EATON VANCE CORP, DEF 14C, 1995-11-03

EATON VANCE CORP
DEF 14C, 1995-11-03
INVESTMENT ADVICE

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<PAGE>

SCHEDULE 14C INFORMATION

Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934

Check the appropriate box:

[_] Preliminary Information Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14c-5(d)(2))

[X] Definitive Information Statement

Eaton Vance Corporation
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)

Payment of Filing Fee (Check the appropriate box):

[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).

[_] Fee computed on table below per Exchange Act Rules 14c-5(g)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

Common Stock and Class A Common Stock of Investors Financial
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Securities Corp., a subsidiary of Eaton Vance Corp.
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(2) Aggregate number of securities to which transaction applies:

Common Stock: 2,613,078; Class A Common Stock: 502,515
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

$20.00 per share estimated solely for the purpose of calculating the
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registration fee, based upon the estimated initial public offering
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price of the Common Stock of Investors Financial Services Corp.
----------------------------------------------------------------------------

(4) Proposed maximum aggregate value of transaction:

$62,311,860
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(5) Total fee paid:

$12,463
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[X] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

----------------------------------------------------------------------------

(2) Form, Schedule or Registration Statement No.:

----------------------------------------------------------------------------

(3) Filing Party:

----------------------------------------------------------------------------

(4) Date Filed:

----------------------------------------------------------------------------

Notes:

<PAGE>

INFORMATION STATEMENT

INVESTORS
-------------------------------
FINANCIAL SERVICES CORP.

Distribution of up to
2,613,078 shares of Common Stock, par value $.01 per share,
and 502,515 shares of Class A Stock, par value $.01 per share

This Information Statement is being furnished to the holders of Voting
Common Stock, par value $.01 per share (the "Voting Stock"), and Non-Voting
Common Stock, par value $.01 per share (the "Non-Voting Stock"), of Eaton
Vance Corp. ("Eaton Vance"), a Maryland corporation, in connection with the
distribution (the "Distribution") by Eaton Vance to its stockholders of all of
the shares of Common Stock, par value $.01 per share (the "Common Stock"), and
Class A Common Stock, par value $.01 per share (the "Class A Stock"), of
Investors Financial Services Corp. ("IFSC" or the "Company"), a Delaware
corporation, held by Eaton Vance on the Record Date referred to herein.

The record date for the Distribution (the "Record Date") is October 30,
1995. The distribution date for the Distribution (the "Distribution Date") is
expected to be two business days after the pricing (the "Pricing Date") of the
Company's proposed initial public offering of 2,000,000 shares of Common Stock
(the "Public Offering") pursuant to a Registration Statement on Form S-1 (the
"Public Offering Registration Statement"). The Distribution will be made to
the holders of record of Voting Stock and Non-Voting Stock on the basis of
approximately 2.799 shares of Common Stock, and approximately .538 shares of
Class A Stock, for every ten shares of Voting Stock or Non-Voting Stock owned
at the close of business on the Record Date. The Distribution is conditioned,
among other things, upon effectiveness of the Public Offering Registration
Statement and the effectiveness of all necessary regulatory approvals.

No consideration or surrender of Voting Stock or Non-Voting Stock will be
required of stockholders of Eaton Vance in return for the shares of Common
Stock and Class A Stock issued pursuant to the Distribution.

There is no current market for the shares of Common Stock or Class A Stock,
and no "when-issued" trading market is expected to develop prior to the
Pricing Date. The Common Stock has been approved for trading on the Nasdaq
National Market under the symbol "IFIN," subject to notice of issuance. After
the Pricing Date, and until the Distribution Date, the Common Stock
distributed in the Distribution will trade on a when-issued basis on the
Nasdaq National Market, and the Common Stock to be issued in the Public
Offering will trade on a regular-way basis on the Nasdaq National Market.
After the Distribution Date, all Common Stock will trade on a regular-way
basis on the Nasdaq National Market. See "The Distribution - Listing and
Trading of Common Stock and Class A Stock."

In reviewing this Information Statement, you should carefully consider the
matters described under the caption "Risk Factors." Neither Eaton Vance nor
IFSC will receive any cash or other proceeds from the Distribution.

----------------

NO VOTE OF STOCKHOLDERS IS REQUIRED IN CONNECTION WITH THIS DISTRIBUTION. WE
ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.

----------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

----------------

THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.

The date of this Information Statement is November 3, 1995
<PAGE>

AVAILABLE INFORMATION

Eaton Vance has been, and upon completion of the Distribution, the Company
will be subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith
reports, proxy statements and other information have been or will be filed
with the Securities and Exchange Commission (the "Commission"). The Company
has filed with the Commission a Registration Statement (the "8-A Registration
Statement") on Form 8-A under the Exchange Act relating to the Common Stock
and Class A Stock to be distributed in the Distribution. The reports, proxy
statements, the 8-A Registration Statement and other information filed by
Eaton Vance and the Company with the Commission may be inspected and copied at
the public reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, as well as
at the Regional Offices of the Commission at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661-2511 and Seven World Trade Center, Suite
1300, New York, NY 10048. Copies of such information may also be obtained by
mail at prescribed rates from the Public Reference Branch of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549.

This Information Statement does not contain all the information contained in
the 8-A Registration Statement and the related exhibits. Statements in this
Information Statement as to the contents of any contract, agreement or other
document are summaries only and are not necessarily complete. For complete
information as to these matters, refer to the applicable exhibits to the 8-A
Registration Statement.

NO PERSON IS AUTHORIZED BY EATON VANCE OR THE COMPANY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
INFORMATION STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THE
DELIVERY OF THIS INFORMATION STATEMENT NOR ANY DISTRIBUTION OF SECURITIES MADE
HEREUNDER SHALL IMPLY THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET
FORTH HEREIN OR IN THE AFFAIRS OF IFSC SINCE THE DATE HEREOF.

ii
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
SUMMARY.................................................................. 1
The Distribution....................................................... 1
Investors Financial Services Corp...................................... 3
The Distribution; Additional Business Activities....................... 4
Financing Transaction.................................................. 5
Investors Financial Services Corp. Summary Financial Data.............. 6

INVESTORS FINANCIAL SERVICES CORP. ...................................... 7

THE DISTRIBUTION......................................................... 9
General................................................................ 9
Reasons for the Distribution........................................... 9
Manner of Effecting the Distribution................................... 10
Federal Income Tax Consequences of the Distribution.................... 11
Listing and Trading of Common Stock and Class A Stock.................. 11
Conditions to the Distribution......................................... 12
Reasons for Furnishing the Information Statement....................... 12

RISK FACTORS............................................................. 13
Changes in Market Conditions; Dependence on Mutual Fund Industry....... 13
Dependence on Key Clients.............................................. 13
Management of Growth................................................... 13
Competition............................................................ 13
Risks Associated with Financial Services Clients....................... 14
Variability of Quarterly Operating Results............................. 14
Intellectual Property Rights........................................... 14
Interest Rate Risk..................................................... 14
Closing of Public Offering............................................. 14
No Prior Trading Market; Potential Volatility of Stock Price........... 15
Shares Eligible for Future Sale........................................ 15
Anti-Takeover Provisions; Rights Plan; Possible Issuance of Preferred
Stock................................................................. 15

CAPITALIZATION........................................................... 17

SELECTED FINANCIAL AND OPERATING DATA.................................... 18

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS............................................... 19
Overview............................................................... 19
Statement of Operations................................................ 20
Financial Condition.................................................... 30
Interest Rate Sensitivity.............................................. 31
Liquidity.............................................................. 33
Capital Resources...................................................... 33

BUSINESS................................................................. 37
General................................................................ 37
Overview of the Financial Services Industry............................ 37
Company Strategy....................................................... 39
Service Offerings...................................................... 41
Sales, Marketing and Client Support.................................... 45
</TABLE>

iii
<PAGE>

<TABLE>
<CAPTION>
PAGE
<S> <C>
Significant Clients..................................................... 45
Software Systems and Data Center........................................ 46
Competition............................................................. 47
Intellectual Property................................................... 48
Properties.............................................................. 48
Employees and Training.................................................. 48
Legal Proceedings....................................................... 49
Regulation and Supervision.............................................. 49

MANAGEMENT AND COMPENSATION............................................... 57
Executive Officers and Directors........................................ 57
Executive Compensation.................................................. 59
Bonuses................................................................. 60
Employment Agreements................................................... 60
1995 Stock Plan......................................................... 61
Benefit Plans........................................................... 62
Indemnification and Limitation of Liability............................. 63

OWNERSHIP OF CAPITAL STOCK................................................ 64

DESCRIPTION OF CAPITAL STOCK.............................................. 66
Common Stock............................................................ 66
Class A Stock........................................................... 66
Preferred Stock......................................................... 67
Delaware Law and Certain Charter and By-Law Provisions.................. 67
Rights Plan............................................................. 69

SHARES ELIGIBLE FOR FUTURE SALE........................................... 70

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................ 71

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS................................ F-1
</TABLE>

iv
<PAGE>

SUMMARY

This summary is qualified by the more detailed information set forth
elsewhere in this Information Statement, which should be read in its entirety.
Capitalized terms used but not defined in this summary are defined elsewhere in
the Information Statement.

The Distribution

Distributing Corporation............ Eaton Vance Corp., a Maryland
corporation. References to Eaton Vance
include its combined subsidiaries, except
where the context otherwise requires.

Distributed Corporation............. Investors Financial Services Corp., a
Delaware corporation, and its related
subsidiary, Investors Bank & Trust
Company.

Shares to be Distributed............ Approximately 2,613,078 shares of Common
Stock, par value $.01 per share, and
502,515 shares of Class A Stock, par
value $.01 per share.

Distribution Ratio.................. Approximately 2.799 shares of Common
Stock and approximately .538 shares of
Class A Stock for each ten shares of
Voting Stock or Non-Voting Stock held as
of the close of business on the Record
Date, based on 9,355,072 shares of Voting
Stock and Non-Voting Stock outstanding as
of the Record Date. See "The
Distribution - Manner of Effecting the
Distribution."

Fractional Share Interests.......... Fractional Shares will not be
distributed. Fractional shares will be
aggregated and sold, on behalf of
stockholders entitled to receive such
shares, by The First National Bank of
Boston (the "Independent Agent"). The net
proceeds from the sale of fractional
shares will be distributed ratably to
those stockholders otherwise entitled to
receive fractional shares.

Distribution Agent.................. First Chicago Trust Company of New York
will be the distribution agent (the
"Distribution Agent").

Transfer Agents and Registrars...... First National Bank of Boston is the
transfer agent for Eaton Vance (the
"Eaton Vance Transfer Agent") and the
Eaton Vance registrar. First Chicago
Trust Company of New York will be the
transfer agent for IFSC (the "IFSC
Transfer Agent") and the IFSC registrar.

Record Date......................... The Record Date is October 30, 1995.

1
<PAGE>

Distribution Date................... The Distribution Date is expected to be
two business days after the Pricing Date.
On the Distribution Date, the
Distribution Agent will begin delivering
Common Stock and Class A Stock to holders
of record of Voting Stock or Non-Voting
Stock as of the Record Date. Eaton Vance
stockholders will not be required to make
any payment or to take any other action
to receive their Common Stock and Class A
Stock. See "The Distribution - Manner of
Effecting the Distribution."

Reasons for the Distribution........ The Distribution will eliminate the
restrictions imposed on Investors Bank &
Trust Company, the Company's wholly-owned
operating subsidiary, by the Competitive
Equality Banking Act of 1987 ("CEBA"),
enabling the Company to expand its
current business activities and
participate in certain additional
activities. See "The Distribution -
Reasons for the Distribution." In
addition, the Board of Directors of Eaton
Vance has concluded that the Distribution
will allow Eaton Vance and the Company to
focus on their respective core businesses
without regard to the corporate
objectives and policies of the other
company, and will allow investors to
evaluate each company more effectively.
See "The Distribution - Reasons for the
Distribution."

Relationship with IFSC after the
Distribution........................ After the Distribution, Eaton Vance will
have no ownership interest in the
Company, and the Company will be an
independent public company. The Company's
business relationship with Eaton Vance
generated approximately 14%, 13% and 21%
of the net operating revenues of the
Company for the twelve-month periods
ended October 31, 1992, 1993 and 1994,
respectively, and 18% and 15% of the net
operating revenues for the nine-month
periods ended July 31, 1994 and 1995,
respectively. Subsequent to the
Distribution, the Company expects to
continue its business relationship with
Eaton Vance by providing certain custody,
fund accounting, data processing,
depository, and trustee services. See
"Investors Financial Services Corp." and
"Certain Relationships and Related
Transactions."

Federal Income Tax Consequences..... Eaton Vance has received a ruling from
the Internal Revenue Service to the
effect that the Distribution will qualify
as a tax-free spinoff under Section 355
of the Internal Revenue Code of 1986, as
amended (the "Code"), and that, for
federal income tax purposes, no gain or
loss will be recognized by a holder of
Voting Stock or Non-Voting Stock upon the
receipt of Common Stock and Class A Stock
in the Distribution. See "The
Distribution - Federal Income Tax
Consequences of the Distribution."

2
<PAGE>

Trading Market...................... There is not currently a public market
for Common Stock or Class A Stock, and no
"when-issued" trading market is expected
to develop prior to the Pricing Date. The
Common Stock has been approved for
listing on the Nasdaq National Market
under the trading symbol "IFIN," subject
to notice of issuance. After the Pricing
Date, and until the Distribution Date,
the Common Stock distributed in the
Distribution will trade on a when-issued
basis on the Nasdaq National Market, and
the Common Stock issued in the Public
Offering will trade on a regular-way
basis on the Nasdaq National Market.
After the Distribution Date, all Common
Stock will trade on a regular-way basis
on the Nasdaq National Market. Because
the Class A Stock automatically converts
into an equal number of shares of Common
Stock upon transfer, the Transfer Agent
has been instructed to deliver shares of
Common Stock upon presentation of shares
of Class A Stock for sale or transfer.
For a description of "when-issued" and
"regular-way" trading and other matters
related to the listing and trading of the
Common Stock and Class A Stock, see "The
Distribution - Listing and Trading of
Common Stock and Class A Stock."

Certain Considerations.............. Stockholders should carefully consider
the matters discussed under the section
entitled "Risk Factors" in this
Information Statement.

Investors Financial Services Corp.

Investors Financial Services Corp., a Delaware corporation based in Boston,
Massachusetts, provides asset administration services for the financial
services industry through its wholly-owned subsidiary, Investors Bank & Trust
Company. The Company provides domestic and global custody, multicurrency
accounting, institutional transfer agency, performance measurement, foreign
exchange, securities lending, and mutual fund administration services to a
variety of financial asset managers, including mutual fund complexes,
investment advisors, banks and insurance companies. Currently, the Company
provides financial asset administration services for approximately $87 billion
of assets, including assets managed by 35 mutual fund complexes and insurance
companies and approximately $6 billion of assets based outside of the United
States. The Company derived approximately 87%, 85% and 89% of its revenues from
financial asset administration services for the twelve-month periods ended
October 31, 1992, 1993 and 1994, respectively, and 89% and 84% of its revenues
from financial asset administration services for the nine-month periods ended
July 31, 1994 and 1995, respectively. The Company derived the balance of its
revenues from private banking transactions, including secured lending, trust
administration and deposit accounts. As used herein, the terms "IFSC" and the
"Company" shall mean Investors Financial Services Corp. together with its
wholly owned subsidiary, Investors Bank & Trust Company from and after June 29,
1995, the date of organization of Investors Financial Services Corp., and shall
mean Investors Bank & Trust Company prior to that date, unless the context
otherwise indicates. Investors Bank & Trust Company is sometimes referred to
herein as the "Bank."

Demand for the Company's services is driven by growth in the financial
services industry, a trend toward cross-border investing, and the increasing
complexity of financial services and investment vehicles that are offered in
the world markets. In the United States, financial assets managed in the mutual
fund industry grew to more than $2.3 trillion in 1994. Total financial assets
in the United States have grown at an annual rate of approximately 10% over the
last five years, almost double the nominal gross domestic product growth. The
Company believes that the rapid pace of financial asset creation through the
flow of assets into pooled investment products and the related asset
administration of those products is the key to revenue growth for asset
administration companies.

3
<PAGE>

The Company's business strategy is to generate new and recurring revenue by
delivering superior client service, maintaining technological expertise and
expanding the range of service offerings for all forms of financial assets. The
Company believes that asset administration companies operate most efficiently
when bundling services such as custody and accounting with value-added services
such as securities lending and foreign exchange. The Fund Accounting and
Tracking System ("FACTS"), the software system developed and owned by the
Company, with its integrated functionality, supports these services, and can be
distributed globally to service most pooled investment products. See
"Business - Company Strategy."

The Company has operated as a majority-owned subsidiary of Eaton Vance since
1969. In May 1990, Investors Bank & Trust Company, the Company's operating
subsidiary, acquired the Financial Products Services Division of the Bank of
New England and hired Kevin J. Sheehan and Michael F. Rogers, then managers of
that division and now the Company's Chief Executive Officer and Executive
Managing Director, respectively. The acquisition increased the Company's base
of assets processed from $9 billion to $21 billion. Over the five fiscal years
ended October 31, 1994, the Company has experienced an average annual growth
rate of 27% in total assets processed. The Company opened a subsidiary in
Toronto, Canada in 1993 to service the growing offshore mutual fund market. In
1994, the Company opened an office in Dublin, Ireland to service European
clients, and in July 1995, the Company was granted preliminary approval to open
a small administration site in the Cayman Islands to service Caribbean-based
funds.

The Company provides custody and fund accounting services to mutual funds for
which Eaton Vance is the investment advisor and administrator and, in some
cases, the sponsor and distributor. The Company also provides custody and
accounting services for Eaton Vance's separately managed accounts. Various
mutual funds for which Eaton Vance serves as financial advisor presently
maintain deposits at the Company in connection with these funds' custody
accounts, which represent approximately 4.3% of the Company's deposit
relationships. The Company maintains, and serves as trustee for, a common trust
fund consisting of several funds for which Eaton Vance is the investment
advisor. The Company also serves as the directed trustee for a collective
investment trust sponsored and managed by Eaton Vance. The Company's business
relationships with Eaton Vance generated approximately 14%, 13% and 21% of the
net operating revenues of the Company for the twelve-month periods ended
October 31, 1992, 1993 and 1994, respectively, and 18% and 15% of the net
operating revenues of the Company for the nine-month periods ended July 31,
1994 and 1995, respectively. The Company believes its relationship with Eaton
Vance is good and expects it to continue after completion of the Distribution.
The Company's agreements with mutual funds managed by Eaton Vance, pursuant to
which the Company provides custody and fund accounting services, extend through
August 2000 and continue thereafter until terminated by either party upon sixty
days prior notice. If a majority of non-interested trustees of a fund
determines that the performance of the Company under any such agreement has
been unsatisfactory or adverse to the interests of the fund's shareholders, or
that the terms of the agreement are no longer consistent with publicly
available industry standards, the Company shall have 60 days after receipt of
written notice from the fund to such effect to (i) correct its performance or
(ii) renegotiate such terms. If such corrective action or renegotiation is not
satisfactory to such trustees, such agreement may be terminated on sixty days
prior notice. There have been no requests for corrective action or
renegotiation to date. See "Certain Relationships and Related Transactions."

4
<PAGE>

The Distribution; Additional Business Activities

The boards of directors of the Company and Eaton Vance have determined to
separate the Company's business operations from those of Eaton Vance by means
of a tax free, pro rata distribution of Eaton Vance's ownership interest in the
Company to the Eaton Vance stockholders effective on the business day prior to
the completion of the Public Offering. The principal reasons for the
Distribution are to eliminate regulatory restrictions under the Competitive
Equality Banking Act of 1987 ("CEBA") and to enable Eaton Vance and the Company
each to pursue its business goals independent of the other company. In order to
avoid being regulated as a bank holding company for the purposes of the Bank
Holding Company Act of 1956, Eaton Vance has operated Investors Bank & Trust
Company under certain growth and activity restrictions mandated by CEBA. If
Eaton Vance were regulated as a bank holding company, it would be required to
cease certain of its business activities. Under these CEBA restrictions, the
Company could not: (a) engage in any activity in which it was not engaged as of
March 5, 1987; (b) increase its assets by more than 7% during any 12-month
period beginning after August 10, 1988; (c) engage in certain cross-marketing
activities with affiliates; or (d) permit overdrafts by or incur overdrafts on
behalf of affiliates at a Federal Reserve Bank.

The elimination of the CEBA growth and activity restrictions will enable the
the Company to expand current business activities and participate in certain
additional business activities. The Company's clients, which consist
principally of managers of mutual funds, unit investment trusts and other
pooled investment products, typically generate cash balances from securities
sales and other transactions which they wish to invest on a short-term basis.
Because the Company has been subject to the 7% annual asset growth cap, it has
not been able to accept those deposits and must direct them to other financial
institutions, foregoing a potential source of revenue. The Company directed
client deposits averaging approximately $1.1 billion daily to other financial
institutions in fiscal year 1994. Similarly, many of the Company's clients use
credit lines to leverage their portfolios or to handle overnight cash
shortfalls. CEBA requirements have restricted the Company from making
commercial loans of this type. As a result of the removal of CEBA limitations,
the Company will now offer these deposit and lending services directly to
existing and potential clients. In addition to the increased revenue generated
from these deposit and lending services, the increase in assets reflected on
the Company's balance sheet as a result of retaining client deposits will
enable the Company, as a significantly larger institution, to market itself to
a broader range of potential clients. See "Description of Capital Stock."

Financing Transaction

Unless otherwise indicated, all information in this Information Statement
assumes the over-allotment option will not be exercised in the Public Offering.

5
<PAGE>

INVESTORS FINANCIAL SERVICES CORP.

SUMMARY FINANCIAL DATA

Summary Consolidated Financial Information

(Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
July 31, 1995
--------------------
as
Actual Adjusted(7)
-------- -----------
(Unaudited)
<S> <C> <C>
Consolidated Balance Sheet Data:
Total assets............................................... $112,539 $139,361
Total deposits............................................. 88,777 88,777
Stockholders' equity....................................... 17,248 44,070
</TABLE>
- --------
(1) Net operating revenue for the nine months ended July 31, 1995 includes the
recognition of net proceeds of $2,572,000 ($.37 pro forma earnings per
share) from the assignment to a third party of asset administration rights
associated with $5 billion of unit investment trust ("UIT") assets. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(2) Net operating revenue consists of net interest income and noninterest
income.

(3) Pro forma data gives effect to the recapitalization of the Company prior to
the Distribution, whereby the Company will issue 3,418,573 shares of Common
Stock and 611,427 shares of Class A Stock in exchange for the 1,000,000
shares of the Bank's capital stock previously outstanding.
(4) Ratios for the nine months ended July 31, 1994 and 1995 have been
annualized. The ratio for the nine months ended July 31, 1995 includes the
effect of the unit investment trust transaction described in (1), above.
Without the earnings associated with that transaction, return on equity and
return on assets for the nine months ended July 31, 1995 would have been
18.04% and 2.30%, respectively.
(5) Tier I capital consists of the sum of common stockholders' equity and non-
cumulative perpetual preferred stock minus all intangible assets (other
than certain qualifying goodwill) and excess deferred tax assets.
(6) Assets processed is the total dollar value of financial assets on the
reported date for which the Company provides one or more of the following
services: custody, multicurrency accounting, institutional transfer agency,
performance measurement, foreign exchange, securities lending and mutual
fund administration.

(7) Adjusted to reflect the sale of 2,000,000 shares of Common Stock to be
offered by the Company in the Public Offering at an assumed initial
offering price of $15.00 per share (the mid-point of the price range as set
forth in the Company's preliminary prospectus dated October 19, 1995),
after deducting underwriting discounts and offering expenses. See
"Summary - Financing Transaction" and "Capitalization."

6
<PAGE>

INVESTORS FINANCIAL SERVICES CORP.

Investors Financial Services Corp., based in Boston, Massachusetts, provides
asset administration services for the financial services industry through its
wholly-owned subsidiary, Investors Bank & Trust Company. The Company provides
domestic and global custody, multicurrency accounting, institutional transfer
agency, performance measurement, foreign exchange, securities lending, and
mutual fund administration services to a variety of financial asset managers,
including mutual fund complexes, investment advisors, banks and insurance
companies. Currently, the Company provides financial asset administration
services for approximately $87 billion of assets, including assets managed by
35 mutual fund complexes and insurance companies and approximately $6 billion
of assets based outside of the United States. The Company derived
approximately 87%, 85% and 89% of its revenues from financial asset
administration services for the twelve-month periods ended October 31, 1992,
1993 and 1994, respectively, and 89% and 84% of its revenues from financial
administration services for the nine-month periods ended July 31, 1994 and
1995, respectively. The Company derived the balance of its revenues from
private banking transactions, including secured lending, trust administration
and deposit accounts.

Demand for the Company's services is driven by growth in the financial
services industry, a trend toward cross-border investing, and the increasing
complexity of financial services and investment vehicles that are offered in
the world markets. In the United States, financial assets managed in the
mutual fund industry grew to more than $2.3 trillion in 1994. Total financial
assets in the United States have grown at an annual rate of approximately 10%
over the last five years, almost double the nominal gross domestic product
growth. The Company believes that the rapid pace of financial asset creation
through the flow of assets into pooled investment products and the related
asset administration of those products is the key to revenue growth for asset
administration companies. See "Business - Overview of Financial Services
Industry."

The Company's business strategy is to generate new and recurring revenue by
delivering superior client service, maintaining technological expertise and
expanding the range of service offerings for all forms of financial assets.
The Company believes that asset administration companies operate most
efficiently when bundling services such as custody and accounting with value-
added services such as securities lending and foreign exchange. FACTS, the
software system developed and owned by the Company, with its integrated
functionality, supports these services, and can be distributed globally to
service most pooled investment products. See "Business - Company Strategy."

The Company has operated as a majority-owned subsidiary of Eaton Vance since
1969. In May 1990, the Company acquired the Financial Products Services
Division of the Bank of New England and hired Kevin J. Sheehan and Michael F.
Rogers, then managers of that division and now the Company's Chief Executive
Officer and Executive Managing Director, respectively. The acquisition
increased the Company's base of assets processed from $9 billion to $21
billion. Over the five fiscal years ended October 31, 1994, the Company has
experienced an average annual growth rate of 27% in total assets processed.
The Company opened a subsidiary in Toronto, Canada in 1993 to service the
growing offshore mutual fund market. In 1994, the Company opened an office in
Dublin, Ireland to service European clients, and in July 1995, the Company was
granted preliminary approval to open a small administration site in the Cayman
Islands to service Caribbean-based funds.

The Company provides custody and fund accounting services to the mutual
funds for which Eaton Vance is the investment advisor and administrator and,
in some cases, the sponsor and distributor. The Company also provides custody
and accounting services for Eaton Vance's separately managed accounts. Various
mutual funds for which Eaton Vance serves as financial advisor presently
maintain deposits at the Company in connection with these funds' custody
accounts, which represent approximately 4.3% of the Company's deposit
relationships. The Company maintains, and serves as trustee for, a common
trust fund consisting of several funds for which Eaton Vance is the investment
advisor. The Company also serves as the directed trustee for a collective
investment trust sponsored and managed by Eaton Vance. The Company's business
relationships with Eaton Vance generated approximately 14%, 13% and 21% of the
net operating revenues of the Company for the twelve-month periods ended
October 31, 1992, 1993 and 1994, respectively, and 18% and 15% of the net
operating revenues of the Company for the nine-month periods ended July 31,
1994 and 1995, respectively. The

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Company believes its relationship with Eaton Vance is good and expects it to
continue after completion of the Distribution. The Company's agreements with
mutual funds managed by Eaton Vance, pursuant to which the Company provides
custody and fund accounting services, extend through August 2000 and continue
thereafter until terminated by either party upon sixty days prior notice. If a
majority of non-interested trustees of a fund determines that the performance
of the Company under such agreement has been unsatisfactory or adverse to the
interests of the fund's shareholders, or that the terms of the agreement are
no longer consistent with publicly available industry standards, the Company
shall have 60 days after receipt of written notice from the fund to such
effect to (i) correct its performance or (ii) renegotiate such terms. If such
corrective action or renegotiation is not satisfactory to such trustees, such
agreement may be terminated on sixty days prior notice. There have been no
requests for corrective action or renegotiation to date. The reported
transactions with Eaton Vance were conducted on an arms-length basis, on terms
the Company believes were no less favorable to the Company than could have
been obtained from unrelated third parties. The Company did not obtain
independent third party valuations of the terms of these transactions. See
"Certain Relationships and Related Transactions."

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THE DISTRIBUTION

General

On October 12, 1995, the Board of Directors of Eaton Vance (the "Eaton Vance
Board") approved a definitive plan to distribute, on a pro-rata basis, all the
shares of Common Stock and Class A Stock held by Eaton Vance to the holders of
Voting Stock and Non-Voting Stock. The Eaton Vance Board set the Record Date
and declared a dividend (subject to satisfaction of all conditions to the
Distribution) payable to each holder of record on the Record Date, at a ratio
of approximately 2.799 shares of Common Stock and approximately .538 shares of
Class A Stock for every ten shares of Voting Stock or Non-Voting Stock held by
such holder on the Record Date, based on 9,335,072 shares of Voting Stock and
Non-Voting Stock outstanding as of the Record Date.

Certificates representing shares of Common Stock and Class A Stock will be
mailed or delivered by the Distribution Agent, or made available in
stockholders' book entry accounts, beginning on the Distribution Date. The
shares of Common Stock and Class A Stock will be fully paid and non-assessable
and the holders thereof will not be entitled to preemptive rights. See
"Description of Capital Stock."

Reasons for the Distribution

The boards of directors of Eaton Vance and the Company have determined to
separate the Company's business operations from those of Eaton Vance by means
of a tax free, pro rata distribution of Eaton Vance's ownership interest in
the Company to the Eaton Vance stockholders effective on the business day
prior to the completion of the Public Offering. The principal reasons for the
Distribution are to eliminate the CEBA regulatory restrictions and to enable
the Company to pursue its business goals independent of Eaton Vance. In order
to avoid being regulated as a bank holding company for the purposes of the
Bank Holding Company Act of 1956, Eaton Vance has operated Investors Bank &
Trust Company under certain growth and activity restrictions mandated by CEBA.
Under these CEBA restrictions, the Company could not: (a) engage in any
activity in which it was not engaged as of March 5, 1987; (b) increase its
assets by more than 7% during any 12-month period beginning after August 10,
1988; (c) engage in certain cross-marketing activities with affiliates; and
(d) permit overdrafts by or incur overdrafts on behalf of affiliates at a
Federal Reserve Bank.

The elimination of the CEBA growth and activity restrictions will enable the
Company to expand current business activities and participate in certain
additional business activities. The Company's clients, which consist
principally of managers of mutual funds, unit investment trusts and other
pooled investment products, typically generate cash balances from securities
sales and other transactions which they wish to invest on a short-term basis.
Because the Company has been subject to the 7% annual asset growth cap, it has
not been able to accept those deposits and must direct them to other financial
institutions, foregoing a potential source of revenue. The Company directed
client deposits averaging approximately $1.1 billion daily to other financial
institutions in fiscal year 1994. Similarly, many of the Company's clients use
credit lines to leverage their portfolios or to handle overnight cash
shortfalls. CEBA requirements have restricted the Company from making
commercial loans of this type. As a result of the removal of CEBA limitations,
the Company will now offer these deposit and lending services directly to
existing and potential clients. In addition to the increased revenue generated
from these deposit and lending services, the increase in assets reflected on
the Company's balance sheet as a result of retaining client deposits will
enable the Company, as a significantly larger institution, to market itself to
a broader range of potential clients.

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The Company has been operated independently of Eaton Vance since 1969. The
Company has not relied on Eaton Vance to provide for its funding needs,
administrative or other support services, or any significant operating
facilities. Eaton Vance has not provided any financial or performance
guarantees in connection with any of the Company's client or vendor contracts.
As a result, clients and vendors have not looked to Eaton Vance as a source of
financial or other support of the Company. In addition, the Company believes
that some prospective mutual fund clients have viewed the Company as a
potential competitive threat due to its affiliation with Eaton Vance, an
investment management firm. See "Certain Relationships and Related
Transactions."

The Company believes that the separation from Eaton Vance will also allow
the financial markets to better evaluate the strengths and prospects of the
Company, potentially resulting in a higher overall market valuation for the
Company independent of Eaton Vance. The Company also believes that the
separation will assist the Company in attracting and retaining key employees
by allowing the Company to offer its employees incentive compensation programs
based solely on the Company's performance. Finally, the Company believes the
separation will provide investors with additional flexibility by allowing them
to make separate investment decisions regarding Eaton Vance and the Company.

Manner of Effecting the Distribution

Eaton Vance will effect the Distribution by providing for the delivery of
all of the Common Stock and Class A Stock held by Eaton Vance on the Record
Date to the Distribution Agent for the transfer and distribution to the
holders of Voting Stock and Non-Voting Stock as of the Record Date. The
Distribution will be made on the basis of approximately 2.799 shares of Common
Stock and approximately .538 shares of Class A Stock for every ten shares of
Voting Stock or Non-Voting Stock held as of the close of business on the
Record Date, based on 9,335,072 shares of Voting Stock and Non-Voting Stock
outstanding on the Record Date. No certificates representing fractional shares
of Common Stock or Class A Stock will be issued to Eaton Vance stockholders as
part of the Distribution. The Distribution Agent will aggregate fractional
shares into whole shares of Common Stock and Class A Stock and the Independent
Agent will sell them in the open market at prevailing prices on behalf of the
holders who otherwise would be entitled to receive fractional share interests.
Such persons will instead receive a cash payment for the amount of their
allocable share of the total sale proceeds. Such sales are expected to be made
as soon as practicable after distribution of the Common Stock and Class A
Stock to Eaton Vance stockholders. Eaton Vance will bear the cost of any
commissions incurred in connection with such sales. See "Federal Income Tax
Consequences of the Distribution" below.

Certificates representing shares of Common Stock and Class A Stock will be
mailed or delivered by the Distribution Agent, or made available in
stockholders' book entry accounts, beginning on the Distribution Date. The
shares of Common Stock and Class A Stock will be fully paid and nonassessable
and the holders thereof will not be entitled to preemptive rights. See
"Description of Capital Stock."

Holders of Voting Stock and Non-Voting Stock on the Record Date will not be
required to pay cash or any other consideration for the Common Stock or Class
A Stock received in the Distribution or to surrender or exchange certificates
representing shares of Voting Stock or Non-Voting Stock in order to receive
Common Stock or Class A Stock. Holders of Voting Stock or Non-Voting Stock
will continue to own their shares of Voting Stock or Non-Voting Stock, and if
such stockholders were stockholders of record on the Record Date, they will
also receive shares of Common Stock and Class A Stock. The Distribution will
not change the number of outstanding shares of Voting Stock or Non-Voting
Stock.

The Board of Directors of Eaton Vance may amend, modify or abandon the
Distribution at any time prior to the Distribution Date.

Stockholders of Eaton Vance having inquiries relating to the Distribution
should contact William M. Steul, Eaton Vance Corp., 24 Federal Street, Boston,
MA 02110, telephone number (617) 482-8260. Questions relating to transfers of
Common Stock or Class A Stock after the Distribution Date should be addressed
to: Karen R. Creegan, Investors Financial Services Corp., 89 South Street
Boston, MA 02205-1537, telephone number (617) 330-6001.

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Federal Income Tax Consequences of the Distribution

Eaton Vance has received a ruling from the Internal Revenue Service to the
effect, among other things, that the Distribution will qualify as a tax-free
spin-off under Section 355 of the Code, and that, for federal income tax
purposes:

(1) No gain or loss will be recognized by (and no amount will be included
in the income of) a holder of Voting Stock or Non-Voting Stock upon the
receipt of Common Stock and Class A Stock in the Distribution;

(2) The aggregate basis of Voting Stock, Non-Voting Stock, Common Stock
and Class A Stock (including fractional share interests of Common Stock and
Class A Stock) in the hands of each holder of Voting Stock or Non-Voting
Stock who receives Common Stock and Class A Stock in the Distribution will
be the same as the basis of such holder's Voting Stock and Non-Voting Stock
held by such stockholder immediately before the Distribution with respect
to which the Distribution is made, allocated in proportion to the fair
market value of each;

(3) The holding period of the Common Stock and Class A Stock received by
Eaton Vance stockholders, for purposes of determining long-term capital
gain treatment, will include the holding period of the Voting Stock or Non-
Voting Stock with respect to which the Distribution will be made, provided
that such stockholder held such Voting Stock or Non-Voting Stock as a
capital asset on the Distribution Date;

(4) No gain or loss will be recognized by Eaton Vance upon the
Distribution; and

(5) An Eaton Vance stockholder will recognize gain or loss upon the
receipt of cash in lieu of fractional shares of Common Stock or Class A
Stock in an amount equal to the difference between the amount of cash
received for the fractional share and the adjusted tax basis in such
fractional share. With respect to each fractional share, such gain or loss
generally will be capital gain or loss if the Voting Stock or Non-Voting
Stock to which such fractional share relates is held as a capital asset at
the time of the Distribution.

Regulations require that Eaton Vance stockholders who receive Common Stock
and Class A Stock in the Distribution attach to their federal income tax
return for the tax year in which such stock is received a detailed statement
setting forth such data as may be appropriate in order to show the
applicability of Section 355 of the Code to the Distribution. After the
Distribution, Eaton Vance will provide to each Eaton Vance stockholder on the
Record Date additional information concerning the allocation of basis referred
to in (2) above and other appropriate information.

THE SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR
GENERAL REFERENCE ONLY AND DOES NOT PURPORT TO COVER ALL FEDERAL INCOME TAX
CONSEQUENCES THAT MAY APPLY TO ALL CATEGORIES OF STOCKHOLDERS. ALL
STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE PARTICULAR
FEDERAL, FOREIGN, STATE AND LOCAL TAX CONSEQUENCES OF THE DISTRIBUTION TO SUCH
STOCKHOLDERS.

Listing and Trading of Common Stock and Class A Stock

There is currently no public market for Common Stock or Class A Stock, and a
"when-issued" trading market (as defined in the following paragraph) is not
expected to develop prior to the Pricing Date. The Company does not intend to
list the Common Stock for public trading until the Pricing Date, and no
registration statement relating to such stock is expected to become effective
with the Commission until that date. The Company does not intend to list the
Class A Stock for public trading. The Common Stock and Class A Stock are
identical except that the Class A Stock has ten votes per share and converts
into Common Stock upon sale or transfer and under certain other circumstances.
The IFSC Transfer Agent has been instructed to deliver shares of Common Stock
upon presentation of shares of Class A Stock for sale or transfer. See
"Description of Capital Stock."

The Common Stock will be approved for listing on the Nasdaq National Market
under the symbol "IFIN" on the Pricing Date, subject to notice of issuance.
The Transfer Agent and Registrar for Common Stock and Class A Stock will be
the First Chicago Trust Company of New York. After the Pricing Date, and until
the Distribution Date, the Common Stock distributed in the Distribution will
trade on a when-issued basis on the Nasdaq National Market, and the Common
Stock issued in the Public Offering will trade on a regular-way basis

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<PAGE>

on the Nasdaq National Market. After the Distribution Date, all Common Stock
will trade on a regular-way basis on the Nasdaq National Market. In the case
of "regular-way" trading, contracts for the purchase and sale of Common Stock
are settled by delivery of the shares on the third business day after the
contract is made. In the case of "when-issued" trading, contracts for the
purchase and sale of shares are settled by delivery of the shares four
business days after the Distribution Date.

Prior to the completion of the Distribution, there has been no public market
for the Common Stock and Class A Stock and there can be no assurance that an
active trading market will develop or be sustained after the Distribution. The
price at which the Common Stock trades will be determined by the marketplace
and may be influenced by many factors, including, among others, announcements
of new services and client engagements by the Company or its competitors and
quarterly variations in financial results. Such factors could cause the market
price of the Common Stock to fluctuate substantially. In addition, the stock
market has experienced volatility that has affected the market prices for
shares of many financial service companies and that has in some cases been
unrelated to the operating performance of such companies. These market
fluctuations may adversely affect the price of the Common Stock. See "Certain
Considerations - No Prior Trading Market; Potential Volatility of Stock
Price."

On the business day following the commencement of the Distribution, the
Company is expected to complete the sale of up to 2,000,000 shares of Common
Stock (plus up to an additional 300,000 shares to cover over-allotments, if
any) to the public in a firm commitment underwritten public offering. Upon
completion of the Distribution and the Public Offering, approximately
5,532,573 shares of Common Stock and 611,427 shares of Class A Stock will be
issued and outstanding and 3,855,703 shares of Common Stock and 356,871 shares
of Class A Stock may be sold in the public market immediately (subject in some
cases to compliance with the limitations set forth in Rule 144). Eaton Vance
has received a "no-action" letter from the Staff of the Commission to the
effect that the Common Stock and Class A Stock distributed to Eaton Vance
stockholders in the Distribution will not be considered, for enforcement
purposes, to be "restricted securities" within the meaning of Rule 144 and,
accordingly, will be freely tradeable under the Securities Act of 1933, as
amended (the "Securities Act"). Sales of substantial amounts of such shares in
the public market could adversely affect the market price of the Common Stock
and Class A Stock. In connection with the Public Offering of Common Stock,
certain of the Eaton Vance's and the Company's security holders, executive
officers, directors and employees, with the power to dispose of a total of
1,159,013 shares of Common Stock and 184,878 shares of Class A Stock, have
agreed not to offer, sell or otherwise dispose of any shares of Common Stock
or Class A Stock for a period of 180 days after the Pricing Date (the "Lock-up
Period") without the prior written consent of Keefe, Bruyette & Woods, Inc.
and A.G. Edwards & Sons, Inc., the managing underwriters for the Public
Offering (the "Underwriters"). Following the Lock-up Period, these shares will
not be eligible for sale in the public market without registration unless such
sales meet the conditions and restrictions of Rule 144 as described below in
"Shares Eligible for Future Sale". See "Shares Eligible for Future Sale."

Conditions to the Distribution

The Distribution is conditioned upon, among other things: (i) the
Registration Statement filed by the Company with the Commission on Form S-1
under the Securities Act of 1933, as amended (the "Securities Act"), relating
to the Public Offering being effective; (ii) the effectiveness of all
necessary regulatory approvals; and (iii) distribution of this Information
Statement to the holders of Voting Stock and Non-Voting Stock as of the Record
Date. Even if the above conditions are satisfied, the Eaton Vance Board has
reserved the right to abandon, defer or modify the Distribution at any time
prior to the Distribution Date.

Reasons for Furnishing the Information Statement

This Information Statement is being furnished by Eaton Vance solely to
provide information to Eaton Vance stockholders who will receive Common Stock
and Class A Stock in the Distribution. It is not, and is not to be construed
as, an inducement or encouragement to buy or sell any securities of Eaton
Vance or the Company. The information contained in this Information Statement
is believed by Eaton Vance to be accurate as of the date set forth on its
cover. Changes may occur after that date, and neither Eaton Vance nor the
Company will update the information except in the normal course of their
respective public disclosure practices.

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RISK FACTORS

Holders of Common Stock and Class A Stock should be aware that the ownership
of such stock involves certain risks, including those described below, which
could adversely affect the value of their holdings.

Changes in Market Conditions; Dependence on Mutual Fund Industry. The
Company derives a significant portion of its revenues and profits from
investment management companies and other sponsors of pooled asset investment
vehicles. A significant portion of the Company's revenues are generated from
fees based on the average daily market value of assets in debt and equity-
based investment vehicles that the Company administers. Changes in interest
rates or declines in stock market values could influence an investor's
decision to invest, or retain an investment, in that type of investment
vehicle. While the Company believes that a portion of such investment funds
would be reinvested in other investment vehicles processed by the Company,
there can be no assurance that such funds would be reinvested or that their
withdrawal will not adversely affect the Company's financial results. The
occurrence of a significant investor trend seeking alternatives to pooled
asset investments could also have an adverse effect on the Company's financial
results by reducing the amount of assets it administers. See "Business -
Service Offerings."

Dependence on Key Clients. The Company presently provides services to
approximately 35 mutual fund complexes and insurance companies. Most of the
Company's client engagements are, and in the future are likely to continue to
be, terminable upon 60 days notice. The Company's largest current client,
Eaton Vance, the former parent of the Company, represented 14%, 13% and 21% of
net operating revenues for the twelve-month periods ended October 31, 1992,
1993 and 1994, respectively, and 18% and 15% of net operating revenues for the
nine- month periods ended July 31, 1994 and 1995, respectively. Another client
of the Company, Merrill, Lynch, Pierce, Fenner & Smith, Incorporated
("Merrill, Lynch") accounted for 22%, 21% and 16% of net operating revenues
for the twelve-month periods ended October 31, 1992, 1993 and 1994,
respectively, and 17% and 6% of net operating revenues for the nine-month
periods ended July 31, 1994 and 1995, respectively. No other single client of
the Company represented more than 10% of net operating revenues for those
periods. Although the Company believes its relations with its clients are
good, no assurances can be made that its clients will maintain their
relationships with the Company. An unanticipated termination of a major client
engagement could adversely affect the Company and its financial results. See
"Business - Significant Clients."

Management of Growth. Since the acquisition of the Financial Products
Services Division of the Bank of New England in 1990, the financial assets for
which the Company provides asset administration services have grown from $9
billion to $87 billion. During that period, the Company's staff has increased
significantly to support this asset growth. A continuing period of rapid
growth could place a strain on the Company's management, operations, financial
and other resources. The Company's ability to manage its growth effectively
will require it to continue to invest in its operational, financial, and other
internal systems, and to retain, motivate and manage its employees. If the
Company's management is unable to manage growth effectively and new employees
are unable to achieve anticipated performance levels, the Company's results of
operations could be adversely affected. Potential investors should consider
the risks, expenses and difficulties frequently encountered in connection with
the operation and development of an expanding business. There can be no
assurance that the Company will be able to effectively manage any future
growth. See "Business - Employees and Training."

Competition. The Company is engaged in a segment of the financial services
industry that is extremely competitive. Competitors in the United States and
elsewhere include major banks, mutual fund complexes and mutual fund service
companies, many of which have substantially greater financial resources,
marketing resources and facilities than the Company. As the larger mutual fund
complexes continue to grow and build in-house asset administration service
capabilities, they will be able to provide these services internally rather
than outsourcing them to the Company. Additionally, competition from these
groups is expected to intensify as they begin to market asset administration
services to third party asset managers. The Company's competitors may succeed
in developing products and services that are more effective than those that
have been or may be developed by the Company and may also prove to be more
successful than the Company in producing and marketing these services to third
party asset managers. See "Business - Competition."

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<PAGE>

Risks Associated with Financial Services Clients. The Company's asset
administration services enable its clients to administer significant amounts
of complex financial assets and to comply with a variety of complex federal
and state regulations. Should information generated by the Company's services
be incorrect or result in a client's violation of such regulatory requirements
due to a human error or software programming defect, the client, or the
governmental authority whose requirements were not met, could claim that the
Company is responsible. There can be no assurance that the Company will be
able to correct claimed or actual information errors in a timely manner, or at
all. Although the Company carries insurance of the types and in the amounts
which it believes to be adequate, there can be no assurance that claims would
be covered by the Company's indemnity insurance policies. There can be no
assurance that these policies will be renewed or will remain priced within the
Company's capacity to pay the premiums. In the event that the Company's
contract limits are found to be unenforceable or that its insurance policies
do not adequately cover claims, the Company's results of operations may be
adversely affected. See "Business - Regulation and Supervision."

Variability of Quarterly Operating Results. The Company's quarterly
operating results have historically varied and can be expected to continue to
vary depending upon factors such as the timing of the commencement or
termination of client engagements, the rate of net inflows and outflows of
investor funds in the debt and equity-based investment vehicles offered by the
Company's clients, the introduction and market acceptance of new services by
the Company and changes or anticipated changes in economic conditions. Because
the Company's operating expenses are based on anticipated revenue levels and a
high percentage of the Company's operating expenses are relatively fixed, any
unanticipated shortfall in revenues in a quarter may have an adverse impact on
the Company's results of operations for that quarter. Results of operations in
any period are not necessarily indicative of the results to be expected for
any future period. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Intellectual Property Rights. The Company's success is dependent upon its
software development methodology and other intellectual property rights
developed and owned by the Company, including FACTS. The Company relies on a
combination of trade secret, nondisclosure and other contractual arrangements
and technical measures, and copyright and trademark laws to protect its
proprietary rights. The Company generally enters into confidentiality
agreements with its employees and consultants, and limits access to and
distribution of its proprietary information. There can be no assurance that
the steps taken by the Company in this regard will be adequate to deter
misappropriation of its proprietary information or that the Company will be
able to detect unauthorized use and take appropriate steps to enforce its
intellectual property rights. Furthermore, such protections may not preclude
competitors from developing products and services with functionality or
features similar to those of the Company. In addition, effective copyright,
trademark and other trade protection may not be available in certain
international markets serviced by the Company. Although the Company believes
that its services and products do not infringe on the intellectual property
rights of others, there can be no assurance that such a claim will not be
asserted against the Company in the future. See "Business - Intellectual
Property."

Interest Rate Risk. The profitability of the Company may be adversely
affected by rapid changes in interest rates. A change in interest rates could
have an impact both on the market value of the Company's assets and its net
interest income. The Company seeks to manage interest rate risk by investment
portfolio actions designed to address the interest rate sensitivity of asset
cash flows in relation to liability cash flows. Portfolio actions used to
manage interest rate risk include managing the effective duration of portfolio
securities and utilizing interest rate floors. Interest rate floors involve
elements of credit and market risk which are not reflected in the Company's
consolidated financial statements. Such instruments are entered into for
hedging, as opposed to speculative, purposes. There can be no assurance that
such portfolio actions will adequately limit interest rate risk. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 13 of Notes to Consolidated Financial Statements.

Closing of Public Offering. On the business day following the Distribution
Date, the Company expects to complete the sale of 2,000,000 (plus an
additional 300,000 shares to cover over allotments, if any) shares of Common
Stock in the Public Offering, with estimated proceeds to the Company of
$26,822,000 ($31,007,000 if

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<PAGE>

the over allotment option is exercised in full) assuming an initial public
offering price of $15.00 per share (the mid-point of the price range as set
forth in the Company's preliminary prospectus dated October 19, 1995) and
after deducting underwriting discounts and offering expenses. See "Summary -
Financing Transaction." There can be no assurance that the Public Offering
will close on that or any date. If the Public Offering is not completed, the
Company would have significantly less capital than would otherwise be
anticipated, and may be required to seek alternative sources of capital which
may or may not be available on commercially acceptable terms, if at all. If
adequate funds are not available, the Company may be required to significantly
curtail its planned expansion of deposit and lending activities to existing
and potential clients. See "The Distribution - Reasons for the Distribution."

No Prior Trading Market; Potential Volatility of Stock Price. Prior to
Distribution and the Public Offering, there has been no public market for the
Company's Common Stock and Class A Stock and there can be no assurance that an
active trading market will develop or be sustained after Distribution and the
Public Offering. The initial public offering price for the Company's Common
Stock to be issued in the Public Offering will be negotiated between the
Company and the Underwriters and may not be indicative of prices that will
prevail in the trading market. The Company believes factors such as
announcements of new services and client engagements by the Company or its
competitors and quarterly variations in financial results could cause the
market price of the Common Stock to fluctuate substantially. In addition, the
stock market has experienced volatility that has affected the market prices
for shares of many financial service companies and that has in some cases been
unrelated to the operating performance of such companies. These market
fluctuations may adversely affect the price of the Company's Common Stock.

Shares Eligible for Future Sale. Upon completion of Distribution and the
Public Offering, approximately 5,532,573 shares of Common Stock and 611,427
shares of Class A Stock will be issued and outstanding and 3,855,703 shares of
Common Stock and 356,871 shares of Class A Stock may be sold in the public
market immediately (subject in some cases to compliance with the limitations
set forth in Rule 144). Sales of substantial amounts of such shares in the
public market could adversely affect the market price of the Common Stock and
Class A Stock. Certain of the Company's stockholders, executive officers,
directors and employees, with the power to dispose of a total of 1,159,013
shares of Common Stock and 184,878 shares of Class A Stock, have agreed not to
offer, sell or otherwise dispose of any shares of Common Stock or Class A
Stock for a period of 180 days after the Pricing Date (the "Lock-up Period")
without the prior written consent of the Underwriters. Upon completion of the
Distribution and the Public Offering, a substantial portion of the Company's
shareholder base will consist of shareholders with no direct investment
history with the Company. A substantial number of outstanding shares of Common
Stock, and up to 560,000 shares of Common Stock issuable under the Company's
1995 Stock Plan and up to 40,000 shares of Common Stock issuable under the
Director Plan will become available for future sale in the public market at
prescribed times. See "Shares Eligible for Future Sale."

Anti-Takeover Provisions; Rights Plan; Possible Issuance of Preferred
Stock. The Company's Certificate of Incorporation and By-laws contain
provisions that may make it more difficult for a third party to acquire, or
discourage acquisition bids for, or changes in management of, the Company.
These provisions could limit the price that certain investors might be willing
to pay in the future for shares of the Company's Common Stock. Also, the
Company has adopted a Stockholder Rights Plan, pursuant to which the Company
has distributed to its stockholders rights to purchase shares of junior
participating preferred stock (the "Rights Plan"). Upon certain triggering
events, such rights become exercisable to purchase the Company's Common Stock
at a price substantially discounted from the then applicable market price of
the Company's Common Stock. The Rights Plan could generally discourage a
merger or tender offer involving the securities of the Company that is not
approved by the Company's Board of Directors by increasing the cost of
effecting any such transaction and, accordingly, could have an adverse impact
on stockholders who might want to vote in favor of such merger or participate
in such tender offer. In addition, shares of the Company's Preferred Stock may
be issued in the future without further stockholder approval and upon such
terms and conditions, and having such rights, privileges and preferences, as
the Board of Directors may determine. The rights of the holders of Common
Stock will be subject to, and may be adversely affected by, the rights of any
holders of Preferred Stock that may be issued in the

15
<PAGE>

future. The issuance of Preferred Stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire, or
discouraging a third party from acquiring, a majority of the outstanding
voting stock of the Company. The Company has no present plans to issue any
shares of Preferred Stock. The Company's Board of Directors is divided into
three classes, each of which serves for a staggered three-year term. Such
staggered Board may make it more difficult for a third party to gain control
of the Company's Board of Directors. See "Description of Capital Stock."

DIVIDEND POLICY

The Company currently intends to retain the majority of future earnings to
fund the development and growth of its business. The Company has never paid
any cash dividends on its Common Stock. The Company's ability to pay dividends
on the Common Stock and Class A Stock depends on the receipt of dividends from
Investors Bank & Trust Company. Investors Bank & Trust Company has
historically paid an aggregate annual dividend of $60,000 to its stockholders.
Any dividend payments by Investors Bank & Trust Company are subject to certain
restrictions imposed by the Massachusetts Commissioner of Banks. See
"Business - Regulation and Supervision." Subject to regulatory requirements,
Investors Bank & Trust Company expects to pay an annual dividend to the
Company, which the Company expects to pay to its stockholders, currently
estimated to be in an amount equal to $.04 per share of outstanding Common
Stock and Class A Stock (approximately $245,760 based upon 6,144,000 shares
outstanding after the completion of the Spin-Off Transaction and this
Offering).

16
<PAGE>

CAPITALIZATION

The following table sets forth the pro forma capitalization of the Company as
of July 31, 1995, after giving pro forma effect to the recapitalization of the
Company, prior to the Distribution, whereby the Company will issue 3,418,573
shares of Common Stock and 611,427 shares of Class A Stock in exchange for the
1,000,000 shares of the Bank's capital stock previously outstanding, and as
adjusted to reflect the sale of 2,000,000 shares of Common Stock offered in the
Public Offering by the Company at an assumed initial public offering price of
$15.00 (the mid-point of the price range as set forth in the Company's
preliminary prospectus dated October 19, 1995) and the application of the
estimated net proceeds therefrom. After the completion of the Distribution and
the Public Offering, 5,532,573 shares of Common Stock and 611,427 shares of
Class A Stock will be issued and outstanding. This table should be read in
conjunction with the Consolidated Financial Statements and related notes
thereto appearing elsewhere in this Information Statement.

<TABLE>
<CAPTION>
July 31, 1995
-------------------------
Pro forma
Pro forma as adjusted
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Stockholders' Equity:
Preferred stock, $.01 par value, authorized,
1,000,000 shares pro forma and as adjusted; issued
and outstanding, no shares pro forma and as
adjusted........................................... -- --
Common stock, $.01 par value, authorized, 20,000,000
shares pro forma and as adjusted; issued and
outstanding, 3,418,573 shares pro forma and
5,418,573 shares as adjusted (1)................... $ 34 $ 54
Class A Common Stock, $.01 par value, authorized
650,000 shares pro forma and as adjusted; issued
and outstanding 611,427 shares pro forma and as
adjusted........................................... 6 6
Additional paid-in capital.......................... 17,208 44,010
Retained earnings................................... -- --
----------- -----------
Total stockholders' equity........................ 17,248 44,070
----------- -----------
Total capitalization.............................. $ 17,248 $ 44,070
=========== ===========
</TABLE>
- --------

(1) Excludes 199,000 shares of Common Stock issuable upon the exercise of stock
options outstanding immediately prior to the Distribution under the
Company's 1995 Stock Plan with an exercise price equal to the initial
public offering price of the shares to be sold in the Public Offering,
114,000 shares of Common Stock authorized for grant upon the closing of
this Offering to certain officers of the Company pursuant to the Company's
1995 Stock Plan, and an additional 247,000 shares of Common Stock issuable
under the Company's 1995 Stock Plan. Also excludes 12,500 shares of Common
Stock issuable upon the exercise of stock options outstanding as of the
date hereof under the Company's 1995 Non-Employee Director Stock Option
Plan (the "Director Plan") and an additional 27,500 shares issuable under
the Director Plan. See "Management - 1995 Stock Plan" and "Management -
1995 Non-Employee Director Stock Option Plan."

17
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected consolidated historical financial
data regarding the Company's operating results and financial position for and
at the periods indicated, certain unaudited pro forma data giving effect to
the distribution of shares in the Distribution and the sale of shares in the
Public Offering and certain ratio and other statistical information. The
selected consolidated statement of income data presented below for each of the
five years in the period ended October 31, 1994 have been derived from the
Company's consolidated financial statements, which have been audited by
Deloitte & Touche LLP independent public accountants. The consolidated
financial data for and as of each of the interim periods ended July 31, 1994
and July 31, 1995 are unaudited but, in the opinion of management of the
Company, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the results of such periods.
The results of operations for the interim periods ended July 31, 1994 and 1995
are not necessarily indicative of the results to be expected for any other
interim period or the entire year. This data should be read in conjunction
with the Consolidated Financial Statements and the notes thereto and other
financial information appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
For the Nine Months
For the Year Ended October 31, Ended July 31,
--------------------------------------------------------------- ------------------------
1990 1991 1992 1993 1994 1994 1995(1)
----------- ----------- ----------- ----------- ----------- ----------- -----------
(Unaudited)
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income
Data:
Net interest income..... $ 2,737 $ 3,732 $ 3,659 $ 4,494 $ 4,778 $ 3,434 $ 4,052
Noninterest income...... 15,749 25,549 29,664 32,967 43,049 31,304 39,674
Gain on sale of
investment securities.. -- 434 -- 48 -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net operating revenues.. 18,486 29,715 33,323 37,509 47,827 34,738 43,726
Operating expenses...... 17,942 28,345 30,589 33,939 42,503 31,045 37,916
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before income
taxes.................. 544 1,370 2,734 3,570 5,324 3,693 5,810
Income taxes............ 230 579 1,163 1,211 1,863 1,273 2,215
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income.............. $ 314 $ 790 $ $1,571 $ 2,359 $ 3,461 $ 2,420 $ 3,595
=========== =========== =========== =========== =========== =========== ===========
Pro Forma Data(2):
Earnings per share...... $ 0.86 $ 0.89
=========== ===========
Average number of shares
outstanding............ 4,030 4,030
=========== ===========
Average Balance Sheet
Data:
Interest earning
assets................. $ 78,698 $ 80,314 $ 81,148 $ 87,965 $ 94,351 $ 90,737 $ 100,039
Total assets............ 87,682 93,544 99,609 109,477 116,810 113,040 122,186
Total deposits.......... 80,558 84,063 88,684 99,523 102,664 99,574 101,797
Stockholders' equity.... 5,645 6,138 7,053 9,022 11,779 11,332 15,597
Selected Financial
Ratios:
Return of equity(3)..... 5.57% 12.89% 22.27% 26.15% 29.38% 28.46% 30.73%
Return on assets(3)..... 0.36 0.85 1.58 2.15 2.96 2.85 3.92
Equity as % of total
assets................. 6.44 6.56 6.52 8.24 10.08 10.03 12.76
Dividend payout
ratio(4)............... 19.10 7.59 3.82 2.54 1.73 2.48 1.67
Tier 1 capital
ratio(5)............... 25.26 15.69 37.78 37.08 42.53 41.69 53.30
Noninterest income as %
of net operating
revenue................ 85.19 85.98 89.02 87.89 90.01 90.15 90.73
Nonperforming assets as
% of total assets...... .00 .00 .00 .00 .00 .00 .00
Allowance for loan
losses as % of total
loans.................. 0.81 0.68 0.59 0.34 0.26 0.27 0.26
Other Statistical Data:
Assets processed at end
of period(6)........... $22,142,690 $36,750,390 $43,348,597 $61,239,242 $72,418,449 $69,881,256 $86,666,528
Employees at end of
period................. 463 456 460 522 678 635 673
</TABLE>
- -------
(1) Noninterest income for the nine months ended July 31, 1995 includes the
recognition of net proceeds of $2,572,000 ($.37 pro forma earnings per
share) from the assignment to a third party of asset administration rights
associated with $5 billion of unit investment trust assets. See
"Managements Discussion and Analysis of Financial Condition and Results of
Operations."

(2) Pro forma data gives effect to the recapitalization of the Company prior
to the Distribution whereby the Company will issue 3,418,573 shares of
Common Stock and 611,427 shares of Class A Stock in exchange for the
1,000,000 shares of the Bank's capital stock previously outstanding.
(3) Ratios for the nine months ended July 31, 1994 and 1995 have been
annualized. The ratio for the nine months ended July 31, 1995 includes the
effect of the unit investment trust transaction described in (1) above.
Without the earnings associated with this transaction, return on equity
and return on assets for the nine months ended July 31, 1995 would have
been 18.04% and 2.30%, respectively.

(4) The Company intends to retain the majority of future earnings to fund
development and growth of its business but anticipates paying future cash
dividends currently estimated to be $.04 per share, subject to receipt of
a like dividend from the Bank and further subject to regulatory
requirements. See "Dividend Policy" and "Business - Regulation and
Supervision."
(5) Tier I capital consists of the sum of common stockholders' equity and non-
cumulative perpetual preferred stock minus all intangible assets (other
than certain qualifying goodwill) and excess deferred tax assets.
(6) Assets processed is the total dollar value of financial assets on the
reported date for which the Company provides one or more of the following
services: custody, multicurrency accounting, institutional transfer
agency, performance measurement, foreign exchange, securities lending and
mutual fund administration.

18
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Overview

The following discussion and analysis of the financial condition and results
of operations of the Company should be read in conjunction with the Company's
Consolidated Financial Statements and related notes, which are included
elsewhere in this Information Statement. Investors Financial Service Corp., as
a holding company, has conducted no business operations to date, other than
the acquisition of all of the capital stock of Investors Bank & Trust Company.
Therefore, the following is a discussion and analysis of the business and
operations of Investors Bank & Trust Company.

The Company, through its wholly owned subsidiary, Investors Bank & Trust
Company, provides domestic and global custody, multicurrency accounting,
institutional transfer agency, performance measurement, foreign exchange,
securities lending and mutual fund administration services to a variety of
financial asset managers, including mutual fund complexes, investment
advisors, banks and insurance companies. Currently, the Company provides
financial asset administration services for assets totaling approximately $87
billion, including approximately $6 billion of assets based outside the United
States. The Company also engages in private banking transactions, including
the administration of trust and custody accounts, secured lending and deposit
accounts. See "Business - Service Offerings."

The Company's historical business and financial results have been
significantly influenced by the restrictions imposed under CEBA. After the
completion of the Distribution, the Company will no longer be subject to such
restrictions, and the Company will be able to expand current business
activities and participate in certain additional business activities which may
result in increased revenues generated by a possible increase in client
deposits and lending opportunities. See "The Distributionn - Reasons for the
Distribution." Accordingly, the Company's historical operating results may not
necessarily be indicative of either the full scope of the future conduct of
its business or its future operating results.

The Company's business relationship with Eaton Vance generated approximately
14%, 13% and 21% of the Company's net operating revenue for the twelve-month
periods ended October 31, 1992, 1993 and 1994, respectively, and 18% and 15%
of net operating revenues for the nine-month periods ended July 31, 1994 and
1995, respectively. The Company believes its relationship with Eaton Vance is
good and expects it to continue after completion of the Distribution. The
Company's agreements with mutual funds managed by Eaton Vance, pursuant to
which the Company provides custody and fund accounting services, extend
through August 2000 and continue thereafter until terminated by either party
upon sixty days prior notice. If a majority of non-interested trustees of a
fund determines that the performance of the Company under such agreement has
been unsatisfactory or adverse to the interests of the fund's shareholders, or
that the terms of the agreement are no longer consistent with publicly
available industry standards, the Company shall have 60 days after receipt of
written notice from the fund to such effect to (i) correct its performance or
(ii) renegotiate such terms. If such corrective action or renegotiation is not
satisfactory to such trustees, such agreement may be terminated on sixty days
prior notice. There have been no requests for corrective action or
renegotiation to date. See "Certain Relationships and Related Transactions."

The Company derives its revenues from financial asset administration
services and private banking transactions. Although interest income and
noninterest income are reported separately for financial statement
presentation purposes, the Company's clients view the pricing of the Company's
asset administration and banking service offerings on a bundled basis. In
establishing a fee structure for a specific client, management analyzes the
expected revenue and related expenses, as opposed to separately analyzing fee
income and interest income and related expenses for each from such
relationship. Accordingly, management believes net operating revenue (net
interest income plus noninterest income) and net income are meaningful
measures of financial results.

Noninterest income consists primarily of fees for financial asset
administration and is principally derived from custody, multicurrency
accounting, transfer agency and administration services for financial asset
managers and the assets they control. The Company's clients pay fees based on
the volume of assets under custody, the

19
<PAGE>

number of securities held and portfolio transactions, income collected and
whether other value-added services such as foreign exchange, securities
lending and performance measurement are needed. Asset-based fees are usually
charged on a sliding scale. As such, when the assets in a portfolio under
custody grow as a result of changes in market values or cash inflows, the
Company's fees may be a smaller percentage of those assets. Fees for
individually managed accounts, such as custodial, trust and portfolio
accounting services for individuals, investment advisors, private trustees,
financial planners, other banks and fiduciaries, and other institutions are
also included in noninterest income.

Net interest income represents the difference between income generated from
interest-earning assets and expense on interest-bearing liabilities. Interest-
bearing liabilities are generated by the Company's clients who, in the course
of their financial asset management, generate cash balances which they deposit
on a short-term basis with the Company. The Company invests these cash
balances and remits a portion of the earnings on these investments to its
clients. The Company's share of earnings from these investments is viewed as
part of the total package of compensation paid to the Company from its clients
for performing asset administration services.

Because certain fees charged by the Company for its services are based on
the market values of assets processed, such fees and the Company's quarterly
operating results are sensitive to changes in interest rates, declines in
stock market values, and investors seeking alternatives to investment
offerings of the Company's clients. See "Risk Factors - Changes in Market
Conditions; Dependence on Mutual Fund Industry." Also, the Company's interest-
related services, along with the market value of the Company's investments,
may be adversely affected by rapid changes in interest rates. See "Risk
Factors - Interest Rate Risk." In addition, most of the Company's client
engagements are, and in the future are likely to continue to be, terminable
upon 60 days notice. See "Risk Factors - Dependence on Key Clients."

Statement of Operations

Comparison of Operating Results for the Nine Months Ended July 31, 1995 and
1994

Noninterest Income

Noninterest income increased $8,370,000 to $39,674,000 for the nine months
ended July 31, 1995 from $31,304,000 for the same period in 1994. Noninterest
income consists of the following items:

<TABLE>
<CAPTION>
For the Nine Months Ended July 31,
--------------------------------------
1994 1995 Change
------------ ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C>
Asset administration fees................ $ 30,827 $ 36,668 19%
Proceeds from assignment of UIT servic-
ing, net................................ 0 2,572 --
Computer service fees.................... 421 380 (10)
Other operating income................... 56 54 (4)
------------ ------------
Total Noninterest Income................. $ 31,304 $ 39,674 27%
============ ============
</TABLE>

An increase in asset administration fees, due principally to higher levels
of assets processed, represented a significant part of the increase. Assets
processed is the total dollar value of financial assets on the reported date
for which the Company provides one or more of the following services: custody,
multicurrency accounting, institutional transfer agency, performance
measurement, foreign exchange, securities lending and mutual fund
administration. Total assets processed grew to $87 billion at July 31, 1995
compared to $70 billion for the prior period, a 24% increase, despite the
transfer of $5 billion of unit investment trust assets discussed below. Over
50% of this growth resulted from assets processed for new clients. The
remainder of the growth was due to the net expansion of relationships with
existing clients, including growth in assets processed and increased use of
the Company's securities lending and foreign exchange services.

20
<PAGE>

Unit investment trust ("UIT") assets processed by the Company have decreased
over the last five years, a reflection of declining investor demand for this
type of unmanaged investment product. Declining asset levels led one client,
Merrill, Lynch, to consolidate its asset administration service providers, and
it agreed, effective March 1, 1995, to pay the Company to assign the Company's
servicing rights to the Bank of New York Company, Inc. The Company recognized
proceeds of $2,572,000, net of expenses, resulting from the assignment of the
rights to service approximately $5.0 billion of the client's unit investment
trust assets. The administration of these assets accounted for $5,954,000 in
asset administration fees for the nine months ended July 31, 1994 and
$2,570,000 in such fees for the 1995 period (in addition to the assignment
fee). The Company has made the strategic decision to focus its marketing and
processing efforts on mutual funds and other pooled investments which
typically experience growth in asset levels and can utilize a wider variety of
services provided by the Company, as compared to unit investment trusts which
are unmanaged investment vehicles. See Note 10 of Notes to Consolidated
Financial Statements.

Computer services fees consist of amounts charged by the Company to Eaton
Vance for data processing services related to individual accounts managed by
Eaton Vance. These fees decreased $41,000 to $380,000 for the nine months
ended July 31, 1995 from $421,000 for the same period in 1994 due to fewer
special processing requests for those accounts. Other operating income
consists of miscellaneous private banking fees for safe deposit and checking
account services.

Operating Expenses

Total operating expenses increased by $6,871,000 to $37,916,000 for the
first nine months of fiscal 1995 compared to $31,045,000 for the first nine
months of fiscal 1994. The components of operating expenses were as follows:

<TABLE>
<CAPTION>
For the Nine Months Ended July 31,
--------------------------------------
1994 1995 Change
------------ ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C>
Compensation.............................. $ 16,764 $ 20,316 21%
Pension and other employee benefits....... 3,098 3,595 16
Occupancy................................. 2,631 3,259 24
Equipment................................. 3,111 3,671 18
Insurance................................. 800 800 0
Subcustodian Fees......................... 932 1,527 64
Depreciation and amortization............. 1,007 893 (11)
Professional fees......................... 678 1,128 66
Travel and sales promotion................ 497 463 (7)
Other operating expenses.................. 1,527 2,264 48
------------ ------------
Total Noninterest Expenses.............. $ 31,045 $ 37,916 22%
============ ============
</TABLE>

Compensation of officers and employees increased by $3,552,000 or 21% from
period to period due to higher staffing levels throughout the 1995 period. The
number of employees increased 6% to 673 at July 31, 1995 from 635 at July 31,
1994 to support growth in the asset administration business. The principal
portion of headcount growth for the 1994 period occurred in the last 45-60
days of the nine-month period and, as a result, the compensation expense
associated with this growth is not reflected in the full 1994 period.
Approximately 40 employees staffed the unit investment trust accounts which
were transferred on March 1, 1995. These employees were retained to support
future business growth. The average annualized salary increase for Company
employees during the 1995 period was approximately 5%.

Pension and other employee benefits, including group insurance plans, 401(k)
plan matching contributions and tuition reimbursement, increased to $3,595,000
for the nine months ended July 31, 1995 from $3,098,000 for the same period in
1994. The increase was primarily due to the increase in staffing levels
discussed above.

21
<PAGE>

Occupancy expense increased $628,000 between periods as additional office
space was leased in Boston and Toronto and a new office was opened in Dublin
during the 1995 period. The additional space was needed due to the growth in
assets processed. As of July 31, 1995, the Company expects to have sufficient
space to support anticipated future growth through 1997.

Equipment expense principally consists of operating lease payments for
microcomputers and fees charged by Electronic Data Systems, Inc. ("EDS") for
data processing and data storage services provided to the Company. A
substantial portion of the Company's data processing depends upon a mainframe
host computer system owned and operated by EDS. See "Business - Software
Systems and Data Center." These expenses vary with the level of assets
processed by the Company. The $560,000 increase between periods is due
principally to the growth in assets processed by the Company. In addition, the
Company increased its usage of EDS services during the nine months ended July
31, 1995 as it prepared to implement new functionality in FACTS to support
shorter settlement periods for securities transactions.

Subcustodian expense consists of fees paid to centralized clearinghouses and
depositories for settling and holding securities on the Company's behalf. This
expense increased $595,000 to $1,527,000 for the nine months ended July 31,
1995 from $932,000 for the nine months ended July 31, 1994. This increase is
due to two factors- the growth in assets processed and the movement by clients
into emerging markets with higher cost structures and where subcustodians are
required.

Depreciation and amortization expense decreased $114,000 between periods as
certain assets purchased in 1990, 1991 and 1992 were fully depreciated.

Professional fees consist of fees paid for audit, legal and consulting
services. These fees increased $450,000 to $1,128,000 for the nine months
ended July 31, 1995 from $678,000 for the nine months ended July 31, 1994.
This increase is primarily due to the Company's increased use of independent
contractors to perform certain information systems development projects,
rather than adding permanent staff.

Travel and sales promotion consists of expenses incurred by the sales force
and client management staff in connection with making sales calls on potential
clients, traveling to existing client sites and attending industry
conferences.

Other operating expenses increased $737,000 to $2,264,000 for the nine
months ended July 31, 1995 from $1,527,000 for the nine months ended July 31,
1994. Other operating expenses include, fees for daily market pricing data,
telephone, office supplies, and the FDIC assessment on deposits. Fees for
daily market pricing data vary with the level of assets processed. Other
expenses such as telephone and office supplies vary with staffing levels. The
FDIC assessment is based on deposit balances as of four annual measurement
dates.

22
<PAGE>

Net Interest Income

Net interest income is affected by the volume and mix of assets and
liabilities, and the movement and level of interest rates. The table below
presents the changes in net interest income resulting from changes in the
volume of interest-earning assets or interest-bearing liabilities or changes
in interest rates for the nine months ended July 31, 1995 compared to the same
period in 1994.

<TABLE>
<CAPTION>
Change Change
Due to Due to
Volume Rate Net
-------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C>
Interest-earning assets
Fed funds sold and interest-earning deposits....... $ 170 $ 32 $ 202
Investment securities.............................. 171 25 196
Loans.............................................. 70 255 325
-------- ------- -------
Total interest-earning assets.................... 411 312 723
-------- ------- -------
Interest-bearing liabilities
Deposits........................................... (151) 184 33
Borrowings......................................... 58 14 72
-------- ------- -------
Total interest-bearing liabilities............... (93) 198 105
-------- ------- -------
Change in net interest income...................... $ 504 $ 114 $ 618
======== ======= =======
</TABLE>

Net interest income increased $618,000 or 18% to $4,052,000 for the nine
months ended July 31, 1995 from $3,434,000 for the same period in 1994. This
net increase resulted from an increase in interest income of $723,000
partially offset by an increase in interest expense of $105,000. The net
impact of the above changes was a 35 basis point increase in net interest
margin.

The increase in interest income resulted from both a higher level of
interest earning assets and higher interest rates. The Company's average
assets for the nine-month period ended July 31, 1995 increased $9,146,000 or
8% compared to the same period in 1994. This growth was significantly affected
by an increase in average interest earning assets of $9,302,000. The prime
rate increased 175 basis points between July 31, 1994 and July 31, 1995,
improving the yield on the Company's prime-based loan portfolio. Regulatory
restrictions imposed by CEBA limit the Company's asset growth to 7% for the
twelve month period ending each September 30. See "The Distribution - Reasons
for the Distribution."

Interest expense increased $105,000 due largely to higher rates paid on
deposits and increased purchases of Federal Funds. The higher rate was paid on
large denomination institutional deposits. The purchases of Federal Funds were
used to supply the Company with short-term liquidity.

Income Taxes

The Company's earnings were taxed on the federal level at 34% for the 1994
and 1995 periods. State taxes on the gross earnings from the Company's
portfolio of investment securities, held by a wholly-owned subsidiary, were
assessed at the tax rate for Massachusetts securities corporations of 1.32%.
State taxes on the remainder of the Company's taxable income were assessed at
the tax rate for Massachusetts banks of 12.54%. The provision for income taxes
for the nine months ended July 31, 1995, increased by $942,000 over the same
period in 1994. The overall effective tax rate increased to 38% for the nine
months ended July 31, 1995, from 35% for the same period in 1994 as the net
proceeds from the assignment of servicing rights for unit investment trust
assets were taxed at the higher state tax rate.

23
<PAGE>

Comparison of Operating Results for the Years Ended October 31, 1994 and 1993

Noninterest Income

Noninterest income increased $10,035,000 to $43,049,000 for the year ended
October 31, 1994 from $33,014,000 for the prior fiscal year. Noninterest
income consists of the following items:

<TABLE>
<CAPTION>
For the Year Ended
October 31,
-----------------------
1993 1994 Change
----------- ----------- ------
(Dollars in thousands)
<S> <C> <C> <C>
Asset administration fees........................ $31,986 $42,423 33%
Computer service fees............................ 528 552 5
Other operating income........................... 452 74 (84)
Gain on sale of investment security.............. 48 -- --
----------- -----------
Total Noninterest Income....................... $33,014 $43,049 30%
=========== ===========
</TABLE>

An increase in asset administration fees, due principally to higher levels
of assets processed, represented a significant part of the increase. Total
assets processed at October 31, 1993 compared to October 31, 1994 grew from
$61 billion to $72 billion, respectively, or 18%. Over 95% of this growth
resulted from assets processed for new clients, including $3.8 billion of
assets processed for new clients of the Company's wholly-owned Canadian
subsidiary. The year ended October 31, 1994 represents the first full fiscal
year of operations for that subsidiary. The remainder of the growth in assets
processed was due to the net expansion of relationships with existing clients,
including asset growth and broader service selections.

Other operating income decreased 84% to $74,000 in fiscal year 1994 from
$452,000 in fiscal year 1993. The amount presented for the 1993 fiscal year
includes $325,000 in non-recurring income due to the settlement of a claim
brought by the Company in connection with the acquisition in 1990 of the
Financial Products Services Division of the Bank of New England.

No investment securities were sold in the year ended October 31, 1994. The
Company's policy is to hold its investment securities to maturity. In the year
ended October 31, 1993, the Company sold an investment security at a $48,000
gain in order to meet the annual asset growth limits imposed by CEBA.

Operating Expenses

Total operating expenses increased by $8,564,000 to $42,503,000 for the year
ended October 31, 1994 compared to $33,939,000 for the year ended October 31,
1993. The components of operating expenses were as follows:

<TABLE>
<CAPTION>
For the Year Ended
October 31,
-----------------------
1993 1994 Change
----------- ----------- ------
(Dollars in thousands)
<S> <C> <C> <C>
Compensation..................................... $18,510 $23,163 25%
Pension and other employee benefits.............. 3,631 4,136 14
Occupancy........................................ 2,642 3,736 41
Equipment........................................ 3,061 4,292 40
Insurance........................................ 947 1,070 13
Subcustodian fees................................ 914 1,327 45
Depreciation and amortization.................... 1,065 1,376 29
Professional fees................................ 746 955 28
Travel and sales promotion....................... 421 735 75
Other operating expenses......................... 2,002 1,713 (14)
----------- -----------
Total Noninterest Expenses....................... $33,939 $42,503 25%
=========== ===========
</TABLE>

24
<PAGE>

Compensation of officers and employees increased by $4,653,000 or 25% to
$23,163,000 in fiscal year 1994 from $18,510,000 in fiscal year 1993 due to
higher staffing levels. The number of employees increased from 522 at October
31, 1993 to 678 at October 31, 1994, an increase of 30%, to support growth in
the asset administration business. The average annualized salary increase for
Company employees was approximately 4.5%.

Pension and other employee benefits including group insurance plans, 401(k)
plan matching contributions and tuition reimbursement, increased $505,000 to
$4,136,000 for the year ended October 31, 1994 from $3,631,000 for the same
period in 1993. The increase was primarily due to the increase in staffing
levels discussed above.

Occupancy expense increased $1,094,000 between periods as additional office
space was leased in Boston during fiscal 1994 to accommodate growth in the
asset administration business during the 1994 period. In addition, the 1994
fiscal year represents the first full year of occupancy expense for the
Company's wholly-owned Canadian subsidiary.

Equipment expense consists of operating lease payments for microcomputers
and fees charged by EDS for processing and data storage services provided to
the Company. These expenses vary with the level of assets processed by the
Company. The $1,231,000 increase between periods is due principally to the
growth in assets processed by the Company. In addition, this increase reflects
telecommunications costs associated with the continuing expansion of the
Canadian subsidiary's operations.

Insurance expense increased $123,000 to $1,070,000 for the year ended
October 31, 1994 from $947,000 for the same period in 1993. The increase was
due to the expansion of errors and omissions insurance coverage to reflect the
growth in assets processed.

Subcustodian expense consists of fees paid to centralized clearinghouses and
depositories for settling and holding securities on the company's behalf. This
expense increased $413,000 from $914,000 for the year ended October 31, 1993
to $1,327,000 for the year ended October 31, 1994. The increase was due to two
factors: growth in assets processed and the movement by clients into emerging
markets with higher cost structures and where subcustodians are required.

Depreciation and amortization expense increased $311,000 between periods as
furniture and fixtures were purchased to outfit the additional office space
discussed above.

Professional fees increased $209,000 to $955,000 for the year ended October
31, 1994 from $746,000 for the year ended October 31, 1993. This increase is
due to two factors: an increase in legal fees incurred to research the
possibility of legislative relief from the annual growth limitation imposed by
CEBA and the Company's use of independent contractors, rather than adding
permanent staff, to perform certain information systems development projects.

Travel and sales promotion expense increased $314,000 between period due to
travel to the Company's Canadian subsidiary, as well as travel in connection
with the Company's establishment of an office in Ireland.

Other operating expenses decreased $289,000 to $1,713,000 for the year ended
October 31, 1994 from $2,002,000 for the year ended October 31, 1993 due to a
reduction in unreimbursed charges for telephone, office supplies, and fees for
daily market pricing.

25
<PAGE>

Net Interest Income

Net interest income is affected by the volume and mix of assets and
liabilities, and the movement and level of interest rates. The table below
presents the changes in net interest income resulting from changes in the
volume of interest-earning assets or interest-bearing liabilities or changes
in interest rates for the year ended October 31, 1994 as compared to the same
period in fiscal 1993.

<TABLE>
<CAPTION>
Change Change
Due to Due to
Volume Rate Net
-------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Interest-earning assets
Fed funds sold and interest-earning deposits...... $ (10) $ 15 $ 5
Investment securities............................. 117 15 132
Loans............................................. 319 35 354
-------- ------- -------
Total interest-earning assets................... 426 65 491
-------- ------- -------
Interest-bearing liabilities
Deposits.......................................... 257 (49) 208
Borrowings........................................ (1) -- (1)
-------- ------- -------
Total interest-bearing liabilities.............. 256 (49) 207
-------- ------- -------
Change in net interest income..................... $170 $114 $284
======== ======= =======
</TABLE>

Net interest income increased $284,000 or 6% to $4,778,000 for the year
ended October 31, 1994 from $4,494,000 for the same period in 1993. This
increase resulted from an increase in interest income of $491,000 partially
offset by an increase in interest expense of $207,000. The net impact of the
above changes was a 1 basis point decrease in net interest margin.

The increase in interest income resulted from both a higher level of
interest earning assets and higher interest rates. During this six-month
period, the Company's average assets grew $7,333,000 or 7%, including an
increase in average interest earning assets of $6,386,000. The Company also
shifted assets out of short-term investments, which typically earn the Federal
Funds rate, into loans, which typically earn the Prime rate. Regulatory
restrictions imposed by CEBA limit the Company's asset growth to 7% for the
twelve month period ending each September 30. See "The Distribution - Reasons
for the Distribution."

Interest expense increased $207,000 due largely to the increase in interest-
bearing deposits to fund the increase in assets. The average rate paid on
deposits decreased from 2.15% to 2.01% during the period.

Income Taxes

The Company's earnings were taxed on the federal level at 34% for the 1993
and 1994 periods. State taxes on the gross earnings from the Company's
portfolio of investment securities, held by a wholly-owned subsidiary, were
assessed at the tax rate for Massachusetts securities corporations of 1.32%.
State taxes on the remainder of the Company's taxable income were assessed at
the tax rate for Massachusetts banks of 12.54%. The provision for income taxes
for fiscal year 1994 increased by $652,000 due to higher levels of taxable
income in the later year. The overall effective tax rate increased from 34% to
35%.

26
<PAGE>

Comparison of Operating Results for the Years Ended October 31, 1993 and 1992

Noninterest Income

Noninterest income increased $3,350,000 to $33,014,000 for the year ended
October 31, 1993 from $29,664,000 for the prior fiscal year. Noninterest
income consists of the following items:

<TABLE>
<CAPTION>
For the Year Ended
October 31,
-------------------
1992 1993 Change
--------- --------- ------
(Dollars in thousands)
<S> <C> <C> <C>
Asset administration fees............................ $29,054 $31,986 10%
Computer service fees................................ 455 528 16
Other operating income............................... 155 452 192
Gain on sale of investment security.................. -- 48 --
--------- ---------
Total Noninterest Income........................... $29,664 $33,014 11%
========= =========
</TABLE>

An increase in asset administration fees, due principally to higher levels
of assets processed, represented a significant part of the increase. Total
assets processed at October 31, 1993 and 1992, respectively, grew to
$61 billion from $43 billion or 42%. Over 47% of this growth resulted from
assets processed for new clients. Approximately $5.5 billion of the increase
in assets processed at October 31, 1993 resulted from the Company's wholly-
owned Canadian subsidiary opened in the 1993 period, which performs offshore
processing for mutual funds. The remainder of the growth was due to the net
expansion of relationships with existing clients, including asset growth and
broader service selections.

The Company negotiated a price increase for computer services provided to
Eaton Vance effective January 1, 1992. Computer service fees for the fiscal
year ended October 31, 1993 includes a full year at the higher rate, resulting
in an increase of $73,000 from the fiscal year ended October 31, 1992, which
included only ten months of the higher rate.

Other operating income increased 192% to $452,000 in fiscal year 1993 from
$155,000 in fiscal year 1992. The amount presented for the 1993 fiscal year
includes $325,000 in non-recurring income due to the settlement of a claim
brought by the Company in connection with the acquisition in 1990 of the
Financial Products Services Division of the Bank of New England.

In the year ended October 31, 1993, the Company sold an investment security
at a $48,000 gain in order to meet the annual asset growth limits imposed by
CEBA. No investment securities were sold in the year ended October 31, 1992.
The Company's policy is to hold its investment securities to maturity.

27
<PAGE>

Operating Expenses

Total operating expenses increased by $3,350,000 to $33,939,000 for the year
ended October 31, 1993 compared to $30,589,000 for the year ended October 31,
1992. The components of operating expenses were as follows:

<TABLE>
<CAPTION>
For the Year
Ended
October 31,
---------------
1992 1993 Change
------- ------- ------
(Dollars in
thousands)
<S> <C> <C> <C>
Compensation............................................. $17,102 $18,510 8%
Pension and other employee benefits...................... 3,158 3,631 15
Occupancy................................................ 2,442 2,641 8
Equipment................................................ 2,551 3,061 20
Insurance................................................ 910 947 4
Subcustodian fees........................................ 901 914 1
Depreciation and amortization............................ 875 1,065 22
Professional fees........................................ 593 746 26
Travel and sales promotion............................... 352 421 20
Other operating expenses................................. 1,705 2,003 17
------- -------
Total Noninterest Expense.............................. $30,589 $33,939 11%
======= =======
</TABLE>

Compensation of officers and employees increased by $1,408,000 or 8% to
$18,510,000 in fiscal year 1993 from $17,102,000 in fiscal year 1992 due to
higher staffing levels and salary increases. The number of employees increased
from 460 at October 31, 1992 to 522 at October 31, 1993, an increase of 13%,
to support growth in the asset administration business. The average annualized
salary increase for Company employees was approximately 4.5%.

Pension and other employee benefits, including group insurance plans, 401(k)
plan matching contributions and tuition reimbursement, increased to $3,631,000
for the year ended October 31, 1993 from $3,158,000 for the same period in
1992. The increase was primarily due to a substantial rate increase related to
state unemployment taxes.

Equipment expenses vary with the level of assets processed by the Company.
The $510,000 increase in equipment expense between periods is due principally
to the growth in assets processed by the Company. In addition, this increase
reflects telecommunications costs associated with the establishment of the
Canadian subsidiary's operations.

Depreciation and amortization expense increased $190,000 between periods.
This increase relates to furniture and fixtures and leasehold improvements
purchased in connection with the consolidation of operating areas to one
location in Boston at the end of 1992. In addition, the Company purchased an
updated wire transfer system in 1993.

Professional fees increased $153,000 to $746,000 for the year ended October
31, 1993 from $593,000 for the year ended October 31, 1992. This increase is
due to legal fees incurred in connection with the Company's establishment of a
Canadian subsidiary and its engagement of a certified public accounting firm
to audit the performance of two functionality additions to FACTS.

Travel and sales promotion expenses increased $69,000 between periods
primarily due to the Company's establishment of a Canadian subsidiary.

Other operating expenses increased to $2,003,000 in fiscal year 1993 from
$1,705,000 in fiscal year 1992 due to increased expenses related to the
Company's commencement of asset administration services for Hub and Spoke
mutual funds. In May 1993, the Company signed an exclusive, five-year
facilities management

28
<PAGE>

agreement with Signature Financial Group, the creator of the Hub and Spoke
administration structure. Amortization of the license fee associated with this
agreement added $152,000 to other operating expenses in fiscal year 1993. Soon
after signing the agreement, the Company opened its wholly-owned subsidiary in
Toronto, Canada to perform offshore processing for funds using the Hub and
Spoke structure.

Net Interest Income

Net interest income is affected by the volume and mix of assets and
liabilities, and the movement and level of interest rates. The table below
presents the changes in net interest income resulting from changes in the
volume of interest-earning assets or interest-bearing liabilities or changes
in interest rates for the year ended October 31, 1993 as compared to the same
period in fiscal 1992.

<TABLE>
<CAPTION>
Change Change
Due to Due to
Volume Rate Net
------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C>
Interest-earning assets
Fed funds sold and interest-earning deposits......... $(1,404) $(143) $(1,547)
Investment securities................................ 2,484 (541) 1,943
Loans................................................ 117 (48) 69
------- ----- -------
Total interest-earning assets...................... 1,197 (732) 465
------- ----- -------
Interest-bearing liabilities
Deposits............................................. (131) (231) (362)
Borrowings........................................... (6) (1) (7)
------- ----- -------
Total interest-bearing liabilities................. (137) (294) (369)
------- ----- -------
Change in net interest income........................ $ 1,334 $(500) $ 834
======= ===== =======
</TABLE>

Net interest income increased $834,000 or 23% to $4,494,000 for the year
ended October 31, 1993 from $3,660,000 for the same period in 1992. This net
increase resulted from an increase in interest income of $465,000 and a
decrease in interest expense of $369,000. The net impact of the above changes
was a 60 basis point increase in net interest margin.

The increase in interest income is primarily due to a change in the mix of
interest earning assets. Short-term investments were reinvested at maturity in
higher yielding U.S. Treasury securities and loans as the Company reevaluated
its needs for short-term liquidity. Interest expense decreased $369,000 due
largely to lower rates paid on deposits.

Income Taxes

The Company's earnings were taxed on the Federal level at 34% for the 1992
and 1993 periods. State taxes on the gross earnings from the Company's
portfolio of investment securities, held by a wholly-owned subsidiary were
assessed at the tax rate for Massachusetts securities corporations of 1.32%.
State taxes on the remainder of the Company's taxable income were assessed at
the tax rate for Massachusetts banks of 12.54%.

The securities corporation was established on December 31, 1992, effective
for the taxable year beginning January 1, 1993. The provision for income taxes
for fiscal year 1993 increased by $48,000 due to increased taxable earnings
substantially offset by the favorable impact of the lower state tax rate on
investment earnings. The overall effective tax rate decreased to 34% from 43%.

29
<PAGE>

Financial Condition

Investment Portfolio

The following table summarizes the Company's investment portfolio for the
dates indicated:

<TABLE>
<CAPTION>
July
October 31, 31,
----------------------- -------
1992 1993 1994 1995
------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Investment securities:
U.S. Treasury securities........................ $55,508 $64,913 $76,158
Mortgage-backed securities...................... 8,474 15,293 12,120
------- ------- -------
Total investment securities................... $63,982 $80,206 $88,278
======= ======= =======
Securities held to maturity:
U.S. Treasury securities........................ $65,528
Mortgage-backed securities...................... 11,017
-------
Total securities held to maturity............. $76,545
=======
</TABLE>

The investment portfolio is used to invest depositors funds and provide a
secondary source of earnings for the Company. In addition, the Company uses
the investment portfolio to secure open positions at securities clearing banks
in connection with its custody services. The portfolio is composed of U.S.
Treasury securities and mortgage-backed securities issued by the Federal
National Mortgage Association ("FNMA" or "Fannie Mae") and the Federal Home
Loan Mortgage Corporation ("FHLMC" or "Freddie Mac").

The Company invests in mortgage-backed securities to supplement its
portfolio of U.S. Treasury securities and increase the total return of the
investment portfolio. Mortgage-backed securities generally have a higher yield
than U.S. Treasury securities due to credit risk and prepayment risk.
Mortgage-backed securities have credit risk, even though payment guarantees
and credit enhancements substantially reduce it. These securities are also
subject to the risk that fluctuating interest rates and other factors may
alter the prepayment rate of the loans underlying the mortgage-backed
securities, and so affect both the prepayment speed and the value of such
securities.

Effective November 1, 1994, the Company classified its investment portfolio
as held-to-maturity. Management has the intent and the Company has the ability
to hold these securities until maturity. The held-to-maturity portfolio is
carried at cost, adjusted for amortization of premiums and accretion of
discounts.

The book value and weighted average yield of the Company's Securities held
to maturity at July 31, 1995, by contractual maturity, are reflected in the
following table.

<TABLE>
<CAPTION>
Weighted
Average
Book Value Yield
---------- --------
<S> <C> <C>
Due within one year......................................... $30,231 5.32%
Due from one to five years.................................. 35,297 5.91%
Due after five years up to ten years(1)..................... 11,018 7.34%
-------
Total securities.......................................... $76,546
=======
</TABLE>
- --------
(1) Reflects effective maturity of all mortgage-backed securities in the
investment portfolio.

30
<PAGE>

Loan Portfolio

The following table summarizes the Company's loan portfolio for the dates
indicated:

<TABLE>
<CAPTION>
October 31,
---------------------------------------- July 31,
1990 1991 1992 1993 1994 1995
------ ------ ------ ------- ------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans to individuals....... $3,237 $3,786 $5,103 $8,435 $12,085 $13,400
Loans to not-for-profit
organizations............. 1,100 1,375 814 1,821 1,520 307
------ ------ ------ ------- ------- -------
4,337 5,161 5,917 10,256 13,605 13,707
Less: allowance for loan
losses.................... (35) (35) (35) (35) (35) (35)
Net loans.................. $4,302 $5,126 $5,882 $10,221 $13,570 $13,672
====== ====== ====== ======= ======= =======
Floating Rate.............. $4,312 $5,136 $5,892 $10,231 $13,580 $13,682
Fixed Rate................. 25 25 25 25 25 25
------ ------ ------ ------- ------- -------
$4,337 $5,161 $5,917 $10,256 $13,605 $13,707
====== ====== ====== ======= ======= =======
</TABLE>

The Company's loan portfolio is composed primarily of loans to individually
managed account customers. Virtually all loans are written on a demand basis,
bear variable interest rates tied to the prime rate and are fully secured by
liquid collateral, primarily freely tradable securities held in custody by the
Company for the borrower.

At the end of the most recent reported period, the Company had one lending
concentration which exceeded 10% of total loans. The Company's largest single
lending relationship at July 31, 1995 was with Landon T. Clay, an officer of
Eaton Vance. That relationship represents two loans aggregating $1,200,000 in
principal amount. The Company also has a loan relationship with another
officer of Eaton Vance, M. Dozier Gardner. At July 31, 1995, the Company had
one loan outstanding to Mr. Gardner in the principal amount of $100,000. These
loans to Mr. Clay and Mr. Gardner were made in the ordinary course of business
on the same terms and conditions prevailing at the time for comparable
transactions with unrelated third parties. Each of these loans was secured
with Non-Voting Stock of Eaton Vance.

The Company's credit loss experience has been excellent. There have been no
loan chargeoffs or adverse credit actions in the history of the Company. It is
the Company's policy to place a loan on non-accrual 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 July 31,
1995, there were no past due loans, troubled debt restructurings, or any loans
on nonaccrual status. Although virtually all of the Company's loans are
variable rate, demand loans which are fully collateralized with freely
tradeable securities, management recognizes some credit risk inherent in the
loan portfolio, and has recorded an allowance for loan losses of $35,000 at
July 31, 1995. 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.

The significant increase in loan volume in 1993 and 1994 is due primarily to
loan marketing programs that began in 1992. Loan volume increased slightly
during the nine months ended July 31, 1995.

Interest Rate Sensitivity

Interest rate risk arises when an earning asset matures or when its rate of
interest changes in a time frame different from that of the supporting
interest-bearing liability. By seeking to minimize the difference between the
amount of earning assets and the amount of interest-bearing liabilities that
could change interest rates in the same time frame, the Company attempts to
reduce the risk of significant adverse effects on net interest income caused
by interest rate changes. The Company does not attempt to match each earning
asset with a specific interest-bearing liability. Instead, as shown in the
table below, it aggregates all of its earning assets and interest-bearing
liabilities to determine the difference between these in specific time frames.
This difference is known as the rate-

31
<PAGE>

sensitivity gap. A positive gap indicates that more earning assets than
interest-bearing liabilities mature in a time frame, and a negative gap
indicates the opposite. Maintaining a balanced position will reduce risk
associated with interest rate changes, but it will not guarantee a stable
interest rate spread because the various rates within a time frame may change
by differing amounts and change in different directions.

The Company seeks to manage interest rate risk by investment portfolio
actions designed to address the interest rate sensitivity of asset cash flows
in relation to liability cash flows. Portfolio actions used to manage interest
rate risk include managing the effective duration of the portfolio securities
and utilizing interest rate floors. Interest rate floors involve elements of
credit and market risk which are not reflected in the Company's consolidated
financial statements. Such instruments are entered into for hedging (as
opposed to investment or speculative) purposes. There can be no assurance that
such portfolio actions will adequately limit interest rate risk.

The following table presents the repricing schedule for the Company's
interest earning assets and interest bearing liabilities at July 31, 1995:

<TABLE>
<CAPTION>
Within Over Three Over Six Over One
Three to Six to Twelve Year to Over Five
Months Months Months Five Years Years Total
------- ---------- --------- ---------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest earning
assets(1):
Time deposits due from
banks................ $ 1,000 $ 1,000
Investments
securities(2)........ $14,951 $15,279 $35,297 $11,018 76,545
Loans--fixed rate..... 25 25
Loans--variable rate.. 13,682 13,682
------- ------- ------- ------- ------- -------
Total interest
earning assets..... 14,682 14,951 15,279 35,322 11,018 91,252
Interest bearing
liabilities............ 0
Savings deposits...... 1,046 1,046
Time deposits......... 12,631 12,631
Treasury, tax and loan
account.............. 770 770
------- ------- ------- ------- ------- -------
Total interest
bearing
liabilities........ 14,447 0 0 0 0 14,447
------- ------- ------- ------- ------- -------
Net interest
sensitivity gap
during the period.. $ 235 $14,951 $15,279 $35,322 $11,018 $76,805
======= ======= ======= ======= ======= =======
Cumulative gap...... $ 235 $15,186 $30,465 $65,787 $76,805
======= ======= ======= ======= =======
Interest sensitive
assets as a percent of
interest sensitive
liabilities
(cumulative)........... 101.63% 205.12% 310.87% 555.37% 631.63%
Interest sensitive
assets as a percent of
total assets
(cumulative)........... 13.13% 26.49% 40.15% 71.73% 81.58%
Net interest sensitivity
gap as a percent of
total assets........... 0.21% 13.37% 13.66% 31.58% 9.85%
Cumulative gap as a
percent of total
assets................. 0.21% 13.58% 27.24% 58.82% 68.67%
</TABLE>
- --------
(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 their contractual maturity.

32
<PAGE>

Liquidity

Liquidity represents the ability of an institution to meet present and
future financial obligations through either the sale or maturity of existing
assets or the acquisition of additional funds through liability management.
For a financial institution such as the Company, these obligations arise from
the withdrawals of deposits and the payment of operating expenses.

The Company's primary sources of liquidity include cash and cash
equivalents, federal funds sold, demand loans to individuals, new deposits,
federal funds purchased, interest payments on securities held to maturity,
fees collected from asset administration clients, and the capital raised from
Public Offering. Assets liquidity is also provided by managing the duration of
the investment portfolio. As a result of the company's management of liquid
assets and the ability to generate liquidity through liability funds,
management believes that the Company maintains overall liquidity sufficient to
meet its depositors' needs, and to satisfy its operating requirements and to
fund the payment of an anticipated cash dividend of approximately $.04 per
share.

The Company's ability to pay dividends on the Common Stock depends on the
receipt of dividends from Investors Bank & Trust Company. Investors Bank &
Trust Company has historically paid an aggregate annual dividend of $60,000 to
its stockholders. Any dividend payments by Investors Bank & Trust Company are
subject to certain restrictions imposed by the Massachusetts Commissioner of
Banks. See "Business - Regulation and Supervision." Subject to regulatory
requirements, Investors Bank & Trust Company expects to pay an annual dividend
to the Company, which the Company expects to pay to its stockholders,
currently estimated to be in an amount equal to $.04 per share of outstanding
Common Stock and Class A Stock (approximately $245,760 based upon 6,144,000
shares outstanding after the completion of the Distribution and this
Offering).

At July 31, 1995, cash and cash equivalents were 4% of total assets,
compared to 7% of total assets at October 31, 1994. At July 31, 1995,
approximately $30 million or 27% of total assets mature within a one year
period.

The Company has a borrowing arrangement with Harris Trust and Savings Bank
("Harris") whereby Harris has agreed to make available to the Company up to
$10 million at the federal funds overnight rate. The Company pays no
commitment fee to Harris and Harris may terminate this arrangement at any time
and is under no contractual obligation to provide requested funding to the
Company. The Company's borrowings under this arrangement are typically on an
overnight basis and the Company borrowed and repaid an aggregate of
approximately $30,200,000 during July 1995. At July 31, 1995, no borrowings
were outstanding to Harris. The Company believes that if Harris was unable to
provide funding as described above, a satisfactory alternative source of
funding would be available to the Company.

The Company's cash flows are comprised of three primary classifications:
cash flows from operating activities, investing activities, and financing
activities. Cash flows provided by operating activities were $5,070,000 and
$6,754,000 for the fiscal year ended October 31, 1994 and the nine months
ended July 31, 1995, respectively. Accrued interest and fees receivable
increased to $3,714,000 during the fiscal year ended October 31, 1994 due to
the increase in assets processed, as well as delay in the billing process
caused by staff turnover. Billing procedures were re-engineered in fiscal year
1995 resulting in improved collections in the nine months ended July 31, 1995.
Net cash (used) provided by investing activities, consisting primarily of
purchases of investment securities and proceeds from maturities of investment
securities, was ($14,338,000) and $9,601,000 for the fiscal year ended October
31, 1994 and the nine months ended July 31, 1995, respectively. Net cash
(used) provided by financing activities, consisting primarily of net activity
in deposits, was $2,371,000 and ($19,962,000) for the fiscal year ended
October 31, 1994 and the nine months ended July 31, 1995.

Capital Resources

Historically, the Company has financed its operations primarily through
internally generated cash flows. The Company incurs capital expenditures for
furniture, fixtures and miscellaneous equipment needs. The Company leases
microcomputers through operating leases. Such capital expenditures have been
incurred and such leases

33
<PAGE>

entered into on an as-required basis, primarily to meet the growing operating
needs of the Company. As a result, the Company's capital expenditures for
fiscal 1992, 1993 and 1994 were $1,188,000, $1,877,000 and $1,616,000,
respectively. The Company's capital expenditures for the nine months ended July
31, 1995 were $1,408,000.

Stockholders' equity at July 31, 1995 was $17,248,000, an increase of
$3,535,000 or 26%, from $13,713,000 at October 31, 1994. The ratio of
stockholders' equity to assets was 15.33% at July 31, 1995, compared with
10.75% at October 31, 1994. The growth in stockholders' equity is attributable
to current period net income.

The Federal Reserve Board has adopted a system using internationally
consistent risk-based capital adequacy guidelines to evaluate the capital
adequacy of banks and bank holding companies. Under the risk-based capital
guidelines, different categories of assets are assigned different risk weights,
based generally upon the perceived credit risk of the asset. These risk weights
are multiplied by corresponding asset balances to determine a "risk-weighted"
asset base. Certain off-balance sheet items, which previously were not
expressly considered in capital adequacy computations, are added to the risk-
weighted asset base by converting them to a balance sheet equivalent and
assigning them the appropriate risk weight.

Federal Reserve Board and FDIC guidelines require that banking organizations
have a minimum ratio of total capital to risk-adjusted assets and off balance
sheet items of 8.0%. Total capital is defined as the sum of "Tier I" and "Tier
II" capital elements, with at least half of the total capital required to be
Tier I. Tier I capital includes, with certain restrictions, the sum of common
stockholders' equity, noncumulative perpetual preferred stock, a limited amount
of cumulative perpetual preferred stock, and minority interests in consolidated
subsidiaries, less certain intangible assets. Tier II capital includes, with
certain limitations, subordinated debt meeting certain requirements,
intermediate-term preferred stock, certain hybrid capital instruments, certain
forms of perpetual preferred stock, as well as maturing capital instruments and
general allowances for loan losses.

The following table summarizes the Company's Tier I and total capital ratios
at July 31, 1995:

<TABLE>
<CAPTION>
July 31, 1995
-------------
Amount Ratio
------- -----
<S> <C> <C>
Tier I capital................................................ $17,248 53.30%
Tier I capital minimum requirement............................ $ 1,294 4.00
------- -----
Excess Tier I capital......................................... $15,954 49.30%
======= =====
Total capital................................................. $17,283 53.41%
Total capital minimum requirement............................. $ 2,589 8.00
------- -----
Excess total capital.......................................... $14,694 45.41%
======= =====
Risk adjusted assets, net of intangible assets................ $32,359
=======
</TABLE>

In addition to the risk-based capital guidelines, the Federal Reserve Board
and the FDIC use a "Leverage Capital Ratio" as an additional tool to evaluate
capital adequacy. The Leverage Capital Ratio is defined to be a company's Tier
I capital divided by its adjusted total assets. The Leverage Capital Ratio
adopted by the federal banking agencies requires a ratio of 3.0% Tier I capital
to adjusted average total assets for top rated banking institutions. All other
banking institutions will be expected to maintain a Leverage Capital Ratio of
4.0% to 5.0%. The computation of the risk-based capital ratios and the Leverage
Capital Ratio requires the capital of the Company to be reduced by most
intangible assets. The Company's Leverage Capital Ratio at July 31, 1995 was
15.33%, which is in excess of regulatory requirements. See "Business -
Regulation and Supervision."

34
<PAGE>

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.

<TABLE>
<CAPTION>
Nine Months Ending July 31, 1995 Nine Months Ending July 31, 1994
-------------------------------------- --------------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------------ ---------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning Assets:
Fed funds sold.......... $ 4,065 $ 185 6.06%
Interest-earning
deposits............... 1,000 42 5.64% $ 1,000 $ 25 3.37%
Investment securities... 81,316 3,558 5.83% 77,406 3,362 5.79%
Loans................... 13,658 925 9.03% 12,331 601 6.49%
------------ ---------- --------- ------------ ---------- ---------
Total interest-earning
assets................. 100,039 4,710 6.28% 90,737 3,988 5.86%
---------- --------- ---------- ---------
Allowance for loan
losses................. (35) (35)
Noninterest-earning
assets................. 22,182 22,338
------------ ------------
Total assets............ $ 122,186 $ 113,040
============ ============
Interest-bearing
liabilities:
Deposits:
Savings................ $ 4,119 85 2.75% $ 9,272 119 1.72%
Time................... 24,991 495 2.64% 29,061 428 1.95%
Borrowings.............. 1,495 78 6.99% 252 6 3.15%
------------ ---------- --------- ------------ ---------- ---------
Total interest-bearing
liabilities............ 30,605 658 2.87% 38,585 554 1.91%
---------- --------- ---------- ---------
Noninterest-bearing
liabilities:
Demand deposits........ 41,269 41,881
Noninterest bearing
time deposits......... 3,297 19,359
Other liabilities...... 31,418 1,882
------------ ------------
Total liabilities....... 106,589 101,707
Equity.................. 15,597 11,332
------------ ------------
Total liabilities and
equity................. $ 122,186 $ 113,040
============ ============
Net interest income..... $ 4,052 $ 3,434
========== ==========
Net interest margin(1).. 5.40% 5.05%
Average interest rate
spread(2).............. 3.41% 3.95%
Ratio of interest-
earning assets to
interest-bearing
liabilities............ 326.9% 235.2%
</TABLE>
- --------
(1) Net interest income divided by average interest-earning assets.
(2) Yield on interest-earning assets less rate paid on interest-bearing
liabilities.

35
<PAGE>

<TABLE>
<CAPTION>
Year Ending October 31, 1992 Year Ending October 31, 1993 Year Ending October 31, 1994
---------------------------------- ----------------------------- -----------------------------
Average Average Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost Balance Interest Yield/Cost
---------- --------- ----------- -------- -------- ---------- -------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Fed funds sold.......... $ 17,410 $ 663 3.81% $ 667 $ 19 2.84% $ 393 $ 20 5.20%
Interest-earning
deposits............... 833 38 4.55% 1,000 34 3.38% 1,000 38 3.80%
Other short-term
investments............ 19,531 899 4.60%
Investment securities... 37,301 2,656 7.12% 78,469 4,599 5.86% 80,462 4,731 5.88%
Demand loans............ 6,073 436 7.18% 7,829 505 6.45% 12,497 859 6.87%
---------- --------- -------- -------- ------ ----- -------- ------ -----
Total interest-earning
assets................. 81,148 4,692 5.78% 87,965 5,157 5.86% 94,351 5,648 5.99%
--------- -------- ------ ----- ------ -----
Allowance for loan
losses................. (35) (35) (35)
Noninterest-earning
assets................. 18,497 21,547 22,494
---------- -------- --------
Total assets............ $ 99,609 $109,477 $116,810
========== ======== ========
Interest-Bearing
Liabilities:
Deposits:
Savings................ $ 2,871 56 1.97% $ 1,878 48 2.57% $ 12,898 256 1.98%
Time................... 32,793 961 2.93% 28,646 607 2.12% 30,212 609 2.01%
Short Term Borrowings... 435 15 3.39% 269 8 2.86% 220 6 2.79%
---------- --------- -------- -------- ------ ----- -------- ------ -----
Total interest-bearing
liabilities............ 36,098 1,032 2.86% 30,793 663 2.15% 43,330 870 2.01%
--------- -------- ------ ----- ------ -----
Noninterest-bearing
liabilities:
Demand deposits........ 43,562 63,088 37,535
Noninterest bearing
time deposits......... 9,458 5,911 22,019
Other liabilities...... 3,438 664 2,147
---------- -------- --------
Total liabilities....... 92,556 100,456 105,031
Equity.................. 7,053 9,022 11,779
---------- -------- --------
Total liabilities and
equity................. $ 99,609 $109,477 $116,810
========== ======== ========
Net interest income..... $3,660 $4,494 $4,778
========= ====== ======
Net interest margin(1).. 4.51% 5.11% 5.06%
Average interest rate
spread(2).............. 2.92% 3.71% 3.98%
Ratio of interest-
earning assets to
interest-bearing
liabilities............ 224.8% 285.7% 217.8%
</TABLE>
- --------

(1) Net interest income divided by average interest-earning assets.
(2) Yield on interest-earning assets less rate paid on interest-bearing
liabilities.

36
<PAGE>

BUSINESS

General

Investors Financial Services Corp., based in Boston, Massachusetts, provides
asset administration services for the financial services industry through its
wholly owned subsidiary, Investors Bank & Trust Company. The Company provides
domestic and global custody, multicurrency accounting, institutional transfer
agency, performance measurement, foreign exchange, securities lending, and
mutual fund administration services to a variety of financial asset managers,
including mutual fund complexes, investment advisors, banks and insurance
companies. Currently, the Company provides financial asset administration
services for approximately $87 billion of assets, including assets managed by
35 mutual fund complexes and insurance companies and approximately $6 billion
of assets based outside the United States. The Company derived approximately
87%, 85% and 89% of its revenues from financial asset administration services
for the twelve-month periods ended October 31, 1992, 1993 and 1994,
respectively, and 89% and 84% of its revenues from financial asset
administration services for the nine-month periods ended July 31, 1994 and
1995, respectively. The Company derived the balance of its revenues from
private banking transactions, including the administration of trust and
custody accounts, secured lending, trust administration and deposit accounts.

The Company has operated as a subsidiary of Eaton Vance since 1969. The
boards of directors of the Company and Eaton Vance have determined to separate
the business operations of the Company from those of Eaton Vance by means of a
tax free, pro rata distribution of Eaton Vance's ownership interest in the
Company to the Eaton Vance stockholders. The principal reasons for the
Distribution are to eliminate certain regulatory restrictions to which the
Company is subject under CEBA, and to enable the Company to pursue its
business goals independent of Eaton Vance. See "The Distribution - Reasons for
the Distribution."

Overview of the Financial Services Industry

In the financial services industry, asset managers, whether independent or
affiliated with investment management companies, banks or insurance companies,
manage and invest financial assets entrusted to them. Asset managers utilize a
broad range of pooled investment products such as mutual funds, unit
investment trusts, separate accounts and variable annuities to achieve their
clients' investment goals. Asset administration companies, such as the
Company, perform various services for the asset managers and the pooled
products they sponsor, including domestic and global custody, multicurrency
accounting, transfer agency, portfolio performance measurement, foreign
exchange, securities lending, and administration. In the United States,
financial assets managed in the mutual fund industry totaled over $2.3
trillion in 1994. Total financial assets in the United States have grown at an
annual rate of approximately 10% over the last five years, almost double the
nominal gross domestic product growth.

The Company believes that the rapid pace of financial asset creation through
the flow of assets into pooled products and other investment products and the
related asset administration of those products is the key to revenue growth
for asset administration companies. Mutual funds, such as those serviced by
the Company, make up a large part of the financial assets in pooled investment
vehicles. As of December 31, 1994, there were approximately 5,250 mutual funds
worldwide. Investment management companies sponsored approximately 3,400
funds, with an aggregate of $1.6 trillion in assets. The 1,300 bank-sponsored
mutual funds managed approximately $277 billion in assets in 1994. Insurance
companies also participate in the industry, sponsoring approximately 500 funds
with $160 billion in assets. In addition, insurance companies manage separate
accounts and variable annuity products which also require asset administration
services.

The asset administration environment differs by asset management
organization and operational philosophy. Most asset managers outsource custody
services. In many cases, they use multiple custodians to foster cost reduction
through competition. Large asset managers may have the critical mass necessary
to cost-justify in-house facilities to handle accounting, administration and
transfer agency services, while smaller asset managers outsource these
services as well. The Company believes that asset administration companies
such as the Company operate most efficiently when bundling services such as
custody and accounting with value-added

37
<PAGE>

services such as securities lending and foreign exchange. The Fund Accounting
and Tracking System, the software system developed and owned by the Company,
with its integrated functionality, supports these services, so that
information is input once and is entered into various administrative
subsystems without manual intervention.

Providing asset administration services offshore is a growing area in the
financial services industry. Non-U.S. investors in certain pooled investment
vehicles are subject to U. S. income tax if their income is effectively
connected with the conduct of a trade or business in the U. S. Operating an
investment fund from an offshore location is a requirement for sheltering an
investment fund from U.S. taxation. In 1993, the Company opened a subsidiary
in Toronto, Canada to service the growing offshore mutual fund market. In July
1994, the Company opened an office in Dublin, Ireland to service European
clients. In July 1995, the Company was granted preliminary approval to open a
small administration site in the Cayman Islands to service Caribbean-based
funds.

Another driving force in the financial services industry is the importance
of information technology. Asset managers are able to create innovative
investment products using data from world markets as a result of more powerful
and affordable information processing power, coupled with the ability to send
large volumes of information instantly through widely dispersed communication
networks. Timely on-line access to electronic information on security
positions, prices and price shifts facilitate on-line currency trading,
indexation of assets, real time arbitrage, and hedging through the use of
derivative securities. Asset administration providers use technology as a
competitive tool to deliver precise and functional information to the asset
managers, and to increase value-added services. Value-added services include
performance measurement and analytical tools for asset managers, such as
reports showing time-weighted return, performance by sector, and time-weighted
return by sector. Other factors, such as the reduction in settlement times in
world markets, have created greater demand for asset administration service
providers to have on-line, real-time systems. The Company believes that the
integrated nature of FACTS, compared with the disparate systems used for
different tasks by many other financial service providers, positions the
Company well to respond to the changing technological demands of the financial
services industry.

Competition in the asset administration industry has reduced pricing in
almost all business segments, particularly with respect to custody services
and trustee services. Partially offsetting this trend is the development of
new services that have higher margins. Its investment in technology has
permitted the Company to offer new value-added services to clients such as
offshore custody and fund accounting, securities lending and foreign exchange
at competitive prices around the globe. Technological evolution and new
service innovation enable the Company to generate additional revenues to
offset price pressure in maturing service lines.

Asset managers are also creating different investment structures in an
effort to capture efficiencies of larger pools of assets. One example of this
innovation is a patented product of Signature Financial Group, Inc. ("SFG"),
the Hub and Spoke structure. The Company has an agreement with SFG to act
as a third party asset administration service provider for assets in the Hub
and Spoke structure (a description of the terms of such agreement appears at
"Business - Service Offerings - Hub and Spoke Processing"). In the Hub and
Spoke structure, one or more investment vehicles (the "Spokes") with identical
investment objectives pool their assets in a common portfolio held by a
separate investment vehicle (the "Hub"). This structure permits each of the
Spoke vehicles to be sold to a separate target market and through a different
distribution channel even if the Spoke, on a stand alone basis, would not be
large enough to support its operating costs. The Spokes benefit from economies
of scale available to the larger pool of funds invested in the Hub. The Hub
and Spoke structure was first developed by SFG in 1989. Since that time,
financial assets managed in Hub and Spoke vehicles have grown to $40 billion
at December 31, 1994. The Company services approximately $24 billion in Hub
and Spoke assets, representing approximately 60% of all Hub and Spoke assets.
See "Business - Company Strategy" and "Business - Service Offerings - Hub and
Spoke Processing."

In addition, a growing number of mutual funds have been structured as
multiple class funds in order to address the differing requirements and
preferences of potential investors. In the typical multiple class environment,
investors have the option of purchasing fund shares with the sales load
structure that best meets

38
<PAGE>

their short-term and long-term investment strategy. Multiple class
arrangements allow an investment company to sell interests in a single
investment portfolio to separate classes of stockholders. Multiple class
funds, due to the increased complexity of their structure, present new
opportunities for asset administration companies. The Company services
approximately 80 multiple class mutual funds, representing $23 billion in
financial assets.

The financial asset service industry has recently experienced a
consolidation among service providers. The Company believes that its size and
its responsiveness to client needs provide the financial services industry
with an asset administration alternative to superregional and money center
banks. In addition, consolidation within the industry causes prospective
clients to review their relationships with existing service providers. The
Company's sales and marketing group actively monitors these situations as they
develop.

Company Strategy

Global and domestic custody and multicurrency accounting are the principal
asset administration services provided to the Company's clients. The Company's
securities lending, foreign exchange, transfer agency and mutual fund
administration services are value-added services utilized by clients based on
their particular needs. The Company's objective is to provide a broad range of
services to all clients, maximize the use of its value-added services and
increase the size of its client base. To achieve these objectives, the Company
has adopted the following strategy:

. Deliver superior service and expand client relationships. Service
quality in asset administration relationships is a key to maintaining
existing business and in attracting new clients. The Company takes an
integrated approach to asset administration rather than the functional
approach of some of its competitors. Instead of separate departments
managing components of the custody and accounting task (e.g., trade
settlement, income collection, corporate actions, general ledger
accounting, portfolio accounting and pricing), the Company has
integrated these custody and accounting functions and dedicates a single
operations team to handle all work for a particular account or fund. 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. The Company believes that
its strong client relationships create continuing opportunities to
provide additional services to existing customers. Financial assets
processed by the Company for existing clients increased by $6.1, $11.7
and $6.1 billion during the twelve-month periods ended October 31, 1992,
1993 and 1994, respectively, and increased by $6.1 and $16.2 billion
during the nine-month periods ended July 31, 1994 and 1995,
respectively.

. Maintain technological expertise. The asset administration industry
requires the technological capability to support a wide range of global
security types and complex portfolio structures in both local and base
currencies, as well as the telecommunications flexibility to support the
diversity of global communications standards. The Fund Accounting and
Custody Tracking System was developed in the mid-1980s to support its
integrated approach to the provision of services to its clients. From a
systems standpoint, FACTS is an integrated computerized information
system that provides custody, securities movement and control, portfolio
accounting, general ledger accounting, pricing, net asset value
calculation, and Hub and Spoke processing into a single information
system. By consolidating these functions, the Company has eliminated
redundancy in data capture and reduced the opportunity for clerical
error. The FACTS architecture enables the Company to modify the system
quickly, resulting in increased processing quality and efficiency for
its clients. The Company believes that this integrated architecture
helps differentiate the Company from its competitors.

System enhancements and upgrades are an ongoing part of asset
administration, both to remain competitive and to create information
delivery mechanisms that add value to the information available as part
of clearing and settling transactions. During the past two years, the
Company has developed standardized data extracts and automated
interfaces that allow its clients to connect electronically with the
Company's host computer and access data collected from clearance and
settlement transactions in

39
<PAGE>

multiple currencies on a real-time basis. Through these information-
sharing tools, the Company is better equipped to expand its custody and
accounting services with foreign exchange services and asset and
transaction reporting and monitoring services. This electronic linkage
also positions the Company to respond quickly to client requests.

The Company's sixty-three systems professionals have developed
expertise in various advanced technologies, including graphical user
interfaces, relational database management systems, distributed
processing and imaging technology. The Company intends to continue to
utilize these technologies to provide the responsiveness necessary to
keep pace with the rapidly changing requirements of the industry and
the needs of its clients.

. Expand the range of value-added service offerings. Asset administration
companies gain competitive advantage by offering a range of value-added
services to their financial services clients. The Company operates most
efficiently when bundling basic services such as custody and accounting
with value-added services such as performance measurement, securities
lending and foreign exchange. Additionally, the Company's activities
have been restricted under CEBA. After the Spin-Off Transaction, the
Company will no longer be subject to the CEBA restrictions and will be
able to participate in additional business activities. The Company's
clients, which consist mainly of managers of mutual funds, unit
investment trusts and other pooled asset products, typically generate
large cash balances from securities sales and other transactions which
they wish to invest on a short-term basis. Because the Company is
subject to a 7% annual asset growth cap under CEBA, it has not been able
to accept those deposits and must direct these deposits to other
financial institutions, foregoing a potential source of revenue. The
Company directed client deposits averaging almost $1.1 billion daily to
other financial institutions in fiscal year 1994. Similarly, many of the
Company's clients use credit lines to leverage their portfolios or to
handle overnight cash shortfalls, however, CEBA rules have restricted
the Company from making commercial loans of this type. As a result of
the Spin-Off Transaction, the Company may now offer these deposit and
lending services directly to existing and potential clients.

. Expand offshore processing capabilities. Non-U. S. investors in certain
pooled investment vehicles are subject to U. S. income tax if their
income is effectively connected with the conduct of a trade or business
in the U. S. Operating an investment fund from an offshore location is a
requirement for sheltering an investment fund from U.S. taxation. In
1993, the Company opened a subsidiary in Toronto, Canada to service the
growing offshore mutual fund market. In July 1994, the Company opened an
office in Dublin, Ireland to service European clients. In July 1995, the
Company was granted preliminary approval to open a small administration
site in the Cayman Islands to service Caribbean-based funds. The
technology requirements of the offshore fund accounting operations are
facilitated by the architecture of FACTS. FACTS allows a microcomputer
located at offshore processing centers to use the FACTS software system
to perform the components of processing on-site in compliance with local
jurisdiction and Internal Revenue Service requirements for off-shore
investment funds, while utilizing the mainframe processing, storage and
archive capabilities. In contrast, other fund accounting providers
typically utilize entirely separate systems for domestic and offshore
processing.

. Build expertise in the employee base. The Company believes that in order
to compete successfully for new business and obtain additional business
from existing clients, a qualified employee base is required together
with a commitment to ongoing training to keep employees abreast of
technological advances and industry developments in the financial
services industry. Successful completion of a Professional Development
Training Program is required of all newly hired employees. Topics
covered during the training program include an overview of the financial
services industry and pooled asset vehicles, principles of mutual fund
accounting and custody, instruction in control procedures, manual
performance of fund accounting tasks and intensive training on FACTS.
This training program is supplemented by ongoing education as the
industry or client base changes.

40
<PAGE>

. Seek strategic alliances. The Company intends to continue to pursue
strategic marketing and other alliances with participants in the
financial services industry. In May 1993, the Company signed a Hub and
Spoke(R) facilities management agreement with Signature Financial Group,
Inc. the developer of the Hub and Spoke structure. Hub and Spoke is a
patented investment structure that makes it possible for investment
advisers to reach new markets and avoid the inefficiencies of
maintaining separate portfolios that have common investment objectives.
See "Business - Overview of the Financial Services Industry." The
Company currently services $24 billion in Hub and Spoke assets,
representing 60% of all Hub and Spoke assets and which accounted for 8%
and 14% of net operating revenue for the twelve-month periods ended
October 31, 1993 and 1994, respectively, and 12% and 25% of net
operating revenue for the nine-month periods ended July 31, 1994 and
1995, respectively. The Company had no net operating revenue from Hub
and Spoke processing for its 1992 fiscal year. See "Business - Overview
of Financial Services Industry" and "Business - Service Offerings - Hub
and Spoke Processing."

Service Offerings

The Company provides a broad range of asset administration services to the
financial services industry, including domestic and global custody,
multicurrency accounting, securities lending, foreign exchange, mutual fund
administration, institutional transfer agency, performance measurement and
private banking services. Global and domestic custody and multicurrency
accounting are the principal asset administration services provided to the
Company's clients. Fees charged for these services are price-sensitive.
Securities lending and foreign exchange services provide a more favorable
pricing environment for the Company and increased activity by the Company in
these areas would not involve a proportionate increase in personnel or other
resources. Mutual fund administration and institutional transfer agency
services provide additional revenue generating opportunities, but require a
corresponding increase in personnel and processing resources.

Client fees vary from client to client based on the volume of assets under
custody, the number of securities held and portfolio transactions, income
collected and whether other value-added services such as foreign exchange and
performance measurement are needed. Fees are generally billed to the client
monthly in arrears, and upon their approval, charged directly to their
account.

The Company takes an integrated approach to asset administration rather than
the functional approach of some of its competitors. The Company has integrated
the components of the custody and accounting task (e.g., trade settlement,
income collection, corporate actions, general ledger accounting, portfolio
accounting and pricing) and dedicates a single operations team to handle all
work for a particular account or fund, instead of using separate departments
to manage these custody and accounting functions. 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. The Company's accounting control group independently checks and
verifies transfer agency, custody and administrative operations each day.

The following is a description of the various services offered by the
Company.

Domestic Custody. Custody entails overseeing the safekeeping of client
securities and settlement of portfolio transactions. The Company's domestic
assets under custody have grown from $9 billion at October 31, 1989 to $67
billion at July 31, 1995. Custody functions are fully integrated with security
movement and control, portfolio accounting, general ledger accounting, and
pricing and evaluation through FACTS. Custody functions include:

.Settlement of purchases and sales of securities.
.Safekeeping of securities and cash.
.Tracking and collection of income and receivables, such as dividends and
distributions.
.Reconciliation of cash and security positions.
.Disbursement of expenses.
.Calculation and reporting of cash availability to asset managers.
.Reporting and processing of corporate actions, such as stock splits and
bond calls.
.Initiation of settlement inquiries, including reclaims for foreign tax
withholding.
.Periodic reporting of holdings, transactions, income, corporate actions
and cash flow.

41
<PAGE>

Foreign Custody. Foreign custody includes the safekeeping of cross-border
securities for clients, such as the safekeeping of Hong Kong stocks for a
Dutch mutual fund or German bonds held for a U.S. bank-sponsored mutual fund.
The Company entered the foreign custody marketplace in 1988, when the nature
of foreign custody began to change dramatically. In the 1970s, foreign custody
was a series of manual, labor intensive exchanges; settlement was a slow
process where most securities were re-registered and vaulted in the U.S. and
the volume of assets was relatively small. Major developed countries
throughout the world have evolved to highly automated environments, and the
transition in developing countries is proceeding rapidly. Currently, the
Company has approximately $6 billion in foreign assets under custody.

Given the evolution of information technology and the industry's acceptance
of computer technology as the preferred vehicle to support foreign custody,
the Company established a worldwide network of global subcustodians. In
countries with centralized clearing houses such as Euroclear, the Company
establishes a subcustodian relationship directly with the clearing house and
is able to receive information from the subcustodian in electronic format
directly onto FACTS. In nations without automated environments, subcustodians
hold physical securities in their own vaults and provide reporting in hard
copy format to the Company for input onto FACTS. Today, the Company has
custody agreements in 61 countries, typically with regional providers of
custody services. Since the Company does not have its own branches in these
countries, it is able to operate in the foreign custody arena with minimal
fixed costs, while the Company's clients benefit from the ability use only one
custodian, the Company, for their international investment needs.

Multicurrency Accounting. Multicurrency accounting provides the daily
recordkeeping for each account or investment vehicle, including calculations
of net asset value per share, dividend rates per shares, and the maintenance
of all books, records and financial reports required by the Commission and
other regulatory agencies. Due to the growth in international investments by
asset managers, traditional fund accounting tasks must be reconciled across
multiple currencies. The primary approach of the Company is to bundle the sale
of fund accounting and custody services in order to work within the natural
efficiencies and control mechanisms of its integrated custody/fund accounting
system and operational philosophy. Multicurrency accounting functions include:

. Maintenance of the books and records of a fund in accordance with the
Investment Company Act of 1940.
. Tracking of investment transactions for use in the calculation of tax
gains and losses.
. Calculation and accrual of expenses.
. Booking of purchases, redemptions and transfers of fund shares as
directed by the transfer agent.
. Calculation of gains and losses by security and currency.
. Determination of net income.
. Calculation of daily yield in accordance with Commission formula
requirements.
. Preparation of statements of assets and liabilities and statements of
operations.
. Computation of the market value of the account.
. Calculation of the daily Net Asset Value of the account and reporting of
this value to National Association of Securities Dealers for publication
in newspapers.

In addition to providing the above services to domestic-based accounts and
investment vehicles, the Company also provides offshore fund accounting. The
Company views the offshore market as a significant business opportunity and
will continue to invest in expansion to support client demand. The Company's
Toronto operations are conducted by the Company's wholly-owned Canadian
subsidiary that currently provides offshore services to 28 portfolios. The
Canadian subsidiary processes over $13 billion in assets requiring the
calculation of 77 daily net asset values. In 1994, the Company opened a
processing site in Dublin to service European clients and in July 1995, it was
granted preliminary approval by the authorities in the Cayman Islands to open
a small administration site for Caribbean-based funds.

The technology requirements of the offshore fund accounting operations are
facilitated by the architecture of FACTS. FACTS allows a microcomputer located
at offshore processing centers to use the FACTS software

42
<PAGE>

system to perform the components of account processing on-site in compliance
with local jurisdiction and Internal Revenue Service requirements for off-
shore investment funds, while utilizing the Company's mainframe processing,
storage and archive capabilities. In contrast, other fund accounting providers
typically utilize entirely separate systems for domestic and offshore
processing.

Mutual Fund Administration. The Company provides mutual fund administration
services, including management reporting, regulatory reporting, and tax and
accounting reporting. Management reporting consists of information and
reporting which is of primary interest to the fund's asset managers and its
board of trustees and includes:

. Preparation of detailed quarterly financial information for presentation
to fund management and its board of trustees.
. Monitoring of reporting of net asset value, settlement of trades, and
processing of stockholder transactions.
. Monitoring of compliance with investment portfolio restrictions.
. Calculation of fund dividends to be declared in accordance with management
guidelines.
. Preparation and monitoring of a fund's expense budget.

Regulatory reporting is the reporting and accumulation of information
required of the fund by the Commission and state securities regulators and
includes:

. Coordination of preparation and filing of Commission reports.
. Maintenance of effective "blue sky" registrations in jurisdictions
selected for fund sales.
. Coordination of the preparation and printing of stockholder reports.
. Preparation of prospectus updates and proxy material.
. Coordination of on-going blue sky compliance.

Tax and accounting reporting is required either by the fund's auditors or by
Internal Revenue Service rules and regulations and includes:

. Performing portfolio compliance testing to establish qualification as a
regulated investment company.
. Preparation of income and excise tax returns.
. Preparation of audit package for use by independent public accountants.
. Coordination of review of income, capital gains, and distribution
information.

The Company also provides mutual fund start-up services in addition to
ongoing services. The Company has worked with a number of investment advisors
to assist them in the development of new mutual funds. Its services typically
include product definition assistance, servicer selection, and assistance in
structuring and registering the fund. The Company's Administration Group is
staffed by 15 accounting and legal professionals who have experience in either
mutual fund complexes or mutual fund servicing organizations.

Foreign Exchange. The Company offers foreign exchange services in order to
settle international securities transactions for U.S. dollar denominated
mutual funds and other accounts and to convert income payments denominated in
a non-U.S. currency to U.S. dollars. By using the Company rather than a third
party foreign exchange bank to perform these functions, clients reduce the
amount of time spent coordinating currency delivery and monitoring delivery
failures and claims. The Company, as principal, enters into foreign exchange
contracts with a client and simultaneously enters into a matched trade with
another financial institution. The current volume of trades processed by the
Company is approximately 4,000-5,000 trades per year, which vary in size up to
$1 million. The Company initiates foreign exchange transactions only in
response to a client's request and engages in no foreign exchange trading
transactions for its own account. Foreign exchange fee revenue totaled
$169,000 and $536,000 for the twelve-month periods ended October 31, 1993 and
1994, respectively, and $413,000 and $756,000 for the nine-month periods ended
July 31, 1994 and 1995, respectively. The Company had foreign exchange fee
revenue for its 1992 fiscal year. See Note 16 of Notes to Consolidated
Financial Statements.

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<PAGE>

Securities lending. Securities lending involves the lending of clients'
securities to brokers and other institutions for a fee, which improves a
client's return on the underlying securities. The Company acts as agent for
its clients for both international and domestic securities lending services.
Currently, lending services are provided to five clients, and the current loan
portfolio aggregates approximately $900 million. The Company retains as
compensation a portion of the lending fee due to the client as owner of the
borrowed asset. Securities lending fee revenue totaled $371,000, $561,000 and
$1,181,000 for the twelve-month periods ended October 31, 1992, 1993 and 1994,
respectively, and $963,000 and $950,000 for the nine-month periods ended July
31, 1994 and 1995, respectively.

Through a network of broker/dealers, the Company places the securities out
on loan pursuant to client instruction, delivers the subject securities and
performs the necessary loan accounting. Accounting entails monitoring each
security out on loan by broker, allocating the loans to each fund, tracking
the fixed or variable rebate due the broker, updating the daily investments,
applying the earnings to each security loan and preparing daily and monthly
earnings statements for each fund and all the brokers.

All loans are fully collateralized with cash, government securities or a
letter of credit. This collateral is reinvested according to each client's
instructions. The Company monitors all outstanding loans on a daily basis by
reviewing exposure by broker, performing asset reconciliations, and marking
each security to market to ensure that proper collateral levels are
maintained.

Institutional Transfer Agency. Transfer agency encompasses mutual fund
shareholder recordkeeping and communications. Services include tracking
capital shares, fulfilling purchase, transfer, and redemption requests, and
sending account statements, tax reporting information and distributions to
shareholders. The Company provides mutual fund shareholder servicing and
recordkeeping for clients representing approximately 30,000 shareholder
accounts. These services are generally provided only to institutional clients
with smaller numbers of outstanding shareholders or omnibus positions of
retail shareholders.

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. The Company provides this
service for an aggregate of $12 billion in assets managed by 11 clients.

Hub and Spoke Processing. The Company provides asset administration services
for approximately $24 billion in Hub and Spoke fund assets under contractual
arrangements with Signature Financial Group, Inc., owner of the patented Hub
and Spoke structure. In May 1993, SFG granted the Company the non-exclusive
right to service mutual funds licensing the Hub and Spoke structure from SFG,
as well as a non-exclusive license to integrate SFG's Hub and Spoke software
with FACTS for this purpose. The Company's right to service such mutual funds
and its license to integrate the Hub and Spoke software with FACTS extends
until the earlier of (i) termination by the Company on 120 days notice, or
(ii) termination by SFG upon material and willful breach of the agreement by
the Company, execution of any assignment for the benefit of creditors of the
Company, or filing of bankruptcy of the Company. In May 1993, Signature
Financial Services, Inc., a wholly owned subsidiary of SFG, agreed to use the
Company as its exclusive provider through May 1998 of personnel, data
processing services and facilities for processing of all Hub and Spoke fund
assets of SFG's licensees, other than foreign licensees utilizing off-shore
processing as of May 1993. The Company has the option to decline to provide
services under the agreement to any particular licensee. The Company is
compensated under this arrangement based on the dollar amount of assets
processed. The Company maintains the right under its arrangements with SFG to
provide asset administration services independent of Signature Financial
Services, Inc. to certain licensees of SFG. See "Business - Overview of
Financial Services Industry" and "Business - Company Strategy."

Private Banking Services. The Company offers private banking services to
individuals, family groups, trusts, endowments and foundations, and retirement
plans. The Company develops this client base by forming

44
<PAGE>

relationships with investment advisors and working with the advisors to
service mutual clients. Currently, the Company services over 4,500
individually managed trust and custody accounts. The Company does not conduct
consumer banking operations.

Acting as a fiduciary, the Company provides trust administration and estate
settlement services. These services include on-going fiduciary review of the
trust instrument, collection and safekeeping of assets, distribution of
income, appropriate reporting for court and tax purposes, preparation of tax
returns, and distribution of assets as required. The Company does not provide
investment advice, but works closely with third-party investment advisors
chosen by each client to carry out the investment of assets. Custody services,
such as the safekeeping of securities and the settlement of securities
transactions, are also provided to these clients. Custody service fees are
determined based on assets under custody and number of transactions in each
account.

Because it has been a subsidiary of Eaton Vance, the Company has been
restricted by CEBA from making commercial loans or from writing residential
mortgages. The Company specializes in lending to individuals and non-profit
institutions on a secured basis. Other than two loans made to non-profit
associations for purposes of the Community Reinvestment Act, all loans are
secured by securities and are due on demand.

At July 31, 1995, the Company had gross loans outstanding of $13.7 million,
which represented approximately 12.2% of the Company's total assets. The
interest rates charged on the Bank's loans are indexed to either the prime
rate or the rate paid on 90-day Treasury bills. The Company has never had a
loan loss, and has no delinquent loans.

Commercial Banking Services. As a result of the Distribution, the Company is
able to offer commercial banking services. See "The Distribution - Reasons for
the Distribution." The Company intends to offer credit lines to its clients
for the purpose of leveraging portfolios and covering overnight cash
shortfalls. Additionally, the Company's clients, which consist mainly of
managers of mutual funds, unit investment trusts and other pooled asset
products, typically generate large cash balances from securities sales and
other transactions which they wish to invest on a short-term basis. Because
the Company is subject to a 7% annual asset growth cap under CEBA, it has not
been able to accept those deposits and directed these deposits to other
financial institutions. As a result of the Distribution, the Company may now
offer these deposit services directly to existing and potential clients.

Sales, Marketing and Client Support

The Company employs a direct sales staff of five employees that targets
potential market areas, including investment management companies, insurance
companies, banks and investment advisors. Sales personnel are primarily based
at the Company's headquarters in Boston and are given geographic area sales
responsibility. Additionally, the Company provides the sales staff with market
data and presentation materials. Senior managers from all functional areas are
directly involved in obtaining new clients, frequently working as a team with
a sales professional.

New client contacts are generated by a variety of methods, including client
referrals, personal sales calls, attendance at trade shows and seminars,
advertising in trade publications, and direct mailing to targeted clients.

In order to service existing clients, a client management staff of
approximately 15 professionals based in the Company's Boston office provides
client support. Each client is assigned a Client Manager responsible for the
overall satisfaction of the client. The Client Manager is usually a senior
professional with extensive industry experience and works with the client on
contracts, new products and specific systems requirements.

Significant Clients

The Company presently provides services to approximately 35 mutual fund
complexes and insurance companies. The Company's largest client, Eaton Vance,
accounted for 14%, 13% and 21% of the Company's

45
<PAGE>

net operating revenues for the twelve-month periods ended October 31, 1992,
1993 and 1994, respectively, and 18% and 15% of net operating revenues for the
nine-month periods ended July 31, 1994 and 1995, respectively. Another client
of the Company, Merrill, Lynch, accounted for 22%, 21% and 16% of the
Company's net operating revenues for the twelve-month periods ended October
31, 1992, 1993 and 1994, respectively, and 17% and 6% of net operating
revenues for the nine-month periods ended July 31, 1994 and 1995,
respectively. No other single client of the Company represented more than 10%
of net operating revenues for those periods. Eaton Vance has been a client of
the Company since 1975. Although the Company believes its relations with its
clients are good, no assurances can be made that its clients will remain
clients upon termination of their agreement with the Company. An unanticipated
termination of a major client engagement could adversely effect the Company
and its financial results. Most of the Company's client engagements are, and
in the future may be, terminable upon 60 days notice.

Software Systems and Data Center

The Company asset administration operations are supported by sophisticated
computer technology. The Company requires the capability to receive vast
amounts of information across a world-wide computer network. That information,
which covers a wide range of global security types and complex portfolio
structures in various currencies, must then be processed, resulting in system-
wide updating and reporting. The Company must have the capability to provide
not only daily and periodic reports of asset accounting and performance, but
also to provide measurement and analytical data to asset managers on-line on a
real time basis. These technology requirements call for powerful and
sophisticated computer hardware and software systems operated in a cost-
effective manner.

The primary software system used by the Company is its Fund Accounting and
Tracking System. The system was developed over a four year period by the Bank
of New England, and was put into operation in 1986. It was acquired by the
Company in 1990 in connection with the acquisition of the Financial Products
Services Division of the Bank of New England.

FACTS utilizes a microcomputer networked to a mainframe computer system. The
microcomputer can be located in any location with the requisite
telecommunications network for the automated interface to the mainframe,
enabling the Company to provide offshore processing services effectively and
efficiently. The microcomputer to mainframe configuration also provides
redundant processing capability; if the mainframe fails, FACTS is able to
process independently on the microcomputers.

FACTS emphasizes efficiency and accuracy because it integrates custody,
securities movement and control, portfolio accounting, general ledger
accounting, pricing, net asset value calculation, and Hub and Spoke Processing
into a single system. The traditional industry approach is to have separate
applications for each of these functions and interconnect the component
applications with manual intervention at various points in the process.

The integrated and automated nature of FACTS is best reflected in following
a transaction through the system. For example, a purchase of a security is
entered on a client trading system and the transaction information is
electronically transmitted to FACTS. The receipt of the trade information by
FACTS will trigger the following activities with no manual intervention by the
Company:

. Creation of a Securities Movement and Control transaction to track and
control the trade for the entire settlement cycle (e.g., confirmation,
affirmation, settlement).
. Updating of the portfolio position for the security being purchased.
. Immediate updating of all required general ledger accounts.
. Creation of a pricing record to enable pricing of the security and
inclusion in the total market value and net asset value determination.
. Affirmation and settlement of the trade upon notification from the
counterparty with associated transaction and general ledger updates
occurring simultaneously.
. Accounting for all income for the holding period of the security.

46
<PAGE>

FACTS also complies with current industry standards such as the newly
enacted requirement that mandates a three business day settlement cycle for
public securities transactions rather than the traditional five business day
cycle. The enhancements made to FACTS to address this change included the
ability of FACTS to interact with the Depository Trust Company via its new
Interactive Institutional Delivery System, which allows institutions to
confirm trades earlier in the trade life cycle.

The integrated nature of FACTS architecture allows the Company to affect
modifications and enhancements quickly, resulting in increased processing
quality and efficiency for the Company's clients. This integrated architecture
helps differentiate the Company from its competitors. System enhancements and
upgrades are an ongoing part of asset administration, both to keep ahead of
the competition and to create information delivery mechanisms that add value
to the information available as part of clearing and settling transactions.
During the past two years, the Company has developed standardized data
extracts and automated interfaces that allow its clients to connect
electronically with the Company's host computer and access data collected from
clearance and settlement transactions in multiple currencies on a real-time
basis. This electronic linkage also positions the Company to respond quickly
to client requests.

A substantial portion of the Company's electronic transaction processing
services depends upon a mainframe host computer system, owned and operated by
EDS, contained in the EDS Information Processing Center ("IPC") in Camp Hill,
Pennsylvania. Processing and networking functions and equipment are located at
the IPC, and in the Boston and Detroit metropolitan areas. The Company has
outsourced its mainframe data processing through EDS since December 1990. By
outsourcing data processing, the Company can focus its resources on the core
line of business and minimize its capital investment in computer equipment.
EDS is able to offer the Company up to date computer products and services
that it would not otherwise have access to, while removing the risk of product
obsolescence. Due to its diverse customer base, EDS can invest in the latest
computer technology and spread the costs over multiple users. In addition, the
defined pricing, provided by EDS, for products and services allows the Company
to match its data processing cost with the related revenue stream. The use of
EDS as a hardware provider allows the Company to dedicate its efforts to the
ongoing enhancement of its software systems while receiving the benefit of the
continuing investment by EDS in its computer hardware.

EDS provides full disaster recovery services. EDS maintains additional
processing equipment at the Camp Hill IPC and at a designated alternate IPC
which may be used in the event of equipment failure. The Camp Hill facility is
also supported by an uninterruptable power supply and diesel generators which
can supply power to continue operations for an extended period of time.
Critical software and data files are backed-up daily and stored off-site.
Disaster recovery plans are tested through simulations conducted by the
Company twice a year. Notwithstanding these precautions, there can be no
assurance that a fire or other natural disaster affecting the data center
would not disable the host computer system.

The current agreement between the Company and EDS obligates EDS to provide
the Company with comprehensive data processing services and obligates the
Company to utilize EDS's services for substantially all its data processing
requirements. The Company is billed for these services monthly on an as-used
basis as determined by a pricing schedule for specific products and services.
EDS began providing services in December 1990 and the current agreement is
scheduled to expire on December 9, 1995. The Company is currently negotiating
a new contract with EDS for provision of substantially the same services. The
Company expects to enter into a new agreement with EDS prior to the expiration
of the existing agreement. The initial term of the new agreement is expected
to run through December 31, 2000. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

Competition

The market for asset administration services is highly competitive. The
Company's most significant competitors are State Street Boston Corporation,
Bank of New York Company, Inc., Chase Manhattan Corp., Brown Brothers Harriman
& Co., and PNC Bank. These competitors possess substantially greater
financial, sales

47
<PAGE>

and marketing resources than the Company and process a greater amount of
financial assets than the Company. In addition, the Company also encounters
competition in the sale of fund accounting services from large in-house
accounting departments of mutual fund complexes, insurance companies and banks
offering proprietary mutual funds. Competitive factors include technological
advancement and flexibility, breadth of services provided and quality of
service. The Company believes that it competes favorably in these categories.

Intellectual Property

The Company's success is dependent upon its software development methodology
and other intellectual property rights developed and owned by the Company,
including its Fund Accounting and Custody Tracking System. The Company relies
on a combination of trade secret, nondisclosure and other contractual
arrangements and technical measures, and copyright and trademark laws to
protect its proprietary rights. The Company generally enters into
confidentiality agreements with its employees, and consultants and limits
access to and distribution of its proprietary information. There can be no
assurance that the steps taken by the Company in this regard will be adequate
to deter misappropriation of its proprietary information or that the Company
will be able to detect unauthorized use and take appropriate steps to enforce
its intellectual property rights. Furthermore, such protections may not
preclude competitors from developing products and services with functionality
or features similar to those of the Company. In addition, effective copyright,
trademark and other trade protection may not be available in certain
international markets serviced by the Company. Finally, there can be no
assurance that intellectual property protection will be available in certain
foreign countries. The registration of the service mark Investors Bank & Trust
Company will remain in force until 2006, at which time it may be renewed.

Although the Company believes that its services do not infringe on the
intellectual property rights of others, there can be no assurance that such a
claim will not be asserted against the Company in the future.

Properties

As of July 31, 1995, the Company leased three offices located in Boston, as
well as foreign offices in Toronto, Canada and Dublin, Ireland for its
offshore funds processing business.

The following table provides certain summary information with respect to the
principal properties that the Company leases:

<TABLE>
<CAPTION>
Location Function Sq. Ft. Expiration Date
-------- -------- ------- ---------------
<S> <C> <C> <C>
89 South St., Boston, Principal Executive Offices and 115,249 1997
MA Operations Center
245 Summer St., Bos- 25,225 1996
ton, MA Operations Center
24 Federal St., Bos- 7,831 Tenant at will
ton, MA Operations Center
1 First Canadian
Place, Toronto Offshore Processing Center 13,674 1997
Earlsfort Terrace, 3,400 1997
Dublin Offshore Processing Center
</TABLE>

The Company is currently negotiating an agreement to lease 173,500 square
feet at a Boston location for a ten-year term to commence in 1997 in order to
consolidate its Boston operations. See Note 14 of Notes to Consolidated
Financial Statements.

Employees and Training

As of July 31, 1995, the Company had 673 full-time employees, including 7 in
senior management, 21 in marketing and client management, 620 in operations
and 25 in general and administration. None of the Company's employees are
represented by a union. The Company believes that its relations with its
employees are good.

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<PAGE>

The Company has developed a five-week, professional development program for
entry level staff. Successful completion of the program is required of all
newly hired employees. Topics covered during the program include an overview
of the financial services industry and pooled asset vehicles, principles of
mutual fund accounting and custody, instruction in control procedures, manual
performance of fund accounting tasks and intensive training on FACTS. This
training program is supplemented by ongoing education on the industry and
client base.

The Company's business is labor-intensive, and its success depends to a
significant extent upon a number of key management employees and skilled
technical, managerial and marketing personnel, few of which are bound by
employment agreements. Since October 31, 1990, the Company's staff has
increased from 463 to 673 employees.

Legal Proceedings

The Company is from time to time subject to claims arising in the ordinary
course of business. While the outcome of claims cannot be predicted with
certainty, management does not expect these matters to have a material adverse
effect on the results of operations and financial condition of the Company.

Regulation and Supervision

In addition to the generally applicable state and federal laws governing
businesses and employers, the Company and the Bank are further regulated by
federal and state laws and regulations applicable only to financial
institutions and their parent companies. Virtually all aspects of the
Company's and the Bank's operations are subject to specific requirements or
restrictions and general regulatory oversight. State and federal banking laws
have as their principal objective either the maintenance of the safety and
soundness of financial institutions and the federal deposit insurance system
or the protection of consumers or classes of consumers, rather than the
specific protection of stockholders of a bank or its parent company. To the
extent the following material describes statutory or regulatory provisions, it
is qualified in its entirety by reference to the particular statute or
regulation.

The Company

General. The Company, as a bank holding company, is subject to regulation
and supervision by the Federal Reserve Board (the "FRB") and by the
Massachusetts Commissioner of Banks (the "Commissioner"). The Company is
required to file annually a report of its operations with, and is subject to
examination by, the FRB and the Commissioner. The FRB has the authority to
issue orders to bank holding companies to cease and desist from unsound
banking practices and violations of conditions imposed by, or violations of
agreements with, the FRB. The FRB is also empowered to assess civil monetary
penalties against companies or individuals who violate the Bank Holding
Company Act of 1956, as amended, (the "BHCA") or orders or regulations
thereunder, to order termination of non-banking activities of non-banking
subsidiaries of bank holding companies, and to order termination of ownership
and control of a non-banking subsidiary by a bank holding company.

BHCA - Activities and Other Limitations. The BHCA prohibits a bank holding
company from acquiring substantially all the assets of a bank or acquiring
direct or indirect ownership or control of more than 5% of the voting shares
of any bank, or increasing such ownership or control of any bank, or merging
or consolidating with any bank holding company without prior approval of the
FRB. No approval under the BHCA is required, however, for a bank holding
company already owning or controlling 50% or more of the voting shares of a
bank to acquire additional shares of such bank. Until September 29, 1995, the
BHCA prohibits a bank holding company from acquiring shares of a bank located
outside the state in which the operations of the holding company's banking
subsidiaries are principally conducted unless such an acquisition is
specifically authorized by statute of the other state. The Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Act")
generally authorizes bank holding companies to acquire banks located in any
state commencing on September 29, 1995. In addition, the Interstate Act
generally authorizes national and state chartered banks to merge across state
lines (and thereby create interstate branches) commencing June 1, 1997.

49
<PAGE>

Under the provisions of the Interstate Act, states are permitted to "opt out"
of this latter interstate branching authority by taking action prior to the
commencement date. States may also "opt in" early (i.e., prior to June 1,
1997) to the interstate merger provisions.

The BHCA also prohibits a bank holding company from acquiring a direct or
indirect interest in or control of more than 5% of the voting shares of any
company which is not a bank or bank holding company 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 has determined to be so closely related to banking or managing and
controlling banks as to be a proper incident thereto. In making such
determinations, 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 FRB has by regulation determined that certain activities are closely
related to banking within the meaning of the BHCA. Should the Company desire
to expand its activities beyond its current financial services activities, it
would generally be limited to the following activities: operating a mortgage
company, finance company, credit card company, factoring company, trust
company or savings association; performing certain data processing operations;
providing limited securities brokerage services; acting as an investment or
financial advisor; acting as an insurance agent for certain types of credit-
related insurance; leasing personal property on a full-payout, non-operating
basis; providing tax planning and preparation services; operating a collection
agency; and providing certain courier services. The FRB also has determined
that certain other activities, including real estate brokerage and
syndication, land development, property management and underwriting of life
insurance not related to credit transactions, are not closely related to
banking and a proper incident thereto.

Commitments to Affiliated Institutions. Under FRB policy, the Company is
expected to act as a source of financial strength to the Bank and to commit
resources to support the Bank in circumstances when it might not do so absent
such policy and is expected to maintain the financial flexibility and capital-
raising capacity to obtain additional resources for assisting the Bank. The
legality and precise scope of this policy is unclear, however, in light of
federal judicial precedent. Additionally, the Federal Deposit Insurance Act
(the "FDIA") requires the holding company parent of an undercapitalized bank
to guarantee, up to certain limits, the bank's compliance with a capital
restoration plan approved by the bank's primary federal supervisory agency.
Because Investors Financial Services Corp., as a holding company for the Bank,
has no assets other than its ownership interest in the Bank, its ability to
serve as a source of strength to the Bank through the contribution of capital
is, presently, limited to contributing proceeds from the sale of securities
contemplated by the transactions described herein.

Capital Requirements. The FRB has adopted capital adequacy guidelines
pursuant to which it assesses the adequacy of capital in examining and
supervising a bank holding company and in analyzing applications to it under
the BHCA. These capital adequacy guidelines generally require bank holding
companies to maintain total capital equal to 8% of total risk-adjusted assets
and off-balance sheet items, with at least one-half of that amount consisting
of Tier I or core capital and the remaining amount consisting of Tier II or
supplementary capital. Tier I capital for bank holding companies generally
consists of the sum of common stockholders' equity and perpetual preferred
stock (subject in the case of the latter to limitations on the kind and amount
of such stocks which may be included as Tier I capital), less goodwill. Tier
II capital generally consists of hybrid capital instruments; perpetual
preferred stock which is not eligible to be included as Tier I capital; term
subordinated debt and intermediate-term preferred stock; and, subject to
limitations, general allowances for loan losses. Assets are adjusted under the
risk-based guidelines to take into account different risk characteristics,
with the categories ranging from 0% (requiring no additional capital) for
assets such as cash to 100% for such assets as premises, plant and equipment
and traditional consumer loans. Claims on, or guaranteed by, U.S. government
agencies, as well as the portion of claims that are collateralized by
securities issued or guaranteed by the U.S. Treasury are assigned a 20% level
in the risk-weighting system. Off-balance sheet items also are adjusted to
take into account certain risk characteristics.

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<PAGE>

In addition to the risk-based capital requirements, the FRB requires bank
holding companies to maintain a minimum leverage capital ratio of Tier I
capital (defined by reference to the risk-based capital guidelines) to total
assets of 3.0%. Total assets for this purpose does not include goodwill and
any other intangible assets and investments that the FRB determines should be
deducted from Tier I capital. The FRB has announced that the 3.0% Tier I
Leverage Capital Ratio requirement is the minimum for the top-rated bank
holding companies without any supervisory, financial or operational weaknesses
or deficiencies or those which are not experiencing or anticipating
significant growth. Because the Bank, and consequently, the Company
anticipates significant future growth, the Company will be required to
maintain Tier I Leverage Capital Ratios of at least 4.0% to 5.0% or more.
Management currently intends to maintain Tier I Leverage Capital Ratios of
6.0%.

The Company currently is in compliance with both the Risk Based Capital
Ratios and the Leverage Capital Ratio requirements. At July 31, 1995, the
Company had Tier I Risk Based Capital Ratio and Total Risk Based Capital Ratio
equal to 53.3% and 53.41%, respectively and Tier I Leverage Capital Ratio
equal to 15.33%.

Limitations of Acquisitions of Common Stock. The Federal Change in Bank
Control Act prohibits a person or group of persons from acquiring "control" of
a bank holding company unless the FRB has been given 60 days prior written
notice of such proposed acquisition and within that time period the FRB has
not issued a notice disapproving the proposed acquisition or extending for up
to another 30 days the period during which such a disapproval may be issued.
An acquisition may be made prior to expiration of the disapproval period if
the FRB issues written notice of its intent not to disapprove the action.
Under a rebuttable presumption established by the FRB, the acquisition of 10%
or more of a class of voting stock of a bank 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.

In addition, any company, as that term is 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 bank holding company) or more, or
such lesser percentage as the FRB deems to constitute control over the
Company, of the outstanding Common Stock of the Company. Such approval would
be contingent upon, among other things, the acquirer registering as a bank
holding company, divesting all impermissible holdings and ceasing any
activities not permissible for a bank holding company.

Massachusetts Law. Massachusetts law generally defines a bank holding
company as a company which owns or controls two or more financial
institutions. Although the Company owns or controls only one financial
institution, it is deemed a bank holding company for purposes of Massachusetts
law due to the manner in which it acquired the Bank. Accordingly, the Company
has registered with the Commissioner and is obligated to make reports to the
Commissioner. Further, as a Massachusetts bank holding company, the Company
may not acquire all or substantially all of the assets of a banking
institution or merge or consolidate with another bank holding company without
the prior consent of the Board of Bank Incorporation (the "BBI"). As a
condition of such consent, the BBI must receive notice from the Massachusetts
Housing Partnership Fund (the "Fund") that arrangements satisfactory to the
Fund have been made by the Company to make 0.9% of its assets available for
financing, down payment assistance, share loans, closing costs and other costs
related to programs promoted by the Fund, including those related to creating
affordable rental housing, limited equity cooperatives, and tenant management
programs.

The Bank

General. The Bank is subject to extensive regulation and examination by the
Commissioner and by the FDIC, which insures its deposits to the maximum extent
permitted by law, 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 deposited funds
and the nature and amount of and collateral for certain loans.

51
<PAGE>

FDIC Insurance Premiums. The Bank pays deposit insurance premiums to the
FDIC based on an assessment rate established by the FDIC for Bank Insurance
Fund-member institutions. The FDIC has established a risk-based assessment
system under which institutions are assigned to one of three capital groups -
"well capitalized," "adequately capitalized" and "undercapitalized" - which
are defined in substantially the same manner as under the regulations
establishing the prompt corrective action system pursuant to Section 38 of the
FDIA, as discussed below. These three capital groups are then each divided
into three subgroups which reflect varying levels of supervisory concern, from
those which are considered to be healthy to those which are considered to be
of substantial supervisory concern. The matrix so created results in nine
assessment risk classifications, with corresponding assessment rates ranging
from .04% for well capitalized, healthy institutions to .31% for
undercapitalized institutions with substantial supervisory concerns. The
Bank's assessment for the first semi-annual period of 1995 was $134,000.
Beginning in the third quarter of 1995, assessments will be made on a
quarterly basis. For the third quarter of 1995, the Bank's assessment will be
$48,000. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

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
bank holding companies, as described above.

The FDIC's capital regulation establishes a minimum 3.0% Tier I Leverage
Capital Ratio requirement for the most highly-rated state-chartered, non-
member banks, with an additional cushion of at least 100 to 200 basis points
for all other state-chartered, non-member banks, which effectively will
increase the minimum Tier I Leverage Capital Ratio for such other banks to
4.0% to 5.0% or more. Under the FDIC's regulation, highest-rated banks are
those that the FDIC determines are not anticipating or experiencing
significant growth and have well diversified risk, including no undue interest
rate risk exposure, excellent asset quality, high liquidity, good earnings
and, in general, which are considered a strong banking organization, rated
composite 1 under the Uniform Financial Institutions Rating System. A bank
having less than the minimum Tier 1 Leverage Capital Ratio shall, within 60
days of the date as of which it fails to comply with such requirement, submit
to its FDIC regional director for review and approval a reasonable plan
describing the means and timing by which the bank shall achieve its minimum
leverage capital requirement. A bank which fails to file such plan with the
FDIC is deemed to be operating in an unsafe and unsound manner, and could be
subject to a cease-and-desist order from the FDIC. The FDIC's amended
regulation also provides that any insured depository institution with a Tier 1
Leverage Capital Ratio less than 2.0% is deemed to be operating in an unsafe
or unsound manner pursuant to Section 8(a) of the FDIA and is subject to
potential termination of deposit insurance. Such an institution, however, will
not be subject to an enforcement proceeding thereunder, solely on account of
its capital ratios if it has entered into and is in compliance with a written
agreement with the FDIC to increase its Tier I Leverage Capital Ratio to such
level as the FDIC deems appropriate and to take such other action as may be
necessary for the institution to be operated in a safe and sound manner. The
FDIC capital regulation also provides, among other things, for the issuance by
the FDIC or its designee(s) of a capital directive, which is a final order
issued to a bank that fails to maintain minimum capital to restore its capital
to the minimum leverage capital requirement within a specified time period.
Such directive is enforceable in the same manner as a final cease-and-desist
order.

The FDIC has augmented the capital leverage ratios described above with a
risk-based capital framework which is more explicitly and systematically
sensitive to the risk profiles of individual banks. Under the risk-based
capital framework, the assets of the Bank are weighted pursuant to the risk
category in which each asset falls. These risk categories are substantially
the same as those described in the discussion of FRB capital requirements
above. Banks generally will be expected to maintain a minimum Tier 1 Risk
Based Capital Ratio of 4.0% and a Total Risk Based Capital Ratio of 8.0%. Any
bank that does not meet the minimum requirements, or whose capital is
otherwise considered inadequate, generally will be expected to develop and
implement a capital plan for achieving an adequate level of capital,
consistent with the provisions of the risk-based capital framework.

At July 31, 1995, the Bank was in compliance with all minimum Federal
regulatory capital requirements which are generally applicable to FDIC insured
banks. As of such date, the Bank had Tier I Risk Based Capital

52
<PAGE>

Ratio and Total Risk Based Capital Ratio equal to 53.3% and 53.41%,
respectively, and Tier I Leverage Capital Ratio equal to 15.33%.

Prompt Corrective Action. Under Section 38 of the FDIA, each federal banking
agency is required to implement a system of prompt corrective action for
institutions which it regulates. The federal banking agencies have promulgated
substantially similar regulations to implement the system of prompt corrective
action established by Section 38 of the FDIA. Under the regulations, a bank
shall be deemed to be (i) "well capitalized" if it has Total Risk Based
Capital Ratio of 10.0% or more, has a Tier I Risk Based Capital Ratio of 6.0%
or more, has a Tier I Leverage Capital Ratio of 5.0% or more and is not
subject to any written capital order or directive; (ii) "adequately
capitalized" if it has a total Risk Based Capital Ratio of 8.0% or more, a
Tier I Risk Based Capital Ratio of 4.0% or more (3.0% under certain
circumstances) and does not meet the definition of "well capitalized," (iii)
"undercapitalized" if it has a Total Risk Based Capital Ratio that is less
than 8.0%, a Tier I Risk Based Capital Ratio that is less than 4.0% or a Tier
I Leverage Capital Ratio that is less than 4.0% (3.0% under certain
circumstances), (iv) "significantly undercapitalized" if it has a Total Risk
Based Capital Ratio that is less than 6.0%, a Tier I Risk Based Capital Ratio
that is less than 3.0% or a Tier I Leverage Capital Ratio that is less than
3.0%, and (v) "critically undercapitalized" if it has a ratio of tangible
equity to total assets that is equal to or less than 2.0%. Section 38 of the
FDIA and the regulations also specify circumstances under which a federal
banking agency may reclassify a well capitalized institution as adequately
capitalized and may require an adequately capitalized institution or an
undercapitalized institution to comply with supervisory actions as if it were
in the next lower category, except that the FDIC may not reclassify a
significantly undercapitalized institution as critically undercapitalized.

An institution generally must file a written capital restoration plan which
meets specified requirements with an appropriate federal banking agency within
45 days of the date that the institution receives notice or is deemed to have
notice that it is undercapitalized, significantly undercapitalized or
critically undercapitalized. A federal banking agency must provide the
institution with written notice of approval or disapproval with 60 days after
receiving a capital restoration plan, subject to extensions by the agency.

An institution which is required to submit a capital restoration plan must
concurrently submit a performance guaranty by each company that controls the
institution. Such guaranty shall be limited to the lesser of (i) an amount
equal to 5.0% of the institution's total assets at the time the institution
was notified or deemed to have notice that it was undercapitalized or (ii) the
amount necessary at such time to restore the relevant capital measure of the
institution to the levels required for the institution to be classified as
adequately capitalized. Such a guarantee shall expire after the federal
banking agency notifies the institution that it has remained adequately
capitalized for each of four consecutive calendar quarters. An institution
which fails to submit a written capital restoration plan within the requisite
period, including any required performance guarantee, or fails in any material
respect to implement a capital restoration plan, shall be subject to the
restrictions in Section 38 of the FDIA which are applicable to significantly
undercapitalized institutions.

A critically undercapitalized institution is to be placed in conservatorship
or receivership with 90 days unless the FDIC formally determines that
forbearance from such action would better protect the deposit insurance fund.
Unless the FDIC or other appropriate federal banking regulatory agency makes
specific further findings and certifies that the institution is viable and is
not expected to fail, an institution that remains critically undercapitalized
on average during the fourth calendar quarter after the date it becomes
critically undercapitalized must be placed in receivership.

Immediately upon becoming undercapitalized, an institution becomes subject
to the provisions of Section 38 of the FDIA (i) restricting payment of capital
distributions and management fees, (ii) requiring that the appropriate federal
banking agency monitor the condition of the institution and its efforts to
restore its capital, (iii) requiring submission of a capital restoration plan,
(iv) restricting the growth of the institution's assets and (v) requiring
prior approval of certain expansion proposals. The appropriate federal banking
agency for an undercapitalized institution also may take any of a number of
discretionary supervisory actions if the agency determines that any of these
actions is necessary to resolve the problems of the institution at the least
possible

53
<PAGE>

long-term cost to the deposit insurance fund, subject in certain cases to
specified procedures. These discretionary supervisory action include requiring
the institution to raise additional capital; restricting transaction with
affiliates; restricting interest rates paid by the institution on deposits;
requiring replacement of senior executive officers and directors; restricting
the activities of the institution and its affiliates; requiring divestiture of
the institution or the sale of the institution to a willing purchaser; and any
other supervisory action that the agency deems appropriate. These and
additional mandatory and permissive supervisory actions may be taken with
respect to significantly undercapitalized and critically undercapitalized
institutions.

At July 31, 1995, the Bank was deemed to be a well capitalized institution
for the above purposes. Bank regulators may raise capital requirements
applicable to banking organizations beyond current levels. Because the Company
is unable to predict whether higher capital requirements will be imposed and,
if so, at what levels and on what schedules, it therefore cannot predict what
effect such higher requirements may have on the Company and the Bank.

Brokered Deposits. The FDIA restricts the use of brokered deposits by
certain depository institutions. Under the FDIA and applicable regulations,
(i) a well capitalized institution may solicit and accept, renew or roll over
any brokered deposit without restriction, (ii) an adequately capitalized
institution may not accept, renew or roll over any brokered deposit unless it
has applied for and been granted a waiver of this prohibition by the FDIC and
(iii) an undercapitalized institution may not (x) accept, renew or roll over
any brokered deposits or (y) solicit deposits by offering an effective yield
that exceeds by more than 75 basis points the prevailing effective yields on
insured deposits of comparable maturity in such institution's normal market
area or in the market area in which such deposits are being solicited. The
term "undercapitalized insured depository institution" is defined to mean any
insured depository institution that fails to meet the minimum regulatory
capital requirement prescribed by its appropriate federal banking agency. The
FDIC may, on a case-by-case basis and upon application by an adequately
capitalized insured depository institution, waive the restriction on brokered
deposits upon a finding that the acceptance of brokered deposits does not
constitute an unsafe or unsound practice with respect to such institution.
Currently, the Bank is deemed to be a well capitalized insured depository
institution for purposes of the restriction on the use of brokered deposits by
such institutions. The bank historically has not relied upon brokered deposits
as a source of funding and, at July 31, 1995, the Bank did not have any
brokered deposits.

Transactions with Affiliates. The FDIA restricts the range of permissible
transactions between a member bank and an affiliated company. The Bank is
subject to certain restrictions on loans to the Company, on investment in the
stock or securities thereof, on the taking of such stock or securities as
collateral for loans to any borrower, and on the issuance of a guarantee or
letter of credit on behalf of the Company. The Bank also is subject to certain
restrictions on most types of transactions with the Company, requiring that
the terms of such transactions be substantially equivalent to terms to similar
transactions with non-affiliates.

Activities and Investments of Insured State-Chartered Banks. Section 24 of
the FDIA generally limits the activities and equity investments of FDIC-
insured, state-chartered banks to those that are permissible for national
banks. Under the FDIC's regulations dealing with equity investments, an
insured state bank generally may not directly or indirectly acquire or retain
any equity investment of a type, or in an amount, that is not permissible for
a national bank. An insured state bank is not prohibited from, among other
things, (i) acquiring or retaining a majority interest in a subsidiary, (ii)
investing as a limited partner in a partnership the sole purpose of which is
direct or indirect investment in the acquisition, rehabilitation or new
construction of a qualified housing project, provided that such limited
partnership investments may not exceed 2% of the Bank's total assets, (iii)
acquiring up to 10% of the voting stock of a company that solely provides or
reinsures directors', trustees', and officers' liability insurance coverage or
bankers' blanket bond group insurance coverage for insured depository
institutions, and (iv) acquiring or retaining the voting shares of a
depository institution if certain requirements are met.

Community Reinvestment Act. The Federal Community Reinvestment Act ("CRA")
requires the FDIC and the Commissioner to evaluate the Bank's performance in
helping to meet the credit needs of the community. The Bank defines its CRA
marketplace to include the city of Boston, within the Commonwealth of

54
<PAGE>

Massachusetts. This definition is not intended to restrict the availability of
credit services throughout the Bank's general service area, but represents a
special commitment the Bank has made to participate in the revitalization
efforts of the community. As a part of the CRA program, the Bank is subject to
periodic examinations by the FDIC and the Commissioner, and maintains
comprehensive records of its CRA activities for this purpose. The Bank is
currently in compliance with all CRA requirements.

Massachusetts Law - Dividends. Under Massachusetts law trust companies such
as the Bank may pay dividends only out of "net profits" and only to the extent
that such payments will not impair the Bank's capital stock and surplus
account. If, prior to declaration of a dividend, the Bank's capital stock and
surplus accounts do not equal at least 10.0% of its deposit liabilities, then
prior to the payment of the dividend the Bank must transfer from net profits
to its surplus account the amount required to make its surplus account equal
to either (i) together with capital stock, 10.0% of deposit liabilities or,
(ii) subject to certain adjustments, 100% of capital stock. 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.

Regulatory Enforcement Authority. The enforcement powers available to
federal banking regulators include, among other things, the ability to assess
civil money penalties, to issue cease-and-desist or removal orders and to
initiate injunctive actions against banking organizations and institution-
affiliated parties, as defined. In general, these enforcement actions may be
initiated for violations of law and regulations and unsafe or unsound
practices. Other actions or inaction's may provide the basis for enforcement
action, including misleading or untimely reports filed with regulatory
authorities. Federal law requires, except under certain circumstances, public
disclosure of final enforcement actions by the federal banking agencies.

Transfer Agency. In order to serve as transfer agent to its clients that
execute transactions in publicly traded securities, the Company must register
as a transfer agent under the Exchange Act. As a registered transfer agent,
the Company is subject to certain reporting and recordkeeping requirements.
Currently, the Company is in compliance with these registration, reporting and
recordkeeping requirements.

Regulation of Investment Companies. Certain of the Company's 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 provided by the Company.

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 the Company serves as custodian for a number of
its investment company clients, these regulations require, among other things,
that the Company maintain certain minimum aggregate capital, surplus, and
undivided profits. Additionally, arrangements between the Company and clearing
agencies or other securities depositories must meet ICA requirements for
segregation of assets, identification of assets and client approval. Future
legislative and regulatory changes in the existing laws and regulations
governing custody of investment company assets, particularly with respect to
custodian qualifications, may have a material and adverse impact on the
Company. Currently, the Company is in compliance with all minimum capital and
securities depository requirements. Further, the Company is not aware of any
proposed or pending regulatory developments, which, if approved, would
adversely affect the ability of the Company to act as custodian to an
investment company.

Investment companies are also subject to extensive recordkeeping and
reporting requirements. These requirements dictate the type, volume and
duration of the record keeping undertaken by the Company, either in its role
as custodian for an investment company or as a provider of administrative
services to an investment company. Further, the Company 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 the
Company conducts its operations.

55
<PAGE>

New legislation or regulatory requirements could have a significant impact
on the information reporting requirements applicable to the Company's clients
and may in the short term adversely affect the Company's ability to service
those clients at a reasonable cost. Any failure by the Company to provide such
support could cause the loss of customers and have a material adverse effect
on the Company's financial results. Additionally, legislation or regulations
may be proposed or enacted to regulate the Company in a manner which may
adversely affect the Company's financial results.

56
<PAGE>

MANAGEMENT AND COMPENSATION

Executive Officers and Directors

The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Kevin J. Sheehan........ 44 Chairman of the Board, President, and Chief Executive Officer
Michael F. Rogers....... 38 Executive Managing Director
Karen R. Creegan........ 33 Chief Financial Officer and Secretary
Earl W. Zimmerman,
Jr. ................... 35 Treasurer
Robert D. Mancuso....... 34 Managing Director - Marketing and Client Management
David F. Flynn.......... 48 Managing Director - Lending
Edmund J. Maroney....... 39 Managing Director - Systems
Robert D. Brace......... 65 Director
Edwin W. Hiam........... 68 Director
James M. Oates.......... 49 Director
Thomas P. McDermott..... 60 Director
Charles C. Cabot, Jr. .. 65 Director
Francis B. Condon,
Jr. ................... 60 Director
</TABLE>

Mr. Sheehan is chairman of the Executive Committee of which Messrs. Oates
and Condon are also members. Mr. Oates is Chairman of the Compensation
Committee of which Messrs. McDermott and Condon are also members. Mr. Brace is
Chairman of the Audit Committee of which Messrs. McDermott and Hiam are also
members. The board of directors and executive officers of the Bank are
identical to the board of directors and executive officers of the Company. The
Company was organized in June 1995 to serve as the holding company for the
Bank and for periods prior to that date references to the Company mean the
Bank.

Mr. Sheehan has served as a director since 1990 and as President since June
1992. He has been Chief Executive Officer and Chairman of the Board of
Directors since June 1995. Prior to joining the Company in May 1990 with the
acquisition of the Financial Products Services Division of the Bank of New
England, Mr. Sheehan was a Senior Vice President at the Bank of New England.
He holds a Bachelor of Science in Accounting from the University of
Massachusetts.

Mr. Rogers has been Executive Managing Director since September 1993 and has
had responsibility for all operating areas since 1990. Prior to joining the
Company in May 1990 with the acquisition of the Financial Products Services
Division of Bank of New England, Mr. Rogers was Vice President at Bank of New
England. Mr. Rogers graduated from Boston College with a degree in Economics
and received his Master of Business Administration from the College of William
and Mary.

Ms. Creegan has been Chief Financial Officer and Secretary since June 1995.
Ms. Creegan has served as Vice President of the Company since September 1992.
She joined the Company in August 1989 as an Operations Manager in the Mutual
Fund Group, and became Senior Audit Officer in May 1990. She was Treasurer of
the Company from July 1991 to May 1994. Prior to joining the Company, Ms.
Creegan worked for Arthur Andersen & Co., a public accounting firm. She is a
Certified Public Accountant and holds a Master of Business Administration from
Babson College and a Bachelor of Science in Accountancy from Bentley College.

Mr. Zimmerman has been Treasurer since joining the Company in May 1994.
Prior to joining the Company, he was employed from June 1987 in the financial
services division of Ernst & Young, a public accounting firm. He is a
Certified Public Accountant and holds a Bachelor of Science in Accountancy
from Suffolk University.

Mr. Mancuso has been Managing Director - Marketing and Client Management
since September 1993. He joined the Company in September 1992. Prior to
joining the Company, Mr. Mancuso was Eastern Region Director of Sales for PRJ
Associates, a software development firm from January 1989. Mr. Mancuso holds a
Master of Business Administration and a Bachelor of Science from Boston
College.

57
<PAGE>

Mr. Flynn has been Managing Director - Lending since April 1992. He joined
the Company in July 1974 and served as Director of Marketing prior to April
1992. Mr. Flynn is a Certified Public Accountant and holds a Master of
Business Administration from Babson College and a Bachelor of Science in
Accountancy from Suffolk University.

Mr. Maroney has been Managing Director - Systems since July 1991. Mr.
Maroney joined the Company in August 1985 and served as a systems manager in
the custody department prior to becoming Managing Director -Systems. Mr.
Maroney holds a Bachelor of Science from The University of Notre Dame and a
Master of Science in finance from the University of California-Los Angeles.

Mr. Brace served as President of the Company from its inception in 1969
until 1989 and again from 1991 until 1992. He was Chairman of the Board of
Directors from September 1989 to July 1995. Mr. Brace serves on the boards of
a number of business and charitable organizations including the Greater Boston
Young Men's Christian Association.

Mr. Hiam has been a director of the Company since April 1990. Since 1973,
Mr. Hiam has been an independent investment advisor with offices in Boston,
Massachusetts.

Mr. Oates has been a director of the Company since June 1995. Mr. Oates
became the managing director of the Wydown Group in 1994, a consulting firm
specializing in start-ups, turn-arounds, and defining growth strategies. Mr.
Oates served as President and Chief Executive Officer of Neworld Bancorp
Incorporated from 1984 to 1994. Mr. Oates is also a director of Blue Cross and
Blue Shield of New Hampshire, Stifel Financial Corporation, as well as twenty-
five Phoenix Mutual Funds and six Govett Worldwide Opportunity Funds.

Mr. McDermott has been a director of the Company since June 1995. He has
been Managing Director of TPM Associates, a consulting firm, since January
1994. He served as Managing Partner, New England Area, of Ernst & Young from
1989 to 1993. Mr. McDermott is also a director of ACCION International,
Escuela Agricola Panamericana and the American College of Greece.

Mr. Cabot has been a director of the Company since February 1971. He has
been a partner of the law firm of Sullivan & Worcester since 1966. Mr. Cabot
is also a director of five Merrill, Lynch institutional mutual funds and is
chairman of the Conservation Law Foundation.

Mr. Condon has been a director of the Company since April 1986. From July
1982 to July 1993, he was Chief Executive Officer and President, and from July
1993 he has been Chief Executive Officer and Chairman of Woodstock
Corporation, a Boston-based investment management firm and of its wholly owned
subsidiary, Woodstock Service Corporation, a provider of financial services.
Mr. Condon also serves as Director of Big Sandy Management Company.

Each director holds office until that director's successor has been elected
and qualified. Upon the closing of this Offering, the Company's Board of
Directors will be divided into three classes. Messrs. Brace and Cabot will
serve in the class whose term expires in 1996; Messrs. Hiam and Condon will
serve in the class whose term expires 1997; and Messrs. Oates, McDermott and
Sheehan will serve in the class whose term expires in 1998. Upon the
expiration of the term of each class of directors, directors comprising such
class of directors will be elected for a three-year term at the next
succeeding annual meeting of stockholders.

A director may be removed for cause, which is generally defined under
Delaware law as an event of a substantial nature which directly affects the
rights and interests of a Company's stockholders, such as disclosing trade
secrets of the Company or embezzling corporate funds, by a vote of at least a
majority of the shares of the Company's capital stock entitled to elect such
director. A director may be removed without cause by a vote of at least
seventy-five percent (75%) of the shares of capital stock entitled to elect
such director. Executive officers of the Company are elected by the Board of
Directors on an annual basis and serve at the discretion of the Board of
Directors. There are no family relationships between any of the executive
officers or directors of the Company.

58
<PAGE>

Currently, non-employee directors are paid an annual fee of $10,000 and an
additional $1,000 for each Board meeting attended. Employee directors do not
receive compensation for service as directors of the Company.

Executive Compensation

The following table sets forth the aggregate amount of cash compensation
paid by the Company for the fiscal year ended October 31, 1994 to its Chief
Executive Officer and each of its four most highly compensated executive
officers (the "Named Executive Officers") and to all executive officers as a
group:

Summary Compensation Table

<TABLE>
<CAPTION>
Annual Compensation(1)
--------------------------------------------
Name And Principal Other Annual All Other
Position Salary Bonus(2) Compensation Compensation
------------------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Kevin J. Sheehan................... $182,452 $460,000 -- $11,001(3)
President; Chief Executive
Officer; Director
Michael F. Rogers.................. $139,986 $205,000 -- $ 731(4)
Executive Managing Director
Edmund J. Maroney.................. $111,846 $110,000 -- $ 694(5)
Managing Director--Systems
David F. Flynn..................... $104,004 $ 25,000 -- $ 658(6)
Managing Director--Lending
Robert D. Mancuso.................. $100,962 -- $23,598(7) $ 646(8)
Managing Director--Marketing and
Client Management
All executive officers as a group $761,685 $825,000 $23,598 $14,396(9)
(7 persons).......................
</TABLE>
- --------

(1) Does not include non-cash compensation that in the aggregate does not
exceed the lesser of $50,000 or 10% of such named individual's cash
compensation.
(2) Represents performance bonuses for calendar 1993 paid in fiscal year 1994
for services rendered in the last ten months of fiscal year 1993 and the
first two months of fiscal year 1994. Does not include performance bonuses
for services rendered in the last ten months of fiscal year 1994 that were
paid in fiscal year 1995.
(3) Includes a matching contribution of $520 to the Company's 401(k) plan,
payment of a $268 premium on term life insurance for the benefit of Mr.
Sheehan and a $10,213 contribution to his non-qualified supplemental
retirement plan.
(4) Includes a matching contribution of $520 to the Company's 401(k) plan and
payment of a $211 premium on term life insurance for the benefit of Mr.
Rogers.
(5) Includes a matching contribution of $520 to the Company's 401(k) plan and
payment of a $174 premium on term life insurance for the benefit of Mr.
Maroney.
(6) Includes a matching contribution of $520 to the Company's 401(k) plan and
payment of a $138 premium on term life insurance for the benefit of Mr.
Flynn.

(7) Consists of commissions paid in fiscal year 1994 for revenues generated in
the last ten months of fiscal year 1993 and the first two months of fiscal
year 1994.
(8) Includes a matching contribution of $520 to the Company's 401(k) plan and
payment of a $126 premium on term life insurance for the benefit of Mr.
Mancuso.
(9) Includes: (i) matching contributions of $3,120 to the Company's 401(k)
plan; (ii) payments of $1,063 in premiums on term life insurance for the
benefit of executive officers; and (iii) a $10,213 contribution to
Mr. Sheehan's non-qualified supplemental retirement plan.

In fiscal year 1994, Mr. Brace, then Chairman of the Bank's Board of
Directors, received total compensation of $284,219 as remuneration for his
services for the Bank. The total includes salary of $178,322, a cash bonus

59
<PAGE>

of $55,000, a matching contribution of $520 to the Company's 401(k) plan, a
payment of a $236 premium on term life insurance for his benefit and a $50,141
contribution to a non-qualified supplemental retirement plan.

Bonuses

The Company from time to time awards certain key employees bonuses based on
both individual and Company performance. The Company's bonus policy was put in
place in April 1990 in connection with the acquisition of the Financial
Products Services Division of the Bank of New England and is scheduled to
expire on December 31, 1995. The policy establishes a bonus pool equal to 25%
of the Company's pre-tax earnings. Bonuses are allocated by management based
on contributions to operating results. Payments to Named Executive Officers in
fiscal year 1995 for services rendered in the last ten months of fiscal year
1994 and the first two months of fiscal year 1995 were made in the following
amounts: Mr. Sheehan $690,000; Mr. Rogers $300,000; Mr. Maroney $175,000; Mr.
Flynn $25,000; and all executive officers as a group $1,225,000.

Employment Agreements

The Company entered into employment agreements with Kevin Sheehan, Michael
Rogers, Robert Mancuso and Edmund Maroney on October 11, 1995, each with a
term of three years subject to earlier termination.

Messrs. Sheehan's and Rogers' agreements provide that the Company will
employ Messrs. Sheehan and Rogers as President and Chief Executive Officer,
and Executive Managing Director, respectively, and will pay them an annual
salary of $222,950 and $175,225, respectively, as well as an annual bonus in
1995 determined in accordance with the Company's current bonus policy. Mr.
Sheehan's 1995 annual bonus is required to be equal to 35% of the bonus pool
established pursuant to the Company's current bonus policy. The allocation of
all other 1995 annual bonus amounts, including that of Mr. Rogers, will be
made by Mr. Sheehan, as President of the Company, in his sole discretion.
Messrs. Sheehan and Rogers will be eligible for bonuses in future years under
the Company's then applicable bonus plans, if any. Messrs. Sheehan and Rogers
are also eligible for salary increases subject to approval of the Board of
Directors. Under their employment agreements, the Company may terminate their
employment for cause, defined as (i) a finding by the majority of the Board of
Directors that the employee has performed his duties inadequately, (ii) action
or inaction by the employee which results in a material breach of the
agreement or in the employee unfairly competing with the Company, (iii) the
commission of a felony which shall adversely affect the employee's ability to
perform his duties, or (iv) the commission of an act of fraud, dishonesty,
gross negligence or deliberate disregard for the rules and policies of the
Company. Termination for cause results in no liability to the Company beyond
the payment of wages to the date of discharge, except in the case of a
termination solely pursuant to a finding by the majority of the Board of
Directors that they have performed their duties inadequately, in which case
the agreements provide for a lump sum payment equal to nine months of their
annual salary at their then current rate, as well as nine months of continuing
medical coverage paid for by the Company. Should their employment be
terminated by the Company without cause, by death or disability, or by Mr.
Sheehan or Mr. Rogers for good reason, which good reason includes (i) a
material change by the Company of either of their authority, functions or
duties which results in a reduction in their respective position's scope,
importance or responsibilities, (ii) a failure by the Company to comply with
the terms of the employment agreements, and (iii) with respect to Mr. Sheehan
only, a failure by the shareholders to re-elect him as a director of the
Company, the agreements provide for a lump sum payment equal to the greater of
twice their current annual salary or the salary due to be paid under the
remaining term of the agreement, plus a bonus payment equal to the average of
their last two annual bonuses. The agreements also provide for continuation of
medical coverage for the longer of two years or the remaining term of the
agreement. Should the employment of Messrs. Sheehan or Rogers be terminated
within three months before and twelve months after a change in control of the
Company, defined to be a consolidation, merger, reorganization or sale or
transfer of all or substantially all of the assets of the Company, a change in
the majority of the Board of Directors, or the acquisition by any person of
20% or more of the voting securities of the Company, the agreements provide
for a lump sum severance payment equal to three times their most recent annual
salary plus a payment equal to the average of their two most recent annual
bonuses as well as continuing medical coverage for three years.

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<PAGE>

The employment agreements with Messrs. Mancuso and Maroney provide that the
Company will employ them as Managing Director - Marketing and Client
Management and Managing Director - Systems, respectively, and will pay them an
annual salary of $125,000 and $145,000, respectively, as well as an annual
bonus in 1995 determined by Mr. Sheehan, as President of the Company, in his
sole discretion, in accordance with the Company's current bonus policy.
Messrs. Mancuso and Maroney will be eligible for bonuses in future years under
the Company's then applicable bonus plans, if any. Messrs. Mancuso and Maroney
are also eligible for salary increases subject to approval of the Board of
Directors. The provisions regarding termination for cause under the employment
agreements are identical to those contained in the employment agreements of
Messrs. Sheehan and Rogers. Should the employment of Mr. Mancuso or Mr.
Maroney be terminated by the Company without cause, by death or disability, or
by Mr. Mancuso or Mr. Maroney for good reason, which good reason is the same
as described above in the employment agreements of Messrs. Sheehan and Rogers,
the agreements provide for a lump sum payment equal to the greater of the
current annual salary of Mr. Mancuso or Mr. Maroney or the salary due to be
paid under the remaining term of the agreement, plus a bonus payment equal to
the average of their last two annual bonuses. The agreements also provide for
continuation of medical coverage for the longer of one year or the remaining
term of the agreement. Should the employment of Messrs. Mancuso or Maroney be
terminated within three months before and twelve months after a change in
control of the Company, as described above in the employment agreements of
Messrs. Sheehan and Rogers, the agreements provide for a lump sum severance
payment equal to two times the most recent annual salary of Mr. Mancuso or Mr.
Maroney plus a payment equal to the average of their two most recent annual
bonuses as well as continuing medical coverage for two years.

1995 Stock Plan

The Company's 1995 Stock Plan (the "1995 Plan"), which was approved by the
Company's Board of Directors and sole stockholder in August 1995, provides for
the issuance of a maximum of 560,000 shares of Common Stock pursuant to the
grant to employees of "incentive stock options" within the meaning of the
Internal Revenue Code and the grant of non-qualified stock options, stock
awards or opportunities to make direct purchases of stock in the Company to
employees, consultants, directors and officers of the Company. On the Pricing
Date, options to purchase 199,000 shares of Common Stock, at an exercise price
equal to the initial public offering price, will be granted under the 1995
Plan. Of this amount, option grants exercisable for an aggregate of 140,000
shares of Common Stock will be made to Messrs. Sheehan, Rogers, Maroney,
Mancuso, Zimmerman and Ms. Creegan and will become exercisable in forty-eight
equal monthly installments beginning on the Pricing Date. The remainder of the
option grants made under the 1995 Plan become exercisable in four equal annual
installments beginning on the first anniversary of the Distribution Date. Such
option grants will include grants to certain executive officers of the Company
as follows: Mr. Sheehan, 50,000 shares; Mr. Rogers, 40,000 shares; Mr.
Maroney, 15,000 shares; Mr. Mancuso, 15,000 shares; and Mr. Flynn, 5,000
shares. In addition, the Company intends to grant an aggregate of 114,000
shares of Common Stock to certain of its officers under the 1995 Plan subject
to the right of the Company to repurchase such shares upon termination of
employment at a price equal to the fair market value of such shares on the
date of grant. Of this amount, an aggregate of 105,000 shares of Common Stock
will be granted to Messrs. Sheehan, Rogers, Maroney, Mancuso, Zimmerman and
Ms. Creegan and the Company's right to repurchase such shares lapses as to
such shares in sixty equal monthly installments beginning on the date of the
closing of the Public Offering. The Company's right to repurchase the
remainder of the Common Stock grants to be made under the 1995 Plan will lapse
in five equal installments beginning on the first anniversary of the Pricing
Date. These Common Stock grants will include grants to certain executive
officers as follows: Mr. Sheehan, 40,000 shares; Mr. Rogers, 30,000 shares,
Mr. Maroney, 10,000 shares; Mr. Mancuso, 10,000 shares; and Mr. Flynn, 3,000
shares. Unless sooner terminated by the Board of Directors, the 1995 Plan
terminates on August 15, 2005.

The 1995 Plan permits the granting of incentive stock options ("ISOs") or
nonqualified stock options ("NSOs") at the discretion of the administrator of
the 1995 Plan (the "Plan Administrator"). The Compensation Committee of the
Board of Directors, which consists solely of disinterested directors, is
currently the Plan Administrator. Subject to the terms of the 1995 Plan, the
Plan Administrator determines the terms and conditions

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<PAGE>

of options granted under the 1995 Plan, including the exercise price. The 1995
Plan provides that the Plan Administrator must establish an exercise price for
ISOs that is not less than the fair market value per share at the date of
grant. Each ISO must expire within ten years of the date of grant. If ISOs are
granted to persons owning more than 10% of the voting stock of the Company,
however, the 1995 Plan provides that the exercise price must not be less than
110% of the fair market value per share at the date of grant and that the term
of the ISOs may not exceed five years. Options granted under the 1995 Plan
will vest according to a schedule to be determined by the Plan Administrator.
To the extent not already exercisable, upon mergers or reorganizations the
options may be converted into options to purchase shares in the acquiring
corporation.

1995 Non-Employee Director Stock Option Plan

The Company's 1995 Non-Employee Director Stock Option Plan was approved by
the Company's Board of Directors and its stockholder in October 1995. The
Director Plan provides for the automatic grant of options to non-employee
directors to purchase an aggregate of 40,000 shares of Common Stock. The
Director Plan provides for automatic grants of NSOs at an exercise price that
is not less than the fair market value per share at the date of grant. Options
to purchase 2,500 shares will be awarded immediately prior to the Pricing Date
with an exercise price equal to the initial public offering price. Each non-
employee director elected or appointed after such date will receive an initial
grant of 2,500 shares upon becoming a director. Thereafter, each continuing
director will receive a grant of 2,500 shares effective upon each one year
anniversary of the date of such director's original grant under the Director
Plan. Options granted under the Director Plan become exercisable in forty-
eight equal monthly installments beginning on the Pricing Date.

Options granted under the Director Plan are nontransferable other than by
will or the laws of descent and distribution. Options expire within five years
of the date of grant or 90 days after a director's termination of service as a
director, except in the case of death or disability, in which case the options
will expire upon the originally scheduled expiration date of the option.
Unless earlier terminated by the Board of Directors, the Director Plan
terminates on October 1, 2005.

Benefit Plans

Pension Plan. In 1971, the Company adopted the Investors Bank & Trust
Pension Plan, as amended (the "Pension Plan"), covering all employees who are
at least 21 years of age. Benefits under the Pension Plan are based on an
employee's years of service, and his final average monthly compensation. A
participant's monthly benefit at normal retirement (i.e., at or after
attaining the age of 65 years) payable as a life annuity equals a percentage
of the participant's final average monthly compensation multiplied by years of
service. The percentage varies depending on years of service and the level of
final average monthly compensation. Early retirement benefits are available to
participants who have attained age 55 and have at least 10 years of service.
Benefits are payable at retirement in the form of a monthly annuity or a
single lump sum.

A participant's final average monthly compensation is the average of his
total eligible compensation (i.e., salary, annual bonus and other cash
earnings) in his highest paid five consecutive full calendar years of
employment in his last 10 consecutive full calendar years of employment,
subject to certain limits on eligible compensation set by Federal law. For
1995, such limit was $150,000. The Pension Plan's benefit formula described
above became effective in 1991, but applies to all periods of benefit service.

The following table shows the estimated annual benefits payable upon
retirement in specified compensation and years of service classifications:

<TABLE>
<CAPTION>
Years of Service
-------------------------------------------------------------
Remuneration 10 15 20 25 30 35
- ------------ ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 8,000 $12,000 $ 16,000 $ 20,000 $ 21,875 $ 23,750
$100,000 $18,134 $27,201 $ 36,268 $ 45,335 $ 49,085 $ 52,835
$150,000 $28,884 $43,326 $ 57,768 $ 72,210 $ 77,835 $ 83,460
$200,000 $39,634 $59,451 $ 79,268 $ 99,085 $106,585 $114,085
$250,000 $50,384 $75,576 $100,768 $125,960 $135,335 $144,710
$300,000 $61,134 $91,701 $122,268 $152,835 $164,085 $175,335
</TABLE>

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<PAGE>

The Named Executive Officers have the following credited years of service
under the Pension Plan: Mr. Sheehan, 22 years; Mr. Rogers, 14 years; Mr.
Maroney, 10 years; Mr. Flynn, 21 years; and Mr. Mancuso, 3 years.

401(k) Plan. In 1985, the Company adopted the Investors Bank & Trust Company
Savings Plan (the "401(k) Plan"), covering all employees who have completed at
least six months of service with the Company and are at least 18 years of age.
Under the 401(k) Plan, as amended, eligible employees may elect to reduce
their current compensation and have the amount of such reduction contributed
to the 401(k) Plan on the employee's behalf as salary deferral contributions.
The Company will make matching contributions to the 401(k) Plan on behalf of
its employees in amounts equal to the lesser of each employee's contribution
or $520. The Company's aggregate matching contributions to the 401(k) Plan on
behalf of its employees were $164,392 for the fiscal year ending October 31,
1994. All contributions to the 401(k) Plan by or on behalf of employees are
subject to aggregate annual limits prescribed by the Internal Revenue Code.

As of July 31, 1995, 380 Company employees were active participants in the
401(k) Plan, including all of the Company's executive officers. See Note 11 of
Notes to Consolidated Financial Statements.

Indemnification and Limitation of Liability

The Company's Certificate of Incorporation provides that the Company is
obligated to indemnify its present and former directors and officers to the
fullest extent permitted by law with respect to all liability and loss
suffered and expense reasonably incurred by such person in any action, suit or
proceeding in which such person was or is made or threatened to be made a
party or is otherwise involved by reason of the fact that such person is or
was a director or officer of the Company. The By-Laws further provide that the
Company is obligated to pay the expenses of the directors and officers
incurred in defending the foregoing proceedings if the indemnified party
agrees to repay all amounts advanced if it is ultimately determined that such
person is not entitled to indemnification.

In addition, the Company's Certificate of Incorporation provides that the
Company's directors shall not be liable to the Company or its stockholders for
monetary damages for breach of a director's fiduciary duty as a director to
the Company and its stockholders except to the extent such exemption from
liability or limitation thereof is not permitted under the General Corporation
Law of the State of Delaware. This provision in the Certificate of
Incorporation does not eliminate the director's fiduciary duty to the Company,
and in appropriate circumstances equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware law.
In addition, each director continues to be subject to liability for monetary
damages for breach of the director's duty of loyalty to the Company, for acts
or omissions not in good faith or involving intentional misconduct, for
knowing violations of law, for actions leading to improper personal benefit to
the director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.

The Company has an insurance policy covering directors and officers under
which the insurer agrees to pay for any claim made against the directors and
officers of the Company, other than claims made by Eaton Vance Corp. or its
shareholders for a wrongful act that they may become legally obligated to pay
or for which the Company is required to indemnify the directors or officers.
The Company believes that its Certificate of Incorporation provisions and
indemnification agreements are necessary to attract and retain qualified
persons as directors and officers.

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<PAGE>

OWNERSHIP OF CAPITAL STOCK

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of September 15, 1995 and as
adjusted to reflect the sale of the shares in the Public Offering (i) by each
person who is known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) by each director and Named Executive
Officer of the Company, and (iii) by all directors and executive officers of
the Company as a group. Unless otherwise indicated below, each person listed
below maintains a business address c/o Investors Financial Services Corp., 89
South Street, Boston, MA 02205-1537 and, to the knowledge of the Company, all
persons listed below have sole voting and investment power with respect to
their shares of Common Stock, except to the extent authority is shared by
spouses under applicable law. See "Description of Capital Stock."
<TABLE>
<CAPTION>
Percent of Percent of
Voting Power Voting Power
Number(1)(2) Prior to Offering After Offering(3)
------------ ----------------- -----------------
<S> <C> <C> <C>
Landon T. Clay(4)............ 609,638 15.47% 12.81%
c/o Eaton Vance Corp.
24 Federal Street
Boston, MA 02110
Robert D. Brace.............. 22,313 * *
Edwin W. Hiam(5)............. 4,139 * *
James M. Oates(5)............ 137 * *
Thomas P. McDermott(5)....... 137 * *
Charles C. Cabot, Jr.(5)..... 16,224 * *
Francis B. Condon, Jr.(6).... 141,154 3.03% 2.51%
Kevin J. Sheehan(7).......... 148,885 2.75% 2.27%
Michael F. Rogers(8)......... 52,489 * *
Edmund J. Maroney(9)......... 10,625 * *
David F. Flynn(10)........... 3,672 * *
Robert D. Mancuso(11)........ 10,625 * *
All officers and directors as
a group (13 persons)(12).... 428,244 7.98% 6.61%
</TABLE>
- --------
* Less than 1% of the outstanding voting power of the Company.

(1) Gives effect to the shares of Common Stock issuable within 60 days of the
Pricing Date upon the exercise of all options and other rights
beneficially owned by the indicated stockholders on that date. Also gives
effect to an additional 114,000 shares of Common Stock authorized for
grant upon the closing of the Public Offering under the Company's 1995
Stock Plan, of which grants Messrs. Sheehan, Rogers, Maroney, Flynn and
Mancuso, and all executive officers and directors as a group, are
authorized to receive 50,000, 40,000, 10,000 3,000, 10,000 and, 105,000
shares, respectively. Unless otherwise indicated, the persons named in the
table have sole voting and sole investment control with respect to all
shares beneficially owned.

(2) Includes beneficial ownership of the following amounts of the Company's
Class A Stock representing the following percentages of voting power
after this Offering: Landon T. Clay, 98,083 shares of Class A Stock,
8.42%; Robert D. Brace, 3,004 shares of Class A Stock, less than 1%;
Edwin W. Hiam, 480 shares of Class A Stock, less than 1%; James M. Oates
and Thomas P. McDermott, 5 shares of Class A Stock, less than 1%; Charles
C. Cabot, Jr. 1,920 shares of Class A Stock, less than 1%; Francis B.
Condon, Jr., 16,800 shares of Class A Stock, 1.44%; Kevin J. Sheehan,
12,891 shares of Class A Stock, 1.11%; Michael F. Rogers, 2,508 shares of
Class A Stock, less than 1%; David F. Flynn, 108 shares of Class A Stock,
less than 1%. All officers and directors as a group, 37,961 shares of
Class A Stock, 3.26%.
(3) The number of shares of Common Stock deemed outstanding after the Public
Offering includes an additional 2,000,000 shares of Common Stock which
are being offered for sale by the Company in the Public Offering.

(4) Landon T. Clay is a member of the board of directors of Eaton Vance.
Includes 705 shares of Common Stock and 135 shares of Class A Stock owned
by family members of Mr. Clay, as to which Mr. Clay disclaims beneficial
ownership. Also includes 1,793 shares of Common Stock and 344 shares of
Class A Stock held by LTC Corp. Profit Sharing Plan, of which Mr. Clay is
a beneficiary and is deemed to have sole voting power of such shares.
Also includes 294 shares of Common Stock and 56 shares of Class A Stock
owned by Flowers Antigua Profit Sharing Plan, of which Mr. Clay's spouse,
Lavinia Clay, is a beneficiary and is deemed to have sole voting power of
such shares.

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<PAGE>

(5) Includes 104 shares of Common Stock which may be purchased within 60 days
of the Pricing Date upon the exercise of stock options granted under the
Director Plan. Excludes 2,396 shares of Common Stock issuable pursuant to
options granted under the Director Plan which are not exercisable within
60 days of the Pricing Date.

(6) Includes 120,700 shares of Common Stock and 16,320 shares of Class A
Stock which is held in a fiduciary capacity for its investment management
clients by Woodstock Corporation. Mr. Condon is Chairman and Chief
Executive Officer of Woodstock Corporation and disclaims any beneficial
interest in such shares. Includes 104 shares of Common Stock which may be
purchased within 60 days of the Pricing Date upon the exercise of stock
options granted under the Director Plan. Excludes 2,396 shares of Common
Stock issuable pursuant to options granted under the Director Plan which
are not exercisable within 60 days of the Pricing Date.

(7) Includes 2,083 shares of Common Stock which may be purchased by Mr.
Sheehan within 60 days of the Pricing Date upon the exercise of stock
options granted under the Company's 1995 Stock Plan. Excludes 47,917
shares of Common Stock issuable pursuant to options granted to Mr.
Sheehan under the Company's 1995 Stock Plan which are not exercisable
within 60 days of the Pricing Date.

(8) Includes 1,667 shares of Common Stock which may be purchased by Mr.
Rogers within 60 days of the Pricing Date upon the exercise of stock
options granted under the Company's 1995 Stock Plan. Excludes 38,333
shares of Common Stock issuable pursuant to options granted to Mr. Rogers
under the Company's 1995 Stock Plan which are not exercisable within 60
days of the Pricing Date.

(9) Includes 625 shares of Common Stock which may be purchased by Mr. Maroney
within 60 days of the Pricing Date upon the exercise of stock options
granted under the Company's 1995 Stock Plan. Excludes 14,375 shares of
Common Stock issuable pursuant to options granted to Mr. Maroney under
the Company's 1995 Stock Plan which are not exercisable within 60 days of
the Pricing Date.

(10) Excludes 5,000 shares of Common Stock issuable pursuant to options
granted to Mr. Flynn under the Company's 1995 Stock Plan which are not
exercisable within 60 days of the Pricing Date.

(11) Includes 625 shares of Common Stock which may be purchased by Mr. Mancuso
within 60 days of the Pricing Date upon the exercise of stock options
granted under the Company's 1995 Stock Plan. Excludes 14,375 shares of
Common Stock issuable pursuant to options granted to Mr. Mancuso under
the Company's 1995 Stock Plan which are not exercisable within 60 days of
the Pricing Date.

(12) Includes 5,834 shares of Common Stock which may be purchased by officers
and directors within 60 days of the Pricing Date upon the exercise of
stock options granted under the Company's 1995 Stock Plan and 520 shares
of Common Stock which may be purchased by directors within 60 days of the
Pricing Date upon the exercise of Stock options granted under the
Director Plan. Excludes 139,166 shares of Common Stock issuable pursuant
to options granted under the Company's 1995 Stock Plan which are not
exercisable within 60 days of the Pricing Date and 11,980 shares of
Common Stock issuable pursuant to options granted under the Non-Employee
Director Plan which are not exercisable within 60 days of the Pricing
Date.

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<PAGE>

DESCRIPTION OF CAPITAL STOCK

The Company is authorized to issue up to 21,650,000 shares of capital stock,
consisting of 20,000,000 shares of Common Stock, 650,000 shares of Class A
Stock and 1,000,000 shares of Preferred Stock with a par value of one cent per
share, the designations for which are to be determined by the Board of
Directors (the "Preferred Stock"). The Company currently has approximately 52
shareholders including Eaton Vance. At September 15, 1995, Eaton Vance had
approximately 1,080 beneficial owners of its non-voting common stock. The
Company believes that after the Distribution and prior to the consummation of
the Public Offering, the Company will have approximately 1,151 shareholders.

Common Stock

Upon completion of the Distribution and the issuance of the 2,000,000 shares
of Common Stock offered in the Public Offering, there will be approximately
5,532,573 shares of Common Stock outstanding.

General. Each share of Common Stock shall have the same rights and
privileges and shall rank equally, share ratably and be identical in all
respects as to all matters to each other share of Common Stock. The Common
Stock is not subject to call for redemption and, upon receipt by the Company
of the full purchase price therefore, each share of the Common Stock offered
hereby shall be fully paid and nonassessable. Holders of the Common Stock will
not have preemptive rights with respect to any additional shares of the
capital stock of the Company which may be issued. The rights, preferences and
privileges of holders of the Common Stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of Preferred
Stock which the Company may designate and issue in the future. At the date of
this Information Statement, there will be no shares of Preferred Stock
outstanding.

Voting Rights. Each holder of Common Stock shall have one vote in respect of
each share of stock held by him or her of record on the books of the Company
for the election of directors and on all matters submitted to a vote of
stockholders of the Company. The holders of the Common Stock and Class A Stock
shall vote together on all matters as a single class. Stockholders are not
permitted to cumulate votes in elections of directors.

Dividends. The holders of Common Stock are entitled to such dividends as may
be declared from time to time by the board of directors of the Company out of
funds legally available therefore. The holders of both the Common Stock and
Class A Stock will be entitled to receive the same dividends when and if paid
by the Company.

Liquidation. In the event of any dissolution, liquidation or winding up of
the affairs of the Company, whether voluntary or involuntary, subject to the
rights of any class of Preferred Stock outstanding at the time of such
dissolution, liquidation or winding up, and after payment of all debts and
liabilities of the Company holders of Common Stock and Class A Stock shall be
entitled to receive all of the remaining assets of the Company of whatever
kind available for distribution to stockholders ratably in proportion to the
number of shares of Common Stock and Class A Stock held by them respectively.

Class A Stock

Upon completion of the Distribution, there will be approximately 611,427
shares of Class A Stock outstanding.

General. Each share of Class A Stock shall have the same rights and
privileges and shall rank equally, share ratably and be identical in all
respects as to all matters to each other share of Class A Stock, except as
described below. Upon receipt by the Company of the full purchase price
therefore, each share of the Class A Stock offered hereby shall be fully paid
and nonassessable. Holders of the Class A Stock will not have preemptive
rights with respect to any additional shares of the capital stock of the
Company which may be issued.

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<PAGE>

The rights, preferences and privileges of holders of the Class A Stock are
subject to, and may be adversely affected by, the rights of the holders of
shares of any series of Preferred Stock which the Company may designate and
issue in the future. At the date of this Information Statement, there will be
no shares of Preferred Stock outstanding.

Voting Rights. Each holder of Class A Stock shall have ten votes in respect
of each share of stock held by him or her of record on the books of the
Company for the election of directors and on all matters submitted to a vote
of stockholders of the Company. The holders of the Class A Stock and Common
Stock shall vote together on all matters as a single class. Stockholders are
not permitted to cumulate votes in elections of directors.

Dividends. The holders of Class A Stock are entitled to such dividends as
may be declared from time to time by the board of directors of the Company out
of funds legally available therefore. The holders of both the Class A Stock
and Common Stock will be entitled to receive the same dividends per share when
and if paid by the Company.

Conversion - Restrictions on Transfer. At anytime after the date (the
"Registration Date") on which the Company becomes subject to the reporting
requirements of Section 13 of the Exchange Act and the rules and regulations
promulgated thereunder, the following conversion terms and conditions will
apply to the Class A Stock:

(a) Upon the sale or transfer of any share of Class A Stock, such share
will automatically convert into a newly-issued share of Common Stock;

(b) If at any time the number of shares of Class A Stock outstanding is
less than 50% of the number of shares of Class A Stock outstanding on the
Registration Date, all of the remaining outstanding shares Class A Stock
will automatically convert into shares of Common Stock on the basis of one
share of Common Stock for each share of Class A Stock; and

(c) At any time after the date two years after the Registration Date, the
shares of Class A Stock may be converted, at any time or from time to time,
at the option of each holder of Class A Stock, into shares of Common Stock
on the basis of one share of Common Stock for each share of Class A Stock.

Liquidation. In the event of any dissolution, liquidation or winding up of
the affairs of the Company, whether voluntary or involuntary, subject to the
rights of any class of Preferred Stock outstanding at the time of such
dissolution, liquidation or winding up, and after payment of all debts and
liabilities of the Company, holders of Class A Stock and Common Stock shall be
entitled to receive all of the remaining assets of the Company of whatever
kind available for distribution to stockholders ratably in proportion to the
number of shares of Class A Stock and Common Stock held by them, respectively.

Preferred Stock

The Board of Directors is authorized, subject to certain limitations
prescribed by law, without further stockholder approval, to issue from time to
time up to an aggregate of 1,000,000 shares of Preferred Stock in one or more
series and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions of the shares of each such series
thereof, including the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption (including sinking fund provisions),
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designations of such series. The issuance of
Preferred Stock may have the effect of delaying, deferring or preventing a
change of control of the Company. The Company has no present plans to issue
any shares of Preferred Stock.

Delaware Law and Certain Charter and By-Law Provisions

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "DGCL"). Subject to certain exceptions, Section
203 prohibits a publicly-held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the

67
<PAGE>

date of the transaction in which the person became an interested stockholder,
unless the interested stockholder attained such status with the approval of
the Board of Directors or unless the business combination is approved in a
prescribed manner. A "business combination" includes mergers, asset sales and
other transactions resulting in a financial benefit to the interested
stockholder. Subject to certain exceptions, an "interested stockholder" is a
person who, together with affiliates and associates, owns, or within three
years did own, 15% or more of the corporation's voting stock.

The Company's Certificate of Incorporation (the "Charter") provides for the
division of the Board of Directors into three classes as nearly equal in size
as possible with staggered three-year terms. See "Management - Executive
Officers and Directors." Any director may be removed without cause only by the
vote of at least 75% of the shares entitled to vote for the election of
directors.

The Company's By-Laws provide that for nominations for the Board of
Directors or for other business to be properly brought by a stockholder before
a meeting of stockholders, the stockholder must first have given timely notice
thereof in writing to the Secretary of the Company. To be timely, a
stockholder's notice generally must be delivered not less than 60 days nor
more than 90 days prior to an annual meeting. With respect to special
meetings, notice must generally be delivered not more than 90 days prior to
such meeting and not later than the later of 60 days prior to such meeting or
10 days following the day on which public announcement of such meeting is
first made by the Company. The notice must contain, among other things,
certain information about the stockholder delivering the notice and, as
applicable, background information about each nominee or a description of the
proposed business to be brought before the meeting.

The Charter empowers the Board of Directors, when considering a tender offer
or merger or acquisition proposal, to take into account factors in addition to
potential economic benefits to stockholders. Such factors may include (i)
comparison of the proposed consideration to be received by stockholders in
relation to the then current market price of the Company's capital stock, the
estimated current value of the Company in a freely negotiated transaction and
the estimated future value of the Company as an independent entity; (ii) the
impact of such a transaction on the employees, suppliers and customers of the
Company and its effect on the communities in which the Company operates; and
(iii) the ability of the Company to fulfill its objectives under applicable
statutes and regulations.

The foregoing provisions could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from acquiring,
control of the Company.

The Charter contains certain provisions permitted under the DGCL relating to
the liability of directors. These provisions eliminate a director's liability
for monetary damages for a breach of fiduciary duty, except in certain
circumstances involving certain wrongful acts, such as the breach of a
director's duty of loyalty or acts or omissions which involve intentional
misconduct or a knowing violation of law. The Charter also contains provisions
indemnifying the directors and officers of the Company to the fullest extent
permitted by the General Corporation Law of Delaware. The Company believes
that these provisions will assist the Company in attracting and retaining
qualified individuals to serve as directors.

The Charter provides that any action required or permitted to be taken by
the stockholders of the Company may be taken only at a duly called annual or
special meeting of the stockholders, and that special meetings may be called
only by the Chairman of the Board of Directors, or the President of the
Company. These provisions could have the effect of delaying until the next
annual stockholders meeting stockholder actions which are favored by the
holders of a majority of the outstanding voting securities of the Company.
These provisions may also discourage another person or entity from making a
tender offer for the Company's Common Stock, because such person or entity,
even if it acquired a majority of the outstanding voting securities of the
Company, would be able to take action as a stockholder (such as electing new
directors or approving a merger) only at a duly called stockholders' meeting,
and not by written consent.

68
<PAGE>

The DGCL provides generally that the affirmative vote of a majority of the
shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or by-laws, unless a corporation's certificate of
incorporation or by-laws, as the case may be, requires a greater percentage.
The Charter requires the affirmative vote of the holders of at least 75% of
the outstanding voting stock of the Company to amend or repeal any of the
foregoing Charter provisions, and to reduce the number of authorized shares of
Common Stock, Class A Common Stock and Preferred Stock. Such 75% vote is also
required to amend or repeal the Company's By-Laws. The By-Laws may also be
amended or repealed by a majority vote of the Board of Directors. Such 75%
stockholder vote would be in addition to any separate class vote that might in
the future be required pursuant to the terms of any Preferred Stock that might
be outstanding at the time any such amendments are submitted to stockholders.

Rights Plan

Pursuant to the Company's Stockholder Rights Plan, each share of the Common
Stock and Class A Stock has an associated preferred stock purchase right (a
"Right"). Each Right entitles the holder to purchase from the Company one one-
hundredth of a share of Series A Junior Participating Preferred Stock, $.01
par value (the "Junior Preferred Shares"), of the Company at a price of $75.00
per one one-hundredth of a Junior Preferred Share, subject to adjustment (the
"Purchase Price"). The Rights will be exercisable only if (i) a person or
group acquires beneficial ownership of 15% or more of the outstanding Common
Stock and Class A Stock in the aggregate of the company (an "Acquiring
Person"), (ii) a person or group announces a tender offer or exchange offer
the consummation of which would result in the beneficial ownership by such
person or group of 15% or more of the outstanding Common Stock, and Class A
stock in the aggregate or (iii) a person owning 10% or more of the Common
Stock of the Company whose ownership is determined by the Board of Directors
to be reasonably likely to cause a material adverse impact on the business or
prospects of the Company or to pressure the Company to take action to benefit
such person as opposed to the Company is declared by the Board of Directors to
be an adverse person (an "Adverse Person")(the earlier of such dates being
called the "Distribution Date"). Until a Right is exercised, the holder
thereof will have no rights as a stockholder of the Company. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
Rights will be transferred with and only with the Common Stock.

In the event that (i) any person or group acquires 20% or more of the
outstanding Common Stock and Class A Stock of the Company in the aggregate,
(ii) a person owning 10% or more of the Common Stock and Class A Stock of the
Company in the aggregate is determined by the Board of Directors to be an
Adverse Person, or (iii) while there is an Acquiring Person, such person
engages in certain self dealing transactions or such person's stock holdings
increase by 1% more due to a recapitalization, each holder of a Right, other
than Rights beneficially owned by the Acquiring Person or the Adverse Person,
will thereafter have the right to receive upon exercise that number of shares
of Common Stock having a market value of two (2) times the Purchase Price, and
in the event that, while there is an Acquiring Person, the Company is acquired
in a business combination transaction or 50% or more of its assets are sold,
each holder of a Right will thereafter have the right to receive upon exercise
that number of shares of common stock of the acquiring company which at the
time of the transaction will have a market value of two (2) times the Purchase
Price.

At any time after any person becomes an Acquiring Person or an Adverse
Person, and prior to the acquisition by such person or group of 50% or more of
the outstanding Common Stock, the Board of Directors of the Company may cause
the Rights (other than Rights owned by such person or group) to be exchanged,
in whole or in part, for Common Stock at an exchange rate of one (1) share of
Common Stock per Right.

The Board of Directors of the Company may redeem the Rights in whole at a
price of $.01 per Right, until such time as the Rights are exercisable for
shares of Common Stock.

The Rights have certain anti-takeover effects, in that they will cause
substantial dilution to a person or group that attempts to acquire a
significant interest in the Company on terms not approved by the Board of
Directors.

69
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Distribution and the Public Offering, there has been no public
market for securities of the Company. No prediction can be made as to the
effect, if any, that market sales of shares or the availability of shares for
sale will have on the market price prevailing from time to time. Nevertheless,
sales of substantial amounts of Common Stock of the Company in the public
market after the restrictions described below lapse could adversely affect the
prevailing market price and the ability of the Company to raise equity capital
in the future.

Upon completion of the Distribution and the Public Offering, the Company
will have outstanding 5,532,573 shares of Common Stock (excluding 300,000
shares of Common Stock issuable upon exercise of the Underwriter's over-
allotment option) and 611,427 shares of Class A Stock. See "Description of
Capital Stock." Of these shares, the 2,000,000 shares (2,300,000 shares if the
Underwriter's over-allotment option is exercised in full) of Common Stock sold
in the Public Offering, and 1,595,703 of the shares of Common Stock and
356,871 of the shares of Class A Stock distributed to the stockholders of
Eaton Vance Corp. pursuant to the Distribution, will be freely tradable under
the Securities Act of 1933, as amended (the "Securities Act"), except to the
extent such shares are subject to the agreement with the Underwriters
described below, and except for any shares purchased by "affiliates," as that
term is defined in the Securities Act, of the Company. See "Investors
Financial Services Corp." The remaining 919,495 shares of Common Stock and
108,912 shares of Class A Stock are "restricted securities" under Rule 144
adopted under the Securities Act (the "Restricted Shares"). The Restricted
Shares were issued and sold by the Company in private transactions in reliance
upon exemptions from the registration requirements of the Securities Act, or,
in the case of 114,000 shares, will have been granted pursuant to the
Company's 1995 Stock Plan. The Restricted Shares may not be sold unless they
are registered under the Securities Act or are sold pursuant to an exemption
from registration, such as the exemption provided by Rule 144 under the
Securities Act.

Certain of the Company's security holders, executive officers, directors and
employees, with the power to dispose of a total of 1,159,013 shares of Common
Stock and 184,878 shares of Class A Stock, have agreed not to offer, sell or
otherwise dispose of any shares of Common Stock for a period of 180 days after
the Effective Date (the "Lock-up Period") without the prior written consent of
the Underwriters. Following the Lock-up Period, these shares will not be
eligible for sale in the public market without registration unless such sales
meet the conditions and restrictions of Rule 144 as described below.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate of the Company, who has
beneficially owned Restricted Shares for at least two years (as computed under
Rule 144) is entitled to sell, within any three-month period, a number of such
shares that does not exceed the greater of (i) one percent of the then
outstanding shares of Common Stock (approximately 61,440 shares after giving
effect to this Offering) or (ii) the average weekly trading volume in the
Common Stock during the four calendar weeks preceding the date on which notice
of such sale on Form 144 is filed with the Commission. Sales under Rule 144
are also subject to certain provisions relating to notice and manner of sale
and the availability of current public information about the Company. In
addition, under Rule 144(k), a person (or persons whose shares are aggregated)
who has not been an affiliate of the Company at any time during the 90 days
immediately preceding a sale, and who has beneficially owned Restricted Shares
for at least three years (as computed under Rule 144) would be entitled to
sell such shares under Rule 144(k) without regard to the volume limitation and
other conditions described above. The foregoing description of Rule 144 is not
intended to be a complete description thereof.

As soon as practicable following the consummation of the Public Offering,
the Company intends to file a registration statement under the Securities Act
to register the shares of Common Stock available for issuance pursuant to its
stock option plans as of the date hereof. See "Management - 1995 Stock Plan"
and "Management - 1995 Non-Employee Director Stock Option Plan." Shares issued
pursuant to such plans after the effective date of such registration statement
will be available for sale in the open market subject to the Lock-up Period
and, for Affiliates of the Company, subject to certain conditions and
restrictions of Rule 144.

70
<PAGE>

Rule 701 under the Act provides that the shares of Common Stock acquired on
the exercise of currently outstanding options may be resold by persons, other
than Affiliates, beginning 90 days after the date of this Prospectus, subject
only to the manner of sale provisions of Rule 144, and by Affiliates under
Rule 144 without compliance with its two-year minimum holding period, subject
to certain limitations.

Options

The 1995 Plan, which was approved by the Company's Board of Directors and
sole stockholder in August 1995, provides for the issuance of a maximum of
560,000 shares of Common Stock pursuant to the grant to employees of
"incentive stock options" within the meaning of the Internal Revenue Code and
the grant of non-qualified stock options, stock awards or opportunities to
make direct purchases of stock in the Company to employees, consultants,
directors and officers of the Company. On the Pricing Date, options to
purchase 199,000 shares of Common Stock will be granted under the 1995 Plan.
Option grants exercisable for an aggregate of 140,000 shares of Common Stock
will be made to Messrs. Sheehan, Rogers, Maroney, Mancuso, Zimmerman and Ms.
Creegan and become exercisable in forty-eight equal monthly installments
beginning on the Pricing Date. The remainder of the option grants to be made
under the 1995 Plan become exercisable in four equal annual installments
beginning on the first anniversary of the Distribution Date. See "Management -
1995 Stock Plan."

The Director Plan, which was approved by the Company's Board of Directors
and sole stockholder in October 1995, provides for the issuance of a maximum
of 40,000 shares of Common Stock pursuant to the automatic grant of options to
non-employee directors of the Company. Immediately prior to the date hereof,
options to purchase 12,500 shares of Common Stock were granted under the
Director Plan and become exercisable in forty-eight equal monthly installments
beginning on the date hereof. See "Management - 1995 Non-Employee Director
Stock Option Plan."

The Company intends to file one or more registration statements on Form S-8
under the Securities Act to register all shares of Common Stock subject to
outstanding stock options and Common Stock issuable pursuant to the Company's
stock option plan that do not qualify for an exemption under Rule 701 from the
registration requirements of the Act. The Company expects to file these
registration statements promptly following the closing of the Public Offering,
and such registration statements are expected to become effective upon filing.
Shares covered by these registration statements will thereupon be eligible for
sale in the public markets, subject to the Lock-up Agreements, to the extent
applicable.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In fiscal year 1994, the Company generated asset administration fee revenue
of $8,565,352 for services provided to mutual funds and separately managed
accounts managed by Eaton Vance, or for which Eaton Vance is the sponsor or
investment advisor. In addition, these Eaton Vance related mutual funds and
managed accounts maintain deposits with the Company that represent
approximately 4.3% of the Company's deposit relationships.

The Company provides, for a fee, certain data processing services related to
individual accounts managed by Eaton Vance. Fees received from Eaton Vance for
these data processing services totaled $552,000 in fiscal year 1994.
Additionally, the Company leases office space from Eaton Vance at 24 Federal
Street, Boston, Massachusetts. Fees paid to Eaton Vance in connection with the
occupancy of this space totaled $344,000 in fiscal year 1994.

71
<PAGE>

The Company has entered into loan agreements with certain officers of Eaton
Vance. These loans are made in the ordinary course of business and on the same
terms and conditions prevailing at the time for comparable transactions. As of
July 31, 1995, the Company had outstanding an aggregate of $1,300,000 in
principal amount of loans to Landon T. Clay and M. Dozier Gardner, officers of
Eaton Vance. See Note 12 of Notes to Consolidated Financial Statements.

The Company has adopted a policy whereby all future transactions between the
Company and its officers, directors and affiliates will be on terms no less
favorable to the Company than could be obtained from unrelated third parties
and will be approved by a majority of the disinterested members of the
Company's Board of Directors. The Company believes that the reported
transactions with Eaton Vance and its officers were conducted on an arms-
length basis, on terms the Company believes were no less favorable to the
Company than could have been obtained from unrelated third parties. The
Company did not obtain independent third party valuations of the terms of
these transactions.

72
<PAGE>

INVESTORS FINANCIAL SERVICES CORP.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheets as of October 31, 1993 and 1994 and July 31,
1995..................................................................... F-3
Consolidated Statements of Income for the Years Ended October 31, 1992,
1993 and 1994 and the Nine-Month Periods Ended July 31, 1994 and 1995.... F-4
Statements of Stockholders' Equity for the Years Ended October 31, 1992,
1993 and 1994 and the Nine-Month Periods Ended July 31, 1994 and 1995.... F-5
Consolidated Statements of Cash Flows for the Years Ended October 31,
1992, 1993 and 1994 and the Nine-Month Periods Ended July 31, 1994 and
1995..................................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Stockholders and the Board of Directors of
Investors Bank & Trust Company:

We have audited the accompanying consolidated balance sheets of Investors
Bank & Trust Company (a majority-owned subsidiary of Eaton Vance Corp.) and
its subsidiaries as of October 31, 1993 and 1994, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the
three years in the period ended October 31, 1994. These financial statements
are the responsibility of the Bank's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by the 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 Investors Bank & Trust
Company and its subsidiaries at October 31, 1993 and 1994, and the results of
their operations and their cash flows for each of the three years in the
period ended October 31, 1994 in conformity with generally accepted accounting
principles.

Deloitte & Touche LLP

Boston, MA
December 8, 1994

F-2
<PAGE>

INVESTORS BANK & TRUST COMPANY

CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1993 AND 1994 AND JULY 31, 1995

<TABLE>
<CAPTION>
July 31,
1993 1994 1995
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Cash and due from banks............... $ 15,240,610 $ 8,343,906 $ 4,736,998
Time deposits due from banks.......... 1,000,000 1,000,000 1,000,000
Investment securities (approximate
market value of $82,404,478 and
$86,171,585 in 1993 and 1994,
respectively)........................ 80,206,102 88,277,866 --
Securities held to maturity
(approximate market value of
$76,419,000)......................... -- -- 76,545,373
Loans, less allowance for loan losses
of $35,000 at October 31, 1993 and
1994 and April 30, 1995.............. 10,220,589 13,570,209 13,672,206
Accrued interest and fees receivable.. 5,668,379 9,382,591 9,893,020
Equipment and leasehold improvements,
net.................................. 3,010,159 3,250,617 3,765,984
Other assets.......................... 4,838,423 3,780,213 2,925,107
------------ ------------ ------------
Total assets........................ $120,184,262 $127,605,402 $112,538,688
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand............................... $ 77,151,854 $ 44,494,295 $ 20,099,577
Savings.............................. 263,993 5,734,170 1,046,406
Time................................. 28,832,261 58,450,304 67,630,765
------------ ------------ ------------
Total deposits...................... 106,248,108 108,678,769 88,776,748
Other liabilities....................... 3,623,755 5,213,591 6,513,983
------------ ------------ ------------
Total liabilities................... 109,871,863 113,892,360 95,290,731
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock.......................... 1,000,000 10,000,000 10,000,000
Surplus............................... 1,000,000 -- --
Retained earnings..................... 8,312,399 3,713,042 7,247,957
------------ ------------ ------------
Total stockholders' equity.......... 10,312,399 13,713,042 17,247,957
------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY................................. $120,184,262 $127,605,402 $112,538,688
============ ============ ============
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>

INVESTORS BANK & TRUST COMPANY

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED OCTOBER 31, 1992, 1993 AND 1994
AND THE NINE MONTH PERIODS ENDED JULY 31, 1994 AND 1995

<TABLE>
<CAPTION>
July 31, July 31,
1992 1993 1994 1994 1995
----------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUE:
Interest income:
Federal funds sold..... $ 663,063 $ 18,951 $ 20,430 $ -- $ 184,762
Other short-term
investments........... 937,262 33,781 37,993 25,273 42,294
Investment securities
and securities held to
maturity.............. 2,655,577 4,598,913 4,730,824 3,362,094 3,558,365
Loans.................. 435,831 504,784 859,005 600,525 925,084
----------- ----------- ----------- ----------- -----------
Total interest income.. 4,691,733 5,156,429 5,648,252 3,987,892 4,710,505
----------- ----------- ----------- ----------- -----------
Interest expense:
Deposits............... 1,017,332 655,146 864,148 547,585 580,475
Federal funds bought... -- -- -- -- 62,798
Treasury tax and loan
account............... 14,736 7,706 6,143 5,941 15,588
----------- ----------- ----------- ----------- -----------
Total interest
expense............... 1,032,068 662,852 870,291 553,526 658,861
----------- ----------- ----------- ----------- -----------
Net interest income.... 3,659,665 4,493,577 4,777,961 3,434,366 4,051,644
Noninterest income:
Asset administration
fees (including
amounts from related
parties of $7,365,000,
$7,949,000,
$8,565,000, $6,080,000
and $6,547,000)....... 29,054,254 31,985,921 42,422,555 30,826,886 36,667,515
Proceeds from
assignment of UIT
servicing, net........ -- -- -- -- 2,572,298
Computer service fees
from related parties.. 454,803 528,381 552,407 420,928 380,424
Other operating
income................ 154,501 452,498 74,163 56,314 54,145
Gain on sale of
investment security... -- 48,409 -- -- --
----------- ----------- ----------- ----------- -----------
Net operating revenue.. 33,323,223 37,508,786 47,827,086 34,738,494 43,726,026
----------- ----------- ----------- ----------- -----------
OPERATING EXPENSES:
Compensation of
officers and
employees............. 17,101,730 18,510,275 23,162,729 16,763,927 20,315,901
Pension and other
employee benefits..... 3,157,572 3,631,237 4,136,066 3,097,929 3,594,783
Occupancy.............. 2,441,545 2,641,399 3,735,820 2,631,500 3,259,467
Equipment.............. 2,551,577 3,061,332 4,292,523 3,110,868 3,671,099
Insurance.............. 909,922 946,837 1,069,996 800,017 799,561
Subcustodian fees...... 901,392 913,929 1,326,783 932,509 1,527,013
Depreciation and
amortization.......... 875,109 1,064,449 1,375,850 1,006,702 892,557
Professional fees...... 593,115 746,286 955,341 677,809 1,127,883
Travel and sales
promotion............. 351,936 421,226 735,385 497,130 462,825
Other operating
expenses.............. 1,705,591 2,001,901 1,712,950 1,526,771 2,264,423
----------- ----------- ----------- ----------- -----------
Total operating
expenses.............. 30,589,489 33,938,871 42,503,443 31,045,162 37,915,512
----------- ----------- ----------- ----------- -----------
INCOME BEFORE INCOME
TAXES.................. 2,733,734 3,569,915 5,323,643 3,693,332 5,810,514
INCOME TAXES............ 1,163,000 1,211,000 1,863,000 1,273,656 2,215,599
----------- ----------- ----------- ----------- -----------
NET INCOME.............. $ 1,570,734 $ 2,358,915 $ 3,460,643 $ 2,419,676 $ 3,594,915
=========== =========== =========== =========== ===========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>

INVESTORS BANK & TRUST COMPANY

STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED OCTOBER 31, 1992, 1993 AND 1994 AND THE NINE-MONTH PERIOD ENDED
JULY 31, 1995

<TABLE>
<CAPTION>
Common Retained
Stock Surplus Earnings Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, NOVEMBER 1, 1991... $ 1,000,000 $ 1,000,000 $ 4,502,750 $ 6,502,750
Net income................ -- -- 1,570,734 1,570,734
Cash dividend, $0.06 per
share.................... -- -- (60,000) (60,000)
----------- ----------- ----------- -----------
BALANCE, OCTOBER 31, 1992... 1,000,000 1,000,000 6,013,484 8,013,484
Net income................ -- -- 2,358,915 2,358,915
Cash dividend, $0.06 per
share.................... -- -- (60,000) (60,000)
----------- ----------- ----------- -----------
BALANCE, OCTOBER 31, 1993... 1,000,000 1,000,000 8,312,399 10,312,399
Net income................ -- -- 3,460,643 3,460,643
Stock split............... 9,000,000 (1,000,000) (8,000,000) --
Cash dividend, $0.06 per
share.................... -- -- (60,000) (60,000)
----------- ----------- ----------- -----------
BALANCE, OCTOBER 31, 1994... 10,000,000 -- 3,713,042 13,713,042
Net income (unaudited).... -- -- 3,594,915 3,594,915
Cash dividend, $0.06 per
share (unaudited)........ -- -- (60,000) (60,000)
----------- ----------- ----------- -----------
BALANCE, JULY 31, 1995
(unaudited)................ $10,000,000 $ -- $ 7,247,957 $17,247,957
=========== =========== =========== ===========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>

INVESTORS BANK & TRUST COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1992, 1993 AND 1994 AND THE NINE-MONTH PERIODS ENDED
JULY 31, 1994 AND 1995

<TABLE>
<CAPTION>
July 31, July 31,
1992 1993 1994 1994 1995
------------ ------------ ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income............. $ 1,570,734 $ 2,358,915 $ 3,460,643 $ 2,419,676 $ 3,594,915
------------ ------------ ------------ ------------ ------------
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization.......... 942,328 1,227,310 1,375,850 933,263 892,557
Deferred income
taxes................. 163,000 (162,000) (127,000) -- --
Amortization of
premiums on
investment
securities, net of
accretion of
discounts............. 183,194 1,469,064 1,300,037 1,036,828 621,383
Gain on sale of
security.............. -- (48,409) -- -- --
Loss on disposal of
equipment............. 24,565 -- -- -- --
Adjustment to carrying
value of interest
rate floor
contracts............. -- -- -- -- 1,057,700
Changes in assets and
liabilities:
Accrued interest and
fees receivable...... (716,071) (846,677) (3,714,212) (2,280,935) (510,429)
Other assets.......... (56,091) (2,462,405) 1,185,210 93,233 (202,594)
Other liabilities..... 350,850 (219,379) 1,589,835 534,753 1,300,392
------------ ------------ ------------ ------------ ------------
Total adjustments.... 891,775 (1,042,496) 1,609,720 317,142 3,159,009
------------ ------------ ------------ ------------ ------------
Net cash provided by
operating
activities.......... 2,462,509 1,316,419 5,070,363 2,736,818 6,753,924
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Net decrease in other
short-term
investments........... 17,992,030 -- -- -- --
Proceeds from
maturities of
investment securities
and securities held to
maturity.............. 7,032,121 3,015,813 16,264,293 3,778,686 11,111,110
Proceeds from sale of
investment security... -- 5,065,234 -- -- --
Purchase of investment
securities............ (38,367,578) (25,725,664) (25,636,094) -- --
Net decrease in federal
funds sold............ 16,000,000 16,000,000 -- -- --
Net (increase) decrease
in loans.............. (756,081) (4,338,176) (3,349,620) (2,692,450) (101,997)
Purchases of
equipment............. (1,188,172) (1,876,904) (1,616,307) (1,244,190) (1,407,924)
Proceeds from sales of
equipment............. 3,000 -- -- -- --
------------ ------------ ------------ ------------ ------------
Net cash provided by
(used for) investing
activities)......... 715,320 (7,859,697) (14,337,728) (157,954) 9,601,189
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Net increase (decrease)
in demand deposits.... (15,916,820) 29,126,500 (32,657,559) 8,885,193 9,180,461
Net increase (decrease)
in time and savings
deposits.............. 13,885,121 (14,043,834) 35,088,220 (22,765,156) (29,082,482)
Dividends paid......... (60,000) (60,000) (60,000) (60,000) (60,000)
------------ ------------ ------------ ------------ ------------
Net cash provided by
(used for) financing
activities.......... (2,091,699) 15,022,666 2,370,661 (13,939,963) (19,962,021)
------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE)
IN CASH AND DUE FROM
BANKS.................. 1,086,130 8,479,388 (6,896,704) (11,361,099) (3,606,908)
CASH AND DUE FROM BANKS,
BEGINNING OF PERIOD.... 5,675,092 6,761,222 15,240,610 15,240,610 8,343,906
------------ ------------ ------------ ------------ ------------
CASH AND DUE FROM BANKS,
END OF PERIOD.......... $ 6,761,222 $ 15,240,610 $ 8,343,906 $ 3,879,511 $ 4,736,998
============ ============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Cash paid for
interest.............. $ 1,075,000 $ 669,000 $ 807,000 $ 536,000 $ 716,000
============ ============ ============ ============ ============
Cash paid for income
taxes................. $ 1,133,000 $ 1,420,000 $ 2,136,000 $ 1,454,000 $ 2,023,000
============ ============ ============ ============ ============
</TABLE>

See notes to consolidated financial statements.
(concluded)

F-6
<PAGE>

INVESTORS BANK & TRUST COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 31, 1992, 1993 AND 1994 AND THE NINE-MONTH PERIODS ENDED
JULY 31, 1994 AND 1995

1. DESCRIPTION OF BUSINESS

Investors Bank & Trust Company (the "Bank") is a state-chartered
Massachusetts bank which commenced operations in November 1969. The Bank
provides domestic and global custody, multicurrency accounting, institutional
transfer agency, performance measurement, foreign exchange, securities
lending, and mutual fund administration services to a variety of financial
asset managers, including mutual fund complexes, investment advisors, banks
and insurance companies. The Bank is subject to regulation by the Office of
the Commissioner of Banks of the Commonwealth of Massachusetts and the Federal
Deposit Insurance Corporation. The Bank is majority owned by Eaton Vance Corp.
("EVC"), a holding company deriving its revenues primarily from investment
management activities.

2. PROPOSED BANK SPIN-OFF (UNAUDITED)

On June 29, 1995, EVC, together with minority stockholders of the Bank,
formed Investors Financial Services Corp. ("IFSC"), a Bank Holding Company,
under the Bank Holding Act of 1956. It is anticipated that all stockholders of
the Bank will exchange their stock for a combination of Common Stock and Class
A Common Stock ("Class A Stock") of IFSC (the "Exchange"). The Common Stock
and Class A Stock are identical except that the Class A Stock has ten votes
per share and automatically converts into Common Stock upon transfer and under
certain other circumstances.

Following the Exchange, the business operations of IFSC will be separated
from those of EVC by means of a tax-free, pro rata distribution of EVC's
ownership interest in IFSC to the EVC stockholders (the "Distribution"). It is
anticipated that after the Exchange, IFSC will have 3,418,573 shares of Common
Stock and 611,427 shares of Class A Stock outstanding. Subsequent to the
completion of the Distribution, IFSC plans to sell up to 2,000,000 additional
shares of its Common Stock in an initial public offering.

The Distribution is subject to receipt by EVC of certain regulatory
approvals and a private letter ruling from the Internal Revenue Service
confirming the tax-free treatment to EVC stockholders of the distribution of
shares of Common Stock and Class A Stock in the Distribution to EVC
stockholders. IFSC had no operations or contingencies and has entered into no
commitments through July 31, 1995.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Custody and Trust Assets - Asset administration fees, including securities
lending and foreign exchange services and computer services fees, are composed
primarily of fee and fee-related income and are recorded on the accrual basis.

Securities - Prior to November 1, 1994, investment securities, which
consisted solely of debt securities, were stated at cost, adjusted for
amortization of premiums and accretion of discounts. Maturities and sales of
investment securities were accounted for on a specific-identification basis.

Effective November 1, 1994, the Bank adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." SFAS No. 115 requires

F-7
<PAGE>

INVESTORS BANK & TRUST COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
investments in equity securities that have readily determinable fair values
and all investments in debt securities
to be classified into three categories as follows:

. Debt securities that the Bank has the positive intent and ability to
hold to maturity are classified as held-to-maturity and reported 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 reported at fair value, with unrealized gains and losses
included in earnings.
. All other debt and equity securities are classified as available-for-
sale and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
stockholders' equity.

At the adoption of SFAS No. 115, the Bank classified its entire portfolio of
securities as held-to-maturity based upon the Bank's positive intent and
ability to hold such securities to maturity. Factors considered in determining
the Bank's ability to hold such securities to maturity include the Bank's
historical experience, the maturity distribution of securities and the Bank's
access to additional deposits from custody and trust customers. The effect of
adopting SFAS No. 115 was not significant (unaudited).

Fair Value of Financial Instruments - SFAS No. 107 requires the disclosure
of the estimated fair value of financial instruments, whether or not
recognized in the Bank's consolidated balance sheets, estimated using
available market information or other appropriate valuation methodologies.

The carrying amounts of cash and cash equivalents are a reasonable estimate
of their fair value. The fair value of the Bank's investment securities is
estimated based on quoted market prices. Both loans (including commitments to
lend) and deposits, including time deposits, bear interest at variable rates
and are subject to periodic repricing. As such, the carrying amount of loans
and deposits is a reasonable estimate of fair value. The fair value of the
Bank's interest rate floor contracts is estimated based on quoted market
prices. The Bank does not have any other significant financial instruments.

Loans - Interest income on loans is recorded on the accrual basis. Losses on
loans are provided for under the allowance method of accounting. The allowance
is increased by provisions charged to operating expenses based on amounts
management considers necessary to meet reasonably foreseeable losses on loans.

In May 1993, the Financial Accounting Standards Board issued SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan." SFAS No. 114, as amended,
requires that impaired loans be measured on a loan-by-loan basis by either the
present value of expected future cash flows discounted at the loan's effective
interest rate, the loans's obtainable market price, or the fair value of the
collateral if the loan is collateral dependent.

SFAS No. 114 is applicable to all creditors and to all loans, except large
groups of smaller balance homogenous loans that are collectively evaluated for
impairment, loans that are measured at fair value or at the lower of cost or
fair value, leases, and convertible or nonconvertible debentures and bonds and
other debt securities.

The Bank will be required to adopt SFAS No. 114 in fiscal 1996. Adoption of
SFAS No. 114 is not expected to have a significant impact on the Bank's
consolidated financial statements.

Equipment and Leasehold Improvement - Equipment and leasehold improvements
are stated at cost, less accumulated depreciation and amortization.
Depreciation and amortization are provided on the straight-line method over
the estimated useful lives of the assets which range from three to seven
years.

F-8
<PAGE>

INVESTORS BANK & TRUST COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Income Taxes - The Bank adopted SFAS No. 109, "Accounting for Income Taxes,"
effective November 1, 1993, on a prospective basis. 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 basis and the tax basis of the Bank'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. Prior
to November 1, 1993, the Bank recognized income tax expense based on income
reported in the financial statements. The adoption of SFAS No. 109 did not
have a material effect on the consolidated financial statements.

Translation of Foreign Currencies - The functional currency of the Bank's
foreign subsidiaries is the U.S. dollar. Accordingly, gains and losses
realized from the settlement of foreign currency transactions, which were not
significant in the years ended October 31, 1993 and 1994, are included in
other operating expenses in the consolidated statement of income. The Bank had
no foreign subsidiaries prior to October 31, 1992. At October 31, 1994, there
were no cumulative unpatriated earnings on which to provide deferred taxes.

Derivative Financial Instruments - Derivative financial instruments used by
the Bank are purchased interest rate floor contracts ("Floor"). These
instruments are matched with fees on trust and custody assets that are based
on current interest rates. Periodic cash payments are accrued on a settlement
basis. Interest rate floor contracts are not purchased for trading purposes.
Any premiums associated with the instruments are amortized over their term.
Realized gains or losses as a result of the termination of the instruments are
deferred and amortized over the shorter of the remaining term of the
instrument or the underlying hedged item.

To the extent that the hedged item is terminated, the Floor is adjusted to
market value and the resulting gain or loss is included as a component of the
gain or loss of the terminated item. The Floor is then carried at market value
with gains or losses included as a component of operations until such time, if
any, as the Floor is redesignated as a hedge of another financial instrument.
The Bank is subject to credit loss in the event of nonperformance by the Floor
counterparty. However, the Bank does not anticipate nonperformance by the
counterparty.

The Bank also enters into foreign exchange contracts as discussed in Note
16. The Bank will be required to implement SFAS No. 119, "Disclosure About
Derivative Financial Instruments and Fair Value of Financial Instruments," in
fiscal 1996. This standard requires expanded disclosure about amounts, nature
and terms associated with the derivative financial instruments held.

Reclassifications - Certain amounts in the 1992 and 1993 financial
statements have been reclassified to conform to the 1994 presentation.

Unaudited Information - The consolidated financial statements and related
disclosures in the notes to the consolidated financial statements as of July
31, 1995 and for the nine-month periods ended July 31, 1994 and 1995 are
unaudited. In the opinion of management, such consolidated financial
statements for the unaudited periods include all adjustments necessary,
consisting of adjustments of a normal recurring nature, for a fair
presentation of such information. The consolidated results of operations and
cash flows for the nine months ended July 31, 1994 and 1995 are not
necessarily indicative of results that would be expected for a full year.

F-9
<PAGE>

INVESTORS BANK & TRUST COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

4. SECURITIES

Carrying amounts and approximate market values of investment securities are
summarized as follows as of October 31, 1993 and 1994:

<TABLE>
<CAPTION>
1993
---------------------------------------------
Approximate
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities......... $64,913,057 $1,624,043 $ -- $66,537,100
Mortgage-backed securities....... 15,293,045 622,475 48,142 15,867,378
----------- ---------- ---------- -----------
Total.......................... $80,206,102 $2,246,518 $ 48,142 $82,404,478
=========== ========== ========== ===========
<CAPTION>
1994
---------------------------------------------
Approximate
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities......... $76,158,320 $ -- $1,220,719 $74,937,601
Mortgage-backed securities....... 12,119,546 -- 885,562 11,233,984
----------- ---------- ---------- -----------
Total.......................... $88,277,866 $ -- $2,106,281 $86,171,585
=========== ========== ========== ===========

Securities held to maturity are summarized as follows at July 31, 1995
(unaudited):

<CAPTION>
Approximate
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities......... $65,527,717 $ 198,085 $ 203,852 $65,521,950
Mortgage-backed securities....... 11,017,656 35,955 156,367 10,897,244
----------- ---------- ---------- -----------
Total.......................... $76,545,373 $ 234,040 $ 360,219 $76,419,194
=========== ========== ========== ===========
</TABLE>

The carrying amounts and approximate market value of securities by
contractual maturity are as follows at October 31, 1994 and July 31, 1995:

<TABLE>
<CAPTION>
October 31, 1994 July 31, 1995
----------------------- ------------------------
Approximate
Carrying Market Carrying Approximate
Amount Value Amount Market Value
----------- ----------- ----------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
Due within one year....... $ -- $ -- $30,230,718 $30,157,800
Due from one to five
years.................... 76,158,320 74,937,601 35,296,999 35,364,150
Mortgage-backed
securities............... 12,119,546 11,233,984 11,017,656 10,897,244
----------- ----------- ----------- -----------
Total................... $88,277,866 $86,171,585 $76,545,373 $76,419,194
=========== =========== =========== ===========
</TABLE>

There were no sales of securities during 1992, 1994 or the nine-month period
ended July 31, 1995 (unaudited). Only one security, resulting in a gain, was
sold during 1993.

The carrying value of securities pledged amounted to approximately
$80,000,000, $88,000,000 and $77,000,000 at October 31, 1993 and 1994 and July
31, 1995 (unaudited), respectively. Securities are pledged primarily to secure
public funds and clearings with other depository institutions.

5. LOANS

Loans consist of demand loans with individuals and not-for-profit
institutions located in the greater Boston, Massachusetts metropolitan area.
The loans are generally collateralized with marketable securities. There were
no nonperforming loans at October 31, 1993 or 1994, or July 31, 1995
(unaudited). In addition, there have been

F-10
<PAGE>

INVESTORS BANK & TRUST COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
no loan charge-offs or recoveries during 1992, 1993 or 1994 or the nine-month
period ended July 31, 1995 (unaudited). Loans consisted of the following at
October 31, 1993 and 1994 and July 31, 1995:

<TABLE>
<CAPTION>
July 31,
1993 1994 1995
----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
Loans to individuals.................... $ 8,435,000 $12,085,000 $13,400,000
Loans to not-for-profit institutions.... 1,821,000 1,520,000 307,000
----------- ----------- -----------
10,256,000 13,605,000 13,707,000
Less allowance for loan losses.......... 35,000 35,000 35,000
----------- ----------- -----------
Total................................. $10,221,000 $13,570,000 $13,672,000
=========== =========== ===========
</TABLE>

The Bank had commitments to lend of approximately $6,279,000 at July 31,
1995 (unaudited). The terms of these commitments are similar to the terms of
outstanding loans.

6. EQUIPMENT AND LEASEHOLD IMPROVEMENTS

The major components of equipment and leasehold improvements are as follows
at October 31, 1993 and 1994 and July 31, 1995:

<TABLE>
<CAPTION>
July 31,
1993 1994 1995
---------- ---------- -----------
(Unaudited)
<S> <C> <C> <C>
Furniture, fixtures and equipment........ $4,803,461 $6,066,307 $6,177,523
Leasehold improvements................... 447,866 575,774 737,656
---------- ---------- ----------
Total.................................. 5,251,327 6,642,081 6,915,179
Less accumulated depreciation and
amortization............................ 2,241,168 3,391,464 3,149,195
---------- ---------- ----------
Equipment and leasehold improvements,
net..................................... $3,010,159 $3,250,617 $3,765,984
========== ========== ==========
</TABLE>

7. DEPOSITS

Time deposits at October 31, 1993 and 1994 and July 31, 1995 (unaudited)
include noninterest-bearing amounts of approximately $5,000,000, $30,000,000
and $55,000,000, respectively.

Time deposits with a minimum balance of $100,000 at October 31, 1993 and
1994 and July 31, 1995 (unaudited) aggregated approximately $22,543,000,
$52,308,000 and $62,113,000, respectively.

At October 31, 1993 and 1994 and July 31, 1995 (unaudited) all time deposits
had a maturity of less than three months.

8. INCOME TAXES

The components of income tax expenses are as follows for the years ended
October 31, 1992, 1993 and 1994:

<TABLE>
<CAPTION>
1992 1993 1994
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal................................. $ 703,000 $1,324,000 $1,829,000
State................................... 297,000 49,000 161,000
---------- ---------- ----------
1,000,000 1,373,000 1,990,000
---------- ---------- ----------
Deferred:
Federal................................. 115,000 (118,000) (7,000)
State................................... 48,000 (44,000) (3,000)
Foreign................................. -- -- (117,000)
---------- ---------- ----------
163,000 (162,000) (127,000)
---------- ---------- ----------
Total income taxes.................... $1,163,000 $1,211,000 $1,863,000
========== ========== ==========
</TABLE>

F-11
<PAGE>

INVESTORS BANK & TRUST COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Differences between the effective income tax rate and the federal statutory
rates are as follows for the years ended October 31, 1992, 1993 and 1994 and
the nine-month periods ended July 31, 1994 and 1995:

<TABLE>
<CAPTION>
July 31, July 31,
1992 1993 1994 1994 1995
---- ---- ---- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Federal statutory rate................. 34.0% 34.0% 34.0% 34.0% 34.0%
State income tax, net of federal
benefit............................... 8.3 0.1 2.0 1.8 3.7
Foreign income taxes with different
rates................................. -- -- (1.5) (1.8) .5
Other.................................. 0.2 (0.2) 0.5 .5 (.1)
---- ---- ---- ---- ----
Effective tax rate..................... 42.5% 33.9% 35.0% 34.5% 38.1%
==== ==== ==== ==== ====
</TABLE>

Deferred income taxes prior to the adoption of SFAS No. 109 resulted
primarily from timing differences in recognition of certain expense items for
tax and financial reporting purposes, as follows for the years ended October
31, 1992 and 1993:

<TABLE>
<CAPTION>
1992 1993
-------- ---------
<S> <C> <C>
Depreciation and amortization............................ $ 42,000 $ 15,000
Employee benefit plans................................... 121,000 (165,000)
Other, net............................................... -- (12,000)
-------- ---------
Total.................................................. $163,000 $(162,000)
======== =========
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities consist of the following at
November 1, 1993 and October 31, 1994:

<TABLE>
<CAPTION>
1992 1993
-------- ---------
<S> <C> <C>
Deferred tax assets:
Employee benefit plans.............................. $500,000 $ 549,000
Foreign net operating losses........................ 8,000 125,000
-------- ---------
508,000 674,000
Deferred tax liabilities-depreciation and
amortization......................................... (67,000) (106,000)
-------- ---------
Net deferred tax asset................................ $441,000 $ 568,000
======== =========
</TABLE>

Net deferred tax assets are reported as a component of other assets in the
consolidated balance sheets.

At October 31, 1994, the Bank had approximately $283,000 of net operating
loss carryforwards at its Canadian subsidiary. These loss carryforwards expire
in 2001. Management of the Bank believes it more likely than not that these
loss carryforwards will be realized. Accordingly, no valuation allowance has
been provided on these loss carryforwards.

9. STOCKHOLDERS' EQUITY

On May 27, 1994, the Bank's Board of Directors approved a reduction in the
par value of the Bank's common stock from $100 per share to $10 per share and
a 100-for-1 stock split which caused the number of shares of common stock
authorized, issued and outstanding to increase from 10,000 shares to 1,000,000
shares. There were no other changes in authorized, issued or outstanding
common stock for any period presented.

The stock split resulted in a $9,000,000 increase in common stock, a
$1,000,000 decrease in surplus and a $8,000,000 decrease in retained earnings.
Where appropriate, share and per share information included in the
consolidated financial statements has been adjusted to reflect retroactive
application of the stock split.

F-12
<PAGE>

INVESTORS BANK & TRUST COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Under Massachusetts law, trust companies such as the Bank may only pay
dividends out of "net profits" and only to the extent that such payments will
not impair the Bank's capital stock and surplus account. If, prior to
declaration of a dividend, the Bank's capital stock and surplus accounts do
not equal at least 10% of its deposit liabilities, then prior to the payment
of the dividend the Bank must transfer from net profits to its surplus account
the amount required to make its surplus account equal to either (i) together
with capital stock, 10.0% of deposits liabilities, or (ii) subject to certain
adjustments, 100% of capital stock. The Bank is also required to maintain
minimum amounts of capital to total "risk-weighted" assets, as defined by the
banking regulators. At October 31, 1994, the Bank is required to have minimum
Tier 1 and total capital ratios of 3.0% and 8.0%, respectively. The Bank's
actual ratios at that date were in excess of all regulatory requirements.

10. PROCEEDS FROM ASSIGNMENT OF UNIT INVESTMENT TRUST SERVICING, NET

On March 1, 1995, the Bank recognized $2,572,000 (unaudited) of noninterest
income resulting from the assignment to The Bank of New York Company, Inc. of
the rights to service approximately $5.0 billion of Merrill Lynch, Pierce,
Fenner & Smith, Incorporated unit investment trust assets. In connection with
the assignment, the Bank adjusted to market value Floors with a notional
amount of $80,000,000. These Floors had previously been designated as hedges
of fees from the unit investment trusts. The resulting loss of $1,057,700
(unaudited) is reported net of the cash proceeds from the assignment of unit
investment trust servicing. Fees from Merrill, Lynch were approximately 22%,
21% and 16% of total interest income and non-interest income in 1992, 1993 and
1994, respectively.

11. EMPLOYEE BENEFIT PLANS

Pension Plan - The Bank has a trusteed, noncontributory qualified defined
benefit pension plan covering substantially all of its employees. The benefits
are based on years of service and the employee's compensation during
employment. The Bank's funding policy is to contribute annually the maximum
amount which 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 Bank established a supplemental retirement plan in 1994 that covers
certain employees and pays benefits that supplement any benefits paid under
the qualified plan. Benefits under the supplemental plan are generally based
on compensation not includable in the calculation of benefits to be paid under
the qualified plan.

The following table sets forth the funded status and accrued pension cost
for the Bank's pensions and supplemental retirement plans recognized in the
consolidated balance sheets at October 31, 1993 and 1994:

<TABLE>
<CAPTION>
1993 1994
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including
vested benefits of $3,440,000 for 1993 and
$2,896,000 for 1994........................... $ 3,153,000 $ 3,689,000
=========== ===========
Projected benefit obligations for services
rendered to date................................ $ 5,352,000 $ 5,717,000
Plan assets at fair value, primarily listed
stocks and U.S. government obligations.......... 4,390,000 4,754,000
----------- -----------
Projected benefit obligations in excess of
assets.......................................... (962,000) (963,000)
Unrecognized net gain from past experience
different from that assumed and effects of
changes in assumptions.......................... (120,000) (397,000)
Prior service cost not yet recognized in periodic
pension cost.................................... 400,000 301,000
Unrecognized net asset........................... (501,000) (270,000)
----------- -----------
Accrued pension cost............................. $(1,183,000) $(1,329,000)
=========== ===========
</TABLE>

F-13
<PAGE>

INVESTORS BANK & TRUST COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Net pension cost included the following components for the years ended
October 31, 1992, 1993 and 1994:

<TABLE>
<CAPTION>
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Service cost-benefits earned during the
period.................................. $ 461,000 $ 497,000 $ 618,000
Interest cost on projected benefit
obligations............................. 349,000 388,000 425,000
Return on plan assets.................... (300,000) (373,000) (420,000)
Net amortization and deferral............ (32,000) 1,000 (5,000)
--------- --------- ---------
Net periodic pension cost................ $ 478,000 $ 513,000 $ 618,000
========= ========= =========
</TABLE>

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:

<TABLE>
<CAPTION>
1993 1994
---- ----
<S> <C> <C>
Weighted average discount rate................................... 7.5% 7.5%
Rate of increase in future compensation levels................... 5.0 5.0
Long-term rate of return on plan assets.......................... 8.5 8.5
</TABLE>

Employee Savings Plan - The Bank sponsors a qualified defined contribution
employee savings plan covering substantially all Bank employees who elect to
participate. The Bank matches employee contributions to the plan up to
specified amounts. The total cost of this plan to the Bank was $117,000,
$152,000 and $164,000 in 1992, 1993 and 1994, respectively.

12. RELATED-PARTY TRANSACTIONS

The Bank enters into various transactions with EVC and a group of mutual
funds sponsored by EVC. The following is a summary of such related-party
transactions for the years ended October 31, 1992, 1993 and 1994:

<TABLE>
<CAPTION>
1992 1993 1994
---------- ---------- ----------
<S> <C> <C> <C>
Asset administration fee income............. $4,671,000 $5,049,000 $8,565,000
Computer service fee income................. 455,000 528,000 552,000
Occupancy expense........................... 464,000 413,000 344,000
</TABLE>

The aggregate of the above fees exceeds 10% of total interest income and
noninterest income of the Bank.

In addition, EVC and its group of mutual funds had the following amounts
outstanding with the Bank as follows at October 31, 1993 and 1994:

<TABLE>
<CAPTION>
1993 1994
-------- ----------
<S> <C> <C>
Fees receivable.......................................... $288,000 $ 309,000
Deposits................................................. 307,000 1,991,000
</TABLE>

The Bank also makes loans to officers of EVC and other related parties. Such
loans are made in the ordinary course of business and on the same terms and
conditions prevailing at the time for comparable transactions. The following
is a summary of loans to related parties during 1992, 1993 and 1994, and for
the six months ended July 31, 1995:

<TABLE>
<S> <C>
Balance at October 31, 1992.................................... $ 350,000
Loans made/advanced.......................................... 950,000
Repayments................................................... (39,000)
---------
Balance at October 31, 1993.................................... 1,261,000
</TABLE>

F-14
<PAGE>

INVESTORS BANK & TRUST COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
<TABLE>
<S> <C>
Loans made/advanced......................................... 507,000
Repayments.................................................. (135,000)
----------
Balance at October 31, 1994................................... 1,633,000
Loans made (unaudited)...................................... 15,000
Repayments (unaudited)...................................... (15,000)
----------
Balance at July 31, 1995 (unaudited).......................... $1,633,000
==========
</TABLE>

13. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

Lines of Credit - At October 31, 1994, the Bank had commitments to
individuals under collateralized open lines of credit totaling $7,493,000,
against which $3,108,171 in loans was drawn. The credit risk involved in
issuing lines of credit essentially the same as that involved in extending
loan facilities. The Bank does not anticipate any loss as a result of these
lines of credit.

Interest-Rate Contracts - The Bank uses Floors to reduce the impact of
declining interest rates on asset administration fees. The Bank's exposure
from these contracts results from the possibility that the counterparty may
default on its contractual obligations. The credit exposure in the event of
non-performance by the counterparty is represented by the fair value of the
Floors, $5,000 at October 31, 1994. The Bank minimizes its credit risk in this
area by performing credit reviews of its counterparties. The exposure to
market risk can be estimated by calculating the cost, on a present value
basis, to replace the Floors at current market rates. At October 31, 1994, the
notional amount of the Bank's floor contracts was $80,000,000. The Floors have
interest rates ranging from 4% to 5% and mature at various dates through 1997.

14. COMMITMENTS AND CONTINGENCIES

Restrictions on Cash Balances - The Bank is required to maintain certain
average cash reserve balances with the Federal Reserve Bank. The average
reserve balance requirement as of October 31, 1994 was $3,292,000 and was
$773,000 as of July 31, 1995 (unaudited). In addition, other cash balances in
the amount of $392,000 were pledged to secure clearings with depositary
institutions as of October 31, 1994 and July 31, 1995 (unaudited),
respectively.

Lease Commitments - Minimum future commitments on noncancelable operating
leases at October 31, 1994, were as follows:

<TABLE>
<CAPTION>
Bank
Premises Equipment
---------- ----------
<S> <C> <C>
1995................................................... $3,375,000 $1,178,000
1996................................................... 3,203,000 973,000
1997................................................... 2,783,000 404,000
1998................................................... 179,000 --
1999................................................... 159,000 --
</TABLE>

Total rent expense was $2,429,000, $2,634,000 and $3,517,000 in 1992, 1993
and 1994, respectively. The Bank leases certain premises from EVC.

Contingencies - The Bank provides domestic and global custody, multicurrency
accounting, institutional transfer agency, performance measurement, foreign
exchange, securities lending and mutual fund administration services to a
variety of financial asset managers, including mutual fund complexes,
investment advisors, banks and insurance companies. Assets under custody and
management, held by the Bank in a fiduciary capacity, are not included in the
consolidated balance sheets since such items are not assets of the Bank.
Management conducts regular reviews of its fiduciary responsibilities and
considers the results in preparing its consolidated

F-15
<PAGE>

INVESTORS BANK & TRUST COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
financial statements. In the opinion of management, there are no contingent
liabilities at October 31, 1994 that are material to the consolidated
financial position or results of operations of the Bank.

15. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value and estimated fair value of financial instruments are as
follows at October 31, 1993 and 1994 (in thousands):

<TABLE>
<CAPTION>
1993 1994
----------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
On-balance sheet amounts:
Cash and due from banks.............. $ 15,240 $ 15,240 $ 8,344 $ 8,344
Time deposits due from banks......... 1,000 1,000 1,000 1,000
Investment securities................ 80,206 82,404 88,278 86,172
Loans................................ 10,221 10,221 13,570 13,570
Deposits............................. 106,248 106,248 108,679 108,679
Off-balance sheet amounts:
Commitments to lend ($1,801 in 1993
and $4,385 in 1994)................. -- 1,801 -- 4,385
Interest rate floor contracts
(notional amounts of $130,000 in
1993 and $80,000 in 1994)........... 2,001 2,880 1,258 5
Foreign exchange contracts (notional
amounts of $27,572 in 1993 and $24,922
in 1994).............................. -- -- -- --
</TABLE>

The fair value estimates presented herein are based on pertinent information
available to management as of October 31, 1993 and 1994. 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 purposes
of these consolidated financial statements since that date and, therefore,
current estimates of fair value may differ significantly from the amounts
presented herein.

16. FOREIGN EXCHANGE CONTRACTS

The Bank enters into foreign exchange contracts with clients and
simultaneously enters into a matched position with another bank. These
contracts are subject to market value fluctuations in foreign currencies.
Gains and losses from such fluctuations are netted and recorded as an
adjustment of asset administration fees. A summary of foreign exchange
contracts outstanding at October 31, 1993 and 1994 is as follows (in
thousands):

<TABLE>
<CAPTION>
1993 1994
---------------------------- ----------------------------
Unrealized Unrealized
Currency Purchases Sales Gain/loss Purchases Sales Gain/loss
-------- --------- ------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Germany (Mark).......... $ 13 $ 13 $ -- $ 1,957 $ 1,957 $ --
Britain (Pound)......... 7,721 7,721 -- 1,141 1,141 --
Hong Kong (Dollar)...... 3,401 3,401 -- 3,502 3,502 --
Japan (Yen)............. -- -- -- 1,126 1,126 --
Philippines (Peso)...... 335 335 -- 1,185 1,185 --
Singapore (Dollar)...... 457 457 -- 1,265 1,265 --
Other currencies........ 1,859 1,859 -- 2,285 2,285 --
------- ------- ----- ------- ------- -----
$13,786 $13,786 $ -- $12,461 $12,461 $ --
======= ======= ===== ======= ======= =====
</TABLE>

F-16
<PAGE>

INVESTORS BANK & TRUST COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The maturity of contracts outstanding as of October 31, 1994 is as follows:

<TABLE>
<CAPTION>
MATURITY Purchases Sales
-------- --------- -------
<S> <C> <C>
November 1994.............................................. $12,386 $12,386
December 1994.............................................. 75 75
</TABLE>

17. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
First Second Third Fourth
1993 Quarter Quarter Quarter Quarter
- ---- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income................ $ 1,065,251 $ 1,279,101 $ 1,441,527 $ 1,370,550
Interest expense............... 174,519 151,359 176,160 160,814
Noninterest income............. 7,880,530 8,047,451 8,332,115 8,755,113
Operating expenses............. 7,957,263 8,356,354 8,706,065 8,919,189
Income before income taxes..... 813,999 818,839 891,417 1,045,660
Income taxes................... 322,162 262,962 282,899 342,977
Net income..................... 491,837 555,877 608,518 702,683
Earnings per share............. 0.49 0.56 0.61 0.70
<CAPTION>
1994
- ----
<S> <C> <C> <C> <C>
Interest income................ $ 1,339,017 $ 1,313,085 $ 1,335,787 $ 1,660,363
Interest expense............... 176,667 184,219 192,640 316,765
Noninterest income............. 9,217,235 10,872,738 11,346,207 11,612,945
Operating expenses............. 9,600,272 10,650,206 10,926,734 11,326,231
Income before income taxes..... 779,313 1,351,398 1,562,620 1,630,312
Income taxes................... 252,593 451,264 569,798 589,345
Net income..................... 526,720 900,134 992,822 1,040,967
Earnings per share............. 0.53 0.90 0.99 1.04
<CAPTION>
1995
- ----
<S> <C> <C> <C> <C>
Interest income................ $ 1,574,963 $ 1,475,812 $ 1,659,730
Interest expense............... 256,579 232,147 170,135
Noninterest income............. 12,240,802 14,901,928 12,531,652
Operating expenses............. 11,959,783 13,058,887 12,896,842
Income before income taxes..... 1,599,403 3,086,706 1,124,405
Income taxes................... 568,180 1,185,202 462,217
Net income..................... 1,031,223 1,901,504 662,188
Earnings per share............. 1.03 1.90 .66
</TABLE>

18. PRO FORMA EARNINGS PER SHARE (UNAUDITED)

Pro forma earnings per share of IFSC, based on the average number of shares
outstanding giving retroactive effect to the number and class of shares to be
issued in connection with the Exchange and Distribution, more fully described
in Note 2, are as follows for the year ended October 31, 1994 and for the
nine-month periods ended July 31, 1995:

<TABLE>
<CAPTION>
October 31, July 31,
1994 1995
----------- --------
<S> <C> <C>
Pro forma earnings per share............................ $0.86 $0.89
</TABLE>

F-17