work to be done and a statement, pursuant to Paragraph 9, describing any Hazardous Materials to be brought into the Building in connection with the work) whether or not consent is required. Landlord shall respond to requests for consents (a) within two (2) business days, as to requests for decorative alterations and (b) within five (5) business days, as to requests for other nonstructural alterations. If Landlord consents to said alterations, improvements or additions after initial construction, it may impose such reasonable conditions with respect thereto as Landlord reasonably deems appropriate (but in no event shall Landlord be entitled to ask Tenant to remove at the end of the term any nonstructural alterations that are Customary Office Improvements, as defined below). Tenant shall have the right to tie into the Building security system, at Tenant’s sole cost and expense, its HVAC alarm provided that plans for such tie-in shall be submitted to

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Landlord for approval and that Landlord, its employees, agents and contractors shall be held harmless against any and all damages, liabilities, claims and expenses which may be incurred by Tenant arising from any failure of the Building security system to provide any notice of failure of the Tenant’s system or any other level of security or alarm which might otherwise be anticipated to be provided by the Landlord’s security system. The work necessary to make any alterations, improvements or additions to the Premises, whether prior to or subsequent to an applicable Commencement Date, shall be done at Tenant’s expense by employees of or contractors hired by Landlord except to the extent Landlord gives its prior written consent to Tenant’s hiring its own contractors, which consent shall not be unreasonably withheld or delayed. Initial construction of the Premises shall be accomplished by Tenant’s contractor using plans and specifications prepared by Tenant’s architect in accordance with the Work Letter. It is understood that Landlord’s consent to the hiring by Tenant of Tenant’s own contractors for any work subsequent to initial construction (the contractor for which has been approved by Landlord as provided in the Work Letter) may be withheld if Landlord’s permitting such hiring might reasonably be expected to result in an interruption of services provided to tenants of the Building by reason of labor difficulties. Tenant shall promptly pay to Tenant’s contractors, or to Landlord if Landlord has hired the contractor, when due, the actual cost of all such work and of all decorating. In connection with seeking Landlord’s approval hereunder, Tenant shall provide to Landlord plans and specifications regarding proposed alterations, additions or improvements, as Landlord shall reasonably require, and Tenant shall, in addition to all other expenses which Tenant is obligated to pay to Landlord hereunder, pay to Landlord the actual reasonable out-of-pocket expense incurred by Landlord in connection with the review of such information. Upon completion of such work Tenant shall deliver to Landlord, if payment is made directly to contractors, evidence of payment, contractors’ affidavits and full and final waivers of all liens for labor, services or materials, all in form reasonably satisfactory to Landlord. Tenant shall defend and hold Landlord, Landlord’s lessor, any mortgagee of Landlord, the MTA (hereinafter defined), the Property and the Building harmless from all costs, damages, liens and expenses related to such work. All work done by Tenant or its

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contractors pursuant to Paragraphs 9 or 10 shall be done in a first-class workmanlike manner using only good grades of materials and shall comply with all insurance requirements and all applicable laws and ordinances and rules and regulations of governmental departments or agencies.

B.All alterations, improvements and additions to the Premises, whether temporary or permanent in character, made or paid for by Landlord or Tenant, which are not removed by Tenant (to the extent permitted and as provided in Paragraph 18) prior to the end of the Term shall without compensation to Tenant become Landlord’s property at the termination of this Lease by lapse of time or otherwise and shall, unless Landlord has requited their removal as a condition of its consent to installation (in which case Tenant shall remove the same as provided in Paragraph 18), be relinquished to Landlord in good condition, ordinary wear and damage or condition resulting from the effects of casualty and eminent domain excepted. Notwithstanding the foregoing, Tenant shall not be obligated to remove any partitions, floor or wall coverings, or other normal office layout construction (“Customary Office Improvements”), or any improvements made pursuant to the Work Letter unless otherwise specified by Landlord in connection with Landlord’s approval of Tenant’s plans for initial construction of the Premises. Nothing contained herein shall be deemed to grant Landlord an ownership interest in Tenant’s trade fixtures, equipment or personal property (including, without limitation, the work stations and anti-static floor in the communications room) which shall remain Tenant’s property and may be removed during or at the end of the term of the Lease provided that Tenant shall repair any and all damage to the Premises caused by such removal.

Tenant may install, maintain, replace, remove or use any communications or computer wires, cables and related devices (collectively the “Lines”) at the Property in or serving the Premises, provided: (a) Tenant shall obtain Landlord’s prior written consent to any such action (which consent shall not be unreasonably withheld or delayed), use an experienced and qualified contractor approved in writing by Landlord (which approval shall not be unreasonably withheld or delayed), and comply with all of the other

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provisions of Paragraph 10A, (b) any such installation, maintenance, replacement, removal or use shall not interfere with the use of any then existing Lines at the Building, (c) as to Lines installed after the initial buildout, an acceptable number of spare Lines and space for additional Lines shall be maintained for existing and future occupants of the Building, as determined in Landlord’s reasonable opinion, (d) if Tenant at any time uses any equipment that may create an electromagnetic field exceeding the normal insulation ratings or ordinary twisted pair riser cable or cause radiation higher than normal background radiation, the Lines therefor (including riser cables) shall be appropriately insulated to prevent such excessive electromagnetic fields or radiation, (e) as a condition to permitting the installation of new Lines, Landlord may require that Tenant remove existing Lines located in or serving the Premises (other than Lines installed or used by Tenant), (f) Tenant’s rights shall be subject to the rights of any regulated telephone company, and (g) Tenant shall pay all costs in connection therewith. Landlord reserves the right to require that Tenant remove any Lines installed by Tenant located in or serving the Premises which are installed in violation of these provisions, or which are at any time in violation of any laws, ordinances, rules or regulations or causing a dangerous or potentially dangerous condition within thirty (30) days after written notice.

Landlord may (but shall not have the obligation to): (i) install new Lines at the Building, (ii) create additional space for Lines at the Property, and (iii) reasonably monitor and/or supervise the installation, maintenance, replacement and removal of, the allocation and periodic re-allocation of available space (if any) for, and (solely as to Lines installed by Landlord) the allocation of excess capacity (if any) on, any Lines now or hereafter installed at the Building by Landlord, Tenant or any other party (but Landlord shall have no right to monitor or control the information transmitted through such Lines). Such rights shall not be in limitation of other rights that may be available to Landlord by law or otherwise. If Landlord exercises any such rights, Landlord may charge Tenant for the costs attributable to Tenant, or may include those costs and all other costs in Operating Expenses under Paragraph 5A(vi) (including without limitation, costs for acquiring and installing Lines and risers to accommodate new Lines and spare Lines, any

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associated computerized system and software for maintaining records of Line connections, and the fees of any consulting engineers and other experts); provided, the cost of any capital improvements shall be included in Operating Expenses hereunder and shall be amortized (together with reasonable finance charges) as provided in Paragraph 5A(vi) and shall not be included in Operating Expenses if attributable to any particular tenant or tenants of the Property or would otherwise not be includable in Operating Expenses pursuant to exclusions under Paragraph 5A(vi).

Tenant shall remove currently existing Lines in the Premises, including, without limitation, those above the existing finished ceiling in connection with Tenant’s construction, but Tenant shall have no obligation to remove any Lines installed by or for Tenant within or serving the Premises upon termination of this Lease. Any Lines not removed prior to the end of the Term shall, at Landlord’s option, become the property of Landlord (without payment by Landlord). Tenant shall not, without the prior written consent of Landlord in each instance, grant to any third party a security interest or lien in or on the Lines, and any such security interest or lien granted without Landlord’s written consent shall be null and void. Subject to Paragraph 8C and except to the extent arising from the intentional or negligent acts of Landlord or Landlord’s agents or employees, Landlord shall have no liability for damages arising from, and Landlord does not warrant that the Tenant’s use of any Lines will be free from the following (collectively called “Line Problems”): (x) any eavesdropping or wire-tapping by unauthorized parties, (y) any failure of any Lines to satisfy Tenant’s requirements, or (z) any shortages, failures, variations, interruptions, disconnections, loss or damage caused by the installation, maintenance, replacement, use or removal of Lines by or for other tenants or occupants at the Building, by any failure of the environmental conditions or the power supply for the Building to conform to any requirements for the Lines or any associated equipment, or any other problems associated with any Lines by any other cause; provided, however, that Landlord shall use its best efforts to enforce the leases of other tenants in respect of matters relating to Line Problems. Subject to Paragraph 8C, under no circumstances shall any Line Problems be deemed an actual or constructive eviction of Tenant or relieve

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Tenant from performance of Tenant’s obligations under this Lease. Landlord in no event shall be liable for damages by reason of loss of profits, business interruption or other consequential damage arising from any Line Problems.

11.COVENANT AGAINST LIENS.

Tenant has no authority or power to cause or permit any lien or encumbrance of any kind whatsoever, whether created by act of Tenant, operation of law or otherwise, to attach to or be placed upon the Property, the Building or the Premises, or to affect any estate or interest of Landlord, Landlord’s lessor, any mortgagee or the MTA. Tenant covenants and agrees not to suffer or permit any lien of mechanics, materialmen or others to the placed against the Property, the Building or the Premises, or to affect any estate or interest of Landlord, Landlord’s lessor, any mortgagee or the MTA, with respect to work or services claimed to have been performed for or materials claimed to have been furnished to Tenant or the Premises, and, in case of any such lien attaching or notice of any lien, or claim therefor being asserted, Tenant covenants and agrees to cause same to the immediately released and removed of record or bonded over. In the event that such lien is not released and removed or bonded over within twenty (20) days of the date Tenant receives notice of the same, Landlord, at its sole option, may take all action necessary to release and remove such lien (without any duty to investigate the validity thereof) and Tenant shall promptly upon notice reimburse Landlord for all sums, costs and expenses (including reasonable attorneys’ fees) incurred by Landlord in connection therewith.

12.INSURANCE.

A.Waiver of Subrogation.

Landlord and Tenant each hereby waive any and every claim for recovery from the other for any and all loss of or damage to the Property, the Building or the Premises or to

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the contents thereof, which loss or damage is (i) covered by valid and collectible physical damage insurance policies, to the extent that such loss or damage is recoverable under said insurance policies or (ii) required to be covered under this Lease but the party required to maintain such insurance failed to maintain the same in which event such party shall be deemed to have received the total insurance proceeds required to be carried hereunder. Inasmuch as this mutual waiver will preclude the assignment of any such claim by subrogation (or otherwise) to an insurance company (or any other person), Landlord and Tenant each agree to give to each insurance company which has issued, or in the future may issue, to it policies of physical damage insurance, written notice of the terms of this mutual waiver, and to have said insurance policies properly endorsed, if necessary, to prevent the invalidation of said insurance coverage by reason of said waiver. Tenant’s waiver of subrogation as hereinabove set forth shall also run to the benefit of and extend to Landlord’s lessor and the MTA.

B.Coverage.

Tenant shall purchase and maintain insurance during the entire Term for the benefit of Tenant, with Landlord, Landlord’s lessor, any mortgagee and the MTA named as additional insureds (as their respective interests may appear) in companies reasonably satisfactory to Landlord, and with such increases in limits as Landlord may from time to time request (provided such increases are consistent with that required of similar tenants in the Greater Boston area), but initially Tenant shall maintain the following coverages in the following amounts:

(i)Commercial General Liability Insurance covering Tenant, with Landlord, Landlord’s lessor, the MTA and Landlord’s management agent named as additional insureds for claims of bodily injury, personal injury and property damage arising out of Tenant’s operations, assumed liabilities or use of the Premises, for limits of liability not less than:

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Bodily Injury and Property	$3,000,000 each occurrence
Damage Liability	$3,000,000 annual aggregate
Personal Injury Liability	$3,000,000 annual aggregate
	0% Insured’s participation

(ii)Comprehensive Automobile Insurance covering all owned, non-owned and hired automobiles of Tenant including the loading and unloading of any automobile with limits of liability not less than:

Bodily Injury and Property	$3,000,000 each person
Damage Liability	$3,000,000 each accident

(iii)Physical Damage Insurance covering all additions, improvements and alterations to the Premises which are beyond the building standard tenant improvements provided by Landlord and all office furniture, trade fixtures, office equipment, merchandise and all other items of Tenant’s property on the Premises. Such insurance shall be written on an “all risks” of physical loss or damage basis, for the full replacement cost value of the covered items and in amounts that meet any coinsurance clauses of the policies of insurance.

Tenant shall, prior to the commencement of the Term, furnish to Landlord certificates evidencing such coverage, on ACORD Form 27, which certificates shall state that such insurance coverage may not be changed or canceled without at least thirty (30) days’ prior written notice to Landlord and Tenant and shall name Landlord and Landlord’s management agent as additional insureds.

During the Term of this Lease, Landlord shall secure and carry (a) a policy of commercial general liability insurance covering Landlord on an occurrence basis in an amount not less than $3,000,000 for claims based on bodily injury (including death), personal injury and property damage relating to the Property and the Land; and (b) a

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policy of property insurance covering the Property and the other improvements on the Land for direct risk of physical loss, on an occurrence basis, in an amount equal to the full replacement cost of the Property and other improvements on the Land.

C.Avoid Action Increasing Rates.

Tenant shall comply with all applicable laws and ordinances, all orders and decrees of court and all requirements of other governmental authorities having jurisdiction over the Building and of the applicable rating bureau, and shall not, directly or indirectly, make any use of the Premises which may thereby be prohibited or be dangerous to person or property or which may jeopardize any insurance coverage or may increase the cost of insurance or require additional insurance coverage. If by reason of the failure of Tenant to comply with the provisions of this Paragraph 12C, (i) any insurance coverage is jeopardized Landlord may, in addition to all other remedies which may be available to Landlord, require Tenant to cease such use and if Tenant does not do so promptly, Landlord may terminate this Lease or (ii) if insurance premiums are increased, Landlord may require Tenant to make immediate payment of the increased insurance premium.

13.FIRE OR CASUALTY.

A. Paragraph 9 hereof notwithstanding, if the Premises or the access thereto (which term for purposes of this Paragraph 13 shall include Office Section corridors which provide access to the Premises, elevator or escalator service to the Premises and the garage, at least one pedestrian entrance to the Building which provides access to the elevators and such other access as shall be necessary to permit Tenant to conduct its business in the Premises) shall be damaged by fire or other casualty and if such damage is not of such a character or magnitude as would result in Landlord having a right to terminate under this Paragraph 13A, or if a right to terminate is available to either Landlord or Tenant but no termination is exercised, Landlord shall, subject to building

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and zoning laws then applicable, repair and restore the Premises to substantially the condition (exclusive of tenant improvements thereto to the extent such tenants, including Tenant, are responsible therefor) thereof prior to the casualty, and shall restore access to the Premises and Building systems to the extent necessary to permit Tenant to operate its business in the Premises, with reasonable promptness and subject to reasonable delays for insurance adjustments and delays caused by matters beyond Landlord’s reasonable control, but shall not be obligated to expend therefor an amount in excess of the proceeds of insurance recovered with respect thereto plus the deductible under Landlord’s insurance, provided that such limitations shall not apply to the extent Landlord has not maintained all insurance required to be carried hereunder and unless diligently pursued all claims against its insurer. Landlord shall have the right to terminate this Lease by giving notice of Landlord’s election so to do not later than “Landlord’s Restoration Notice Date” (as hereinafter defined) in the following circumstances:

(a)If damage from fire or other casualty to the Premises or access thereto is such that the same cannot, in the ordinary course, reasonably be expected to be repaired within two hundred seventy (270) days from the date of damage and Landlord terminates the leases of all other similarly situated tenants in space which is in the Tower in which the damaged space is located; or

(b)If damage from fire or other casualty to a “Tower” (the Office Section being comprised of four “Towers” known as One Copley Place, Two Copley Place, Three Copley Place and Four Copley Place) in which all or a portion of the Premises is located is such that the same cannot, in the ordinary course, reasonably be expected to be repaired within two hundred seventy (270) days from the date of damage and Landlord terminates the leases of all other similarly situated tenants in space which is in the Tower in which the damaged space is located (but Landlord’s right to terminate hereunder shall only apply to that portion of the Premises which is located within the Tower damaged by such fire or other casualty); or

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(c)If Landlord determines to demolish all or substantially all of the Building by reason of fire or other casualty; or

(d)If damage to the Building from fire or other casualty is such that the same cannot, in the ordinary course, reasonably be expected to be repaired within one year from the date of damage and Landlord terminates the leases of all other similarly situated tenants in space which is in the Tower in which the damaged space is located.

Landlord shall notify Tenant no later than Landlord’s Restoration Notice Date of the date by which Landlord reasonably estimates such repairs will be substantially completed (the “Estimated Repair Completion Date”). Tenant shall have the right to terminate this Lease by giving notice to Landlord of Tenant’s election so to do in the following circumstances:

(1)If only the Premises and/or the access thereto have been damaged by fire-or-casualty and the Estimated Repair Construction Date is more than three hundred sixty (360) days after the date of damage,

(2)If the Premises and/or access thereto have not been damaged such that clause (1) is applicable, but a Tower in which all or a portion of the Premises is located has been damaged by fire or other casualty, the Estimated Repair Completion Date is more than three hundred sixty (360) days from the date of damage and such damage has a materially adverse effect on the business of Tenant in the Premises (but Tenant’s right to terminate hereunder shall only apply to that portion of the Premises which is located within the Tower damaged by such fire or other casualty),

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(3)If the Premises and/or access thereto or a Tower in which all or a portion of the Premises is located have not been damaged such that clause (1) or (2) is applicable, but the Building has been damaged by fire or other casualty, the Estimated Repair Completion Date is more than three hundred sixty (360) days from the date of damage and such damage has a materially adverse effect on the business of Tenant in the Premises, or

(4)If substantial completion of repairs actually takes thirty (30) days longer than the Estimated Repair Completion Date and Tenant had the right to terminate or would have had the right if Landlord had correctly stipulated the Estimated Repair Completion Date (but Tenant’s right to terminate hereunder shall only apply to that portion of the Premises which would have been the subject of such a termination had Landlord correctly stipulated).

(5)If substantial completion of repairs to the Premises and access thereto sufficient for Tenant to conduct its business in the Premises occurs more than three hundred sixty (360) days after the date of damage and Tenant notifies Landlord of its intent to terminate within thirty (30) days after the end of such 360 day period unless not later than the end of such thirty (30) day period Landlord shall have so substantially completed such repairs, such termination to be effective as of midnight on the thirtieth day after such 360 day period (but Tenant’s right to terminate hereunder shall only apply to that portion of the Premises which would have been the subject of such a termination had Landlord correctly stipulated).

In the event a party entitled to do so gives such termination notice, this Lease shall terminate (with appropriate proration(s) of Rent being made for Tenant’s use of any tenantable portion of the Premises after the date of such damage) as of the date specified in such notice (but in no event sooner than thirty (30) days after the date of such notice) with the same force and effect as if the date specified were the Termination Date. Landlord shall have no liability to Tenant, and except as specifically set forth above,

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Tenant shall not be entitled to terminate this Lease by virtue of any delays in completion of such repairs and restoration. Further, in the event this Lease is not terminated, Landlord shall not be obligated to restore any portion of the Office Section or the Building outside of the Premises which is not necessary for reasonable access to and egress from the Premises provided such failure to restore does not interfere with Tenant’s ability legally to occupy the Premises or to reconstruct the alterations, additions and improvements for which it is responsible. Rent shall abate on those portions of the Premises as are, from time to time, untenantable (“untenantable” meaning “not suitable for the normal conduct of Tenant’s business”) as a result of such damage. For purposes hereof, Landlord’s Restoration Notice Date shall be the date which is the earlier of (i) thirty (30) days after Landlord has ascertained all information required by Landlord to determine whether or not to terminate this Lease, including without limitation the amount of insurance proceeds which are available to Landlord for restoration and (ii) ninety (90) days after the date of such damage.

B.Notwithstanding anything to the contrary herein set forth, Landlord shall have no duty pursuant to this Paragraph 13 to repair or restore any portion of the alterations, additions or improvements in the Premises or the decorations thereto except to the extent that such alterations, additions, improvements and decorations were provided by Landlord at the beginning of the Term. If Tenant desires any other or additional repairs or restoration and if Landlord consents thereto, the same shall be done at Tenant’s sole cost and expense subject to all of the provisions of Paragraph 9 hereof. Tenant acknowledges that Landlord shall be entitled to the full proceeds of any insurance coverage, whether carried by Landlord or Tenant, for damage to alterations, additions, improvements or decorations provided by Landlord either directly or through an allowance to Tenant.

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14.WAIVER OF CLAIMS - INDEMNIFICATION.

To the extent not prohibited by law, Landlord, its partners, its managing agent, Landlord’s lessor, any mortgagee, the MTA and their respective officers, agents, servants and employees shall not be liable for any damage either to person or property or resulting from the loss of use thereof sustained by Tenant or by other persons due to the Building or any part thereof or any appurtenances thereof becoming out of repair, or due to the happening of any accident or event in or about the Office Section, the Premises or the Building, or due to any act or neglect of any tenant or occupant of the Office Section, the Building or of any other person or entity. This provision shall apply particularly, but not exclusively, to damage caused by gas, electricity, snow, frost, steam, sewage, sewer gas or odors, fire, water, noise, vibration, fumes or by the bursting or leaking of pipes, faucets, sprinklers, plumbing fixtures and windows, and shall apply without distinction as to the person whose act or neglect was responsible for the damage and whether the damage was due to any of the causes specifically enumerated above or to some other cause of an entirely different kind. Tenant further agrees that all personal property upon the Premises, or upon loading docks, receiving and holding areas, or freight elevators of the Building shall be at the risk of Tenant only, and that Landlord shall not be liable for any loss or damage thereto or theft thereof. Without limitation of any other provisions hereof, Tenant agrees to defined, protect, indemnify and save harmless Landlord, Landlord’s lessor, any mortgagee and the MTA from and against all liability to third parties which arose (or which were claimed to have arisen) within the Premises. Nothing contained herein shall, however, excuse landlord from its obligations regarding maintenance of the Building, as contrasted with Landlord being released from liability for personal or property damage arising from Landlord’s failure to maintain; nor shall this Paragraph relieve Landlord from liability for its negligence except as provided in Paragraph 12A or, but only to the extent liability therefor cannot be released as a matter of law, the negligence of its agents, employees and contractors; nor shall this Paragraph modify Landlord’s obligations with respect to failure of services pursuant to Paragraph 8C of this Lease.

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Landlord agrees to defend, protect, indemnify and save harmless Tenant from and against all liability to third parties which arose (or which is claimed to have arisen) outside of the Premises.

15.NONWAIVER.

No waiver of any provision of this Lease shall be implied by any failure of either party to enforce any remedy on account of the violation of such provision, even if such violation be continued or repeated subsequently, and no express waiver shall affect any provision other than the one specified in such waiver and that one only for the time and in the manner specifically stated. No receipt of monies by Landlord from Tenant after the termination of this Lease shall in any way alter the length of the Term or of Tenant’s right of possession hereunder or after the giving of any notice shall reinstate, continue or extend the Term or affect any notice given Tenant prior to the receipt of such monies, it being agreed that after the service of notice or the commencement of a suit or after final judgment for possession of the Premises, Landlord may receive and collect any Rent due, and the payment of said Rent shall not waive or affect said notice, suit or judgment.

16.CONDEMNATION.

If the Property, the Building or any portion thereof shall be taken or condemned by any competent authority for any public or quasi-public use or purpose (a “taking”), Landlord shall have the right, exercisable at its sole discretion within one hundred eighty (180) days of official notice of taking, to cancel this Lease upon not less than ninety (90) days’ notice prior to the date of cancellation designated in the notice provided Landlord terminates all other leases of the Tower in which the Premises are located which are similarly affected by such taking. No money or other consideration shall be payable by Landlord to Tenant for the right of cancellation and Tenant shall have no right to share in the condemnation award or in any judgment for damages caused by such taking or change

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in configuration except for Tenant’s relocation expenses and costs of improvements to the Premises.

17.ASSIGNMENT AND SUBLETTING.

A.Tenant shall not, without the prior written consent of Landlord (which consent shall not be unreasonably withheld) (i) assign, convey or mortgage this Lease or any interest hereunder, (ii) permit to occur or exist any assignment of this Lease, or any lien upon Tenant’s interest, voluntarily or by operation of law; (iii) sublet the Premises or any part thereof; or (iv) permit the use of the Premises by any parties other than Tenant and its employees. Any such action on the part of Tenant shall be void and of no effect. Landlord’s consent to any assignment, subletting or transfer or Landlord’s election to accept any assignee, subtenant or transferee as the tenant hereunder and to collect rent from such assignee, subtenant or transferee shall not release Tenant or any subsequent tenant from any covenant or obligation under this Lease. Landlord’s consent to any assignment, subletting or transfer shall not constitute a waiver of Landlord’s right to withhold its consent to any future assignment, subletting, or transfer. Notwithstanding any contrary provision of this Lease, Tenant shall have the right, without the prior consent of Landlord, to assign this Lease and to sublet all or any portion of the leased Premises to any person or entity (a) controlling, controlled by, or under common control with Tenant, (b) acquiring all or substantially all of the assets of Tenant, or (c) with or into which Tenant merges or consolidates and which succeeds in any case to the business conducted by Tenant originally named herein so long as (i) the principal purpose of such assignment or sublease is not the acquisition of Tenant’s interest in this Lease, (ii) the assignment or sublet is not made to circumvent the provisions of this Section 17A, and (iii) the assignee or sublessee succeeds to Tenant’s business conducted within the Premises immediately prior to such assignment or sublet.

B.If Tenant requests or was obligated to request Landlord’s consent to assign this Lease or sublet all or any portion of the Premises in addition to withholding its

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consent, Landlord shall have the option, exercisable by written notice to Tenant given within thirty (30) days after receipt of such request, to terminate this Lease for the entire Premises, in the case of an assignment or subletting of the whole, and for the portion of the Premises, in the case of a subletting of a portion. If Landlord exercises its right to terminate, Tenant shall have the right to rescind its request for consent and agree not to assign or sublet by written notice of such rescission and agreement given to Landlord within five (5) business days of the date on which Landlord notifies Tenant of Landlord’s intent to terminate this Lease by reason of such request and in such event Tenant shall be deemed not to have requested consent, no assignment or sublet which would otherwise require consent shall occur and Landlord’s termination notice shall be void and of no further force or effect. In the event that Landlord exercises such right to terminate and Tenant does not timely exercise its right to rescind, Landlord shall be entitled to recover possession of and Tenant shall surrender the whole or such portion of the Premises on the later of (i) the proposed date for possession by such assignee or subtenant, or (ii) ninety (90) days after the date of Landlord’s notice of termination to Tenant. In the event of termination in respect of a portion of the Premises, the portion so eliminated shall be delivered to Landlord in good order and condition and thereafter, to the extent necessary in landlord’s judgment, Landlord, at its own cost and expense, may have access to and may make modification to the Premises so as to make such portion a self-contained rental unit with access to common areas, elevators and the like. Base Rent and Tenant’s Proportionate Share shall be adjusted according to the extent of the Premises for which the Lease is terminated. Without limitation of the rights of Landlord hereunder in respect thereto, if there is any assignment of this Lease by Tenant or a subletting of the whole of the Premises by Tenant at a rent which, in either case, exceeds the rent payable hereunder by Tenant, or if there is a subletting of a portion of the Premises by Tenant at a rent in excess of the subleased portion’s pro rata share of the rent payable hereunder by Tenant, then Tenant shall pay to Landlord, as additional rent, forthwith upon Tenant’s receipt of each installment of any such excess rent, 50% of the full amount of any such excess rent after deduction of Tenant’s costs in connection with such assignment or sublet including, without limitation, attorneys’ fees, brokerage commissions and modifications to the

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Premises. The provisions of this Paragraph shall apply to each and every assignment of the Lease and each and every subletting of all or a portion of the Premises with respect to which the consent of the Landlord is required. Each request by Tenant for permission to assign this Lease or to sublet the whole or any part of the Premises shall be accompanied by a warranty by Tenant as to the amount of rent to be paid to Tenant by the proposed assignee or sublessee. Landlord or its authorized representatives shall have the right at all reasonable times to audit the books, records and papers of Tenant relating to any consideration received in connection with such an assignment or subletting, and shall have the right to make copies thereof. If the excess rent being paid shall be found understated, Tenant shall within thirty (30) days after demand pay the deficiency, and Landlord’s cost of such audit if understated by more than five percent (5%) and if the amount paid is so understated more than once during the Term by more than five percent (5%), Landlord shall have the right to terminate this Lease upon thirty (30) days’ notice. For the purposes of this Paragraph 17B, the term “rent” shall mean all Base Rent, Additional Rent or other payments and/or consideration payable by one party to another related to the use and occupancy of all or a portion of the Premises.

18.SURRENDER OF POSSESSION.

Upon the expiration of the Term or upon the termination of Tenant’s right of possession to all or a portion of the Premises, whether by lapse of time or at the option of Landlord as herein provided, Tenant shall forthwith quietly and peaceably surrender the Premises or portion thereof to Landlord in good order, repair and condition, ordinary wear, damage by fire or other casualty, taking by eminent domain or caused by Landlord, its agents, employees or contractors excepted. Except as otherwise provided in this Lease, any interest of Tenant in the alterations, improvements and additions to the Premises made or paid for by Landlord or Tenant shall, without compensation to Tenant, become Landlord’s property at the termination of this Lease by lapse of time or otherwise and such alterations, improvements and additions shall be relinquished to Landlord in good condition, ordinary wear, damage by fire or other casualty, taking by eminent

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domain or caused by Landlord, its agents, employees or contractors excepted. Not later than the termination of the Term or of Tenant’s right of possession Tenant shall remove office furniture, trade fixtures, office equipment and all other items of Tenant’s property on the Premises. Subject to Paragraph 12A above, Tenant shall pay to Landlord upon demand the cost of repairing any damage to the Premises and to the Building caused by any removal required hereunder. If Tenant shall fail or refuse to remove any such property from the Premises, Landlord shall, at Tenant’s expense, (i) remove the same or any part in any manner that Landlord shall choose, repairing any damage to the Premises caused by such removal, and (ii) store the same without incurring liability to Tenant or any other person. If Tenant fails to pay Landlord’s cost relating to such removal, storage and repair and claim such property within thirty (30) days of termination, Tenant shall be conclusively presumed to have abandoned the same, and title thereto shall thereupon pass to Landlord without any cost either by set-off, credit, allowance or otherwise and Landlord may destroy or otherwise dispose of the same, but such abandonment shall not affect Tenant’s obligations with respect to the costs of removal, storage, repair, destruction and/or disposition.

19.HOLDING OVER.

In addition to performing all of Tenant’s other obligations hereunder, Tenant shall pay to Landlord an amount as Rent equal to the greater of (i) the monthly market rental rate for a term of not less than one (1) year for similar premises in the Building without regard to concessions such as tenant improvement allowance and free rent, if any, or (ii) the sum of one hundred fifty percent (150%) of one-twelfth the Base Rent and one hundred fifty percent (150%) of one-twelfth the Additional Rent paid by Tenant during the previous Calendar Year herein provided, such amount to be paid monthly during each month or portion thereof for which Tenant shall retain possession of the Premises or any part thereof after the termination of the Term or of Tenant’s right of possession, whether by lapse of time or otherwise, and also shall pay all damages sustained by Landlord, whether direct or consequential, on account thereof. At the option of Landlord, expressed

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in a written notice to Tenant and not otherwise, if such holding over continues for more than thirty (30) days, such holding over shall constitute a renewal of this Lease for a period of one year at such Base Rent and Additional Rent as would be applicable for such year, and if Landlord does not so notify Tenant, such holding over shall constitute the Tenant a tenant-at-will from month to month. The provisions of this Paragraph 19 shall not be deemed to limit or constitute a waiver of any other rights or remedies of Landlord provided herein or at law.

20.ESTOPPEL CERTIFICATE.

Tenant agrees that, from time to time upon not less than twenty (20) days’ prior request by Landlord, Landlord’s lessor or any mortgagee, Tenant or Tenant’s duly authorized representative having knowledge of the following facts will deliver to Landlord a statement in writing certifying (i) that to Tenant’s knowledge this Lease is unmodified and in full force and effect (or if there have been modifications, a description of such modifications and that the Lease as modified is in full force and effect); (ii) the dates to which Rent and other charges have been paid; (iii) that Landlord is not in default under any provision of this Lease, or, if in default, the nature thereof in detail; (iv) that the Premises have been-delivered to Tenant by Landlord and accepted by Tenant (or if not, the reason therefor); (v) that there are no proceedings pending against Tenant which have been adversely decided and which would affect Tenant’s obligations under this Lease (and if not correct, detail regarding such proceeding); (vi) that Tenant has not made a claim against Landlord which has not been resolved or satisfied (and if not, correct details regarding the same); and (vii) such further matters as may be reasonably requested by Landlord, it being intended that any such statement may be relied upon by any prospective assignee of Landlord, any mortgagee or prospective mortgagee of the Building, any prospective assignee of any such mortgagee, or any prospective and/or subsequent purchaser or transferee of all or a part of Landlord’s interest in the Property, the Office Section or the Building, or any other person having an interest therein. Tenant shall execute and deliver whatever instruments may be reasonably required for such

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purposes, and in the event Tenant fails so to do within twenty (20) days after demand in writing, Tenant shall be considered in default under this Lease.

21.SUBORDINATION.

This Lease and all rights of Tenant hereunder are subject and subordinate to the mortgage which now encumbers the Property and to any and all renewals, modifications, consolidations, replacements and extensions thereof, and to any ground lease or similar instrument now against the Building. It is the intention of the parties that this provision be self-operative and that no further instrument shall be required to effect such subordination of this Lease other than the non-disturbance agreements described below. Tenant shall, however, upon demand at any time or times execute, acknowledge and deliver to Landlord, any and all instruments that may be necessary or proper to subordinate this Lease and all rights of Tenant hereunder to such mortgage or ground lease or to any mortgage or ground lease which may hereafter encumber the Property or the Building or to confirm or evidence such subordination and to confirm or evidence Tenant’s agreement to attorn to the holder of any such mortgage or the ground lessor under such ground lease, on condition with respect to mortgages other than the mortgage which now encumbers the Property, that such holder or ground lessor shall agree in such instrument (a “Non-Disturbance Agreement”) that such holder or ground lessor for so long as Tenant is not in default of those terms, covenants and conditions of this Lease, beyond applicable periods of notice and grace, which are to be performed by Tenant (i) will not disturb Tenant’s possession of the Premises or other rights under this Lease and (ii) will not join in any foreclosure action or action to terminate the ground and (iii) will recognize the Tenant as its tenant on the terms and conditions of this Lease in the event of a foreclosure, deed in lieu of foreclosure or termination of a ground lease, as applicable. Such Non-Disturbance Agreement shall further provide, at the option of the mortgagee or ground lessor, that in the event any proceedings are brought for the foreclosure of any mortgage with respect to which a Non-Disturbance Agreement in Tenant’s favor is in effect or for the termination of a ground lease with respect to which a Non-Disturbance

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Agreement in Tenant’s favor is in effect, Tenant will attorn, without any deductions or set-offs whatsoever, to the purchaser upon any such foreclosure sale or to such ground lessor if so requested to do by such purchaser or ground lessor, and to recognize such purchaser or ground lessor as the Landlord under this Lease. Landlord agrees to use reasonable efforts to cause the holder of the existing mortgage on the Property to enter into such a Non-Disturbance Agreement with Tenant, in such holder’s standard form, as promptly as reasonably possible. For purposes of the foregoing, “reasonable efforts” shall mean: (a) Landlord shall, not later than the date hereof, submit the then most current draft of this Lease (or the execution copy of this Lease, as the case may be) to Metropolitan Life Insurance Company (“Met”) with the request that Met promptly review the Lease and enter into a Non-Disturbance Agreement in the form of Non-Disturbance Agreement which Met has previously issued to tenants of the Office Section with such modifications as Tenant may request, (b) at regular intervals, Landlord shall renew its request to Met in the event a Non-Disturbance Agreement has not then been issued and (c) in the event Met indicates its unwillingness to issue a Non-Disturbance Agreement or that it is unwilling to issue Non-Disturbance Agreement in the form requested by Tenant, Landlord shall request that Met discuss any issues directly with Tenant and/or its counsel. In all event, in attempting to obtain a Non-Disturbance Agreement for the benefit of Tenant, Landlord will proceed with diligence and in good faith. Tenant agrees to execute and deliver at any time and from time to time, upon the request and at the expense of Landlord or of any holder of such mortgage or of such purchaser and ground lessor, any instrument which, in the sole reasonable judgment of such requesting party, may be necessary or appropriate in any such foreclosure proceeding or termination or otherwise to evidence such attornment by Tenant as described herein, on condition that such party shall agree in such instrument that for so long as Tenant is not in default of those terms, covenants and conditions of this Lease, beyond applicable periods of notice and grace, which are to be performed by Tenant it (x) will not disturb Tenant’s possession of the Premises or other rights under this Lease and (y) will not join in any foreclosure action or action to terminate the ground lease and (z) will recognize the Tenant as its tenant on the terms and conditions of this Lease in the event of a foreclosure, deed in lieu of

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foreclosure or termination of a ground lease, as applicable. Tenant further waives the provisions of any statute or rule of law, now or hereafter in effect, which may give or purport to give Tenant any right or election to terminate or otherwise adversely affect this Lease or the obligations of Tenant hereunder in the event any such foreclosure proceeding or termination is brought, prosecuted or completed. Tenant and Landlord further agree that if so requested by any mortgagee or ground lessor of Landlord, this Lease shall be made superior to any such mortgage or ground lease and that they will execute such documents as may be reasonably required by such mortgagee or ground lessor to effect the superiority of this Lease to such mortgage or ground lease, provided such is in form and substance-reasonably acceptable to Tenant.

22.CERTAIN RIGHTS RESERVED BY LANDLORD.

Landlord shall have the following rights (but not obligations), each of which Landlord may exercise without notice to Tenant and, except as provided in Paragraph 14, without liability to Tenant for damage or injury to property, person or business on account of the exercise thereof, and the exercise of any such rights shall not be deemed to constitute an eviction or disturbance of Tenant’s use or possession of the Premises and shall not give rise to any claim for set-off or abatement of Rent:

(i)To change the Building’s name or street address.

(ii)To install, affix and maintain any and all signs on the exterior and on the interior of the Building (including, but only if mandated by law, within the Premises).

(iii)To decorate or to make repairs, alterations, additions, or improvements, whether structural or otherwise, in and about the Building, or any part thereof, and for such purposes to enter upon the Premises, and during the continuance of any of said work, to temporarily close doors, entryways, public

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space and corridors in the Building and, upon not less than forty-eight (48) hours’ advance notice (except in case of emergency), to interrupt or temporarily suspend services or use of facilities, all without affecting any of Tenant’s obligations hereunder, so long as the Premises are reasonably accessible and usable. Landlord’s exercise of its rights hereunder shall be conducted at such times and in such manner as to avoid unreasonable interference with Tenant’s use and occupancy of the Premises. Any exercise of such rights within the Premises (except for repairs) shall be subject to Tenant’s consent, which shall not be unreasonably withheld, conditioned or delayed.

(iv)To furnish door keys for the entry door(s) in the Premises at the commencement of this Lease and to retain at all times, and to use in appropriate instances, keys to all doors within and into the Premises. Tenant agrees to purchase only from Landlord additional duplicate keys as required, to change no locks, and not to affix locks on doors without the prior written consent of Landlord, which consent shall not be unreasonably withheld. Upon the expiration of the Term or of Tenant’s right of possession, Tenant shall return all keys to Landlord and shall disclose to Landlord the combination of any safes, cabinets or vaults left in the Premises.

(v)To designate and approve all window coverings used in the Building.

(vi)To approve the weight, size and location of safes, vaults and other heavy equipment and articles in and about the Premises and the Building so as not to exceed the legal live load per square foot designated by the structural engineers for the Building, and to require all such items and furniture and similar items to be moved into or out of the Building and Premises only at such reasonable times and in such manner as Landlord shall direct in writing. Tenant shall not install or operate machinery or any mechanical devices of a nature not directly related to

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Tenant’s ordinary use of the Premises without the prior written consent of Landlord. Movements of Tenant’s property into or out of the Building or the Premises and within the Building are entirely at the risk and responsibility of Tenant, and Landlord reserves the right for security purposes on reasonable notice to Tenant to require permits before allowing any property to be moved into or out of the Building or the Premises.

(vii)To establish reasonable security policies and other controls for the purpose of regulating all property and packages, both personal and otherwise, to be moved into or out of the Building and Premises and all persons using the Building both during and after normal office hours.

(viii)To regulate delivery and service of supplies and the usage of the loading docks, receiving areas and freight elevators.

(ix)To show the Premises to prospective tenants at reasonable times within the last twelve (12) months of the Term.

(x)To erect, use and maintain pipes, ducts, wiring and conduits, and appurtenances thereto, in and through the Premises at reasonable locations, but in no event may such installations reduce the usable square footage of the Premises by more than a de minimus amount.

(xi)To enter the Premises at any reasonable time upon reasonable advance notice (except in case of emergency) to inspect the Premises.

23.RULES AND REGULATIONS.

Tenant agrees to observe the rules and regulations for the Building attached hereto as Exhibit C and made a part hereof. Landlord shall have the right from time to time to

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prescribe additional reasonable rules and regulations of uniform applicability which, in its judgment, may be desirable for the use, entry, operation and management of the Premises, the Office Section and the Building, each of which rules and regulations and any amendments thereto shall become a part of this Lease. Tenant shall comply with all such rules and regulations; provided, however, that such rules and regulations shall not contradict or abrogate any right or privilege herein expressly granted to Tenant.

24.LANDLORD’S REMEDIES.

If default shall be made in the payment of the Rent or any installment thereof or in the payment of any other sum required to be paid by Tenant under this Lease or under the terms of any other agreement between Landlord and Tenant and such default shall continue for five (5) days after written notice to Tenant, or if default shall be made in the observance or performance of any of the other covenants or conditions in this Lease which Tenant is required to observe and perform and such default shall continue for thirty (30) days after written notice to Tenant (or such longer period of time as is necessary to cure if such default is not reasonably curable within thirty (30) days but is curable provided Tenant pursues such cure diligently to completion) or if a default involves a hazardous condition and is not cured by Tenant immediately upon written notice to Tenant, or if the interest of Tenant in this Lease shall be levied on under execution or other legal process, or if any voluntary petition in bankruptcy or for corporate reorganization or any similar relief shall be filed by Tenant, or if any involuntary petition in bankruptcy shall be filed against Tenant under any federal or state bankruptcy or insolvency act and shall not have been dismissed within ninety (90) days from the filing thereof, or if a receiver shall be appointed for Tenant or any of the property of Tenant by any court and such receiver shall not have been dismissed within thirty (30) days from the date of his appointment, or if Tenant shall make and assignment for the benefit of creditors, or if Tenant shall admit in writing Tenant’s inability to meet Tenant’s debts as they mature, then Landlord may treat the occurrence of any one or more of the foregoing events as a breach of this Lease, and thereupon at its option may, without notice or any

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demand of any kind to Tenant or any other person, have any one or more of the following described remedies in addition to all other rights and remedies provided at law or in equity or elsewhere herein:

(i)Landlord may terminate this Lease and the Term created hereby and shall give Tenant written notice of Landlord’s election to do so and the effective date thereof (the “Effective Date”), in which event Landlord may forthwith repossess the Premises in accordance with applicable laws and shall be entitled to recover, forthwith, in addition to any other sums or damages for which Tenant may be liable to Landlord (including without limitation amounts then due or thereafter due with respect to periods prior to the Effective Date),

(a)as liquidated damages, a sum of money equal to the amount by which the present value (such present value to be computed on the basis of a per annum discount rate equal to seven percent (7%) per annum) of the Rent and other sums to become due under this Lease for all or a part of the period from the Effective Date to the Termination Date exceeds the present value of the fair market rental value of the Premises, after deduction from the present value of such fair market rental value of all reasonably anticipated expenses of reletting. Should the present value of the fair market rental value of the Premises, after deduction of all anticipated reasonable expenses of reletting, for the balance of the Term exceed the present value of the Rent provided to be paid by Tenant for the balance of the Term, Landlord shall have no obligation to pay to Tenant the excess or any part thereof or to credit such excess or any part thereof against any other sums or damages for which Tenant may be liable to Landlord.

(b)a sum of money equal to the sum of (x) the present value (computed as aforesaid) of that portion of the Rent related (on a per square

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foot, proportionate basis) to such portion of the Premises that has been relet by Landlord after the termination of this Lease (but during a period which would have been within the Term but for such termination by reason of a Tenant default) to the extent amounts to be credited (as described below) to Base Rent and Operating Expenses, from amounts paid by the tenant to whom such portion of the Premises has been relet, is less than the Rent and Additional Rent which would have been paid by Tenant (during such period) with respect to such portion of the Premises had this Lease not been so terminated plus (y) from time to time as the same become due, all Rent and other sums to become due under this Lease, other than Rent accelerated and paid pursuant to clause (x). In the event Landlord elects the remedy under this subparagraph (b) and relets The Premises (but Landlord shall be under no obligation to relet, except as required by law) or any part thereof for the account of Tenant, the rents from any such reletting before crediting as set forth in clause (x) shall be first applied to the payment of reasonable and actual expenses of reentry, redecoration, repair and alterations and the expenses of reletting and the excess or residue remaining shall then be applied to the payment of Rent and other sums in this Lease provided to be paid by Tenant and not theretofore paid by acceleration or otherwise, and any such excess or residue shall operate only as an off setting credit against the amount of Rent and other sums then due and owing and to the extent any excess or residue is still remaining shall, at Landlord’s option, either be refunded to Tenant to the extent of amounts paid as a result of acceleration under this subparagraph (b) or be applied as an offsetting credit against Rent and other sums thereafter becoming due and payable hereunder; provided that in no event shall Tenant be entitled to a credit on its indebtedness to Landlord or refunds of amounts accelerated in excess of the aggregate of the amount paid (by reason of acceleration under this subparagraph (b)) or payable by Tenant for the period for which the credit to Tenant is being

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determined, had no default occurred. Any such reletting by Landlord from time to time (which may be for a term extending beyond the Term of this Lease), shall be upon such terms as Landlord in Landlord’s reasonable discretion shall determine, but Landlord shall not be required to accept any tenant offered by Tenant or to observe any instructions given by Tenant relative to such reletting. Also, in any such case, Landlord may change the locks or other entry devices of the Premises and make repairs, alterations and additions in or to the Premises and redecorate same to the extent deemed by Landlord necessary or desirable, and Tenant shall upon written demand pay the cost thereof together with Landlord’s reasonable and actual expenses of reletting, including without limitation, brokerage commissions payable to Landlord’s agent or to others. No such reentry, repossession, repairs, alterations, additions or reletting shall operate to release Tenant in whole or in part from any of Tenant’s obligations hereunder, and Landlord may, at any time and from time to time, sue and recover judgment for any deficiencies from time to time remaining after the application from time to time of the proceeds of any such reletting.

(ii)Landlord, without thereby waiving such default, may cure the same for the account and at the expense of Tenant, if not cured by Tenant within applicable notice and cure periods but without notice in a case of emergency, as determined by Landlord in its sole discretion, or in case of correction of a dangerous or hazardous condition, and in any other case if such default continues after ten (10) days from the date of the giving by Landlord to Tenant of written notice of such default or of intention to cure. Bills for any expense incurred by Landlord in connection with any such performance by Landlord shall be for the account of Tenant, and shall be due and payable in accordance with the terms of said bills, and if not paid when due, the amounts thereof shall become immediately due and payable as Additional Rent under this Lease.

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25.EXPENSES OF ENFORCEMENT.

Tenant shall pay upon demand all Landlord’s costs, charges and expenses including the fees and out-of-pocket expenses of counsel, agents and others retained by Landlord incurred in enforcing Tenant’s obligations hereunder or incurred by Landlord in any litigation, negotiation or transaction in which Tenant causes Landlord without Landlord’s fault to become involved or concerned.

Landlord shall pay upon demand all Tenant’s costs, charges and expenses including the fees and out-of-pocket expenses of counsel, agents and others retained by Tenant incurred in enforcing Landlord’s obligations hereunder or incurred by Tenant in any litigation, negotiation or transaction in which Landlord causes Tenant without Tenant’s fault to become involved or concerned.

26.COVENANT OF QUIET ENJOYMENT.

Landlord covenants that Tenant, provided Tenant is not in default beyond applicable notice and cure periods, shall, during the Term, peaceably and quietly have, hold and enjoy the Premises subject to the terms, covenants, conditions, provisions and agreements hereof, without hindrance or ejection by any persons lawfully claiming by, through or under Landlord, the foregoing covenant of quiet enjoyment being in lieu of any other covenant, expressed or implied.

27.INTENTIONALLY OMITTED.

28.REAL ESTATE BROKER.

The Tenant represents that Tenant has dealt with (and only with) the Broker specified in Paragraph 1 hereof as broker in connection with this Lease, and that insofar as Tenant knows, no other broker negotiated this Lease or is entitled to any commission

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in connection therewith. Tenant agrees to indemnify, defend and hold harmless Landlord its employees and agents from and against any claims made by any broker or finder making such claim by reason of a relationship with Tenant, other than the Broker, for a commission or fee in connection with this Lease or any sublease hereunder (but nothing herein shall be construed as permitting any such sublease) provided that Landlord has not in fact retained such broker or finder. Landlord shall pay the commission or fee due to the Broker.

The Landlord represents that Landlord has dealt with (and only with) the Broker specified in Paragraph 1 hereof as broker in connection with this Lease, and that insofar as Landlord knows, no other broker negotiated this Lease or is entitled to any commission in connection therewith. Landlord agrees to indemnify, defend and hold harmless Tenant its employees and agents from and against any claims made by any broker or finder except as provided in the immediately preceding grammatical paragraph for a commission or fee in connection with this Lease or any sublease hereunder, but nothing herein shall be construed as permitting any such sublease, provided that Tenant has not in fact retained such broker or finder.

29.UNDERLYING LEASES.

Landlord is the lessee of the air rights premises within which the Building is constructed pursuant to that certain Sublease (the “Sublease”) dated September 1, 1982 by and between a predecessor of Urban Investment and Development Co. (“Urban”), as lessor. Urban is the lessee of said air rights premises and other adjacent air rights premises which collectively are referred to as Copley Place, pursuant to that certain Amended and Restated Lease (the “Underlying Lease”) dated January 31, 1980 by and between Urban and the Massachusetts Turnpike Authority (“MTA”), as lessor.

Landlord hereby gives notice to Tenant that it supports the Affirmative Action and Resident Preference goals set forth in Paragraph 6 of Schedule D to the Underlying Lease

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and in Attachment C to the City of Boston’s Urban Development Action Grant application for Copley Place, and encourages Tenant to pursue such goals in Tenant’s own employment practices. In connection with hiring to fill permanent jobs at the Premises, Tenant shall not discriminate against any employee or applicant for employment because of race, color, religious creed, national origin, age or sex. Tenant shall comply to the extent applicable, with Title VII of the U.S. Civil Rights Act and M.G.L. c.151B with respect to employment at the Premises.

30.NOTICE TO MORTGAGEE AND GROUND LESSOR.

After receiving notice from any person, firm or other entity that it holds a mortgage which includes the Premises, the Building or the Office Section as part of the mortgaged premises, or that it is the ground lessor under a ground lease (which term shall include the Underlying Lease and the Sublease) with Landlord, as ground lessee, which includes the Premises, the Building or the Office Section as part of the demised premises, no notice of default from Tenant to Landlord shall be effective unless and until a copy of the same is given to such holder or ground lessor, and the curing of any of Landlord’s defaults by such holder or ground lessor shall be treated as performance by Landlord. Such holder or ground lessor shall be given such reasonable time as may be necessary to effect such cure or as otherwise agreed by Tenant and mortgagee. For the purposes of Paragraph 21, this Paragraph 30, Paragraph 31 and Paragraph 34, the term “mortgage” includes a mortgage on a leasehold interest of Landlord (but not one on Tenant’s leasehold interest).

31.ASSIGNMENT OF RENTS.

With reference to any assignment by Landlord of Landlord’s interest in this Lease, or the rents payable hereunder, conditional in nature or otherwise, which assignment is made to the holder of a mortgage or ground lease (which term shall include the

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Underlying Lease and the Sublease) on property which includes the Premises, the Building or the Office Section, Tenant agrees:

(i)that the execution thereof by Landlord, and the acceptance thereof by the holder of such mortgage, or the ground lessor, shall never be treated as an assumption by such holder or ground lessor of any of the obligations of Landlord hereunder, unless such holder, or ground lessor, shall, by notice sent to Tenant, specifically otherwise elect; and

(ii)that, except as aforesaid, such holder or ground lessor shall be treated as having assumed Landlord’s obligations hereunder only upon a foreclosure of such holder’s mortgage and the taking of possession of the Premises, or in the case of a ground lessor, the assumption of Landlord’s position hereunder by such ground lessor. In no event shall the acquisition of title to the Building and the land on which the same is located by a purchaser which, simultaneously therewith, leases the entire Building or such land back to the seller thereof be treated as an assumption, by operation of law or otherwise, of Landlord’s obligations hereunder, but Tenant shall look solely to such seller-lessee, and its successors from time to time in title, for performance of Landlord’s obligations hereunder. In any such event, this Lease shall be subject and subordinate to the lease to such seller provided such purchaser enters into an agreement with Tenant whereby purchaser agrees to recognize Tenant as its tenant on the terms and conditions of this Lease in the event of a termination of the lease with the seller-lessee. For all purposes, such seller-lessee, and its successors in title, shall be the landlord hereunder unless and until Landlord’s position shall have been assumed by such purchaser-lessor.

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32.PERSONAL PROPERTY TAXES.

Tenant shall pay all taxes which may be lawfully charged, assessed, or imposed upon all fixtures and equipment of every type owned by Tenant and also upon all personal property in the Premises, and Tenant shall pay all license fees which may lawfully be imposed upon the business of Tenant conducted upon the Premises.

33.MISCELLANEOUS.

A.Rights Cumulative. All rights and remedies of Landlord under this Lease shall be cumulative and none shall exclude any other rights and remedies allowed by law.

B.Interest. All payments becoming due under this Lease and remaining unpaid for a period of ten (10) days after when due shall bear interest from the date originally due until paid at the rate of the greater of (i) twelve percent (12%) per annum or (ii) two percent (2%) per annum above the prime rate of interest charged from time to time by The First National Bank of Boston (but in no event at a rate which is more than the highest rate which is at the time lawful in the Commonwealth of Massachusetts).

C.Terms. The necessary grammatical changes required to make the provisions hereof apply either to corporations or partnerships or individuals, men or women, as the case may require, shall in all cases be assumed as though in each case fully expressed.

D.Binding Effect. Each of the provisions of this Lease shall extend to and shall, as the case may require, bind or inure to the benefit not only of Landlord and of Tenant, but also of their respective successors or assigns, provided this clause shall not permit any assignment by Tenant contrary to the provisions of Paragraph 17 hereof. All indemnities, covenants and agreements of Tenant contained herein shall inure to the benefit of Landlord’s agents and employees.

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E.Lease Contains All Terms. All of the representations and obligations of Landlord are contained herein and in the Exhibits attached hereto, and no modification, waiver or amendment of this Lease or of any of its conditions or provisions shall be binding upon Landlord or Tenant unless in writing signed by the party against whom such waiver is claimed or by a duly authorized agent of Landlord or Tenant empowered by a written authority signed by Landlord or Tenant.

F.Delivery for Examination. Submission of this Lease for examination shall not bind Landlord in any manner, and no lease or obligations of Landlord shall arise until this instrument is signed by both Landlord and Tenant and delivery is made to each.

G.No Air Rights. No rights to any view or to light or air over any property, whether belonging to Landlord or any other person, are granted to Tenant by this Lease.

H.Kitchen Equipment. Tenant shall have the right to install microwaves, coffee machines and refrigerators in convenience kitchens for the use of employees and business invitees, but shall have no right to vent to the outside and all such installations shall be in compliance with applicable codes and regulations.

I.Intentionally Omitted.

J.Transfer of Landlord’s Interest. Tenant acknowledges that Landlord has the right to transfer its interest in the Premises, the Office Section and the Building and in this Lease, and Tenant agrees that in the event of any such transfer Landlord shall automatically be released from all liability under this Lease provided the transferee assumes in writing all of the transferor’s liability under this Lease (and shall be release from liability in any event to the extent the transferee agrees to be liable therefor) and Tenant agrees to look solely to such transferee for the performance of Landlord’s obligations hereunder. Tenant further acknowledges that Landlord may assign its interest

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in this Lease to a mortgage lender as additional security and agrees that such an assignment shall not release Landlord from its obligations hereunder and that Tenant shall continue to look to Landlord for the performance of its obligations hereunder.

K.Landlord’s Title. Landlord’s title is and always shall be paramount to the title of Tenant. Nothing herein contained shall empower Tenant to commit or engage in any act which can, shall or may encumber the title of Landlord.

L.Prohibition Against Recording. This Lease shall not be recorded by Tenant or by anyone acting through, under or on behalf of Tenant, and the recording thereof in violation of this provision shall make this Lease null and void at Landlord’s election. At Tenant’s request, Landlord agrees to execute a Notice of Lease in recordable form for recording with the Suffolk County Registry of Deeds.

M.Captions. The captions of paragraphs and subparagraphs are for convenience only and shall not be deemed to limit, construe, affect or alter the meaning of such paragraphs or subparagraphs.

N.Covenants and Conditions. All of the covenants of Tenant hereunder shall be deemed and construed to be “conditions”, if Landlord so elects, as well as “covenants” as though the words specifically expressing or importing covenants and conditions were used in each separate instance.

O.Only Landlord/Tenant Relationship. Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third party to create the relationship of principal and agent, partnership, joint venturer or any association between Landlord and Tenant, it being expressly understood and agreed that neither the method of computation of Rent nor any act of the parties hereto shall be deemed to create any relationship between Landlord and Tenant other than the relationship of landlord and tenant.

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P.Application of Payments. Landlord shall have the right to apply payments received from Tenant pursuant to this Lease (regardless of Tenant’s designation of such payments) to satisfy any obligations of Tenant hereunder, in such order and amounts as Landlord in its sole discretion may elect.

Q.Definition of Landlord. All indemnities, covenants and agreements of Tenant contained herein which inure to the benefit of Landlord shall be construed to also inure to the benefit of Landlord’s agents and employees.

R.Time of Essence. Time is of the essence of this Lease and each of its provisions.

S.Governing Law. Interpretation of this Lease shall be governed by the law of the Commonwealth of Massachusetts.

T.Partial Invalidity. If any term, provision or condition contained in this Lease shall, to any extent, be invalid or unenforceable, the remainder of this Lease (or the application of such term, provision or condition to persons or circumstances other than those in respect of which it is invalid or unenforceable) shall not be affected thereby, and each and every other term, provision and condition of this Lease shall be valid and enforceable to the fullest extent possible permitted by law.

U.Size of Premises. Landlord and Tenant agree that the size of the Premises is as set forth in the Basic Data under Paragraph I of this Lease.

34.NOTICES.

All notices to be given under this Lease shall be in writing and either hand delivered; delivered by reputable overnight courier, delivery acknowledged by recipient;

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or deposited in the United States mail, certified or registered mail with return receipt requested, postage prepaid, addressed as follows:

A.If to Landlord:

c/o Overseas Management, Inc.

Two Copley Place, Suite 100

Boston, Massachusetts 02116-6502

Attn: Building Manager

with copies to:

Urban Retail Properties

Suite 1300

900 North Michigan Avenue

Chicago, Illinois 60611-1575

Attn: Law Department

or to such other person or such other address designated by notice sent by Landlord or Tenant, and as provided in Paragraph 30 of this Lease.

B.If to Tenant:

Addressed to Tenant at Tenant’s present address, and after occupancy of the Premises by Tenant, at 200 Clarendon Street, Boston, Massachusetts 02116, Attn: Richard Bartony with a copy to General Counsel at the same address or to such other address as is designated by Tenant in a notice to Landlord.

with copies to:

Testa, Hurwitz & Thibeault, LLP

125 High Street, High Street Tower

Boston, MA 02110

Attn: Real Estate Department

Notice by mail shall be deemed to have been given as of the date of mailing as aforesaid, but for purposes of computing the period during which a party may cure notice shall be deemed to have been given three (3) business days after mailing provided the

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same is actually delivered. Notice by hand delivery or reputable overnight courier shall be deemed to have been given at the time of delivery.

35.LIMITATION ON LANDLORD’S LIABILITY.

It is expressly understood and agreed by Tenant that none of Landlord’s covenants, undertakings or agreements are made or intended as personal covenants, undertakings or agreements by Landlord or its partners, and any liability for damage or breach or nonperformance by Landlord shall be collectible only out of Landlord’s interest in the Property and in the proceeds of any insurance policies carried by Landlord and no personal liability is assumed by, nor at any time may be asserted against, Landlord or its partners or any of its or their directors, officers, agents, employees, legal representatives, successors or assigns, all such liability, if any, being expressly waived and released by Tenant. The provisions of this Paragraph 35 shall expressly be applicable to and inure to the benefit of Landlord’s successors and assigns. In no event shall Landlord or its constituent partners be liable for any incidental or consequential damages in connection with its obligations under, or any action taken by Landlord or its constituent partners in connection with, this Lease. In no event shall Tenant or its constituent partners be liable for any incidental or consequential damages in connection with its obligations under, or any action taken by Tenant or its constituent partners in connection with, this Lease.

36.LANDLORD’S DESIGNATED AGENT.

It is expressly understood and agreed by Tenant that the provisions of this Lease may be enforced on behalf of Landlord by an agent designated by Landlord for such purpose, and such enforcement shall be equally effective whether in the name of Landlord or such agent.

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37.PARKING.

Tenant shall have the right during the Term to use up to eighteen (18) non-reserved parking spaces in the garage located within and serving the Property, subject to payment by Tenant for such use at the prevailing rate therefor charged by the operator of the garage from time to time (which as of the date of this Lease is $285 per month per space); provided, however, at Landlord’s option, all or some of Tenant’s parking may be relocated to the Dartmouth Street Garage in the property adjacent to the Building and located on Dartmouth Street, in which event, the payment due for use of such relocated l spaces shall be at the prevailing rate charged therefor by the operator of the Dartmouth Street Garage. In the event of non-payment of parking charges due hereunder by the Tenant, Landlord shall have the right to terminate Tenant’s rights with respect to parking without any obligation to reinstate such right to parking in the event Tenant attempts to resume payment for parking.

38.SIGNAGE.

Tenant shall have the right to install in the lobby, of each floor on which Premises is located building standard signage, at Tenant’s sole cost and expense. Landlord shall, at its expense, provide building standard signage, naming the Tenant and its location, on building directories located in the Sky Lobby and in the lobby of One Copley Place.

39.CONSTRUCTION ALLOWANCE.

The sum which is the lesser of (a) the amount spent by Tenant on its “Qualified Costs” incurred in construction of the Premises as certified to Landlord by Tenant and, as to construction, wiring and cabling costs, by Tenant’s Architect and (b) an amount (Landlord’s Base Allowance”) equal to $2,513,600 shall be paid by the Landlord as the Landlord’s contribution toward Tenant’s Work (as defined in the Work Letter). Such amount shall be due and payable by Landlord as described in the Work Letter. For

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purposes hereof, “Qualified Costs” shall mean actual out-of-pocket costs for (a) preparation of drawings and other expenses incurred in connection with initial construction, including without limitation permit fees and costs of labor and materials, (c) construction of the Premises in accordance with the Working Drawings (as defined in the Work Letter), (d) wiring and cabling in the Premises and (e) architectural, engineering and other professional fees relating to construction of the Premises.

In the event Qualified Costs are less than the Landlord’s Base Allowance, Landlord shall allow Tenant a credit against Rent in an amount equal to the difference between such amounts. Such credit shall be applied pro rata over the term of this Lease.

40.EXTENSION OPTION.

A.Tenant shall have the right to extend the Term of this Lease for one (1) additional five (5) year period, such right of Tenant to be conditioned upon this Lease at the time of election being in full force and effect and Tenant not then being in default under this Lease beyond any applicable notice and cure period, such extension period to commence upon the expiration of the original Term of this Lease.

B.Tenant’s right of extension shall be exercised, if at all, by written notice to Landlord given at least twelve (12) months prior to the expiration of the original Term of this Lease. If a notice is given in compliance with the provisions hereof, this Lease shall, thereupon, be extended, subject to the terms of this paragraph, without the need for any further instrument to be executed (but either party shall execute such a confirmatory instrument upon the request of the other); and if no such notice is given, Tenant’s right of extension shall be null and void. All of the terms, conditions and provisions of this Lease shall be applicable to any extension of the Term hereof, as if the termination date of the extension period were the date originally set forth herein for the expiration of the Term, except that (i) the exercised right of extension shall be of no further force or effect, so that there shall be no further right of extension with respect thereto, (ii) the Base Rent during

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the extension period shall be the “Fair Market Rent” (as hereinafter defined) and (iii) the Base Year shall be the calendar year in which the extension Term begins.

C.“Fair Market Rent” shall mean the rent for Class A office space in the Back Bay area similar in size, condition of building, and services provided for a term of five (5) years as of the date the extension is to commence, (i) without taking into account actual improvements (regardless of who paid for such improvements), or the cost of demolition of the space, and (ii) taking into account the Base Year and the magnitude of free rent, if any, buildout allowance, if any, and other market tenant inducements which would be offered to new tenants but are not being offered to Tenant and (iii) taking into account the brokerage commissions, if any, to be paid in connection with the renewal and compared to the market commission for 5-year leases.

D.Within fifteen (15) days after exercise of the extension right, but not earlier than fifteen (15) months prior to the expiration of the original Term, Landlord shall provide Tenant with its quotation of the “Fair Market Rent” as of the first day of the extension period. If within thirty (30) days of having received Landlord’s quotation, Tenant shall not have notified Landlord of its objection to Landlord’s quotation and of Tenant’s calculation of Fair Market Rent, the “Fair Market Rent” quoted by Landlord shall be the new Base Rent. If Tenant so notifies Landlord, the parties shall discuss the matter in good faith for thirty (30) days after Tenant’s notice. If within forty-five (45) days of having received Tenant’s notice the parties have not agreed in writing, then, Landlord and Tenant shall, during a period of forty-five (45) days, attempt to agree on an arbitrator not affiliated with either party (and if they are unable to do so, either party may request that the President of the American Arbitration Association in Boston choose an arbitrator (as promptly as possible) meeting the criteria of the second to last sentence of this grammatical paragraph). Such arbitrator shall have a period of thirty (30) days to pick either Landlord’s quotation of “Fair Market Rent” or Tenant’s determination of “Fair Market Rent” as the “Fair Market Rent” hereunder. Such arbitrator shall have at least ten (10) years’ experience in the valuation and appraisal of office rents real estate in the

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Greater Boston area. “Fair Market Rent” so determined by the arbitrator shall be the new Base Rent and shall be binding on the parties.

The expenses of the arbitrator shall be borne equally by the Landlord and the Tenant.

41.EXPANSION OPTION: RIGHT OF FIRST OFFER.

A.Provided that Tenant is not in default under this Lease beyond any applicable notice and cure period at the time of exercise of such option, Tenant shall have the option to expand the Premises to include the approximately 20,084 rentable square feet of space on the third floor of Two Copley Place shown on Exhibit E attached hereto and made apart hereof, currently occupied by The United States Census Bureau (the “Bureau”) (such space hereinafter referred to as “Expansion Space”) by providing notice of the exercise of this expansion option (hereinafter, “Tenant’s Expansion Notice”) to the Landlord not later than the first to occur of (i) thirty (30) days after the Landlord’s notice to Tenant of the availability of the Expansion Space setting forth the date of availability to the best of Landlord’s knowledge and (ii) September 1, 2002. Such expansion shall be effective (notwithstanding the date of anticipated availability) on the date (the “Expansion Date”) on which Landlord delivers the Expansion Space to Tenant in broom clean condition, free of all occupants, but in no event prior to the first to occur of (x) the date the Landlord indicated to Tenant as to the anticipated availability date or (y) September 1, 2003 if Tenant received no notice from Landlord and timely provided Tenant’s Expansion Notice on or prior to September 1, 2002; provided, however, if the Expansion Date would or is anticipated to occur later than December 1, 2003 pursuant to the foregoing, Tenant shall have the right to withdraw Tenant’s Expansion Notice by notice to the Landlord given not more than thirty (30) days after the earlier of the date on which Landlord in good faith notifies Tenant that the Expansion Space will not be available on or before December 1, 2003, or December 1, 2003. In the event that Tenant shall fail timely to give Tenant’s Expansion Notice to Landlord as aforesaid, all obligations of

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Landlord pursuant to this Paragraph shall terminate and be of no further force and effect and Landlord shall be free to enter into any agreement(s) respecting the Expansion Space with any other party or parties whatsoever on such terms as Landlord may elect. Landlord represents that no other party holds any prior rights to lease the Expansion Space from and after October 1, 2003. In the event that Tenant shall give Tenant’s Expansion Notice to Landlord as aforesaid and does not withdraw such notice pursuant hereto, then notwithstanding anything to the contrary contained in this Lease, as of the Expansion Date (except as otherwise provided below):

(i)The Premises shall be deemed to include the Expansion Space, with the result that all references in this Lease to the “Premises” (except for references to such term in this Paragraph) shall for periods from and after the Expansion Date be and be deemed to be, for all purposes hereunder, references to the Premises and the Expansion Space;

(ii)Base Rent for the Expansion Space shall be the Fair Market Rent. “Fair Market Rent” for purposes of this Paragraph 41 shall mean the rent for Class A office space in the Back Bay area similar in size, condition of building and services provided for a term of four (4) years as of the Expansion Date, (i) without taking into account actual improvements (regardless of who paid for such improvements), or the cost of demolition of the space, and (ii) taking into account the Base Year and the magnitude of free rent, if any, buildout allowance, if any, and other market tenant inducements, if any, otherwise included in rents being quoted, and (iii) taking into account the brokerage commissions, if any, to be paid in connection with the renewal and compared to the market commission for 5-year leases. In this connection, within fifteen (15) days after Tenant has given Tenant’s Expansion Notice, Landlord shall provide Tenant with its quotation of the “Fair Market Rent” as of the Expansion Date. If within thirty (30) days of having received Landlord’s quotation, Tenant shall not have notified Landlord of its objection to Landlord’s quotation and of Tenant’s calculation of

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Fair Market Rent, the “Fair Market Rent” quoted by Landlord shall be the increase to the Base Rent. If Tenant so notifies Landlord, the parties shall discuss the matter in good faith for thirty (30) days after Tenant’s notice. If within forty-five (45) days of having received Tenant’s notice the parties have not agreed in writing, then, Landlord and Tenant shall, during a period of forty-five (45) days, attempt to agree on an arbitrator not affiliated with either party (and if they are unable to do so, either party may request that the President of the American Arbitration Association in Boston choose an arbitrator (as promptly as possible) meeting the criteria of the second to last sentence of this grammatical paragraph). Such arbitrator shall have a period of thirty (30) days to pick either Landlord’s quotation of “Fair Market Rent” or Tenant’s determination of “Fair Market Rent” as the “Fair Market Rent” hereunder. Such arbitrator shall have at least ten (10) years’ experience in the valuation and appraisal of office rents peal estate in the Greater Boston area. “Fair Market Rent” so determined by the arbitrator shall be the increase in the Base Rent and shall be binding on the parties.

The expenses of the arbitrator shall be borne equally by the Landlord and the Tenant.

(iii)Tenant shall accept the Expansion Space in “AS IS, WHERE LOCATED” condition except Landlord shall deliver the same in a broom clean condition, free of all occupants, and all work necessary to prepare the Expansion Space for Tenant’s occupancy shall be performed by Tenant pursuant to plans and specifications therefor prepared by Tenant and subject to Landlord’s prior written approval (such approval not to be unreasonably withheld, conditioned or delayed), all at Tenant’s sole cost and expense; and

(iv)Tenant’s Proportionate Share shall be increased proportionately totake into account the additional floor area of the Expansion Space. In the year in which the Expansion Space is delivered, Tenant’s Proportionate Share shall be

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proportionately allocated between the period prior to and the period subsequent to the delivery of the Expansion Space.

B. Replaced in 2^nd Amendment

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C. Replaced in 2^nd Amendment

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42.SATELLITE DISH: GENERATOR.

Notwithstanding anything to the contrary in this Lease, Landlord hereby agrees that at any time during the term of this Lease, Tenant shall have the right to install, (a) on the roof of the Building in a location mutually agreed upon by Landlord and Tenant, a satellite communications dish, not more than five (5) feet in diameter, and related equipment, and (b) in a location mutually agreeable to Landlord and Tenant (at least one reasonable location to be proposed by Landlord) a generator (such satellite communications dish and related equipment and/or such generator referred to herein collectively as “Equipment”). If Tenant shall install Equipment, Tenant shall do so at its own cost and expense and in accordance with all applicable laws, rules and regulations. In this connection, prior to any such installation or operation, Tenant shall obtain, at Tenant’s sole cost and expense, all permits, licenses, approvals and the like required under applicable law for the same. Tenant shall defend, indemnify and hold Landlord harmless from and against any claims, costs or expenses incurred byLandlord as a result of such installation by Tenant. If Tenant shall install Equipment, Tenant shall be responsible for the maintenance and repair thereof and for any maintenance, repair or replacement of the roof, roofing system or other Building component occasioned by such installation and/or other maintenance and repair of Equipment, all at Tenant’s sole cost and expense. Any and all Equipment shall at all times remain the property of Tenant and shall not be deemed a fixture or accession to the demised premises and/or the Building. Any and all Equipment may be removed by Tenant at any time, and must be removed by Tenant prior to termination or expiration of the Term of this Lease; provided that Tenant shall repair any and all damage to the demised premises and/or the Building caused by such removal.

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43.COMPETITIVE USES.

Landlord agrees that during the Term of this Lease, Landlord shall not lease space within Tower One to State Street Bank, Brown Brothers Harriman or Chase Manhattan Bank for use in the business of transfer agency, mutual, funds administration, foreign exchange, securities lending or custody fund accounting; provided, however, if at anytime during the Term, the general unemployment rate in Massachusetts equals eight percent (8%) as measured by the Federal Bureau of Labor Statistics or the state agency charged with producing such statistics for state purposes, this restriction shall thereafter be of no further force or effect.

[Signatures on next page]

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Executed as a sealed instrument as of the date first above written.

LANDLORD:
COPLEY PLACE ASSOCIATES, LLC,
a Delaware limited liability company
By:		Overseas Management, Inc.,
		a Delaware corporation,
		Managing Agent
		By:	/s/ Paul C. Grant
			Paul C. Grant
			Its:	VP & GM
TENANT:
INVESTORS BANK & TRUST COMPANY,
a Massachusetts trust company
By:	/s/ Kevin J. Sheehan
	Kevin J. Sheehan
	President and Chief Executive Officer

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FIRST AMENDMENT TO LEASE

THIS FIRST AMENDMENT TO LEASE is made and entered into as of the 4^th day of August, 2000 by and between COPLEY PLACE ASSOCIATES, LLC, a Delaware limited liability company (the “Landlord”), and INVESTORS BANK & TRUST COMPANY, a Massachusetts trust company (the “Tenant”).

Reference is made to the following:

A.That certain lease dated as of August 2, 1999 by and between Landlord, as the “Landlord” therein named, and Tenant, as the “Tenant” therein named (the “Lease”), relative to premises consisting of approximately 28,784 rentable square feet of space on the Sixth Floor of One Copley Place, Boston, Suffolk County, Massachusetts, designated as Area B in the Lease, and approximately 34,116 rentable square feet of space on the Seventh Floor of One Copley Place, designated at Area A in the Lease, as more particularly described in the Lease (collectively, from the Area B Commencement Date, the “Premises”); and

B.The size of the Premises has decreased from that set forth in the Lease by reason of the requirement of law that a common corridor be constructed within the area on the Sixth Floor originally constituting a part of the Premises; and

C.The parties now wish to amend the Lease as hereinafter set forth to modify the Lease as to the area constituting the Premises as well as the Rent and other provisions affected by the change in such area.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

1.Effective as of April 1, 2000 (the “Area B Rent Commencement Date”), the Lease is hereby amended to reduce the portion of the Premises designated as Area B in the Lease from 28,724 rentable square feet to 28,592 rentable square feet and Exhibit A-2 of the Lease is amended by deleting Exhibit A-2 in its entirety and replacing it with Exhibit Ato this First Amendment to Lease,

2.From and after the Area B Rent Commencement Date, Paragraph 1 of the Lease is hereby amended by deleting the section thereof captioned “Base Rent”, and substituting the following words and figures therefor:

“Base Rent: From the Area A Rent Commencement Date through the date immediately preceding the Area B

Rent Commencement Date, at the race of One Million Three Hundred Thousand Eight Hundred Six and no/100 Dollars ($1,398,756.00) per annum in equal monthly installments of One Hundred Sixteen Thousand Seven Hundred Thirty-Three and 83/100 Dollars ($116,563.00) (computed on the basis of $41.00 per rentable square foot per annum on 34,116 rentable square feet of space); from the Area B Rent Commencement Date through the day prior to the fifth (5^th) anniversary of the Area B Rent Commencement Date, at the rate of Two Million Five Hundred Seventy-One Thousand Twenty-Eight and no/100 Dollars (52,571,028.00) per annum, in equal monthly installments of Two Hundred Fourteen Thousand Two Hundred Fifty-Two and 33/100 Dollars ($5214,252.33) (computed on the basis of $41.00 per rentable square foot per annum on 62,708 rentable square feet of space); and from the fifth (5^th) anniversary of the Area B Rent Commencement Date through October 30, 2007 at the rate of Two Million Seven Hundred Fifty-Nine Thousand One Hundred Fifty-Two and no/100 Dollars ($52,759,152.00) per annum, in equal monthly installments of Two Hundred Twenty-Nine Thousand Nine Hundred Twenty-Nine and 33/100 Dollars ($229,929.33) (computed on the basis of $44.00 per rentable square foot per annum on 62,708 rentable square feet of space). (See Paragraph 4)”

3.Paragraph 1 of the Lease is hereby amended by deleting the section thereof captioned “Tenant’s Proportionate Share”, and substituting the following words and figures therefor:

“Tenant’s Proportionate Share: With respect to the portion of Operating Expenses payable with respect to the period from the Area A Rent Commencement Date through the day immediately preceding the Area B Rent Commencement Date, 4.2499% (computed on the basis of 95% occupancy) and thereafter 7.812% (computed on the basis of 95% occupancy) subject to adjustment as provided in Paragraph 41 hereof.”

4.Any term contained in this First Amendment to Lease having an initial capital letter and not otherwise herein defined shall have the meaning assigned to it in the Lease.

5.The Lease, as hereby amended, is ratified and confirmed and remains in full force and effect.

IN WITNESS WHEREOF, Landlord and Tenant have caused this document to be executed as of the date first above written.

LANDLORD:
COPLEY PLACE ASSOCIATES, LLC,
a Delaware limited liability company
By:	Overseas Management, Inc.,
	a Delaware corporation,
	Managing Agent
	By:	/s/ Paul C. Grant
		Paul C. Grant
		Its Vice President and
		General Manager
TENANT:
INVESTORS BANK & TRUST
COMPANY, a Massachusetts trust company
By:	/s/ Kevin J. Sheehan
	Kevin J. Sheehan
	President and Chief Executive Officer

SECOND AMENDMENT TO LEASE

THIS SECOND AMENDMENT TO LEASE is made and entered into as of the 24 day of May, 2001 by and between COPLEY PLACE ASSOCIATES, LLC, a Delaware limited liability company (the “Landlord”), and INVESTORS BANK & TRUST COMPANY, a Massachusetts trust company (the “Tenant”).

Reference is made to the following:

A.That certain lease dated as of August 2, 1999 by and between Landlord, as the “Landlord” therein named, and Tenant, as the “Tenant” therein named, as amended by a First Amendment to Lease dated August 4th, 2000 (the lease as so amended, the “Lease”), relative to premises consisting of approximately 28,592 rentable square feet of space on the Sixth Floor of One Copley Place, Boston, Suffolk County, Massachusetts, designated as Area B in the Lease, and approximately 34,116 rentable square feet of space on the Seventh Floor of One Copley Place, designated at Area A in the Lease, as more particularly described in the Lease (collectively, from the Area B Commencement Date, the “Premises”); and

B.Pursuant to its right of first offer set forth in the Lease, Tenant has agreed to add to the Premises demised under the Lease, the Fourth Floor and Fifth Floor of One Copley Place consisting of, respectively, 44,072 rentable square feet and 43,489 rentable square feet, referred to herein as the “4/5 Space”, such Fourth Floor space and such Fifth Floor space being shown on Exhibit “Floor 4” and Exhibit “Floor 5”, respectively, both such Exhibits being attached hereto and made a part hereof; and

C.The parties now wish to amend the Lease as hereinafter set forth to modify the Lease as to the area constituting the Premises as well as the Rent and other provisions affected by the change in such area and to make certain other modifications to the Lease as are hereinbelow set forth.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree to amend the Lease and otherwise agree as follows:

1.To amend the Lease to add to the Premises the 4/5 Space so that the first sentence under the caption “Premises” in Paragraph 1 of the Lease shall read in its entirety as follows:

“Premises: From the Area A Commencement Date through the day immediately preceding the Area B Commencement Date, that portion of the Office

Section designated on the plan attached hereto as  Exhibit A-1 and commonly described as approximately 34,116 rentable square feet, consisting of the seventh (7^th) floor of One Copley Place (“Area A”). From the Area B Commencement Date, Area A and that portion of the Office Section designated on the plan attached hereto as Exhibit A-2 (“Area B”) and commonly described as approximately 28,592 rentable square feet, consisting of a portion of the sixth (6^th) floor of One Copley Place. From the Area C and D Delivery Date (as defined below) Area A, Area B, and that portion of the Office Section designated on the plans attached hereto as Exhibit A-3 (“Area C”) and commonly described as approximately 43,489 rentable square feet, consisting of the entire fifth (5^th) floor of One Copley Place and that portion of the Office Section designated on the plans attached hereto as Exhibit A-4 (“Area D”) and commonly described as approximately 44,072 rentable square feet, consisting of the entire fourth (4^th) floor of One Copley Place

and Exhibit A of the Lease is amended by adding thereto as Exhibit A-4 and Exhibit A-3, respectively, Exhibit Floor 4 and Exhibit Floor 5 to this Second Amendment to Lease. In addition, by reason of the Tenant having added Area C and Area D to the Premises, Paragraphs 41B and 41C of the Lease are deleted therefrom and of no further force or effect and a new Paragraph 41B and a new Paragraph 41C are added to the Lease and shall read in their entirety as follows:

“B.The current tenant of the 3^rd floor of One Copley Place is The Massachusetts Registry of Motor Vehicles (the “Registry”) whose current lease expires on July 31, 2001. Tenant acknowledges that the Registry may holdover in such space notwithstanding the termination of its Lease. Tenant further acknowledges that the Registry may enter into a new lease for the 3^rd floor of One Copley Place or for the 3rd floor of One Copley Place and for all or part of the 1^st and/or 2^nd floors of One Copley Place.

If the Registry has not renewed or extended its lease for the 3^rd floor space in whole or entered into a new lease or an amendment of itsexisting lease with respect to the 3^rd floor of One Copley Place (which amendment or new lease may include all or a portion of the 1^st and 2^nd floors of One Copley Place), provided Tenant is not, at the time Landlord proposes to enter into a new lease which includes the 3^rd floor of One Copley Place with a third party, in default of Tenant’s obligations under

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this Lease beyond applicable periods of notice and grace, Landlord shall not enter into such third-party lease which includes space on the 3rd floor of One Copley Place until Landlord first offers in writing (the “RFR Notice”) to lease the space which includes such 3rd floor space (the spaceso offered referred to herein as the RFR Space) to Tenant on the terms and conditions contained in a letter of intent (a “LOI”) executed by anunrelated third party which desires to lease such space. Without limiting the generality of the foregoing, in the event the RFR Space includes space on floors of One Copley Place other than the 3rd floor, Tenant’s rights hereunder shall only be exercisable if Tenant agrees to lease all of the RFR Space subject to the other conditions of this subparagraph B.

If Tenant has the rights referred to in the preceding grammatical paragraph, (x) Landlord shall deliver a copy of the LOI to Tenant with the RFR. Notice and (y) Tenant shall have the right to lease the RFR Space on the terms and conditions set forth in the LOI, which right Tenant may exercise by giving written notice to Landlord within ten (10) business days of receiving the RFR Notice from Landlord; provided, however, if Tenant fails to exercise such right, Landlord shall be free to lease the RPR Space according to the terms and conditions of the LOI and such other terms that are not materially inconsistent with, or more favorable than, the terms and conditions of the LOI, but if Landlord fails to consummate such a lease of the RPR Space with the proposed tenant under the LOI, Tenant shall again have a right of first refusal to lease all or any portion of the 3rd floor of One Copley Place in accordance with and subject to the provisions of this Section (that is, the procedures of the first sentence of this Section shall again be invoked and Tenant’s rights shall be subject to the Registry continuing to occupy the space by reason of holdover, amendment of lease or new lease whether there was an intervening aborted attempt to lease to a third party as described above).

In the event the Tenant fails to exercise the aforesaid right and space which was part of the RPR Space on the 3rd floor of One Copley Place is subsequently leased to a third party or parties (such third party or third parties being referred to herein as the ‘The Successor Tenant(s)”) and such of the RFR Space as was so leased is thereafter available for lease (in whole or in part) during the term of this Lease, the Tenant shall again have the rights with respect to the such space as RFR Space as are set forth in the first two grammatical paragraphs of this subparagraph B (with the designation “Registry” being replaced in clause (ii) of this sentence with “The Successor Tenant(s)” in such grammatical paragraphs, it being theintention that such rights subject to the limitations on such rights and particularly subject to the right of the Landlord to make any kind of occupancy agreement with The Successor Tenant(s) as Landlord in its sole discretion determines without interference by the Tenant. Thus, as is the

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case with occupancy by the Registry, the Tenant shall have no right hereunder as to any part of the 3rd floor of One Copley Place which The Successor Tenant(s) continues to occupy after the date on which its then current lease of all or a portion of the 3rd floor of One Copley Place would otherwise terminate incident to a renegotiation of the then-current lease(s) or an extension of the then current lease(s) or a re-leasing to The Successor Tenant(s) of the 3rd floor of One Copley Place, or a part thereof, and Landlord expressly negates any implication that it has any responsibility to the Tenant to assure that all or any portion of the 3rd floor of One Copley Place becomes available to Tenant hereunder by terminating the tenancy of a then tenant.

If Tenant validly exercises its right to lease the RFR Space, it shall be added to the Premises, effective as of the date (the “RFR Space Effective Date”) which is the later to occur of the date set forth in Landlord’s notice or, if the Registry holds over, the date on which the Registry vacates all or that portion of the RFR Space occupied by the Registry, on the terms and conditions specified in the RFR Notice and otherwise on the terms and conditions of this Lease, modified as necessary to make the same consistent with the RFR Notice.

In the event that Tenant shall exercise Tenant’s right to add the RFR Space to the Premises, as of the RFR Space Effective Date:

(i)the Premises shall be deemed to include the RFR Space, with the result that all references in this Lease to the “Premises” (except for references to such term in this Paragraph) shall thereafter be and be deemed to be, for all purposes hereunder, references to the Premises and such space except to the extent such references are necessarily modified or impacted by the terms of the RHR Notice;

(ii)Tenant shall accept the RFR Space in “AS IS, WHERELOCATED” condition except Landlord shall deliver the same in a broom clean condition, free of all occupants, and all work necessary to prepare the RFR I Space for Tenant’s occupancy shall be performed by Tenant pursuant to plans and specifications therefor prepared by Tenant and subject to Landlord’s prior written approval (such approval not to be unreasonably withheld, conditioned or delayed), all at Tenant’s sole cost and expense but, notwithstanding the foregoing, Landlord shall, at itsexpense, make such modifications, if any, as are necessary to bring the atrium wall adjacent to the space into compliance with the state building and fire codes; and

(iii)Tenant’s Proportionate Share shall be increased to take into account the additional floor area of the RFR Space in a manner consistent

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with the RFR Notice. In the year in which the RFR Space is delivered, Tenant’s Proportionate Share applicable to the RFR Space shall be proportionately allocated between the period prior to and the period subsequent to the delivery of the RPR Space.

If Tenant timely exercises its rights hereunder so that all or a part of: the 3rd. floor of One Copley Place becomes a part of the Premises under this Lease but the 2nd floor of One Copley Place is not a part of the Premises under this Lease, and Landlord subsequently determines to make all or a portion of the 2nd floor of One Copley Place available for lease, as of the date on which the lease of the current tenant of such space expires or is terminated (as the case may be) which Landlord reasonably and in good faith estimates will be not be less than three (3) years prior to the end of the then Term of this Lease, to third parties other than the then tenant(s) by reason of such tenant not having (x) renewed or extended its Lease for the 2nd floor space in whole or in part or (y) entered into a new lease or an amendment of its existing lease with respect to the 2nd floor of One CopleyPlace), and provided Tenant is not then in default of its obligations under this Lease beyond applicable periods of notice and grace, Landlord shall promptly notify (the “RFO I Notice”) Tenant of the terms under which it intends to offer the space on the 2nd floor of One Copley Place which will no longer be leased to the such tenant (the “RFO I Space”) and the date as of which Landlord estimates the RFO I Space will be available and Tenant shall have the right, by notice to Landlord given within thirty (30) days after receipt of Landlord’s notice by Tenant to add such space to the Premises, effective as of the date (the “RFO I Effective Date”) which is the later to occur of the date set forth in Landlord’s notice or, if the then tenant holds over, the date on which the then tenant vacates the RFO I Space, on the terms and conditions specified in Landlord’s notice and otherwise on the terms and conditions of this Lease.

In the event that Tenant shall exercise Tenant’s right to add the RFO I Space to the Premises, as of the RFO I Effective Date:

(i)the Premises shall be deemed to include the RFO I Space, with the result that all references in this Lease to the “Premises” (except for references to such term in this Paragraph) shall thereafter be and be deemed to be, for all purposes hereunder, references to the Premises and such space; except to the extent such references are necessarily modified or impacted by the terms of the RFO I Notice;

(ii)Tenant shall accept the RFO I Space in “AS IS, WHERE LOCATED” condition except Landlord shall deliver the same in a broom clean condition, free of all occupants, and all work necessary to prepare the RFO I Space for Tenant’s occupancy shall be performed by Tenant

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pursuant to plans and specifications therefor prepared by Tenant and subject to Landlord’s prior written approval (such approval not to be unreasonably withheld, conditioned or delayed), all at Tenant’s sole cost and expense but, notwithstanding the foregoing, Landlord shall at its expense, make such modifications, if any, as are necessary to bring the atrium wall adjacent to the space into compliance with the state building and fire codes; and

(iii)Tenant’s Proportionate Share shall be increased proportionately to take into account the additional floor area of the RFO I Space in a manner consistent with the RFO I Notice. In the year in which the RFO I Space is delivered, Tenant’s Proportionate Share applicable to the RFO I Space shall be proportionately allocated between the period prior to and the period subsequent to the delivery of the RFO I Space.

In the event the Tenant fails to exercise the aforesaid right and (i) Landlord has failed to enter into a lease of the RFO I Space within.sixty (60) days of the RFO I Notice or (ii) after the RFO I Space is subsequently leased to a third party or parties and the RFO II Space is thereafter available for lease in whole or in part during the term of this Lease, the Tenant shall again have the rights with respect to all or such portion of the RFO I Space as are set forth in the two grammatical paragraphs immediately preceding this grammatical paragraph, it being the intention hereof that such rights shall be subject to the limitations on such rights and particularly the right of the Landlord to make any kind of occupancy agreement with the then tenant(s) as Landlord in its sole discretion determines without interference by the Tenant. Thus, the Tenant shall have no right hereunder if the then tenant continues to occupy all or any part of the 2^nd floor of One Copley Place after the date on which its then current lease of all of a, portion of the 2^nd floor of One Copley Place would otherwise terminate incident to a renegotiation of the then current lease(s) or an extension of the then current lease(s) or a re-leasing to the then tenant of all or a portion of the 2nd floor of One Copley Place, and Landlord expressly negates any implication that it has any responsibility to the Tenant to assure that all or any portion of the 2nd floor of One Copley Place becomes available to Tenant hereunder by terminating the tenancy of the then tenant.

If Tenant does not exercise the right to lease such space and thereafter Landlord proposes to lease such space to a third party on terms which vary from those contained in Landlord’s notice, Landlord shall again, and before leasing such space to another party, offer the space to Tenant in written notice upon such varied terms and Tenant shall have thirty (30) days after receipt of such notice to add such space to the Premises on such varied terms.

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If Tenant timely exercises its rights hereunder so that all or a part of the 2nd floor of One Copley Place becomes a part of the Premises under this Lease but the 1st floor of One Copley Place is not a part of the Premises under this Lease, and Landlord subsequently determines to make all or a portion of the 1st floor of One Copley Place available for lease, as of the date on which the lease of the current tenant of such space expires or is terminated (as the case may be) which Landlord reasonably and in good faith estimates will be not be less than three (3) years prior to the endof the then Term of this Lease, to third parties other than the then tenant(s) by reason of such tenant not having (x) renewed or extended its lease for the 1st floor space in whole or in part or (y) entered into a new lease or anamendment of its existing lease with respect to the 1st floor of One Copley Place), the three grammatical paragraphs immediately preceding this grammatical paragraph shall be changed, mutatis mutandis, so that Tenant shall have the same rights with respect to such 1st floor space as are described in the foregoing provisions of this subparagraph B with respect to RFO I Space, subject to the same limitations and conditions, and without limiting the generality of the foregoing, references to “2nd floor of One Copley Place” shall be read as references to the “1st floor of One Copley Place” and references to “RFO I Space” shall be read as references to “RFO II Space.”

If the RFR Effective Date, the RFO I Effective Date or the RFO II Effective Date, as applicable, has not occurred within sixty (60) days after the delivery date set forth in the applicable Landlord’s notice, Tenant shall have the right to terminate its obligations with respect to the space which would otherwise become a part of the Premises pursuant to Tenant’s notice given in response to the RFR Notice, the RFO I Notice or the RFO II Notice, as applicable by notice to the Landlord given RFO II not more than ten (10) days after the expiration of such sixty (60) day period. Landlord agrees that in the event it becomes aware that the current tenant of the RFR Space, the RFO I Space or the RFO II Space may holdover in such space beyond the date specified as the delivery date in the applicable Landlord’s notice, Landlord shall, if Tenant has exercised its rights to add such space to the Premises, promptly notify Tenant of the same and shall provide regular updates to Tenant as to the status of the holdover tenant and that date on which it intends to vacate the applicable space.

2.Paragraph 1 of the Lease is hereby further amended as follows:

(a)Ninety (90) days after the Area C and D Delivery Date (the “Area C and D Rent Commencement Date”), the section thereof captioned “Base Rent” shall read in its entirety as follows:

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“Base Rent:(i) From the Area A Rent Commencement Date through the date immediately preceding the Area B Rent Commencement Date, at the rate of One Million Three Hundred Thousand Eight Hundred Six and no/100 Dollars ($1,398,756.00) per annum, in equal monthly installments of One Hundred Sixteen Thousand Seven Hundred Thirty-Three and 83/100 Dollars ($116,563.00) (computed on the basis of $41.00 per rentable square foot per annum on 34,116 rentable square feet of space); (ii) from the Area B Rent Commencement Date through the day prior to the Area C and D Rent Commencement Date, at the rate of Two Million Five Hundred Seventy-One Thousand Twenty-Eight and no/100 Dollars ($2,571,028.00) per annum, in equal monthly installments of Two Hundred Fourteen Thousand Two Hundred Fifty-Two and 33/100 Dollars ($214,252.33) (computed on the basis of $41.00 per rentable square foot per annum on 62,708 rentable square feet of space); (iii) from the Area C and D Rent Commencement Date through the day prior to the fifth (5th) anniversary of the Area B Rent Commencement Date, at a rate equal to the sum of Six Million Eight Hundred Sixty-One Thousand Five Hundred Seventeen and no/100 Dollars ($6,861,517.00) per annum, in equal monthly installments of Five Hundred Seventy-One Thousand Seven Hundred Ninety-Three and 08/100. Dollars ($571,793.08) (computed on the basis of $41.00 per rentable square foot per annum on 62,708 rentable square feet of space in Area A and Area B, collectively and $49.00 per rentable foot on 87,561 rentable square feet of space in Area C and Area D, collectively; and (iv) from the fifth (5th) anniversary of the Area B Rent Commencement Date through October 30,2007, at the rate of Seven Million Forty-Nine Thousand Six Hundred Forty-One and no/100 Dollars ($7,049,641.00) per annum, in equal monthly installments of Five Hundred Eighty-Seven Thousand Four Hundred Seventy and O8/100 Dollars ($587,470.08) (computed on the basis of $44.00 per rentable square foot per annum on 62,708 rentable square feet of space in Area A and Area B, collectively and $49.00 per rentable

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foot on 87,561 rentable square feet of space in AreaC and Area D, collectively. (See Paragraph 4)”

(b)The section thereof captioned “Tenant’s Proportionate Share’’ shall read in its entirety as follows:

“Tenant’s Proportionate Share:With respect to the portion of Operating Expensespayable with respect to Area A and Area B,collectively, (i) for the period from the Area A RentCommencement Date through the day immediatelypreceding the Area B Rent Commencement Date,4.2499% (computed on the basis of 95%occupancy) and thereafter, 7.812% (the “Area A/BProportionate Share”), and with respect to the portion of Operating Expenses payable with respectto Area C and Area D commencing on the Area Cand D Rent Commencement Date, collectively,10.908% (the “Area C/D Proportionate Share”),such percentages having been computed based on95% occupancy of the Building and being subject toadjustment as provided in Paragraph 41 hereof.”

(c)The section thereof captioned “Base Year” shall read in its entirety as follows:

“Base Year:As to Area A and Area B, the Calendar Year 1999 and as to Area C and Area D, the Calendar Year 2001.”

(d)The section thereof captioned “Base Year Operating Expenses” shall read in its entirety as follows:

“Base Year Operating Expenses:As to Area A and Aiea B, the amount ofOperating Expenses incurred with respect toCalendar Year 1999 (the “A/B Operating ExpenseBase”) and as to Area C and Area D, the amount ofOperating Expenses incurred with respect toCalendar Year 2001 (the “C/D Operating ExpenseBase”).”

3.Paragraph 5B of the Lease, Expense Adjustment, is hereby amended so that the first sentence thereof shall read as follows:

“Tenant shall pay to Landlord or Landlord’s agent as Additional Rent, anamount (“Expense Adjustment Amount”) equal to the sum of (i) the Area

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A/B Proportionate Share (as defined in Paragraph 1 of this Lease) of theamount by which Operating Expenses incurred with respect to eachCalendar Year exceeds A/B Operating Expense Base (as defined inParagraph 1 of this Lease) plus (ii) for and with respect to all periods fromand after the Area C and D Rent Commencement Date, the Area C/DProportionate Share (as defined in Paragraph 1 of this Lease) of theamount by which Operating Expenses incurred with respect to eachCalendar Year exceeds C/D Operating Expenses (as defined inParagraph I of this Lease). With respect to any Calendar Year withinwhich Areas A, B, C and/or D are added to the Premises, Tenant’sExpense Adjustment Amount shall be prorated based on the portion ofsuch Calendar Year that such space is a part of the Premises.”

4.Area C and Area D shall be delivered on April 1, 2002 (the “Scheduled Area C and D Delivery Date”) in an “AS IS, WHERE LOCATED” condition except Landlord shall deliver the same in a broom clean condition, free of all occupants and furniture and excess equipment associated with the data center currently in the 4/5 Space removed but, notwithstanding the foregoing, Landlord shall, at its expense, make such modifications as are necessary to bring the atrium wall adjacent to the space into compliance with the state building and fire codes with all mechanical and electrical systems in good working order. In the event that Area C and/or Area D is not delivered to Tenant in the condition required pursuant to this Section 4 on the Scheduled Area C and D Delivery Date, then the provisions of Section 3.A of the Lease shall apply thereto except that the phrase “Area C” shall be substituted for “Area A”, the phrase “Area D” shall be substituted for “Area B”, the phrase “Scheduled Area C and D Delivery Date” shall be substituted for the phrase “Area A Commencement Date”, the phrase “Scheduled Area C and D Delivery Date” shall be substituted for the phrase “Area B Commencement Date”, the phrase “Area C and D Rent Commencement Date” shall be substituted for the phrase “Area A Rent Commencement Date”, the phrase “Area C and D Rent Commencement Date” shall be substituted for the phrase “Area B Rent Commencement Date”, the date “April 15, 2002” shall be substituted for “January 15, 2000”, the date “April 16, 2002” shall be substituted for “January 16, 2000”, the date “April 30, 2002” shall be substituted for “February 15, 2000” and the date “May 5, 2002” shall be substituted for February 20, 2000” and the termination rights of Tenant shall only apply as to such area as is not delivered on the applicable termination dates, and not with respect to the entire Lease. Tenant shall also have the early access rights with respect to Areas C and/or D as described in Section 3.B of the Lease and Landlord shall provide Tenant with reasonable access to such other areas of the Building as are necessary to the construction of the Tenant Work. The date on which Area C and Area D are delivered in the condition required above shall be the “Area C and D Delivery Date.”

5.Tenant shall be responsible for all construction of the Premises and allcosts related thereto except as hereinafter provided. Such construction shall be accomplished in accordance with the work letter attached hereto as Exhibit ”Work Letter*1and made a part hereof (the “Work Letter” for purposes hereof). The sum which is the

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lesser of (a) the amount spent by Tenant on its “Qualified Costs” incurred in constructionof the Premises as certified to Landlord by Tenant and, as to construction, wiring andcabling costs, by Tenant’s Architect and (b) an amount (Landlord’s Base Allowance”)equal to $1,751,220 shall be paid by the Landlord as the Landlord’s contribution toward Tenant’s Work (as defined in the Work Letter). .Such amount shall be due and payable by Landlord as described in the Work Letter. For purposes hereof, “Qualified Costs” shallmean actual out-of-pocket costs for (a) preparation of drawings and other expensesincurred in connection with construction of the 4/5 Space, including without limitation permit fees and costs of labor and materials, (c) construction of the Premises inaccordance with Working Drawings for such space approved by Landlord, and paymentwith respect to Qualified Costs to be made, in a manner consistent with the Work Letter,(d) wiring and cabling in the Premises and (e) architectural, engineering and other professional fees relating to construction of the Premises. Landlord hereby agrees thatTenant shall have the right to use Lee Kennedy Company, Inc., Payton ConstructionCorporation, Turner Construction Company or H&H Builders for the construction ofTenant’s Work, so long as the work is union.

In the event Qualified Costs are less than the Landlord’s Base Allowance,Landlord shall allow Tenant a credit against Rent in an amount equal to the differencebetween such amounts. Such credit shall be applied pro rata over the term of this Lease.

6.Any term contained in this Second Amendment to Lease having an initialcapital letter and not otherwise herein defined shall have the meaning assigned to it in theLease.

7.The Lease, as hereby amended, is ratified and confirmed and remains infull force and effect, and rights of Tenant contained in the Lease shall apply to Area Cand Area D, including without limitation, the right to connect such areas to theEquipment described in Section 42 of the Lease.

8.Paragraph 37 of the Lease is amended so that Tenant shall have the right toeighteen (18) non-reserved parking spaces and such paragraph is further amended so that at least two (2) of such non-reserved parking spaces shall at all times be located in thegarage located within and serving the Property.

9.The first sentence of Paragraph 38 of the Lease shall be modified so as toread in its entirety as follows:

“Tenant shall have the right to install in the lobby of each floor of OneCopley Place on which a part of the Premises is located, building standardsignage, at Tenant’s sole cost and expense.”

10.Landlord represents and warrants that Metropolitan Life InsuranceCompany continues to hold the only mortgage which encumbers the Property and that

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such mortgage is the same mortgage which encumbered the Property as of August 2,1999.

11.Landlord represents and warrants that it may enter into this SecondAmendment of Lease without the consent or approval of any other party.

IN WITNESS WHEREOF, Landlord and Tenant have caused this document to beexecuted as of the date first above written.

LANDLORD:
COPLEY PLACE ASSOCIATES, LLC,
a Delaware limited liability company
By:		Overseas Management, Inc.,
		a Delaware corporation,
		Managing Agent
		By:	/s/ Paul C. Grant
			Paul C. Grant
			Its Vice President and
			General Manager
TENANT:
INVESTORS BANK & TRUST
COMPANY, a Massachusetts trust company
By:	/s/ Kevin J. Sheehan
	Kevin J. Sheehan
	President and Chief Executive Officer

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EXHIBIT WORK LETTER

INVESTORS BANK & TRUST COMPANY

BOSTON, MASSACHUSETTS

WORK LETTER

This is the Work Letter referred to and specifically made a part of the SecondAmendment to Lease to which this Work Letter is attached, covering premises defined inthe Second Amendment to Lease as the 4/5 Space and referred to herein 35 the“New Premises”, as more particularly described in said Second Amendment to Lease, inthe Building known as One Copley Place, Boston, Massachusetts.

A.Space Design Package

Landlord shall promptly after the execution of the Lease furnish to Tenantone (1) reproducible sepia and one (1) blue-line print of the demise layoutof the Premises, and the Landlord’s design guidelines and standardimprovement details (“Landlord’s Design Criteria”) which gives thetechnical and design information relative to the Premises, (collectively,“Landlord’s Space Design Package”). Landlord gives no assurance thatthe sepia and print provided accurately present existing conditions; it isTenant’s responsibility to field verify conditions.

B.Space Layout

1.Prior to commencing construction of the New Premises, Tenant agrees to deliver to Landlord one (1) set of sepia reproducibles andtwo (2) sets of blue-line prints of Tenant’s approved Space Layout(the “Space Layout”) of the New Premises sufficiently complete to permit preparation of architectural, structural, plumbing, fireprotection, mechanical and electrical engineering drawings for theNew Premises. The Space Layout shall designate and include allTenant finish work (“Tenant Improvement Work”) and shallspecifically include, without limitation:

a.Partition layout and door location;

b.Electrical outlet locations, data cable, sound system, pagingsystem, etc. and anticipated usage thereof.

c.Tenant’s telephone system indicating location of outlets.

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d.Reflected ceiling plan, including ceiling grid, lighting,switching, sprinkler, diffusers, registers, speakers and allother items necessary for the engineering design to beincorporated in the Working Drawings (hereinafterdefined).

e.Tenant’s anticipated occupancy loads for any area in whichsuch occupancy load is expected to be in excess of buildingstandard heating, ventilation, air conditioning, electricaland structural designs (e.g., computer rooms, print/copymachines., equipment to be used in any luncheon areas,concentrated file and library loadings and any otherequipment or systems (with brand names wherever possible) which require structural, mechanical, fireprotection, electrical, or life safety modifications [abovethat set forth in Landlord’s Design Criteria]).

2.Within seven (7) days of Landlord’s receipt of Tenant’s SpaceLayout, Landlord shall review the same for compliance with theintended space usage requirements of the New Premises consistentwith the Lease, and return to Tenant one (1) sepia of the same withLandlord’s comments.

3.Landlord’s review of the Space Layout shall not imply (i) approvalby Landlord as to compliance of the Space Layout with therequirements of applicable codes, rules or regulations of anygovernmental agencies having jurisdiction over the New Premisesor (ii) the Space Layout’s compatibility with the Building’s shelland core construction. Tenant understands that the obtaining of allpermits to comply with all applicable codes, rules and regulationsand the compatibility of the Space Layout with the Building’s shelland core construction is Tenant’s responsibility. Landlord willcooperate with Tenant, at Tenant’s expense, in Tenant’sapplications for permits and, where necessary, will make suchcertifications in connection with such applications as are requiredand correct.

C.Working Drawings

1.Within thirty (30) days (the “Working Drawing Delivery Date”) ofTenant’s receipt of Landlord’s comments on the Space Layout,Tenant agrees to deliver to Landlord one (1) set of sepiareproducibles and three (3) sets of blue-line prints of workingdrawings and specifications for the New Premises (hereinafter

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referred to collectively as “Working Drawings”) prepared, atTenant’s sole cost and expense by an architect (“Tenant’sArchitect”) licensed in the Commonwealth of Massachusetts andreasonably acceptable to Landlord.  Landlord hereby approvesDick Davis and Associates as Tenant’s Architect. All structural,plumbing, fire protection, mechanical and electrical engineeringaspects of the Working Drawings shall be prepared by engineersapproved by the Landlord, such approval to be not unreasonablywithheld.

2.Within fourteen (14) days after receipt of Tenant’s WorkingDrawings, Landlord shall return to Tenant one (1) sepia set of samemarked “Approved”, “Approved as Noted’, or “Disapproved asNoted, Revise and Resubmit”.  If said Working Drawings arereturned to Tenant marked “Disapproved as Noted, Revise andResubmit (in which event, Landlord shall state the reasons forsuch disapproval), such drawings shall be revised by Tenant toincorporate Landlord’s reasonable comments and resubmitted toLandlord within twenty-one (21) days and the same procedure shallbe repeated until Landlord fully approves the Working Drawings,which approval shall not be unreasonably withheld, conditioned ordelayed. Landlord shall not withhold approval based on purelyaesthetic considerations so long as the offending aesthetics are notvisible outside of the space.

3.It is understood that the Working Drawings are to be consistentwith and a logical extension of the approved Space Layout. Anyinconsistencies between the Working Drawings and the shell andcore construction of the Building shall be Tenant’s soleresponsibility. Tenant shall also be solely responsible for thecompleteness of the Working Drawings.

4.In the event Landlord approves the Working Drawings, suchapproval shall not limit Landlord’s right to require changes inportions of the Working Drawings which are incompatible withLandlord’s Design Criteria or which adversely affect Buildingstructure, systems or the availability to Landlord of third partywarranties. When the Working Drawings are approved byLandlord and Tenant, they shall be acknowledged as such byLandlord and Tenant signing each sheet of the Working Drawingsand a complete copy of the Working Drawings shall be provided toLandlord by Tenant.

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D.Payment for Tenant Improvement Work

1.Tenant shall submit to Landlord monthly requests for payment(“Request for Payment”) as Qualified Costs (as defined in theSecond Amendment to Lease to which this Work Letter isattached) are incurred. Such Requests for Payment shall be for theportion of the Work completed during the period covered by suchRequest for Payment less the customary retainage (which retainageshall be paid within thirty (30) days of completion of the Work).Landlord shall make payments under each Request for Paymentan amount equal to the amount shown on the Request for Paymentas due and payable for Work completed (less amounts which werethe subject of prior Requests for Payment and are to be paid undersuch prior Requests) multiplied by a fraction, the numerator ofwhich is Landlord’s Base Allowance and the denominator of whichis the total of Qualified Costs reasonably estimated by Tenant(based upon contracts for such work) as the total Qualified Costsfor construction of the New Premises. Payments due hereunderfrom Landlord shall be made within thirty (30) days of submissionof completed Requests for Payment.  To the extent Landlord hasapproved any changes (as defined below), Landlord will pay thecost thereof after substantial completion of construction of the NewPremises to the extent the total Qualified Costs do not exceedLandlord’s Base Allowance. Tenant shall pay all costs incurred inconnection with such changes, subject to Landlord’s laterreimbursement. Notwithstanding the foregoing, Landlord willhave no obligation with respect to any Request for Payment ifTenant has not theretofore made all payments due from Tenantwith respect to construction or if Tenant’s construction has resultedin any liens then encumbering the Building or if Landlord’sdocumentation with respect to the Request for Payment is notreasonably satisfactory to Landlord.

2.In the event Landlord does not timely fund any portion of theQualified Costs for which Landlord is responsible hereunder,Tenant shall notify Landlord of Landlord’s failure and if Landlorddoes not cure the same within thirty (30) days of such notice,Tenant may make such payment and the amount for whichLandlord was responsible may be offset by the Tenant against rentpayments under the Lease thereafter becoming due.

E.Changes to the Work

A material change to the Work may be made only by a written request ofthe Tenant, accompanied by a Field Order Form describing the change.

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Upon approval of a proposed Change to the Work, Tenant shall causechanges to the Working Drawings to be made to reflect the changes to theWork and Tenant will supply revised Working Drawings to the Landlord. Such changes to the Working Drawings must be consistent with thedescription of the change in Landlord’s Field Order Form.

F.Performance of Work

Tenant agrees that all construction, and services and work performed onthe New Premises including installation of telephone and carpeting, anddelivery of materials and personal property to the New Premises on behalfof or for the account of Tenant shall be performed or delivered, as the casemay be only by persons whose employment for such tasks shall not result in any work stoppage or slow-down by union members working in theBuilding.

G.Access

Landlord shall allow such Tenant contractors to have access to theBuilding and to use the freight elevator serving the Building. Schedulingto the use of the freight elevator shall be as reasonably determined by the Landlord.

H.Tenant’s Representative; Tenant’s Contractor

Tenant hereby designates Richard D. Bartony as its sole representativewith respect to the matters set forth in this Work Letter and such personshall have full authority and responsibility to act on behalf of Tenant asrequired herein. Tenant’s Architect shall not be an authorizedrepresentative of Tenant unless Tenant specifically advised Landlord inwriting of such designation.

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THIRD AMENDMENT TO LEASE

THIS THIRD AMENDMENT TO LEASE is made and entered into as of the 18 day of March, 2005 by and between COPLEY PLACE ASSOCIATES, LLC, a Delaware limited liability company (the “Landlord”), and INVESTORS BANK & TRUST COMPANY, a Massachusetts trust company (the “Tenant”).

Reference is made to the following:

A.That certain lease dated as of August 2, 1999 by and between Landlord, as the “Landlord” therein named, and Tenant, as the “Tenant” therein named, as amended by a First Amendment to Lease dated August 4th, 2000 and a Second Amendment to Lease dated May   , 2001 (the lease as so amended, the “Lease”), relative to premises consisting of 44,072 rentable square feet of space comprising the entire Fourth Floor of One Copley Place, designated as Area D in the Lease; 43,489 rentable square feet of space comprising the entire Fifth Floor of One Copley Place, designated as Area C in the Lease; 28,592 rentable square feet of space on the Sixth Floor of One Copley Place, Boston, Suffolk County, Massachusetts, designated as Area B in the Lease; and 34,116 rentable square feet of space on the Seventh Floor of One Copley Place, designated at Area A in the Lease, as more particularly described in the Lease (collectively, the “Premises”); and

B.Landlord and Tenant desire to amend the Lease to extend the Term, determine Rent payable during the extension of the Term and make certain other modifications to the Lease as are hereinbelow set forth.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree to amend the Lease and otherwise agree as follows:

1.Termination Date.  To extend the Term of the Lease to December 31, 2014, and consistent therewith to amend the caption “Termination Date” in Paragraph 1 of the Lease to read in its entirety as follows:

“Termination Date:December 31, 2014, unless sooner terminated as provided in this Lease.”

2.Base Rent.  To provide for the Base Rent to be paid after October 31, 2007 through the Termination Date, and consistent therewith to amend the caption “Base Rent” in Paragraph 1 of the Lease by adding at the end thereof, immediately prior to the parenthetical expression “(See Paragraph 4)” the following sentence:

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“From November 1, 2007 through June 30, 2008, no Base Rent shall be payable; from July 1, 2008 through December 31, 2010, at the rate of Four Million Six Hundred Fifty- Eight Thousand Three Hundred Thirty-Nine and no/100 Dollars ($4,658,339.00) per annum, in equal monthly installments of Three Hundred Eighty-Eight Thousand One Hundred Ninety-Four and 92/100 Dollars ($388,194.92) (computed on the basis of $31.00 per rentable square foot per annum on 150,269 rentable square feet of space); and from January 1, 2011 through December 31, 2014, at the rate of Five Million One Hundred Nine Thousand One Hundred Forty-Six and no/100 Dollars ($5,109,146.00) per annum, in equal monthly installments of Four Hundred Twenty-Five Thousand Seven Hundred Sixty-Two and 17/100 Dollars ($425,762.17) (computed on the basis of $34.00 per rentable square foot per annum on 150,269 rentable square feet of space); provided, however, if prior to October 31, 2007, Tenant has not made alterations and/or additions to the Premises (in accordance with the requirements of Paragraph 10 of this Lease) which cost less than $751,345.00 in actual contractor costs (as distinguished from costs related thereto of architects, engineers and lawyers and other so-called “soft costs”, the Base Rent payable during the period commencing November 1, 2007 shall be increased by the difference between such costs and $751,345.00 and one-eighth of such difference shall accordingly be paid as Base Rent on the first day of each calendar month commencing November 1, 2007 and ending on June 30, 2008.”

3.Proportionate Share.  To reflect the proper Tenant’s Proportionate Share relating to 150,269 rentable square feet in Paragraph 1 of the Lease (and subject to adjustment for changes in the rentable square footage of the Premises), the caption “Tenant’s Proportionate Share” therein shall for periods from and after the date hereof read in its entirety as follows:

“Tenant’s Proportionate Share:18.7193% of Operating Expenses (computed on the basis of 95% occupancy), such percentages having been computed based on 95% occupancy of the Building and being subject to adjustment as provided in Paragraph 41 hereof.”

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4.Base Year.  The caption “Base Year” in Paragraph 1 shall be amended to add thereto the following sentence:

“With respect to periods from and after November 1, 2007, for the Premises consisting of the 150,269 rentable square feet comprising the Premises on December 31, 2004, the Calendar Year 2007.”

and the caption “Base Year Operating Expenses” shall be correspondingly amended by adding thereto the following sentence:

“With respect to periods from and after November 1, 2007, for the entire Premises, the amount of Operating Expenses incurred with respect to Calendar Year 2007.”

5.Expense Adjustment.  Paragraph 5B of the Lease, Expense Adjustment, is hereby amended so that the first sentence thereof shall read as follows:

“For periods through October 31, 2007, Tenant shall pay to Landlord or Landlord’s agent as Additional Rent, an amount (“Expense Adjustment Amount”) equal to the sum of (i) the Area A/B Proportionate Share (as defined in Paragraph 1 of this Lease) of the amount by which Operating Expenses incurred with respect to each Calendar Year exceeds A/B Operating Expense Base (as defined in Paragraph 1 of this Lease) plus (ii) for and with respect to all periods from and after the Area C and D Rent Commencement Date, the Area C/D Proportionate Share (as defined in Paragraph 1 of this Lease) of the amount by which Operating Expenses incurred with respect to each Calendar Year exceeds C/D Operating Expense Base (as defined in Paragraph 1 of this Lease).  With respect to any Calendar Year within which Areas A, B, C and/or D are added to the Premises, Tenant’s Expense Adjustment Amount shall be prorated based on the portion of such Calendar Year that such space is a part of the Premises.  For periods from and after November 1, 2007, the Expense Adjustment Amount shall be Tenant’s Proportionate Share (as defined in Paragraph 1 of this Lease) of the amount by which Operating Expenses incurred with respect to each Calendar Year exceeds Base Year Operating Expenses for the applicable Base Year (as defined in Paragraph 1 of this Lease).”

6.Compliance with Laws.  Subclause (iii) of the second sentence of Paragraph 7 is hereby amended to delete the words “on and after the Area A Commencement Date as to Area A and the Area B Commencement Date as to Area B” therefrom.

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7.Signage.  Paragraph 38 of the Lease is hereby amended to read in its entirety as follows:

“38.SIGNAGE.

Tenant shall have the right, at Tenant’s sole cost and expense, to install signage at the entrance to Tower One, subject to Landlord’s approval not to be unreasonably withheld.  Tenant shall also have the right to install in the lobby of each floor of One Copley Place (and if any portion of the Premises should hereafter be located in Two Copley Place, then also on each such floor of Two Copley Place) on which a part of the Premises is located, building standard signage, at Tenant’s sole cost and expense.  Landlord shall, at its expense, provide building standard signage, naming the Tenant and its location, on building directories located in the Sky Lobby and in the lobby of One Copley Place” (and if any portion of the Premises should hereafter be located in Two Copley Place, then also on each such floor of Two Copley Place).

8.Extension.  Paragraph 40 of the Lease is hereby amended to read in its entirety as follows:

“40.EXTENSION OPTIONS.

A.Tenant shall have the right to extend the Term of this Lease for two (2) successive additional five (5) year periods, such right of Tenant to be conditioned upon this Lease at the time of election being in full force and effect and Tenant not then being in default under this Lease beyond any applicable notice and cure period, the first such extension period to commence upon the expiration of the original Term of this Lease and the second such extension period to commence upon the expiration of the first extension period, but only if the first right of extension was timely and properly exercised.

B.Tenant’s rights of extension shall be exercised, if at all, by written notice to Landlord given at least twelve (12) months prior to the expiration of the then current term of this Lease.  If a notice is given in compliance with the provisions hereof, this Lease shall, thereupon, be extended for the applicable period, subject to the terms of this paragraph, without the need for any further instrument to be executed (but either party shall execute such a confirmatory instrument upon the request of the other); and if no such notice is given, Tenant’s right of extension shall be null and void.  All of the terms, conditions and provisions of this Lease shall be applicable to any extension of the Term hereof, as if the termination date of the extension period were the date originally set forth herein for the expiration of the Term, except that (i) the exercised right of

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extension shall be of no further force or effect, so that there shall be no further right of extension except, during the first extension term, for Tenant’s right to extend for a second extension term as provided in this Paragraph 40, (ii) the Base Rent during the extension period shall be ninety-five percent (95%) of the “Fair Market Rent” (as hereinafter defined) and (iii) the Base Year shall be the calendar year in which the extension Term begins.

C.“Fair Market Rent” shall mean the rent for Class A office space in the Back Bay area similar in size, condition of building, and services provided for a term of five (5) years as of the date the extension is to commence, (i) without taking into account actual improvements (regardless of who paid for such improvements), or the cost of demolition of the space, and (ii) taking into account the Base Year and the magnitude of free rent, if any, buildout allowance, if any, and other market tenant inducements which would be offered to new tenants but are not being offered to Tenant and (iii) taking into account the brokerage commissions, if any, to be paid in connection with the renewal and compared to the market commission for 5-year leases.

D.Within fifteen (15) days after exercise of an extension right, but not earlier than fifteen (15) months prior to the expiration of the then Term, Landlord shall provide Tenant with its quotation of the “Fair Market Rent” as of the first day of the extension period.  If within thirty (30) days of having received Landlord’s quotation, Tenant shall not have notified Landlord of its objection to Landlord’s quotation and of Tenant’s calculation of Fair Market Rent, the “Fair Market Rent” quoted by Landlord shall be the new Base Rent.  If Tenant so notifies Landlord, the parties shall discuss the matter in good faith for thirty (30) days after Tenant’s notice.  If within forty-five (45) days of having received Tenant’s notice the parties have not agreed in writing, then, Landlord and Tenant shall, during a period of forty-five (45) days, attempt to agree on an arbitrator not affiliated with either party (and if they are unable to do so, either party may request that the President of the American Arbitration Association in Boston choose an arbitrator (as promptly as possible) meeting the criteria of the second to last sentence of this grammatical paragraph).  Such arbitrator shall have a period of thirty (30) days to pick either Landlord’s quotation of “Fair Market Rent” or Tenant’s determination of “Fair Market Rent” as the “Fair Market Rent” hereunder.  Such arbitrator shall have at least ten (10) years’ experience in the valuation and appraisal of office rents real estate in the Greater Boston area.  “Fair Market Rent” so determined by the arbitrator shall be the new Base Rent and shall be binding on the parties.

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The expenses of the arbitrator shall be borne equally by the Landlord and the Tenant.”

9.Expansion.  Paragraph 41A of the Lease is hereby amended to read in its entirety as follows:

“A.Provided that Tenant is not in default under this Lease beyond any applicable notice and cure period at the time of exercise of the option then being exercised, Tenant shall have options to expand the Premises in each of calendar years 2008 and 2011 to include an additional 15,000 to 25,000 rentable square feet (which may be reduced as described below in this Paragraph 41 A) of space in the Building (each such space, an “Expansion Space” and the location in the Building being solely within the Landlord’s discretion so long as the entire square footage of the Expansion Space offered to Tenant constitutes a single block of space on one floor of the Building) for a term beginning on the Expansion Date (as hereinafter defined) and ending on the Termination Date.  No later than twelve (12) months prior to the date in each of 2008 and 2011 in which Landlord anticipates an Expansion Space will be available for occupancy by Tenant (each such date an “Anticipated Expansion Date”), Landlord shall provide Tenant notice thereof, setting forth the size and location of the space covered by the option and the Anticipated Expansion Date for such Expansion Space.  Notwithstanding the foregoing, if during the twenty (20) month period preceding an Anticipated Expansion Date, Tenant exercises an option or options to acquire space pursuant to its rights under Paragraph 41B of this Lease, the amount of an Expansion Space which Landlord would otherwise be required to offer to Tenant under this Paragraph A may be reduced, at Landlord’s discretion by notice given within thirty (30) days of Tenant’s exercise of its rights under Paragraph 4IB, by the amount of square footage leased by Tenant during that twenty (20) month period pursuant to Tenant’s rights under Paragraph 41B, except that once Tenant has delivered Tenant’s Expansion Notice (as hereinafter defined), the amount of square footage of the applicable Expansion Space shall not be subject to reduction as aforesaid.  Tenant may exercise its options hereunder by providing notice of exercise (hereinafter, a “Tenant’s Expansion Notice”) to the Landlord not later than thirty (30) business days after its receipt of Landlord’s notice to Tenant of the availability of the Expansion Space, time being of the essence of Tenant’s rights hereunder.  A particular expansion shall be effective (notwithstanding the date of anticipated availability) on the date (each, an “Expansion Date”) on which Landlord delivers the Expansion Space to Tenant in broom clean condition, free of all occupants, but in no event prior to the Anticipated Expansion Date and in no event later than the last day of the calendar year in which such Expansion Space is to have been delivered pursuant hereto (i.e., 2008 or 2011).  In the event that Tenant

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shall fail timely to give Tenant’s Expansion Notice to Landlord as aforesaid, all obligations of Landlord pursuant to the applicable expansion option only shall terminate and be of no further force and effect.  In the event that Tenant shall give Tenant’s Expansion Notice to Landlord as aforesaid and does not withdraw such notice pursuant hereto, as of the applicable Expansion Date (except as otherwise provided below):

(i)The Premises shall be deemed to include the applicable Expansion Space, with the result that all references in this Lease to the “Premises” (except for references to such term in this Paragraph) shall for periods from and after the applicable Expansion Date be and be deemed to be, for all purposes hereunder, references to the Premises, the applicable Expansion Space and any RFO Space (as defined in Paragraph 4IB of this Lease) and Expansion Space previously added to the Premises pursuant to this Paragraph 41.  The term for any Expansion Space shall be coterminous with the Term of this Lease for the Premises, as such Term may be extended pursuant to Paragraph 40 of this Lease;

(ii)Base Rent for each Expansion Space shall be the Fair Market Rent.  “Fair Market Rent” for purposes of this Paragraph 41 shall mean the rent for Class A office space in the Back Bay area similar in size to the applicable Expansion Space, condition of building and services provided, for a term equal to the term (i.e., concluding December 31, 2014) for the applicable Expansion Space as of the applicable Expansion Date, (i) without taking into account actual improvements (regardless of who paid for such improvements), or the cost of demolition of the space, and (ii) taking into account the Base Year and the magnitude of free rent, if any, buildout allowance, if any, and other market tenant inducements, if any, otherwise included in rents being quoted, and (iii) taking into account the brokerage commissions, if any, to be paid in connection with the expansion and compared to the market commission for a lease for the duration of the term (i.e., concluding December 31, 2014) of the applicable Expansion Space.  In this connection, within fifteen (15) days after Tenant has given a Tenant’s Expansion Notice, Landlord shall provide Tenant with its quotation of the “Fair Market Rent” for the applicable Expansion Space as of the applicable Expansion Date.  If within thirty (30) days of having received Landlord’s quotation, Tenant shall not have notified Landlord of its objection to Landlord’s quotation and of Tenant’s calculation of Fair Market Rent, the “Fair Market Rent” quoted by Landlord shall be the increase to the Base Rent for that particular Expansion Space.  If Tenant so notifies Landlord, the parties shall discuss the matter in good faith for thirty (30) days after Tenant’s notice.  If within forty-five (45) days of having received Tenant’s notice the parties have not agreed in writing, then, Landlord and Tenant shall, during a period of

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forty-five (45) days, attempt to agree on an arbitrator not affiliated with either party (and if they are unable to do so, either party may request that the President of the American Arbitration Association in Boston choose an arbitrator (as promptly as possible) meeting the criteria of the second to last sentence of this grammatical paragraph).  Such arbitrator shall have a period of thirty (30) days to pick either Landlord’s quotation of “Fair Market Rent” or Tenant’s determination of “Fair Market Rent” as the “Fair Market Rent” hereunder for that particular Expansion Space.  Such arbitrator shall have at least ten (10) years’ experience in the valuation and appraisal of office rents real estate in the Greater Boston area.  “Fair Market Rent” so determined by the arbitrator shall be the increase in the Base Rent and shall be binding on the parties.

The expenses of the arbitrator shall be borne equally by the Landlord and the Tenant.

(iii)Tenant shall accept the Expansion Space in “AS IS, WHERE LOCATED” condition except Landlord shall deliver the same in a broom clean condition, free of all occupants, and all work necessary to prepare the Expansion Space for Tenant’s occupancy shall be performed by Tenant pursuant to plans and specifications therefor prepared by Tenant and subject to Landlord’s prior written approval (such approval not to be unreasonably withheld, conditioned or delayed), all at Tenant’s sole cost and expense, but, notwithstanding the foregoing, Landlord shall, at its expense, make such modifications, if any, as are necessary to bring any atrium walls adjacent to any Expansion Space into compliance with the state building and fire codes; and

(iv)Tenant’s Proportionate Share shall be increased proportionately to take into account the additional floor area of the Expansion Space.  In the year in which an Expansion Space is delivered, Tenant’s Proportionate Share shall be proportionately allocated between the period prior to and the period subsequent to the delivery of the applicable Expansion Space.”

10.Right of First Offer.  Paragraphs 41B and 41C of the Lease are deleted therefrom (Paragraph 41C having been deleted by the Second Amendment to Lease but a reference thereto having been improperly added to the Second Amendment to Lease) and of no further force or effect and a new Paragraph 41B and 41C are added to the Lease and shall read in their entirety as follows:

“B.In the event (i) space on the first or second floor of Tower Two of the Office Section becomes available for lease to third parties (i.e., the then current tenant has not renewed or extended its then current lease or

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entered into a new lease for the space) after January 1, 2006, and thereafter during the Term of this Lease, as the same may be extended, or (ii) space in Tower One of the Office Section becomes so available for lease to third parties at any time during the Term of this Lease; provided Tenant is not then in default of its obligations under this Lease beyond applicable periods of notice and grace, Landlord shall promptly notify Tenant of the terms under which it intends to offer such space, and as to such space in Tower Two together with such other space in the Building as would be the subject of such offer (the space to be subject to such offer in each such event, “RFO Space”) and the date as of which Landlord estimates the subject RFO Space will be available and Tenant shall have the right, by notice to Landlord given within thirty (30) days after receipt of Landlord’s notice by Tenant to add such space to the Premises, effective as of the date (the “RFO Effective Date”) which is the later to occur of the date set forth in Landlord’s notice or, if the then current tenant holds over, the date on which the then current tenant vacates the RFO Space and Landlord delivers the RFO Space to Tenant in broom clean condition and free of all occupants.  The term for any RFO Space added to the Premises shall be coterminous with the Term of this Lease for the Premises, as such Term may be extended pursuant to Paragraph 40 of this Lease; provided, however, if the subject RFO Space (i) is less than 25,000 rentable square feet, Landlord shall have no obligation to lease such RFO Space to the Tenant for a term of less than two (2) years from the date which Landlord reasonably anticipates will be the RFO Effective Date for such RFO Space, (ii) is equal to or greater than 25,000 rentable square feet and less than 50,000 rentable square feet, Landlord shall have no obligation to lease such RFO Space to the Tenant for a term of less than three (3) years from the date which Landlord reasonably anticipates will be the RFO Effective Date for such RFO Space and (iii) is equal to or greater than 50,000 rentable square feet, Landlord shall have no obligation to lease such RFO Space to the Tenant for a term of less than five (5) years from the date which Landlord reasonably anticipates will be the RFO Effective Date for such RFO Space.

In the event that Tenant shall exercise Tenant’s right to add a particular RFO Space to the Premises, as of the applicable RFO Effective Date:

(i)the Premises shall be deemed to include the subject RFO Space, with the result that all references in this Lease to the “Premises” (except for references to such term in this Paragraph) shall thereafter be and be deemed to be, for all purposes hereunder, references to the Premises, such RFO Space and any Expansion Space or RFO Space previously added to the Premises pursuant to this Paragraph 41;

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(ii)Tenant shall accept RFO Space in “AS IS, WHERE LOCATED” condition except Landlord shall deliver the same in a broom clean condition, free of all occupants, and all work necessary to prepare the RFO Space for Tenant’s occupancy shall be performed by Tenant pursuant to plans and specifications therefor prepared by Tenant and subject to Landlord’s prior written approval (such approval not to be unreasonably withheld, conditioned or delayed), all at Tenant’s sole cost and expense but, notwithstanding the foregoing, Landlord shall, at its expense, make such modifications, if any, as are necessary to bring any atrium walls adjacent to any RFO Space into compliance with the state building and fire codes; and

(iii)Tenant’s Proportionate Share shall be increased proportionately to take into account the additional floor area of the subject RFO Space.  In the year in which the subject RFO Space is delivered, Tenant’s Proportionate Share shall be proportionately allocated between the period prior to and the period subsequent to the delivery of the subject RFO Space.

If Tenant does not exercise the right to lease space subject to Tenant’s rights under this Paragraph 41B and thereafter Landlord proposes to lease such space to a third party on terms which vary in any material way adverse to the Tenant from those contained in Landlord’s notice, Landlord shall again, and before leasing such space to another party, offer the space to Tenant in a written notice upon such varied terms and Tenant shall again have thirty (30) days after receipt of such notice to add such space to the Premises on such varied terms.

In the event the Tenant fails to exercise the aforesaid right and (i) Landlord has failed to enter into a lease of the subject RFO Space within sixty (60) days of the applicable RFO Notice, Tenant shall again have the rights with respect to such RFO Space as described above, it being the intention hereof that such rights shall be subject to the limitations on such rights and particularly the right of the Landlord to make any kind of occupancy agreement with the then current tenant(s) of the applicable RFO Space, if any, as Landlord in its sole discretion determines without interference by the Tenant.”

C.Notwithstanding anything in this Lease to the contrary, if Landlord fails to deliver any Expansion Space on the Anticipated Expansion Date therefor, or to deliver any RFO Space on the date estimated by Landlord in its notice as the RFO Effective Date then Tenant shall not have any obligations with respect to the space in question until

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the same is delivered to Tenant in accordance with the terms of this Lease.  If the failure of delivery of the applicable space is on account of the holdover of another tenant (a “holdover tenant”), then from and after the Anticipated Expansion Date or the estimated RFO Effective Date, as applicable, Landlord shall pay to Tenant (or at Tenant’s option, Tenant may elect to receive such amount in the form of a rent credit) an amount equal to the difference between the rent (exclusive of any damages for which such tenant may be separately liable) due from the holdover tenant (“holdover rent”) with respect to the space which was to have been delivered to Tenant and with respect to the period beginning on the Anticipated Expansion Date or the estimated RFO Effective Date, as applicable, and the amount which would have been payable by Tenant under this Lease with respect to such period had the Premises been delivered on the Anticipated Expansion Date or the estimated RFO Effective Date, as applicable, as and when payable by such holdover tenant pursuant to its lease and regardless of whether holdover tenant can or does make payment (Landlord having the risk of collectibility).  If Landlord fails to deliver the Expansion Space or RFO Space within sixty (60) days after the Anticipated Expansion Date or the estimated RFO Effective Date, as applicable, irrespective of the reason for such failure, then Tenant shall continue to receive the excess of the holdover rent payable thereafter with respect to such space less the amount that would have been due from Tenant until the earlier of Tenant terminating its rights with respect to the space by reason of the failure to deliver or the date on which the space is delivered (or a rent credit with respect thereto) and shall, in addition, receive a rental credit (the “Credit”) towards its Base Rent thereafter due under this Lease with respect to such space equal to one (1) day of the Base Rent allocable to the Expansion Space or RFO Space, as applicable, due under this Lease for each day from and after the expiration of such sixty (60) day period through the date of the Expansion Date or the RFO Effective Date, as applicable, actually occurs.  Furthermore, by notice to the Landlord given to the Landlord within five (5) days after the end of the additional thirty (30) day period commencing on the expiration of the sixty (60) day period, the Tenant may terminate its rights with respect to the space which Landlord has to such date failed to deliver and Tenant shall thereupon have no right to any portion of the holdover rent payable with respect to periods after the date of such notice or any Credit with respect to the period after the date of such notice, but Landlord may by notice to Tenant within five (5) days after receiving such termination notice from Tenant elect to delay such termination until the end of an additional thirty (30) day period commencing at the end of the ninety day period (comprised of the sixty (60) day period and the additional thirty (30) day period after which Tenant gave its notice of termination) and in such event, the right to the portion of holdover rent shall continue during such final thirty (30) day period as will the Credit applicable to such period; and

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the termination shall not be effective if within the final thirty (30) day period, Landlord delivers such Expansion Space or RFO Space as required under this Lease.  Tenant shall be entitled to offset against its Base Rent due under this Lease the amount of any rent credit to which Tenant is entitled to under the provision of this Paragraph 41C; provided, however, Tenant shall not be entitled to offset any Credit against Base Rent, nor shall tenant be entitled to any payment with respect thereto if the Expansion Space or the RFO Space, as applicable, with respect to which such Credit is payable does not become a part of the Premises at the end of the period during which the Credit was generated.  Landlord agrees that in the event it becomes aware that the current tenant of any Expansion Space or any RFO space may hold over in such space beyond the date specified as the delivery date therefor in the applicable Landlord’s notice, Landlord shall, if Tenant has exercised its rights to add such space to the Premises, promptly notify Tenant of the same and shall provide regular updates to Tenant as to the status of the holdover tenant and that date on which it then intends to vacate the applicable space.  Landlord shall use reasonable commercial efforts to cause holdover tenant to vacate the applicable space.

11.Roof Rights; Generator; Additional Cooling.  In addition to Tenant’s rights under Paragraph 42 of the Lease, Landlord hereby grants to Tenant the right to additionally install (i) during the period ending twenty-four (24) months after the date of this Third Amendment to Lease, in a location mutually agreeable to Landlord and Tenant (at least one reasonable location to be proposed by Landlord), an additional standby diesel generator and related diesel tank, and related equipment; (ii) in a location mutually agreeable to Landlord and Tenant (at least one reasonable location to be proposed by Landlord), an additional chiller on the roof of Tower One; and (iii) additional air handling equipment on the roof of the Building in order to accommodate Tenant’s ventilation needs so that Tenant can accommodate an occupancy level of one person for each 125 rentable square feet in the Premises.  Landlord agrees to exercise commercially reasonable efforts to adjust its existing Office Section HVAC system to provide to Tenant an additional 8,000 Cubic Feet per Minute of outside ventilation/fresh air, but if the same requires that the Landlord incur costs to modify its system or additional operating costs with respect thereto, Landlord will provide Tenant with its best estimate of such costs, and Tenant may at Tenant’s option exercised by notice to the Landlord agree to be responsible for all such costs in which event Landlord shall so modify the system and the parties will enter into an appropriate amendment to this Lease to reflect such obligation of Tenant.  If Tenant does not exercise such option, Landlord shall be under no obligation to so modify its system.  All additional equipment referred to above and installed by Tenant, together with the equipment already referred to in said Paragraph 42, shall be included in the definition of Equipment for all purposes of the Lease.  Notwithstanding anything in Paragraph 42 or elsewhere in the Lease to the contrary, (i) with respect to any cooling equipment installed by Tenant hereunder, Tenant shall have no obligation to remove such Equipment from the roof if Tenant has remained in the Premises through the end of the initial Term and through all extension periods, and (ii) with respect to any generator and

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diesel tank installed hereunder, the same shall be removed at the end of the Term unless Landlord elects by a then notice to Tenant to require Tenant to remove such generator and the related diesel tank within one hundred twenty days following such notice.  Obligations with respect to removal shall survive any termination of this Lease.  It is understood that Tenant’s existing rights to a roof antenna permits microwave communication devices.

12.Security and First Responders.  Landlord shall continue to provide a security card access system on the skylobby level and two (2) manned security stations during normal business hours to monitor all skylobby activity.  Each tower shall continue to be equipped with a card reader and magnetic locking device.  Notwithstanding the foregoing, Landlord may from time to time replace such manned and card based system with a more advanced security system that is consistent with Class A buildings in Boston.  Landlord shall, within six months after execution of this Third Amendment to Lease, provide security personnel at the Building during normal Building business hours that are trained “First Responders,” trained and certified in CPR and cardiac defibrillation.  It is understood that such technicians may not be available at all times during such business hours and that Landlord may not be able to maintain such trained personnel continuously during the Term.

13.Tenant Improvements.  Tenant acknowledges that no further amount is owed by Landlord to Tenant under the provisions of Paragraph 39 of the Lease.  In connection with this Third Amendment to Lease, Landlord shall provide Tenant with an additional construction allowance in the amount of $6,611,836.00 (the “Allowance”).  Of the Allowance, $3,305,918.00 shall be paid to Tenant on the date upon which this Third Amendment to Lease has been fully executed and delivered by the Parties, and the balance of the Allowance equal to $3,305,918.00 shall be paid on the first business day following the forty-fifth day after Tenant requests such amount, but in no event prior to January 2, 2006.  The aforesaid Allowance may be used by Tenant for any purpose that Tenant determines, in its sole discretion, and in the event such amount is not paid within five (5) business days of the date due, Tenant may offset such amount against Rent thereafter becoming due; provided, however, if Tenant receives any portion of the balance of such Allowance after so offsetting such that the offset(s) plus the amount so received exceeds $3,305,918.00, Tenant shall promptly pay said excess to Landlord as Additional Rent under the Lease.

14.Assignment and Subletting.  Paragraph 17B of the Lease is modified to read in its entirety as follows:

B.If Tenant requests or was obligated to request Landlord’s consent to assign this Lease or sublet all or any portion of the Premises, in addition to withholding its consent, Landlord shall have the option, exercisable by written notice to Tenant given within thirty (30) days after receipt of such request, to terminate this Lease for the entire Premises, in the case of an assignment or subletting of the whole, and, in the case of a

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subletting of a portion of the Premises for a term which ends within six (6) months of the end of the then term of this Lease, for such portion of the Premises.  If Landlord exercises its right to terminate, Tenant shall have the right to rescind its request for consent and agree not to assign or sublet by written notice of such rescission and agreement given to Landlord within five (5) business days of the date on which Landlord notifies Tenant of Landlord’s intent to terminate this Lease by reason of such request and in such event Tenant shall be deemed not to have requested consent, no assignment or sublet which would otherwise require consent shall occur and Landlord’s termination notice shall be void and of no further force or effect.  In the event that Landlord exercises such right to terminate and Tenant does not timely exercise its right to rescind, Landlord shall be entitled to recover possession of and Tenant shall surrender the whole or such portion of the Premises on the later of (i) the proposed date for possession by such assignee or subtenant, or (ii) ninety (90) days after the date of Landlord’s notice of termination to Tenant.  In the event of termination in respect of a portion of the Premises, the portion so eliminated shall be delivered to Landlord in good order and condition and thereafter, to the extent necessary in Landlord’s judgment, Landlord, at its own cost and expense, may have access to and may make modification to the Premises so as to make such portion a self-contained rental unit with access to common areas, elevators and the like.  Base Rent and Tenant’s Proportionate Share shall be adjusted according to the extent of the Premises for which the Lease is terminated.  Without limitation of the rights of Landlord hereunder in respect thereto, if there is any assignment of this Lease by Tenant or a subletting of the whole of the Premises by Tenant at a rent which, in either case, exceeds the rent payable hereunder by Tenant, or if there is a subletting of a portion of the Premises by Tenant at a rent in excess of the subleased portion’s pro rata share of the rent payable hereunder by Tenant, then Tenant shall pay to Landlord, as additional rent, forthwith upon Tenant’s receipt of each installment of any such excess rent, 50% of the full amount of any such excess rent after deduction of Tenant’s costs in connection with such assignment or sublet including, without limitation, attorneys’ fees, brokerage commissions and modifications to the Premises.  The provisions of this Paragraph shall apply to each and every assignment of the Lease and each and every subletting of all or a portion of the Premises with respect to which the consent of the Landlord is required.  Each request by Tenant for permission to assign this Lease or to sublet the whole or any part of the Premises shall be accompanied by a warranty by Tenant as to the amount of rent to be paid to Tenant by the proposed assignee or sublessee.  Landlord or its authorized representatives shall have the right at all reasonable times to audit the books, records and papers of Tenant relating to any consideration received in connection with such an assignment or subletting, and shall have the right to make copies thereof.

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If the excess rent being paid shall be found understated, Tenant shall within thirty (30) days after demand pay the deficiency together with interest thereon as required under Section 33B of this Lease (determined from the date the same would have been paid but for such understatement), and shall also pay Landlord’s cost of such audit if understated by more than five percent (5%).  For the purposes of this Paragraph 17B, the term “rent” shall mean all Base Rent, Additional Rent or other payments and/or consideration payable by one party to another related to the use and occupancy of all or a portion of the Premises.

15.Notice of Lease.  Landlord and Tenant agree to execute an amended Notice of Lease in the form attached hereto as Exhibit A which Tenant may record.

16.Definitional.  Any term contained in this Third Amendment to Lease having an initial capital letter and not otherwise herein defined shall have the meaning assigned to it in the Lease.

17.Ratification of Lease.  The Lease, as hereby amended, is ratified and confirmed and remains in full force and effect.

18.No Approval Required.  Landlord and Tenant each represents and warrants to the other that it may enter into this Third Amendment of Lease without the consent or approval of any other party.

19.Met Life Only Mortgagee.  Landlord represents and warrants that Metropolitan Life Insurance Company continues to hold the only mortgage which encumbers the Property and that such mortgagee is the same mortgagee which encumbered the Property as of August 2, 1999.

20.Notices.  Paragraph 34B of the Lease is amended to read in its entirety as follows:

34.NOTICES.

All notices to be given under this Lease shall be in writing and either hand delivered; delivered by reputable overnight courier, delivery acknowledged by recipient; or deposited in the United States mail, certified or registered mail with return receipt requested, postage prepaid, addressed as follows:

A.If to Landlord:

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Simon Property Group, L.P.

Attention Property Manager

Two Copley Place, Suite 100

Boston, MA 02116-6502

With a copy to:

Simon Property Group, L.P.

115 West Washington Street

Indianapolis, IN 46204

or to such other person or such other address designated by notice sent by Landlord or Tenant, and as provided in Paragraph 30 of this Lease.

B.If to Tenant:

Addressed to Tenant at Tenant’s present address, and after occupancy of the Premises by Tenant, at 200 Clarendon Street, Boston, Massachusetts 02116, Attn:  Ed Sargavakian with a copy to General Counsel at the same address or to such other address as is designated by Tenant in a notice to Landlord.

with copies to:

Goodwin Procter LLP

Exchange Place

Boston, MA 02109-2881

Notice by mail shall be deemed to have been given as of the date of mailing as aforesaid, but for purposes of computing the period during which a party may cure notice shall be deemed to have been given three (3) business days after mailing provided the same is actually delivered.  Notice by hand delivery or reputable overnight courier shall be deemed to have been given at the time of delivery.

21.Broker.  The Tenant represents that Tenant has dealt with (and only with) Meredith & Grew (“Broker”) hereof as broker in connection with this Third Amendment to Lease, and that insofar as Tenant knows, no other broker negotiated this third Amendment to Lease or is entitled to any commission in connection therewith other than

16

brokers representing Landlord.  Tenant agrees to indemnify, defend and hold harmless Landlord, its employees and agents from and against any claims made by any broker or finder making such claim by reason of a relationship with Tenant, other than Broker and CB RichardEllis-New England Partners, L.P.  (“CBRE LP”), for a commission or fee in connection with this Lease or any sublease hereunder (but nothing herein shall be construed as permitting any such sublease) provided that Landlord has not in fact retained such broker or finder.  Landlord agrees to indemnify, defend and hold harmless Tenant, its employees and agents from and against any claims made by any broker or finder making such claim by reason of a relationship with Landlord for a commission or fee in connection with this Lease provided that Tenant has not in fact retained such broker or finder.  Landlord shall pay the commission or fee due to the Broker and CBRE LP.

22.Confidentiality.  Except in case of emergency, access by Landlord or its employees, agents, contractors or representatives (each a “Landlord’s Agent”) shall be limited to those certain areas necessary to perform the obligations or services of Landlord under the Lease, or as reasonably necessary to exercise Landlord’s rights under Paragraph 22 of the Lease.  Landlord shall reasonably cooperate if Tenant desires to escort any Landlord’s Agent while accessing the Premises and notifies Landlord thereof sufficiently prior to such access (reasonable prior notice of which need for access shall be given to Tenant in all cases other than in cases of emergency) to assure that there is no unreasonable delay in obtaining such access by any Landlord’s Agent.  Landlord will not, and will use reasonable efforts to cause Landlord’s Agents not to, at any time, reveal to any person, association or company, any information or documentation which comes to the attention of Landlord or Landlord’s Agent during any such access to the Premises; provided, however, such reasonable efforts shall be limited to making Landlord’s Agents aware of the confidential nature of such information and documentation and of the obligation to maintain the confidentiality thereof.  Tenant may furnish Landlord its standard written confidentiality advisory, that Tenant desires be furnished by Landlord to each Landlord’s Agent who shall enter the Premises, which advisory will so make such Landlord’s Agent aware of the confidential nature of such information and documentation, and if Tenant does so, Landlord shall furnish such advisory to each of Landlord’s Agents prior to their entering the Premises.  In the case of regularly scheduled repeated entries (i) such advisory need not be given prior to each entry, but shall be given in any event at least once per calendar year following Tenant’s request therefor, and upon any replacement of the company providing the service in question, without Tenant being required to make a request and (ii) with respect to Building service contractors, such as Landlord’s cleaning contractor, such advisory need only be furnished to the company providing such service and not to each individual employee.  The aforesaid prohibition upon disclosure shall exclude information that (a) becomes generally available to the public other than as a result of a disclosure by Landlord or any Landlord Agent, or (b) was available to Landlord on a non-confidential basis prior to its having been observed at the Premises or otherwise disclosed to Landlord by Tenant or its representatives in connection with access to the Premises as aforesaid.  Nothing in this Section 22 shall prohibit Landlord from disclosing financial information about Tenant that was intentionally provided by Tenant to Landlord, to actual or prospective lenders or

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purchasers of the Property and/or actual or prospective investors in Landlord or any of its affiliates and to Landlord’s consultants, attorneys, and accountants, so long as any person or entity to whom Landlord discloses such information agrees to keep such information confidential.  In addition, Landlord and any Landlord Agent may disclose any information (a) to the extent required by any law, regulation, or order of any public authority or court, and (b) in connection with any litigation between Landlord and Tenant under the Lease.

IN WITNESS WHEREOF, Landlord and Tenant have caused this document to be executed as of the date first above written.

LANDLORD:

COPLEY PLACE ASSOCIATES, LLC, a Delaware limited liability company

By:	SPG COPLEY ASSOCIATES, LLC, a Delaware limited liability company, managing member
	By:	SIMON PROPERTY GROUP, L.P., a Delaware limited partnership, sole member
		By:	SIMON PROPERTY GROUP, INC., a Delaware corporation, general partner
			By:	/s/ David Simon
				David Simon, Chief Executive Officer

TENANT:

INVESTORS BANK & TRUST COMPANY, a Massachusetts trust company

By:	/s/ Kevin J. Sheehan
	KEVIN J. SHEEHAN
	Chief Executive Officer

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EX-21.1

Exhibit 21.1

Subsidiaries of Investors Financial Services Corp.

as of December 31, 2005

IBT Trust Company (Canada)

IBT Trust Company (Cayman), Ltd.

IBT Vermont Insurance Co.

Investors Bank & Trust Company

Investors Boston Securities Corp.

Investors California, LLC

Investors Capital Services, LLC

Investors Capital Trust I

Investors Copley Securities Corp.

Investors Exeter Securities Corp.

Investors Financial Services (Ireland) Limited

Investors Fund Services (Ireland) Limited

Investors Holding Corporation

Investors Securities Corp.

Investors Securities Services, LLC

Investors Trust & custodial Services (Ireland) Limited

Investors Trust Holdings

Investors Trust Holdings Limited

Investors Trust Limited

Investors Trust Nominees Limited

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in this Registration Statement on Form S-8 of our reports dated March 2, 2006, relating to the financial statements and financial statement schedules of Investors Financial Services Corp., and management’s report on the effectiveness of internal control over financial reporting appearing in the Annual Report on Form 10-K of Investors Financial Services Corp. for the year ended December 31, 2005.

DELOITTE & TOUCHE LLP

Boston, Massachusetts
March 2, 2006

EX-31.1

Exhibit31.1

I, Kevin J. Sheehan, Chairman and Chief Executive Officer, certify that:

1.I have reviewed this Report on Form 10-K filed on March 2, 2006 of Investors Financial Services Corp.;

2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  March 2, 2006

/s/ Kevin J. Sheehan

Kevin J. Sheehan

Chairman and Chief Executive Officer

EX-31.2

Exhibit31.2

I, John N. Spinney, Jr., Senior Vice President and Chief Financial Officer, certify that:

1.I have reviewed this Report on Form 10-K filed on March 2, 2006 of Investors Financial Services Corp.;

2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  March 2, 2006

/s/ John N. Spinney, Jr.

John N. Spinney Jr.

Senior Vice President and Chief Financial Officer

EX-32.1

Exhibit32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Report on Form 10-K of Investors Financial Services Corp. (the “Company”) for the period ended December 31, 2005 as filed on March 2, 2006 (the “Report”), I, Kevin J. Sheehan, Chairman and Chief Executive Officer, hereby certify, pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Kevin J. Sheehan

Kevin J. Sheehan

Chairman and

Chief Executive Officer

March 2, 2006

A signed original of this written statement required by Section 906 has been provided to Investors Financial Services Corp. and will be retained by Investors Financial Services Corp. and furnished to the Securities and Exchange Commission or its staff upon request.

In connection with the Report on Form 10-K of Investors Financial Services Corp. (the “Company”) for the period ended December 31, 2005 as filed on March 2, 2006 (the “Report”), I, John N. Spinney, Jr., Senior Vice President and Chief Financial Officer, hereby certify, pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ John N. Spinney, Jr.

Senior Vice President and

Chief Financial Officer

March 2, 2006

A signed original of this written statement required by Section 906 has been provided to Investors Financial Services Corp. and will be retained by Investors Financial Services Corp. and furnished to the Securities and Exchange Commission or its staff upon request.