Edgar Filing: EATON VANCE CORP

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

(Mark One)

[X]

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended October 31, 2007

[ ]

Transition Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
For the transition period from _________________ to _________________

Commission File Number 1-8100

EATON VANCE CORP.
(Exact name of registrant as specified in its charter)

Maryland				04-2718215
(State of incorporation)				(I.R.S. Employer Identification No.)

255 State Street, Boston, Massachusetts 02109
(Address of principal executive offices) (Zip Code)

(617) 482-8260
(Registrant’s telephone number, including area code)

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

Non-Voting Common Stock ($0.00390625 par value per share)				New York Stock Exchange
(Title of each class)				(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act:
None.

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes [X] No [ ]

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

Indicate by check mark if the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Aggregate market value of Non-Voting Common Stock held by non-affiliates of the Registrant, based on the closing price of $38.22 on April 30, 2007 on the New York Stock Exchange was $4,515,618,428. Calculation of holdings by non-affiliates is based upon the assumption, for these purposes only, that executive officers, directors, and persons holding 5 percent or more of the registrant’s Non-Voting Common Stock are affiliates.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the close of the latest practicable date.

Class:					Outstanding at October 31, 2007
Non-Voting Common Stock, $0.00390625 par value					117,798,378
Common Stock, $0.00390625 par value					371,386

Eaton Vance Corp.
Form 10-K
For the Fiscal Year Ended October 31, 2007
Index

Required Information
Part I
Item 1.	Business	3
Item 1A.	Risk Factors	13
Item 1B.	Unresolved Staff Comments	15
Item 2.	Properties	15
Item 3.	Legal Proceedings	15
Item 4.	Submission of Matters to a Vote of Security Holders	15

Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
Item 6.	Selected Financial Data	19
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 8.	Financial Statements and Supplementary Data	44
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	75
Item 9A.	Controls and Procedures	75

Part III
Item 10.	Directors, Executive Officers and Corporate Governance	78
Item 11.	Executive Compensation	83
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	100
Item 13.	Certain Relationships, Related Transactions and Director Independence	103
Item 14.	Principal Accountant Fees and Services	104

Part IV
Item 15.	Exhibits and Financial Statement Schedules	105

Signatures		106

PART I

Item 1. Business

General

Our principal business is managing investment funds and providing investment management and counseling services to high-net-worth individuals and institutions. Our long-term strategy is to develop and sustain value-added core competencies in a range of investment disciplines and to offer industry-leading investment products and services across multiple distribution channels. In executing this strategy, we have developed a broadly diversified product line and a powerful marketing, distribution and customer service capability.

We are a market leader in a number of investment areas, including tax-managed equity, value equity, equity income, emerging market equity, floating-rate bank loan, municipal bond, investment grade and high-yield bond investing. Our diversified product line offers fund shareholders, retail managed account investors, institutional investors and high-net-worth clients a wide range of products and services designed and managed to generate attractive risk-adjusted returns over the long term. Our income investment products cover a broad duration and credit quality range and encompass both taxable and tax-free investments. Our equity products offer a diversity of investment objectives, risk profiles, income levels and geographic representation. As of October 31, 2007, we had $161.7 billion in assets under management.

Our principal retail marketing strategy is to distribute funds and separately managed accounts through financial intermediaries in the advice channel. We have a broad reach in this marketplace, with distribution partners including national and regional broker/dealers, independent broker/dealers, independent financial advisory firms, banks and insurance companies. We support these distribution partners with a team of more than 140 Boston-based and regional sales professionals across the U.S. and internationally. Specialized sales and marketing professionals in our Wealth Management Solutions Group serve as a resource to financial advisors seeking to help high-net-worth clients address wealth management issues and support the marketing of our products and services tailored to this marketplace.

We also commit significant resources to serving institutional and high-net-worth clients who access investment advice outside of traditional retail broker/dealer channels. Through our wholly owned affiliates and consolidated subsidiaries Atlanta Capital Management Company, LLC (“Atlanta Capital”), Fox Asset Management LLC (“Fox Asset Management”), Parametric Portfolio Associates LLC (“Parametric Portfolio Associates”) and Parametric Risk Advisors LLC (“Parametric Risk Advisors”), we manage investments for a broad range of clients in the institutional and high-net-worth marketplace, including corporations, endowments, foundations, family offices and public and private employee retirement plans. Specialized sales teams at our affiliates develop relationships in this market and deal directly with these clients.

Although we distribute a wide range of products and services (including funds, retail managed accounts, institutional separate accounts and high-net-worth separate accounts) in multiple distribution channels, we operate in one business segment, namely as an investment adviser managing fund and separate account assets. We conduct our investment management business through our four wholly owned affiliates, Eaton Vance Management (“EVM”), Boston Management and Research (“BMR”), Eaton Vance Investment Counsel (“EVIC”), and Eaton Vance Trust Company (“EVTC”), and four other consolidated subsidiaries, Atlanta Capital, Fox Asset Management, Parametric Portfolio Associates and Parametric Risk Advisors. EVM, BMR, EVIC, Atlanta Capital, Fox Asset Management, Parametric Portfolio Associates and Parametric Risk Advisors are all registered with the Securities and Exchange Commission (“SEC”) as investment advisers under the Investment Advisers Act of 1940 (the “Advisers Act”). EVTC, a trust company, is exempt from registration under the Advisers Act. Eaton Vance Distributors, Inc. (“EVD”), a wholly owned broker/dealer registered under the Securities Exchange Act of 1934 (the “Exchange Act”), markets and sells the Eaton Vance funds and retail managed accounts. Eaton Vance Management (International) Limited (“EVMI”), a wholly owned financial services company registered under the Financial Services and

Market Act in the United Kingdom, markets and sells our investment products in Europe and certain other international markets. We are headquartered in Boston, Massachusetts, and our subsidiaries have offices in Atlanta, Georgia; Red Bank, New Jersey; Seattle, Washington; Westport, Connecticut; and London, England. Our sales representatives operate throughout the United States, and in Europe and Latin America. Eaton Vance Corp. was incorporated in Maryland in 1990.

Company History and Development

We have been in the investment management business for over eighty years, tracing our history to two Boston-based investment managers: Eaton & Howard, formed in 1924, and Vance, Sanders & Company, organized in 1934. Historically, our managed assets consisted primarily of open-end mutual funds marketed to retail investors under the Eaton Vance brand and investment counsel accounts offered directly to high-net-worth and institutional investors. Today, our products and services include open-end and closed-end funds, private funds for high-net-worth and institutional investors, retail managed accounts and separately managed accounts for institutional and high-net-worth investors.

We expanded our product and distribution focus in fiscal 2001 to encompass two potential growth areas: managing assets for institutions, including pension plans, foundations and endowments; and managing retail managed accounts for clients of our distribution partners who want a more customized form of asset management than provided by mutual funds. In an effort to build a leadership position in the institutional and retail managed account businesses, we acquired an initial 70 percent of Atlanta Capital Management and 80 percent of Fox Asset Management, institutional investment management firms focusing, respectively, on growth and value equity investment styles. These acquisitions, completed on September 30, 2001, provided opportunities to broaden our mix of investment management disciplines, clients and distribution channels.

In fiscal 2003, we acquired an initial 80 percent interest in Parametric Portfolio Associates, an innovative investment management firm based in Seattle, Washington. Parametric Portfolio Associates offers two principal products: core equity investment portfolios that seek to outperform client-specified benchmarks on an after-tax basis through active tax management; and overlay portfolio management for retail separately managed accounts utilizing proprietary technology to implement multi-manager portfolios with consolidated trading, reporting and tax management. Parametric Portfolio Associates also offers quantitative active equity portfolio management, with a primary focus on emerging markets. Parametric Portfolio Associates’ clients include family offices, individual high-net-worth investors, financial intermediaries and large financial services organizations.

We completed additional acquisitions in fiscal 2004, 2005 and 2006 aimed at expanding our management of investment portfolios for high-net-worth individuals. In fiscal 2004, we acquired the management contracts of Deutsche Bank’s private investment counsel group in Boston, Massachusetts. In conjunction with the transaction, we hired six investment counselors with an average of 29 years of experience in providing customized investment management services. We acquired the management contracts of Weston Asset Management in fiscal 2005 and the management contracts of Voyageur Asset Management (MA) Inc. in fiscal 2006.

In May 2007, Parametric Portfolio Associates merged Parametric Risk Advisors, a newly formed Parametric Portfolio Associates’ affiliate, with Managed Risk Advisors, LLC, an investment management and derivatives investment advisory firm based in Westport, Connecticut. The merger extends Parametric Portfolio Associates’ offerings for the wealth management market to include investment programs utilizing equity and equity index options and other derivatives. Parametric Risk Advisors is owned 60 percent by its principals and 40 percent by Parametric Portfolio Associates.

Sponsored Investment Products

We provide investment advisory services to funds, high-net-worth separate accounts, institutional separate accounts and retail managed accounts across a broad range of equity and fixed and floating-rate income asset classes. The following tables show assets under management by product and investment category for the dates indicated:

	Assets Under Management by Product at October 31,
(in billions)	2007		2006		2005
Fund assets:
Open-end funds	$	58.5	$	49.5	$	38.0
Closed-end funds		33.6		22.5		21.1
Private funds		30.0		26.4		21.8
Total fund assets		122.1		98.4		80.9
Separate account assets:
High-net-worth and institutional assets		24.8		21.0		20.5
Retail managed account assets		14.8		9.5		7.1
Total separate account assets		39.6		30.5		27.6
Total	$	161.7	$	128.9	$	108.5

	Assets Under Management by Investment Category at October 31,
(in billions)	2007		2006		2005
Equity assets	$	108.4	$	76.8	$	66.2
Fixed income assets		31.9		30.8		23.2
Floating-rate income assets		21.4		21.3		19.1
Total	$	161.7	$	128.9	$	108.5

Open-end funds represented 36 percent of our total assets under management on October 31, 2007, while closed-end and private funds represented 21 percent and 19 percent, respectively. High-net-worth and institutional separate account assets and retail managed account assets represented 15 percent and 9 percent of total assets under management, respectively, on October 31, 2007. As noted in the table above, our asset base is broadly diversified, with 67 percent of our total assets under management in equity assets, 20 percent in fixed income assets and 13 percent in floating-rate income assets on October 31, 2007. This diversification provides us with the opportunity to address a wide range of investor needs and to offer products and services suited for all market environments.

Open-end Funds
As of October 31, 2007, we offered 110 open-end funds, including 12 tax-managed equity funds, 41 state and national municipals funds, ten bank loan funds (including four continuously offered interval funds), 32 non-tax-managed equity funds, ten taxable fixed income funds and five cash management funds.

We are a leading manager of equity funds designed to minimize the impact of taxes on investment returns, with $55.1 billion in open-end and closed-end tax-managed equity fund assets under management on October 31, 2007. Our open-end tax-managed equity fund offerings, which represent $31.5 billion of the total $55.1 billion in tax-managed equity fund assets under management, utilize the management capabilities of our wholly owned subsidiaries, majority owned subsidiaries and strategic partners. We began building our tax-managed equity fund family in fiscal 1996 with the introduction of Eaton Vance Tax-Managed Growth Fund 1.1, and have since expanded our tax-managed fund offerings to include a variety of equity styles and market

caps, including large-cap value, multi-cap growth, mid-cap core, small-cap value, small-cap growth, international, emerging markets, equity asset allocation and dividend income.

In addition to our tax-managed equity funds, we offer a family of municipal bond funds that are an important part of our tax-advantaged fund lineup. At October 31, 2007, our open-end municipal bond funds included four national and 37 state-specific municipal bond funds in 29 different states. Assets under management in these funds totaled $17.7 billion on October 31, 2007.

We also offer a variety of floating-rate bank loan funds, taxable fixed-income funds and equity funds for qualified retirement plans and other tax-insensitive investors. We introduced our first bank loan fund in 1989 and are now an industry leader in bank loan funds, with a long track record of generating attractive risk-adjusted returns over multiple credit cycles. In recent years, we have been able to capitalize on our leading reputation and long-term track record managing retail bank loan funds to develop a substantial business managing collateralized debt obligation entities focused on bank loans, other private bank loan funds and bank loan separate accounts for institutional clients. Our non-tax-managed equity fund offerings include large, mid and small-cap funds in value, core and growth styles, dividend income funds, international, global and emerging markets funds, and sector-specific funds. Our taxable income fund offerings utilize our investment management capabilities in a broad range of fixed income asset classes, including mortgage-backed securities, global currency and income investments, high grade bonds and high yield bonds.

In fiscal 2000, we introduced The U.S. Charitable Gift Trust (“Trust”) and its Pooled Income Funds, designed to simplify the process of donating to qualified charities and to provide professional management of pools of donated assets. The Trust was one of the first charities to use professional investment advisers to assist individuals with their philanthropic, estate and tax planning needs. The Pooled Income Funds sponsored by the Trust are similar to charitable remainder trusts, providing donors with income during their lifetimes and leaving the principal to the Trust and designated charities upon their deaths. The Trust and its Pooled Income Funds encourage long-term philanthropy by allowing contributors to avoid the high costs associated with setting up their own charitable foundations and charitable remainder trusts. Assets under management in the Trust and its Pooled Income Funds totaled $392.7 million at October 31, 2007.

Closed-end Funds
Since entering the closed-end fund market in 1998, we have expanded our product array to 38 closed-end funds, including three bank loan funds, three diversified income funds, 11 equity income funds and 21 municipal bond funds. As of October 31, 2007, we managed $33.6 billion in closed-end fund assets and ranked as the third largest manager of closed-end fund assets, according to Strategic Insight, a fund industry data provider.

We followed the launch of our first closed-end floating-rate bank loan fund in October 1998 with municipal bond closed-end fund offerings in fiscal 1999, 2002 and 2003. We expanded our closed-end fund product line in fiscal 2003 with the introduction of Eaton Vance Limited Duration Income Fund, a multi-sector low duration income fund, and Eaton Vance Tax-Advantaged Dividend Income Fund, an equity income fund designed to take advantage of the lower tax rate on qualified dividends enacted in May 2003. In fiscal 2004, we offered five new closed-end funds: Eaton Vance Senior Floating-Rate Trust and Eaton Vance Floating-Rate Income Trust (investing in floating-rate bank loans); Eaton Vance Tax-Advantaged Global Dividend Income Fund and Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund (investing globally for tax-advantaged dividend income); and Eaton Vance Enhanced Equity Income Fund (combining equity investing with a systematic program of writing call options on stocks held). Fiscal 2005 brought an additional five closed-end fund offerings: Eaton Vance Short Duration Diversified Income Fund (a low duration multi-sector income fund); Eaton Vance Enhanced Equity Income Fund II (an equity income fund writing call options on stocks held); and Eaton Vance Tax-Managed Buy-Write Income Fund, Eaton Vance Tax-Managed Buy-Write Opportunities Fund and Eaton Vance Tax-Managed Global Buy-Write Opportunities Fund (tax-managed equity income funds utilizing written index call options).

Our activity in the closed-end fund market slowed in fiscal 2006 due to a flattening of the yield curve, tight credit spreads and widening discounts for closed-end funds trading in the secondary market. In May 2006, we offered Eaton Vance Credit Opportunities Fund, which employs an opportunistic approach to investing in a wide spectrum of fixed and floating-rate income instruments.

Investor demand for closed-end funds was strong again in fiscal 2007, and we offered three new closed-end funds in the course of the year: Eaton Vance Tax-Managed Diversified Equity Income Fund, Eaton Vance Tax-Managed Global Diversified Equity Income Fund and Eaton Vance Risk-Managed Diversified Equity Income Fund. Eaton Vance Tax-Managed Global Diversified Equity Income Fund, which raised $5.8 billion in its February 2007 initial public offering, ranks as the largest closed-end fund initial public offering in history.

Private Funds
The private fund category includes privately offered equity funds designed to meet the diversification and tax-management needs of qualifying high-net-worth investors and floating-rate bank loan funds offered to institutional investors. Our private floating-rate bank loan funds include collateralized debt obligation (“CDO”) entities and leveraged and unleveraged institutional senior loan funds. We are recognized as a market leader in the types of privately offered equity funds in which we specialize, with $23.6 billion in assets under management as of October 31, 2007. Assets under management in private bank loan funds totaled $6.5 billion as of October 31, 2007, including $3.3 billion of CDO entity and leveraged fund assets.

Institutional Separate Accounts
We serve a broad range of clients in the institutional marketplace, including foundations, endowments and retirement plans for individuals, corporations and municipalities. Our diversity of investment capabilities allows us to offer institutional investors products across a broad spectrum of equity and fixed and floating-rate income management styles. Product offerings on the equity side fill out style boxes from value to growth and from small-cap to large-cap, while income offerings include high grade and high yield fixed income and floating-rate bank loans.

In fiscal 2005, we expanded our institutional product offerings to include a liability-driven investing strategy, providing customized investment management portfolios to institutional clients seeking to hedge and outperform their future liabilities. During fiscal 2005, we also chartered a non-depository trust company, EVTC, and used this as a platform to launch a series of commingled investment vehicles tailored to meet the needs of smaller institutional clients. Establishing the trust company also enabled us to expand our presence in the retirement market through participation in qualified plan commingled investment platforms offered in the broker/dealer channel. In addition to its management services, EVTC provides certain custody services and has obtained regulatory approval to provide institutional trustee services.

In fiscal 2005 and 2006, we committed to building a full-function institutional marketing and service organization at EVM. In support of this effort, EVM hired a head of institutional sales and created dedicated consultant relations, marketing, sales and client service teams. The build-out of EVM’s institutional sales team is now substantially complete. Specialized institutional sales teams at EVM, Atlanta Capital and Fox Asset Management develop relationships in this market and deal directly with institutional clients. Institutional separate account assets under management totaled $12.2 billion at October 31, 2007.

High-net-worth Separate Accounts
We offer high-net-worth and family office clients personalized investment counseling services through EVIC and our majority-owned affiliates. Private investment counselors assist our clients in establishing long-term financial programs and implementing strategies for achieving them. In fiscal 2004, we acquired the management contracts of Deutsche Bank’s private investment counsel group in Boston and hired many of its investment professionals. In fiscal 2005, we acquired the management contracts of Weston Asset Management and in fiscal 2006 we acquired the management contracts of Voyageur Asset Management (MA) Inc.

In fiscal 2007, Parametric Portfolio Associates formed Parametric Risk Advisors to extend Parametric Portfolio Associates’ offerings for the wealth management market to include investment programs utilizing equity and equity index options and other derivatives.

High-net-worth assets totaled $12.6 billion at October 31, 2007.

Retail Managed Accounts
We have developed our retail managed accounts business by capitalizing on the management capabilities of EVM, Atlanta Capital, Fox Asset Management, Parametric Portfolio Associates and strategic partners and leveraging the strengths of our retail marketing organization and our relationships with major distributors. We now participate in more than 50 retail managed account broker/dealer programs and continue to expand our product offerings in these programs across key platforms. In October 2007, we combined the functions of our former retail separately managed accounts and alternative investments marketing units into a newly formed Wealth Management Solutions Group. In conjunction with our field sales representatives, this group provides marketing and service to support our sophisticated wealth management offerings. Retail managed account assets totaled $14.8 billion at October 31, 2007.

Investment Management and Administrative Activities

Our wholly owned subsidiaries EVM and BMR are investment advisers for all but six of the Eaton Vance funds. Lloyd George Management (“LGM”), an independent investment management company based in Hong Kong in which we own a 20 percent equity position, is the investment adviser for four of our emerging market equity funds, Eaton Vance Asian Small Companies Fund, Eaton Vance Emerging Markets Fund, Eaton Vance Greater China Growth Fund and Eaton Vance Greater India Fund. OrbiMed Advisors LLC (“OrbiMed”), an independent investment management company based in New York, is the investment adviser for Eaton Vance Worldwide Health Sciences Fund and Eaton Vance Variable Trust Worldwide Health Sciences Fund. Certain Eaton Vance funds use investment sub-advisers under agreements between the adviser and the sub-adviser approved by the fund trustees. Eagle Global Advisors L.L.C., an independent investment management company based in Houston, Texas, acts as a sub-adviser to Eaton Vance Tax-Managed International Equity Fund, Eaton Vance International Equity Fund and Eaton Vance Global Growth Fund. Rampart Investment Management Company, Inc., a Boston-based independent investment manager, acts as an options program sub-adviser for Eaton Vance Enhanced Equity Income Fund, Eaton Vance Enhanced Equity Income Fund II, Eaton Vance Tax-Managed Buy-Write Income Fund, Eaton Vance Tax-Managed Buy-Write Opportunities Fund, Eaton Vance Tax-Managed Global Buy-Write Opportunities Fund, Eaton Vance Tax-Managed Diversified Equity Income Fund, Eaton Vance Tax-Managed Global Diversified Equity Income Fund, and Eaton Vance Risk-Managed Diversified Equity Income Fund. Atlanta Capital, Fox Asset Management and Parametric Portfolio Associates also act as sub-advisers to EVM and BMR for ten funds.

EVM provides administrative services, including personnel and facilities, necessary for the operation of all Eaton Vance funds. These services are provided either through a management agreement with the funds that also includes investment advisory services, or through a separate administrative services agreement with the funds, as discussed below.

For funds that are registered under the Investment Company Act of 1940 (“1940 Act”) (“Registered Funds”), a majority of the independent trustees (i.e., those unaffiliated with us or any adviser controlled by us and deemed “non-interested” under the 1940 Act) must review and approve the investment advisory agreements annually. The fund trustees generally may terminate these agreements upon 30 to 60 days’ notice without penalty. Shareholders of Registered Funds must approve any material amendments to the investment advisory agreements.

Investment counselors and separate account portfolio managers employed by our wholly owned and majority owned subsidiaries make investment decisions for the separate accounts we manage. Investment counselors and separate account portfolio managers generally use the same research information as fund portfolio managers, but tailor investment decisions to the needs of particular clients. We receive investment advisory fees for separate accounts quarterly, based on the value of the assets managed on a particular date, such as the first or last calendar day of a quarter, or, in some instances, on the average assets for the period. These fees generally range from 10 to 100 basis points annually of assets under management and are generally terminable upon 30 to 60 days’ notice without penalty.

The following table shows investment advisory and administration fees earned for the past three years ended October 31, 2007:

	Investment Advisory and Administration Fees Year Ended October 31,
(in thousands)	2007		2006		2005
Investment advisory fees —
Funds ⁽¹⁾	$	622,147	$	466,122	$	391,245
Separate accounts ⁽¹⁾		107,929		92,708		83,308
Administration fees — funds		43,536		35,802		28,532
Total	$	773,612	$	594,632	$	503,085

⁽¹⁾

Certain amounts from prior years have been reclassified to conform to the current year presentation. See footnote 1 in Item 8 for further discussion of this change.

Investment Management Agreements and Distribution Plans

The Eaton Vance funds have entered into agreements with EVM or BMR for investment advisory and/or administrative services. The agreements are of three types: investment advisory agreements, administrative services agreements and management agreements, which may provide for both advisory and administrative services. Although the specifics of these agreements vary, the basic terms are similar. Pursuant to the advisory agreements, EVM or BMR provides overall investment management services to each internally advised fund, subject, in the case of Registered Funds, to the supervision of the fund’s board of trustees in accordance with the fund’s investment objectives and policies. Our investment advisory agreements with the funds provide for fees ranging from 10 to 100 basis points of average assets annually. Atlanta Capital, Fox Asset Management, Parametric Portfolio Associates or an unaffiliated advisory firm acts as a sub-adviser to EVM and BMR for certain funds.

EVM provides administrative services to all Eaton Vance funds, including those advised by LGM and OrbiMed. As administrator, EVM is responsible for managing the business affairs of the funds, subject to the oversight of each fund’s board of trustees. Administrative services include recordkeeping, preparing and filing documents required to comply with federal and state securities laws, legal, fund administration and compliance services, supervising the activities of the funds’ custodians and transfer agents, providing assistance in connection with the funds’ shareholder meetings and other administrative services, including providing office space and office facilities, equipment and personnel that may be necessary for managing and administering the business affairs of the funds. For the services provided under the agreements, certain funds

pay EVM a monthly fee calculated at an annual rate of up to 25 basis points of average daily net assets. Each agreement remains in effect indefinitely, subject, in the case of Registered Funds, to annual approval by the fund’s board of trustees.

In addition, certain funds have adopted distribution plans, as permitted by the 1940 Act, which provide for payment of ongoing distribution fees (so-called “12b-1 fees”) for the sale and distribution of shares, and service fees for personal and/or shareholder account services. Distribution fees reimburse us for sales commissions paid to retail distribution firms and for distribution services provided. Each distribution plan and distribution agreement with EVD for the Registered Funds is initially approved and its subsequent continuance must be approved annually by the board of trustees of the respective funds, including a majority of the independent trustees.

Each fund generally bears all expenses associated with its operation and the issuance and redemption or repurchase of its securities, except for the compensation of trustees and officers of the fund who are employed by us. Under some circumstances, particularly in connection with the introduction of new funds, EVM or BMR may waive a portion of its management fee and/or pay some expenses of the fund.

Either EVM, BMR, EVIC, Atlanta Capital, Fox Asset Management, Parametric Portfolio Associates or Parametric Risk Advisors has entered into an investment advisory agreement for each separately managed account and retail managed account program, which sets forth the account’s investment objectives and fee schedule, and provides for management of assets in the account in accordance with the stated investment objectives. Our separate account portfolio managers may assist clients in formulating investment strategies.

EVTC is the trustee for each collective investment trust that is maintained by it and is responsible for designing and implementing the trust’s investment program, including day-to-day management of the trust’s investment portfolio. As trustee, EVTC also provides certain administrative and accounting services to the trust. For services provided under each trust’s declaration of trust, EVTC receives a monthly fee calculated at an annual rate of up to 65 basis points of average daily net assets of the trust.

EVM has entered into an investment advisory and administrative agreement with The U.S. Charitable Gift Trust. In addition, the Trust and its Pooled Income Funds have entered into distribution agreements with EVD that provide for reimbursement of the costs of fundraising and servicing donor accounts.

Marketing and Distribution of Fund Shares

We market and distribute shares of Eaton Vance funds through EVD. EVD sells fund shares through a network of financial intermediaries, including national and regional broker/dealers, banks, insurance companies and financial planning firms. Although the firms in our retail distribution network have each entered into selling agreements with EVD, these agreements (which generally are terminable by either party) do not legally obligate the firms to sell any specific amount of our investment products. For the 2007, 2006 and 2005 fiscal years, the five dealer firms responsible for the largest volume of open-end fund sales accounted for approximately 37 percent, 35 percent and 34 percent, respectively, of our open-end fund sales volume. EVD currently maintains a sales force of more than 140 external and internal wholesalers and other marketing professionals. External and internal wholesalers work closely with investment advisers in the retail distribution network to assist in marketing Eaton Vance funds.

EVD currently sells Eaton Vance mutual funds under four primary pricing structures: front-end load commission (“Class A”); spread-load commission (“Class B”); level-load commission (“Class C”); and institutional no-load (“Class I”). For Class A shares, the shareholder may be required to pay a sales charge to the selling broker-dealer of up to four percent and an underwriting commission to EVD of up to 75 basis points of the dollar value of the shares sold. Under certain conditions, we waive the sales load on Class A shares and the shares are sold at net asset value. EVD generally receives (and then pays to authorized firms after one year) distribution and service fees of up to 25 basis points of average net assets annually, and in the case of certain funds, also may receive and pay to authorized firms a distribution fee not to exceed 50 basis

points annually of average daily net assets. In recent years, a growing percentage of the Company’s sales of Class A shares have been made on a load-waived basis through various fee-based programs. EVD does not receive underwriting commissions on such sales.

Class B shares are offered at net asset value, with EVD paying a commission to the dealer at the time of sale from its own funds, which may be borrowed. Such payments are capitalized and amortized over the period during which the shareholder is subject to a contingent deferred sales charge, which does not exceed six years. EVD recovers the dealer commissions paid on behalf of the shareholder through distribution plan payments limited to an annual rate of 75 basis points of the average net assets of the fund or class of shares in accordance with a distribution plan adopted by the fund pursuant to Rule 12b-1 under the 1940 Act. The SEC has taken the position that Rule 12b-1 would not permit a fund to continue making compensation payments to EVD after termination of the plan and that any continuance of such payments may subject the fund to legal action. Distribution plans are terminable at any time without notice or penalty. In addition, EVD receives (and then pays to authorized firms after one year) a service fee not to exceed 25 basis points annually of average net assets. Class B shares automatically convert to Class A shares after eight years of ownership.

For Class C shares, the shareholder pays no front-end commissions and no contingent deferred sales charges on redemptions after the first year. EVD pays a commission and the first year’s service fees to the dealer at the time of sale. The fund makes monthly distribution plan and service fee payments to EVD similar to those for Class B shares, at an annual rate up to 75 basis points and 25 basis points, respectively, of average net assets of the Class. EVD pays the distribution and service fee to the dealer after one year.

Class I shares are offered to certain types of investors at net asset value and are not subject to any sales charges, underwriter commissions, distribution fees or service fees. For Class I shares, a minimum investment of $250,000 or higher is normally required.

From time to time we sponsor unregistered equity funds that are privately placed by EVD, as placement agent, and by various sub-agents to whom EVD and the subscribing shareholders make sales commission payments. The privately placed equity funds are managed by EVM and BMR.

EVM and BMR also manage the Eaton Vance Emerald Funds, a family of funds for non-U.S. investors. The Emerald Funds are Undertakings for Collective Investments in Transferable Securities (“UCITS”) funds domiciled in Ireland and are sold by EVMI through certain dealer firms to investors who are citizens of member nations of the European Union and other countries. We earn distribution, administration and advisory fees directly or indirectly from the Emerald Funds.

Reference is made to Note 17 of the Notes to Consolidated Financial Statements contained in Item 8 of this document for a description of the major customers that provided over 10 percent of our total revenue.

Regulation

EVM, BMR, EVIC, Atlanta Capital, Fox Asset Management, Parametric Portfolio Associates and Parametric Risk Advisors are each registered with the SEC under the Advisers Act. The Advisers Act imposes numerous obligations on registered investment advisers, including fiduciary duties, recordkeeping requirements, operational requirements and disclosure obligations. Most Eaton Vance funds are registered with the SEC under the 1940 Act. Except for privately offered funds exempt from registration, each U.S. fund is also required to make notice filings with all states where it is offered for sale. Virtually all aspects of our investment management business are subject to various federal and state laws and regulations. These laws and regulations are primarily intended to benefit shareholders of the funds and separate account clients and generally grant supervisory agencies and bodies broad administrative powers, including the power to limit or restrict us from carrying on our investment management business in the event we fail to comply with such laws and regulations. In such event, the possible sanctions that may be imposed include the suspension of individual employees, limitations on EVM, BMR, EVIC, Atlanta Capital, Fox Asset Management,

Parametric Portfolio Associates or Parametric Risk Advisors engaging in the investment management business for specified periods of time, the revocation of any such company’s registration as an investment adviser, and other censures or fines.

EVD is registered as a broker/dealer under the Securities Exchange Act of 1934 and is subject to regulation by the Financial Industry Reporting Authority (“FINRA”), the SEC and other federal and state agencies. EVD is subject to the SEC’s net capital rule designed to enforce minimum standards regarding the general financial condition and liquidity of broker/dealers. Under certain circumstances, this rule may limit our ability to make withdrawals of capital and receive dividends from EVD. EVD’s regulatory net capital consistently exceeded minimum net capital requirements during fiscal 2007. The securities industry is one of the most highly regulated in the United States, and failure to comply with related laws and regulations can result in the revocation of broker/dealer licenses, the imposition of censures or fines and the suspension or expulsion from the securities business of a firm, its officers or employees.

EVMI has the permission of the Financial Services Authority (“FSA”) to conduct a regulated business in the United Kingdom. EVMI’s primary business purpose is to distribute our investment products in Europe and certain other international markets. Under the Financial Services and Markets Act of the United Kingdom, EVMI is subject to certain liquidity and capital requirements. Such requirements may limit our ability to make withdrawals of capital from EVMI. In addition, failure to comply with such requirements could jeopardize EVMI’s approval to conduct business in the United Kingdom. There were no violations by EVMI of the liquidity and capital requirements in fiscal 2007 or prior years.

Our officers, directors and employees may from time to time own securities that are held by one or more of the funds. Our internal policies with respect to individual investments by investment professionals and other employees with access to investment information require prior clearance of most types of transactions and reporting of all securities transactions, and restrict certain transactions to avoid the possibility of conflicts of interest. All employees are required to comply with all prospectus restrictions and limitations on purchases, sales or exchanges of our mutual fund shares and to pre-clear purchases and sales of shares of our exchange-listed closed-end funds.

Competition

The investment management business is a highly competitive global industry and we are subject to substantial competition in each of our principal product categories and distribution channels. There are few barriers to entry for new firms and consolidation within the industry continues to alter the competitive landscape. According to the Investment Company Institute, there were approximately 500 investment managers at the end of calendar 2006 that competed in the U.S. market. We compete with these firms, many of whom have substantially greater resources, on the basis of investment performance, diversity of products, distribution capability, scope and quality of service, and the ability to develop new investment strategies and products to meet the changing needs of investors.

In the retail fund channel, we compete with other mutual fund management, distribution and service companies that distribute investment products through affiliated and unaffiliated sales forces, broker/dealers and direct sales to the public. According to the Investment Company Institute, at the end of calendar 2006 there were more than 8,700 open-end investment companies of varying sizes and investment objectives whose shares were being offered to the public in the United States alone. We rely primarily on intermediaries to distribute our products and continue to pursue sales relationships with all types of intermediaries to broaden our distribution network. A failure to maintain strong relationships with intermediaries who distribute our products in the retail fund channel could have a negative effect on our level of assets under management, revenue and financial condition.

We are also subject to substantial competition in the retail managed account channel from other investment management firms seeking to participate as managers in “wrap-fee” programs. Sponsors of wrap-fee programs limit the number of approved managers within their programs and firms compete based on investment performance to win and maintain slots in these programs.

In the high-net-worth and institutional separate account channels, we compete with other investment management firms based on the breadth of product offerings, investment performance, strength of reputation and the scope and quality of client service.

Employees

On October 31, 2007, we and our majority-owned subsidiaries had 953 full-time and part-time employees. On October 31, 2006, the comparable number was 869.

Available Information

We make available free of charge our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 12(a) and 15(d) of the Exchange Act as soon as reasonably practicable after such filing has been made with the SEC. Reports may be viewed and obtained on our website, www.eatonvance.com, or by calling Investor Relations at 617-482-8260.

The public may read and copy any of the materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE., Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxies and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.

Item 1A. Risk Factors

We are subject to substantial competition in all aspects of our investment management business and there are few barriers to entry. Our funds and separate accounts compete against an increasing number of investment products and services sold to the public by investment management companies, investment dealers, banks, insurance companies and others. Many institutions we compete with have greater financial resources than us. We compete with other providers of investment products on the basis of the products offered, the investment performance of such products, quality of service, fees charged, the level and type of financial intermediary compensation, the manner in which such products are marketed and distributed, reputation and the services provided to investors. In addition, our ability to market investment products is highly dependent on access to the various distribution systems of national and regional securities dealer firms, which generally offer competing affiliated and externally managed investment products that could limit the distribution of our investment products. There can be no assurance that we will be able to retain access to these channels. The inability to have such access could have a material adverse effect on our business. To the extent that existing or potential customers, including securities broker/dealers, decide to invest in or broaden distribution relationships with our competitors, the sales of our products as well as our market share, revenue and net income could decline.

We derive almost all of our revenue from investment advisory and administration fees, distribution income and service fees received from the Eaton Vance funds and separate accounts. As a result, we are dependent upon management contracts, administration contracts, distribution contracts, underwriting contracts or service contracts under which these fees and income are paid. Generally, these contracts are terminable upon 30 to 60 days’ notice without penalty. If any of these contracts are terminated, not renewed, or amended to reduce fees, our financial results could be adversely affected.

Our assets under management, which impact revenue, are subject to significant fluctuations. Our major sources of revenue (i.e., investment advisory, administration, distribution, and service fees) are calculated as percentages of assets under management. A decline in securities prices or the sale of investment products or an increase in fund redemptions or client withdrawals generally would reduce fee income. Financial market declines or adverse changes in interest rates would generally negatively impact the level of our assets under management and consequently our revenue and net income. A recession or other economic or political events could also adversely impact our revenue if it led to a decreased demand for products, a higher redemption rate, or a decline in securities prices. Any decrease in the level of assets under management resulting from price declines, interest rate volatility or uncertainty or other factors could negatively impact our revenue and net income.

Poor investment performance of our products could affect our sales or reduce the amount of assets under management, potentially negatively impacting revenue and net income. Investment performance, along with achieving and maintaining superior distribution and client service, is critical to our success. While strong investment performance could stimulate sales of our investment products, poor investment performance as compared to third-party benchmarks or competitive products could lead to a decrease in sales and stimulate higher redemptions, thereby lowering the amount of assets under management and reducing the investment advisory fees we earn. Past or present performance in the investment products we manage is not indicative of future performance.

Our success depends on key personnel and our financial performance could be negatively affected by the loss of their services. Our success depends upon our ability to attract, retain and motivate qualified portfolio managers, analysts, investment counselors, sales and management personnel and other key professionals including our executive officers. Investment professionals are in high demand, and we face strong competition for qualified personnel. Our key employees do not have employment contracts and may voluntarily terminate their employment at any time. Certain senior executives and directors are subject to our mandatory retirement policy. The loss of the services of key personnel or our failure to attract replacement or additional qualified personnel could negatively affect our financial performance. An increase in compensation made to attract or retain personnel could result in a decrease in net income.

Our expenses are subject to fluctuations that could materially affect our operating results. Our results of operations are dependent on the level of expenses, which can vary significantly. Our expenses may fluctuate as a result of variations in the level of total compensation expense, expenses incurred to support distribution of our investment products, expenses incurred to enhance our infrastructure (including technology and compliance) and impairments of intangible assets or goodwill.

Our reputation could be damaged. We have spent over 80 years building a reputation based on strong investment performance, a high level of integrity and superior client service. Our reputation is extremely important to our success. Any damage to our reputation could result in client withdrawals from funds or separate accounts that are advised by us and ultimately impede our ability to attract and retain key personnel. The loss of either client relationships or key personnel could reduce the amount of assets under management and cause us to suffer a loss in revenue or net income.

We are subject to federal securities laws, state laws regarding securities fraud, other federal and state laws and rules, and regulations of certain regulatory and self-regulatory organizations, including, among others, the SEC, FINRA, the FSA and the New York Stock Exchange. In addition, financial reporting requirements are comprehensive and complex. While we have focused significant attention and resources on the development and implementation of compliance policies, procedures and practices, non-compliance with applicable laws, rules or regulations, either in the United States or abroad, or our inability to adapt to a complex and ever-changing regulatory environment could result in sanctions against us, which could adversely affect our reputation, prospects, revenue, and earnings.

We could be impacted by changes in tax policy due to our tax-managed focus. Changes in U.S. tax policy may affect us to a greater degree than many of our competitors because we emphasize managing funds and separate accounts with an after-tax return objective. We believe an increase in overall tax rates could have a positive impact on our municipal income and tax-managed equity businesses that seek to minimize realized capital gains and/or maximize realized capital losses. An increase in the tax rate on qualified dividends could have a negative impact on our tax-advantaged equity income business. Changes in tax policy could also affect our ability to introduce new privately offered equity funds.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We conduct our principal operations through leased offices located in Boston, Massachusetts. The leased offices of our subsidiaries are in Atlanta, Georgia; Red Bank, New Jersey; Seattle, Washington; Westport, Connecticut; and London, England. In September 2006, we signed a long-term lease to move our corporate headquarters to a new location in Boston. The lease will commence in May 2009. For more information see Note 7 of our Notes to Consolidated Financial Statements included in this Report.

Item 3. Legal Proceedings

As previously disclosed in SEC filings, on June 9, 2004, a lawsuit, captioned In Re Eaton Vance Mutual Funds Fee Litigation (the “Lawsuit”), was filed in the United States District Court for the Southern District of New York (the “Court”), against Eaton Vance Corp., Eaton Vance Management, Boston Management and Research, Eaton Vance, Inc., Eaton Vance Distributors, Inc., Lloyd George Investment Management (Bermuda) Limited, OrbiMed Advisors LLC, Lloyd George Investment Management (B.V.I.) Limited, nine current or past trustees of 81 Eaton Vance funds named as nominal defendants (the “Funds”), and twelve current or past officers and portfolio managers of the Funds. The plaintiffs were seven alleged shareholders of four of the 81 Funds. The Lawsuit, a purported class action, alleged violations of the Investment Company Act of 1940, the Investment Advisers Act of 1940, New York law and the common law, and breaches of fiduciary duties to the Funds and their shareholders.

On July 29, 2005, the Court issued an Opinion and Order dismissing the Lawsuit in its entirety and rejecting the plaintiffs’ request to amend their complaint. On December 6, 2005, the Court issued an Opinion and Order in response to plaintiffs’ motion for reconsideration and motion to file a new amended complaint. The Court adhered to its July Order and denied the motion to amend. Following an appeal by the plaintiffs, the United States Court of Appeals for the second circuit entered into an Order on March 15, 2007 affirming the decision of the District Court and dismissing the appeal. That Order is now final.

Item 4. Submission of Matters to a Vote of Security Holders

On October 24, 2007, the holders of all of the outstanding Voting Common Stock, by unanimous written consent, approved the following matters:

(1) The 2007 Stock Option Plan.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Price Range of Non-Voting Common Stock, Dividend History and Policy

Our Voting Common Stock, $0.00390625 par value, is not publicly traded and was held as of October 31, 2007 by 18 Voting Trustees pursuant to the Voting Trust described in paragraph (A) of Item 12 hereof, which paragraph (A) is incorporated herein by reference. Dividends on our Voting Common Stock are paid quarterly and are equal to the dividends paid on our Non-Voting Common Stock (see below).

Our Non-Voting Common Stock, $0.00390625 par value, is traded on the New York Stock Exchange under the symbol EV. The approximate number of registered holders of record of our Non-Voting Common Stock at October 31, 2007 was 1,600. The high and low common stock prices and dividends per share were as follows:

	Fiscal 2007						Fiscal 2006
	High Price		Low Price		Dividend Per Share		High Price		Low Price		Dividend Per Share
Quarter Ended:
January 31	$	35.05	$	29.55	$	0.12	$	28.83	$	24.15	$	0.10
April 30	$	38.66	$	32.92	$	0.12	$	30.55	$	26.48	$	0.10
July 31	$	47.69	$	37.55	$	0.12	$	28.50	$	23.83	$	0.10
October 31	$	50.03	$	35.16	$	0.15	$	31.32	$	24.13	$	0.12

We currently expect to declare and pay comparable dividends per share on our Voting and Non-Voting Common Stock on a quarterly basis.

The following table sets forth certain information concerning our equity compensation plans at October 31, 2007:

Securities Authorized for Issuance Under Equity Compensation Plans
Plan category	(a) ⁽¹⁾ Number of securities to be issued upon the exercise of outstanding options, warrants and rights		(b) Weighted-average exercise price of outstanding options, warrants and rights		(c) ⁽²⁾ Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders		27,579,000	$	19.99		7,351,000
Equity compensation plans not approved by security holders		—		—		—
Total		27,579,000	$	19.99		7,351,000

⁽¹⁾

The amount appearing under the “Number of securities to be issued upon the exercise of outstanding options, warrants and rights” represents 27,579,000 shares related to the Company’s 1998 Stock Option Plan.

^⁽²⁾

The amount appearing under “Number of securities remaining available for future issuance under equity compensation plans” includes 2,228,000 shares related to the Company’s 1998 Stock Option Plan, 4,000,000 shares related to the Company’s 2007 Stock Option Plan and 1,123,000 shares related to the Company’s Restricted Stock Plan.

Performance Graph

The graph below compares the cumulative total return on our Non-Voting Common Stock for the period from November 1, 2002 through October 31, 2007 to that of the Morningstar Financial Services Sector Index and the Standard & Poor’s 500 Stock Index over the same period. The comparison assumes $100 was invested on October 31, 2002 in our Non-Voting Common Stock and the foregoing indices at the closing price on that day and assumes reinvestments of all dividends paid over the period.

Comparison of Five Year Cumulative Total Return

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The table below sets forth information regarding purchases of our Non-Voting Common Stock on a monthly basis during the fourth quarter of fiscal 2007:

Period		(b) Average Price Paid Per Share
August 1, 2007 through August 31, 2007	865,618	$	40.41	865,618	5,884,129
September 1, 2007 through September 30, 2007	1,730,000	$	38.31	1,730,000	4,154,129
October 1, 2007 through October 31, 2007	3,123,333	$	43.69	3,123,333	7,205,100
Total	5,718,951	$	41.57	5,718,951	7,205,100

⁽¹⁾

We announced a share repurchase program on July 11, 2007, which authorized the repurchase of up to 8,000,000 shares of our Non-Voting Common Stock in the open market and in private transactions in accordance with applicable securities laws. The plan was terminated on October 24, 2007. A total of 6,174,304 shares were repurchased under the plan prior to termination.

We announced a second share repurchase program on October 24, 2007, which authorized the repurchase of up to 8,000,000 shares of our Non-Voting Common Stock in the open market and in private transactions in accordance with applicable securities laws. This repurchase plan is not subject to an expiration date.

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Item 6. Selected Financial Data

The following table contains selected financial data for the last five years. This data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 and our Consolidated Financial Statements and Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Financial Highlights ⁽¹⁾

	For the Years Ended October 31,
(in thousands, except per share data)	2007		2006		2005		2004		2003
Income Statement Data:
Revenue⁽²⁾	$	1,084,100	$	862,194	$	753,175	$	661,813	$	523,133
Net income⁽³⁾		142,811		159,377		138,706		121,962		94,810

Balance Sheet Data:
Total assets	$	966,831	$	668,195	$	702,544	$	743,566	$	658,702
Long-term debt⁽⁴⁾		500,000		—		75,467		74,347		118,736
Shareholders’ equity		229,168		496,485		476,296		464,328		426,511

Per Share Data:
Earning per share before cumulative effect of change in accounting principle:
Basic earnings	$	1.15	$	1.25	$	1.05	$	0.90	$	0.69
Diluted earnings		1.06		1.18		0.99		0.87		0.67
Earnings per share:
Basic earnings		1.15		1.25		1.05		0.90		0.69
Diluted earnings		1.06		1.17		0.99		0.87		0.67
Cash dividends declared		0.51		0.42		0.34		0.28		0.20
Shareholders’ equity		1.94		3.93		3.68		3.48		3.12

⁽¹⁾

In fiscal 2006, the Company adopted SFAS No. 123R, “Share-Based Payment,” using the modified version of retrospective application and adjusted its financial statements for all periods presented on a basis consistent with the pro forma disclosures previously made under SFAS No. 123. Please see Note 8 in Item 8 for further discussion of this change.

⁽²⁾

Certain amounts from prior years have been reclassified to conform to the current year presentation. See Note 1 in Item 8 for further discussion of this change.

⁽³⁾

Net income includes structuring fees of $76.0 million, $1.6 million and $9.3 million in fiscal 2007, 2006 and 2005, respectively, associated with closed-end fund offerings in each of those years. In fiscal 2007, the Company made payments totaling $52.2 million to terminate compensation agreements in respect of certain previously offered closed-end funds.

⁽⁴⁾

In fiscal 2007, the Company offered $500.0 million of 6.5 percent ten-year senior notes. In fiscal 2006, EVM retired its outstanding zero-coupon exchangeable notes. Please see Note 6 in Item 8 for further discussion of these transactions.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Item includes statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding our expectations, intentions or strategies regarding the future. All statements, other than statements of historical facts, included in this Form 10-K regarding our financial position, business strategy and other plans and objectives for future operations are forward-looking statements. Although we believe that the assumptions and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations reflected in such forward-looking statements will prove to have been correct or that we will take any actions that may presently be planned. Certain important factors that could cause actual results to differ materially from our expectations are disclosed in Item 1A, “Risk Factors.” All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by such factors.

General

Our revenue is derived primarily from investment advisory, administration, distribution and service fees received from Eaton Vance funds and investment advisory fees received from separate accounts. Our fees are based primarily on the value of the investment portfolios we manage and fluctuate with changes in the total value and mix of assets under management. Such fees are recognized over the period that we manage these assets. Our major expenses are employee compensation, distribution-related expenses and amortization of deferred sales commissions.

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to deferred sales commissions, goodwill and intangible assets, income taxes, investments, stock-based compensation and litigation. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under current circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Assets Under Management

Assets under management of $161.7 billion on October 31, 2007 were 25 percent higher than the $128.9 billion reported a year earlier. Long-term fund net inflows contributed $19.2 billion to growth in assets under management over the last twelve months, including $10.0 billion of closed-end fund net inflows and $9.2 billion of open-end and private fund net inflows. Retail managed account net inflows contributed $3.7 billion to growth in assets under management, while institutional and high-net-worth acquisitions contributed an additional $0.3 billion. Market price appreciation, reflecting favorable equity markets, contributed $11.9 billion, while a decrease in cash management assets reduced assets under management by $2.1 billion.

Ending Assets Under Management by Investment Category⁽¹⁾

	October 31,
(in billions)	2007		2006		2005		2007 vs. 2006			2006 vs. 2005
Equity assets	$	108.4	$	76.8	$	66.2		41	%		16	%
Fixed income assets		31.9		30.8		23.2		4	%		33	%
Floating-rate bank loan assets		21.4		21.3		19.1		0	%		12	%
Total	$	161.7	$	128.9	$	108.5		25	%		19	%

⁽¹⁾ Includes funds and separate accounts.

Equity assets represented 67 percent of total assets under management on October 31, 2007, compared to 60 percent on October 31, 2006 and 61 percent on October 31, 2005. Assets in equity funds managed for after-tax returns totaled $55.1 billion, $39.1 billion and $34.6 billion on October 31, 2007, 2006 and 2005, respectively. Fixed income assets, including cash management funds, represented 20 percent of total assets under management on October 31, 2007, compared to 24 percent on October 31, 2006 and 21 percent on October 31, 2005. Fixed income assets included $17.7 billion, $14.8 billion and $11.7 billion of tax-exempt municipal bond assets and $1.6 billion, $3.7 billion and $0.7 billion of cash management fund assets on October 31, 2007, 2006 and 2005, respectively. Floating-rate bank loan assets represented 13 percent of total assets under management on October 31, 2007, compared to 16 percent on October 31, 2006 and 18 percent October 31, 2005.

Long-Term Fund and Separate Account Net Flows

	For the Years Ended October 31,								2007 vs.			2006 vs.
(in billions)	2007		2006			2005			2006			2005
Long-term funds:
Closed-end funds	$	10.0	$	0.3		$	5.0			NM	⁽³⁾		–94	%
Open-end funds ⁽¹⁾		7.6		5.6			2.2			36	%		155	%
Private funds		1.6		2.2			1.2			–27	%		83	%
Total long-term fund net inflows		19.2		8.1			8.4			137	%		–4	%
Institutional/HNW⁽²⁾ accounts		—		(2.1	)		(0.6	)		NM			–250	%
Retail managed accounts		3.7		1.4			1.6			164	%		–13	%
Total separate account net inflows (outflows)		3.7		(0.7	)		1.0			NM			–170	%
Total net inflows	$	22.9	$	7.4		$	9.4			209	%		–21	%

⁽¹⁾

Includes net flows of bank loan interval funds.

⁽²⁾

High-net-worth (“HNW”)

⁽³⁾

Not meaningful (“NM”)

Long-term fund net inflows totaled $19.2 billion in fiscal 2007 compared to $8.1 billion in fiscal 2006 and $8.4 billion in fiscal 2005. Closed-end fund offerings contributed significantly to net inflows in fiscal 2007, with $10.0 billion in closed-end fund assets added compared to contributions of $0.3 billion and $5.0 billion in fiscal 2006 and fiscal 2005, respectively. Open-end fund net inflows of $7.6 billion, $5.6 billion and $2.2 billion for fiscal 2007, 2006 and 2005, respectively, reflect gross inflows of $21.1 billion, $15.0 billion and $10.4 billion and redemptions of $13.5 billion, $9.4 billion and $8.2 billion in fiscal 2007, 2006 and 2005, respectively. Private funds, which include privately offered equity and bank loan funds as well as collateralized debt obligation entities, had net inflows of $1.6 billion, $2.2 billion and $1.2 billion in fiscal 2007, 2006 and 2005, respectively.

Separate accounts contributed net inflows of $3.7 billion in fiscal 2007, compared to net outflows of $0.7 billion in fiscal 2006 and net inflows of $1.0 billion fiscal 2005. Retail managed account net inflows increased to $3.7 billion in fiscal 2007 from $1.4 billion and $1.6 billion in fiscal 2006 and 2005, respectively, reflecting strong net sales of Parametric Portfolio Associates’ overlay and tax-efficient core equity products and Eaton Vance Management’s (“EVM’s”) large cap value product. Institutional and high-net-worth gross inflows of $4.4 billion in fiscal 2007 were offset by outflows of $4.4 billion, reflecting primarily withdrawals from certain low-fee institutional relationships at Atlanta Capital. Institutional and high-net-worth net outflows totaled $2.1 billion and $0.6 billion in fiscal 2006 and 2005, respectively.

Cash management fund assets, which are not included in long-term fund net flows because of their short-term characteristics, decreased to $1.6 billion on October 31, 2007 from $3.7 billion on October 31, 2006 and $0.7 billion on October 31, 2005. The decrease in cash management fund assets in fiscal 2007 can be primarily attributed to an increase in short-term treasury fund redemptions by institutional clients. The increase in cash management fund assets in fiscal 2006 can be primarily attributed to investments by institutional clients in our sponsored short-term income funds and the introduction of a cash collateral fund accompanying a securities lending program in which certain of our sponsored funds participate.

The following table summarizes the asset flows by investment category for fiscal years ended October 31, 2007, 2006 and 2005:

Asset Flows

	For the Years Ended October 31,
(in billions)	2007			2006			2005			2007 vs. 2006			2006 vs. 2005
Equity fund assets — beginning	$	53.2		$	45.2		$	36.9			18	%		22	%
Sales/inflows		21.7			7.8			9.7			178	%		–20	%
Redemptions/outflows		(6.9	)		(5.4	)		(4.3	)		28	%		26	%
Exchanges		—			—			—			—			—
Market value change		7.5			5.6			2.9			34	%		93	%
Equity fund assets — ending		75.5			53.2			45.2			42	%		18	%

Fixed income fund assets — beginning		21.5			18.2			17.4			18	%		5	%
Sales/inflows		7.5			5.1			3.2			47	%		59	%
Redemptions/outflows		(3.5	)		(2.2	)		(2.0	)		59	%		10	%
Exchanges		(0.1	)		—			(0.1	)		NM			–100	%
Market value change		(0.8	)		0.4			(0.3	)		NM			NM
Fixed income fund assets — ending		24.6			21.5			18.2			14	%		18	%

Floating-rate bank loan fund assets — beginning		20.0			16.8			15.0			19	%		12	%
Sales/inflows		6.6			7.0			5.2			–6	%		35	%
Redemptions/outflows		(6.2	)		(4.2	)		(3.3	)		48	%		27	%
Exchanges		(0.1	)		(0.1	)		—			0	%		NM
Market value change		0.1			0.5			(0.1	)		–80	%		NM
Floating-rate bank loan fund assets — ending		20.4			20.0			16.8			2	%		19	%

Total long-term fund assets — beginning		94.7			80.2			69.3			18	%		16	%
Sales/inflows		35.8			19.9			18.1			80	%		10	%
Redemptions/outflows		(16.6	)		(11.8	)		(9.6	)		41	%		23	%
Exchanges		(0.2	)		(0.1	)		(0.1	)		100	%		0	%
Market value change		6.8			6.5			2.5			5	%		160	%
Total long-term fund assets — ending		120.5			94.7			80.2			27	%		18	%

Separate accounts — beginning		30.5			27.6			24.4			11	%		13	%
Inflows — HNW and institutional		4.4			2.3			2.9			91	%		–21	%
Outflows — HNW and institutional		(4.4	)		(4.4	)		(3.5	)		0	%		26	%
Inflows — retail managed accounts		6.1			3.6			3.2			69	%		13	%
Outflows — retail managed accounts		(2.4	)		(2.2	)		(1.6	)		9	%		38	%
Market value change		5.1			3.1			2.1			65	%		48	%
Assets acquired		0.3			0.5			0.1			–40	%		400	%
Separate accounts — ending		39.6			30.5			27.6			30	%		11	%

Cash management fund assets — ending		1.6			3.7			0.7			–57	%		429	%
Assets under management — ending	$	161.7		$	128.9		$	108.5			25	%		19	%

Ending Assets Under Management by Asset Class

	October 31,
(in billions)	2007		2006		2005		2007 vs. 2006			2006 vs. 2005
Open-end funds:
Class A ⁽¹⁾	$	35.4	$	27.0	$	18.8		31	%		44	%
Class B ⁽¹⁾		6.0		6.8		7.7		–12	%		–12	%
Class C ⁽¹⁾		10.1		8.4		7.4		20	%		14	%
Class I ⁽¹⁾		3.7		4.5		1.5		–18	%		200	%
Other ⁽²⁾		3.3		2.8		2.6		18	%		8	%
Total open-end funds		58.5		49.5		38.0		18	%		30	%
Private funds ⁽³⁾		30.0		26.4		21.8		14	%		21	%
Closed-end funds		33.6		22.5		21.1		49	%		7	%
Total fund assets		122.1		98.4		80.9		24	%		22	%
HNW and institutional account assets		24.8		21.0		20.5		18	%		2	%
Retail managed account assets		14.8		9.5		7.1		56	%		34	%
Total separate account assets		39.6		30.5		27.6		30	%		11	%
Total	$	161.7	$	128.9	$	108.5		25	%		19	%

⁽¹⁾

Includes bank loan interval funds with similar pricing structures.

⁽²⁾

Includes other classes of Eaton Vance open-end funds and non-Eaton Vance funds subadvised by Atlanta Capital, Fox Asset Management and Parametric Portfolio Associates.

⁽³⁾

Includes privately offered equity and bank loan funds and CDO entities.

We currently sell our sponsored open-end mutual funds under four primary pricing structures: front-end load commission (“Class A”); spread-load commission (“Class B”); level-load commission (“Class C”); and institutional no-load (“Class I”). We waive the sales load on Class A shares under certain circumstances. In such cases, the shares are sold at net asset value.

Fund assets represented 76 percent of total assets under management at October 31, 2007, compared to 76 percent and 75 percent at October 31, 2006 and 2005, respectively. Class A share assets increased to 22 percent of total assets under management at October 31, 2007 from 21 percent and 17 percent at October 31, 2006 and 2005, respectively, while Class B shares dropped to 4 percent at October 31, 2007 from 5 percent and 7 percent at October 31, 2006 and 2005, respectively. The shift from Class B share assets to Class A share assets reflects the overall increasing popularity of Class A shares and the declining popularity of Class B shares in broker/dealer distribution systems. Class C share assets represented 6 percent of total assets under management on October 31, 2007, and 7 percent on both October 31, 2006 and 2005, while Class I share assets represented 2 percent of total assets under management on October 31, 2007, compared to 3 percent on October 31, 2006 and 1 percent on October 31, 2005. Private funds represented 19 percent of total assets under management at October 31, 2007, compared to 20 percent on both October 31, 2006 and 2005. Closed-end funds increased to 21 percent of the Company’s total assets under management on October 31, 2007, up from 17 percent on October 31, 2006 and 19 percent on October 31, 2005.

Separate account assets, including high-net-worth, institutional and retail managed account assets, totaled $39.6 billion at October 31, 2007, up from $30.5 billion and $27.6 billion at October 31, 2006 and 2005, respectively. High-net-worth and institutional account assets increased by 18 percent and 2 percent in fiscal 2007 and 2006, respectively, while retail managed account assets increased by 56 percent and 34 percent in the same periods. Retail managed account assets were positively impacted in both fiscal 2007 and 2006 by strong net sales of Parametric Portfolio Associates’ overlay and tax-efficient core equity products and EVM’s large-cap value product.

The average assets under management presented in the following table represent a monthly average by asset class. This table is intended to provide useful information in the analysis of our asset-based revenue and distribution expenses. With the exception of our separate account investment advisory fees, which are generally calculated as a percentage of either beginning, average or ending quarterly assets, our investment advisory, administration, distribution and service fees are calculated as a percentage of average daily assets.

Average Assets Under Management by Asset Class ⁽¹⁾

	For the Years Ended October 31,
(in billions)	2007		2006		2005		2007 vs. 2006			2006 vs. 2005
Open-end funds:
Class A ⁽²⁾	$	31.8	$	22.7	$	17.2		40	%		32	%
Class B ⁽²⁾		6.4		7.3		8.3		–12	%		–12	%
Class C ⁽²⁾		9.4		7.8		7.3		21	%		7	%
Class I ⁽²⁾		3.0		2.4		1.2		25	%		100	%
Other ⁽³⁾		2.8		2.5		2.3		12	%		9	%
Total open-end funds		53.4		42.7		36.3		25	%		18	%
Private funds ⁽⁴⁾		28.5		23.7		20.9		20	%		13	%
Closed-end funds		29.9		21.8		18.2		37	%		20	%
Total fund assets		111.8		88.2		75.4		27	%		17	%
HNW and institutional account assets		22.2		21.0		20.0		6	%		5	%
Retail managed account assets		12.0		8.2		6.1		46	%		34	%
Total separate account assets		34.2		29.2		26.1		17	%		12	%
Total	$	146.0	$	117.4	$	101.5		24	%		16	%

⁽¹⁾

Assets under management attributable to acquisitions that closed during the relevant periods are included on a weighted average basis for the period from their respective closing dates.

⁽²⁾

Includes bank loan interval funds with similar pricing structures.

⁽³⁾

Includes other classes of Eaton Vance open-end funds and non-Eaton Vance funds subadvised by Atlanta Capital, Fox Asset Management and Parametric Portfolio Associates.

⁽⁴⁾

Includes privately offered equity and bank loan funds and CDO entities.

Results of Operations

We reported net income of $142.8 million, or $1.06 per diluted share, in fiscal 2007 compared to $159.4 million, or $1.17 per diluted share, in fiscal 2006 and $138.7 million, or $0.99 per diluted share, in fiscal 2005. Operating results for fiscal 2007 reflect the payment of $76.0 million in one-time structuring fees and $14.8 million in marketing incentives related to three closed-end funds offered during the fiscal year. These one-time structuring fees and marketing incentives, which are included in distribution expense and compensation expense, respectively, reduced fiscal 2007 earnings by $0.41 per diluted share. Operating results for fiscal 2007 also include payments totaling $52.2 million to Merrill, Lynch, Pierce, Fenner & Smith and A.G. Edwards & Sons, Inc. to terminate compensation agreements in respect of certain of our previously offered closed-end funds under which we were obligated to make payments over time based on the assets of the respective closed-end funds. These one-time termination payments, which are included in distribution expense, reduced diluted earnings for fiscal 2007 by approximately $0.24 per share. Earnings for the fiscal year were also reduced by $3.9 million, or $0.02 per diluted share, by costs associated with the management reorganization of Eaton Vance Distributors, Inc. (“EVD”) announced in October and a loss of $6.7 million, or $0.03 per diluted share, realized on an interest rate lock entered into in connection with the offering of senior notes.

Fiscal 2006 results include the acceleration of non-cash amortization to write off intangible assets of $8.9 million, or $0.04 per diluted share, relating to the termination of certain institutional and high-net-worth asset management contracts at Fox Asset Management, as well as the recognition of $9.8 million in interest expense and the write-off of $1.5 million of deferred financing fees associated with the retirement of EVM’s zero-coupon exchangeable notes in August 2006. The additional interest expense and the write-off of the deferred financing fees reduced fiscal 2006 earnings by $0.06 per diluted share.

In conjunction with the adoption of Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment,” in the first quarter of fiscal 2006, we recognized a cumulative effect of change in accounting principle. In our calculations of stock option expense for the purposes of pro forma disclosure in previous filings, we chose to recognize forfeitures when they occurred rather than estimate them at grant date. Upon adoption of SFAS No. 123R, we were required to recognize the difference between actual forfeitures of awards granted prior to adoption and the calculation of expected forfeitures for these awards as an adjustment to compensation cost. The cumulative effect, net of tax, was $0.6 million.

Results of Operations

	For the Years Ended October 31,
(in thousands, except per share data)	2007			2006			2005			2007 vs. 2006			2006 vs. 2005
Net income	$	142,811		$	159,377		$	138,706			–10	%		15	%
Earnings per share before cumulative effect of change in accounting principle:
Basic	$	1.15		$	1.25		$	1.05			–8	%		19	%
Diluted	$	1.06		$	1.18		$	0.99			–10	%		19	%
Earnings per share:
Basic	$	1.15		$	1.25		$	1.05			–8	%		19	%
Diluted	$	1.06		$	1.17		$	0.99			–9	%		18	%
Operating margin		21	%		31	%		31	%		NM			NM

In evaluating operating performance we consider operating income and net income, which are calculated on a basis consistent with accounting principles generally accepted in the United States of America (“GAAP”), as well as adjusted operating income, an internally derived non-GAAP performance measure. We define adjusted operating income as operating income plus closed-end fund structuring fees and one-time payments, stock-based compensation and any write-off of intangible assets or goodwill. We believe that adjusted operating income is a key indicator of our ongoing profitability and therefore use this measure as the basis for calculating performance-based management incentives. Adjusted operating income is not, and should not be construed to be, a substitute for operating income computed in accordance with GAAP. However, in assessing the performance of the business, our management and the Board of Directors look at adjusted operating income as a measure of underlying performance, since amounts resulting from one-time events (e.g., the offering of a closed-end fund) do not necessarily represent normal results of operations. In addition, when assessing performance, management and the Board look at performance both with and without stock-based compensation.

The following table provides a reconciliation of operating income to adjusted operating income:

	For the Years Ended October 31,
(in thousands)	2007			2006			2005			2007 vs. 2006			2006 vs. 2005
Operating income	$	232,937		$	264,966		$	232,607			–12	%		14	%
Closed-end fund structuring fees		75,998			1,610			9,290			NM			–83	%
Payments to terminate closed-end fund compensation agreements		52,178			—			—			NM			NM
Write-off of intangible assets		—			8,876			—			NM			NM
Stock-based compensation		43,304			36,314			28,655			19	%		27	%
Adjusted operating income	$	404,417		$	311,766		$	270,552			30	%		15	%
Adjusted operating margin		37	%		36	%		36	%

Revenue

Our average effective fee rate (total revenue as a percentage of average assets under management) was 74 basis points in fiscal 2007 compared to 73 basis points in fiscal 2006 and 74 basis points in fiscal 2005.

Revenue

	For the Years Ended October 31,
(in thousands)	2007		2006		2005		2007 vs. 2006			2006 vs. 2005
Investment advisory and administration fees	$	773,612	$	594,632	$	503,085		30	%		18	%
Distribution and underwriter fees ⁽¹⁾		148,369		139,111		138,485		7	%		0	%
Service fees ⁽¹⁾		154,736		124,025		105,202		25	%		18	%
Other revenue		7,383		4,426		6,403		67	%		–31	%
Total revenue	$	1,084,100	$	862,194	$	753,175		26	%		14	%

⁽¹⁾

Certain amounts from prior years have been reclassified to conform to the current year presentation. See footnote 1 in Item 8 for further discussion of this change.

Investment advisory and administration fees
Investment advisory and administration fees are determined by contractual agreements with our sponsored funds and separate accounts and are generally based upon a percentage of the market value of assets under management. Net asset flows and changes in the market value of managed assets affect the amount of managed assets on which investment advisory and administration fees are earned, while shifts in asset mix affect the Company’s average effective fee rate.

The increase in investment advisory and administration fees of 30 percent and 18 percent in fiscal 2007 and 2006, respectively, over the same periods a year earlier can be attributed primarily to an increase in average assets under management, which increased by 24 percent and 16 percent in fiscal 2007 and 2006, respectively, and a modest increase in our average effective investment advisory and administration fee rates. Fund average effective fee rates increased to 59 basis points in fiscal 2007 from 57 basis points and 56 basis points in fiscal 2006 and 2005, respectively. Separately managed account average effective fee rates were 32 basis points in fiscal 2007, 2006 and 2005.

Distribution and underwriter fees
Distribution plan payments, which are made under contractual agreements with our sponsored funds, are calculated as a percentage of average assets under management in specific share classes of our mutual funds, as well as certain private funds. These fees fluctuate with both the level of average assets under management and the relative mix of assets. Underwriter commissions are earned on the sale of shares of our sponsored mutual funds on which investors pay a sales charge at the time of purchase (Class A share sales). Sales charges and underwriter commissions are waived or reduced on sales that exceed specified minimum amounts and on certain categories of sales. Underwriter commissions fluctuate with the level of Class A share sales and the mix of Class A shares offered with and without sales charges.

Distribution plan payments increased 6 percent, or $7.1 million, to $133.3 million in fiscal 2007, reflecting an increase in average Class A, Class C and certain private fund assets subject to distribution fees, partially offset by a decrease in average Class B share assets. Class A share distribution fees increased by 124 percent to $2.3 million, reflecting a 131 percent increase in average Class A share assets that are subject to distribution fees (primarily in funds advised by Lloyd George Management). Class C and certain private fund distribution fees increased by 21 percent and 15 percent to $67.5 million and $13.7 million, respectively, reflecting increases in average assets subject to distribution fees of 20 percent and 12 percent, respectively. Class B share distribution fees decreased by 14 percent to $49.5 million, reflecting a decrease in average Class B share assets under management of 12 percent year-over-year. Underwriter fees and other distribution income increased 17 percent, or $2.2 million, to $15.0 million in fiscal 2007, primarily reflecting an increase of $0.4 million in underwriter fees received on sales of Class A shares and an increase of $1.3 million in contingent deferred sales charges received on certain Class A share redemptions.

Distribution plan payments decreased 4 percent, or $4.8 million, to $126.3 million in fiscal 2006, reflecting a decrease in average Class B share assets subject to distribution fees, partially offset by an increase in average Class A, Class C and certain private fund assets subject to distribution fees. Class B share distribution fees decreased by 13 percent to $57.7 million, reflecting a decrease in average Class B share assets under management of 12 percent. Class A share distribution fees increased by 44 percent to $1.0 million, reflecting a 56 percent increase in average Class A share assets under management subject to distribution fees. Class C and certain private fund distribution fees increased by 5 percent and 14 percent to $55.6 million and $11.9 million, respectively, reflecting increases in average assets subject to distribution fees of 6 percent and 7 percent, respectively. Underwriter fees and other distribution income increased 61 percent, or $4.8 million, to $12.8 million in fiscal 2006, primarily reflecting an increase of $3.3 million in underwriter fees received on sales of Class A shares and an increase of $1.0 million in contingent deferred sales charges received on certain Class A share redemptions.

Service fees
Service plan payments, which are made under contractual agreements with our sponsored funds, are calculated as a percent of average assets under management in specific share classes of our mutual funds (principally Classes A, B and C) as well as certain private funds. Service fees represent payments made by sponsored funds to EVD as principal underwriter for service and/or the maintenance of shareholder accounts.

Service fee revenue increased by 25 percent in fiscal 2007, primarily reflecting a 23 percent increase in average assets under management in Class A, B, and C shares and private funds that pay service fees. Service fee revenue increased by 18 percent in fiscal 2006, reflecting a 15 percent increase in average Class A, B, C and certain private fund assets under management.

Other revenue
Other revenue, which consists primarily of shareholder service fees, miscellaneous dealer income, custody fees, and investment income earned by consolidated funds, increased by 67 percent in fiscal 2007. The increase in other revenue in fiscal 2007 can be attributed primarily to realized and unrealized gains and losses on securities classified as trading. The 31 percent decrease in other revenue in fiscal 2006 can be attributed primarily to a decrease in investment income related to Eaton Vance Institutional Short Term Income Fund and Eaton Vance Institutional Short Term Treasury Fund, which we stopped consolidating in April 2005 and April 2006, respectively. Other revenue for fiscal 2007, 2006 and 2005 includes $1.5 million, $1.2 million and $2.2 million, respectively, of investment income related to consolidated funds and certain limited partnerships for the periods during which they were consolidated.

Expenses

Operating expenses increased by 43 percent in fiscal 2007, primarily reflecting increases in compensation and distribution expense driven by the offering of $10.0 billion in new closed-end funds in fiscal 2007, current year payments to terminate certain closed-end fund compensation agreements, an increase in adjusted operating income-based incentives driven by increased profitability, an increase in asset-based distribution expenses driven by an increase in average assets under management and an increase in other operating expenses as described below. Operating expenses increased by 15 percent in fiscal 2006, primarily reflecting increases in stock-based compensation associated with the implementation of SFAS No. 123R, increases in asset-based distribution expenses associated with an increase in average assets under management and increases in fund and other operating expenses as described below.

Expenses

	For the Years Ended October 31,
(in thousands)	2007		2006		2005		2007 vs. 2006			2006 vs. 2005
Compensation of officers and employees:
Cash compensation	$	273,659	$	208,306	$	177,008		31	%		18	%
Stock-based compensation		43,304		36,314		28,655		19	%		27	%
Total compensation of officers and employees		316,963		244,620		205,663		30	%		19	%
Distribution expense ⁽¹⁾		253,344		114,052		101,661		122	%		12	%
Service fee expense ⁽¹⁾		121,748		98,262		87,983		24	%		12	%
Amortization of deferred sales commissions		55,060		52,048		63,535		6	%		–18	%
Fund expenses		19,974		16,589		12,019		20	%		38	%
Other expenses		84,074		71,657		49,707		17	%		44	%
Total expenses	$	851,163	$	597,228	$	520,568		43	%		15	%

⁽¹⁾

Certain amounts from prior years have been reclassified to conform to the current year presentation. See footnote 1 in Item 8 for further discussion of this change.

Compensation of officers and employees
Compensation expense increased by 30 percent in fiscal 2007, reflecting increases in both cash and stock-based compensation expense. The increase in cash compensation expense of 31 percent, or $65.4 million, can be primarily attributed to $14.8 million in closed-end fund incentive compensation paid; an increase in other sales incentives of $10.0 million, reflecting the increase in open-end fund and retail managed account sales; an increase in base compensation, employee benefits and payroll taxes of 14 percent, or $14.0 million, reflecting an 11 percent increase in average headcount; an increase in severance costs of $3.9 million associated with the reorganization of EVD in October 2007; and an increase in adjusted operating income-based incentives of 36 percent or, $23.5 million, primarily reflecting a 30 percent increase in adjusted

operating income. The increase in headcount in fiscal 2007 reflects additions to our investment management, marketing and operations teams. Stock-based compensation increased by 19 percent or $7.0 million, reflecting an 11 percent increase in average headcount and the acceleration of the recognition of stock-based compensation expense associated with option grants made to retirement-eligible employees.

Compensation expense increased by 19 percent in fiscal 2006 reflecting an 18 percent, or $31.3 million, increase in cash compensation expense and a 27 percent, or $7.7 million, increase in stock-based compensation expense. The increase in cash compensation expense can be primarily attributed to an increase in base compensation, employee benefits and income taxes of 19 percent, or $12.6 million, reflecting a 15 percent increase in average headcount and an increase in adjusted operating income-based incentives of 29 percent, or $14.7 million, reflecting in part a 15 percent increase in adjusted operating income. Stock-based compensation increased by 27 percent, or $7.7 million, reflecting in part a 15 percent increase in average headcount and the acceleration of the recognition of stock-based compensation associated with option grants made to retirement-eligible employees.

Our retirement policy provides that an employee is eligible for retirement at age 65, or for early retirement when the employee reaches age 55 and has a combined age plus years of service of at least 75 years or with our consent. Because many of our outstanding stock options allow for nonforfeiture of options upon retirement, the adoption of SFAS No. 123R on November 1, 2005 resulted in the immediate recognition of compensation expense at grant date for all awards granted to retirement-eligible employees on or after the adoption of SFAS No. 123R. For awards granted to employees approaching retirement eligibility, the adoption of SFAS No. 123R resulted in compensation expense on a straight-line basis over the period from the grant date through the retirement eligibility date. Stock-based compensation expense for employees who will not become retirement eligible during the vesting period of the options (five years) is recognized on a straight-line basis. Prior to the implementation of SFAS No. 123R, and consistent with SFAS No. 123, it had been our policy to recognize all stock-based compensation expense over the vesting period without regard to retirement eligibility.

The accelerated recognition of compensation cost for employees who are retirement-eligible or are nearing retirement eligibility under our retirement policy is applicable for all grants made on or after our adoption of SAFS No. 123R (November 1, 2005). The accelerated recognition of compensation expense associated with stock option grants to retirement-eligible employees in the quarter when the options are granted (the first quarter of each fiscal year) reduces the associated stock-based compensation expense recognized in subsequent quarters.

Distribution expense
Distribution expense consists primarily of ongoing payments made to distribution partners pursuant to third-party distribution arrangements for certain Class C share and closed-end fund assets, calculated as a percentage of average assets under management, commissions paid to broker/dealers on the sale of Class A shares at net asset value, structuring fees paid on new closed-end fund offerings and other marketing expenses, including marketing expenses associated with revenue sharing arrangements with our distribution partners.

Distribution expense increased by 122 percent, or $139.3 million, in fiscal 2007, primarily reflecting the payment of $76.0 million in one-time structuring fees associated with the offering of three closed-end funds: Eaton Vance Tax-Managed Diversified Equity Fund in the first quarter of fiscal 2007, Eaton Vance Tax-Managed Global Diversified Equity Income Fund in the second quarter of fiscal 2007, and Eaton Vance Risk-Managed Diversified Equity Income Fund in the third quarter of fiscal 2007. Distribution expense for fiscal 2007 also includes $52.2 million in payments made to Merrill Lynch, Pierce, Fenner & Smith and A.G. Edwards & Sons, Inc. to terminate certain closed-end fund compensation agreements under which we were obligated to make recurring payments over time based on the assets of the respective closed-end funds. Class C distribution fees increased by $6.2 million to $46.1 million in fiscal

2007, reflecting the increase in Class C share sales and assets year-over-year. Marketing expenses associated with revenue sharing arrangements with our distribution partners increased by $6.7 million to $26.1 million in fiscal 2007, reflecting the increase in sales and assets under management that are subject to these arrangements.

Distribution expense increased by 12 percent in fiscal 2006, largely as a result of increases in average closed-end fund assets and other assets subject to third-party distribution and revenue-sharing arrangements.

Service fee expense
Service fees we receive from sponsored funds are generally retained in the first year and paid to broker/dealers after the first year pursuant to third-party service arrangements. These fees are calculated as a percent of average assets under management in specific share classes of our mutual funds (principally Classes A, B, and C) as well as certain private funds. Service fee expense increased by 24 percent in fiscal 2007 and 12 percent in fiscal 2006, reflecting increases in average fund assets retained more than one year in funds and share classes that are subject to service fees.

Amortization of deferred sales commissions
Amortization expense is affected by ongoing sales and redemptions of mutual fund Class B shares, Class C shares and certain private funds. Amortization of deferred sales commissions increased by 6 percent in fiscal 2007 due to the increase in Class C share deferred sales commissions, which are amortized over a 12 month period, offset by a decrease in Class B share deferred sales commissions, which are amortized over a period not to exceed six years. Class C share sales increased by 38 percent in fiscal 2007, while Class B share sales declined by 24 percent. As a result of this change in product mix, amortization of deferred sales commissions as a percentage of average deferred sales commission assets increased to 51 percent in fiscal 2007 from 44 percent in fiscal 2006.

Amortization expense in fiscal 2006 decreased by 18 percent, primarily reflecting a decrease in Class B share deferred sales commissions.

Fund expenses
Fund expenses consist primarily of fees paid to subadvisors, compliance costs and other fund-related expenses we incurred. Fund expenses increased by 20 percent in fiscal 2007 and 38 percent in fiscal 2006, primarily reflecting increases in subadvisory fees and other fund-related expenses. The increase in subadvisory fees can be attributed to the increase in average assets under management in funds for which external investment advisors act as subadvisors. The increase in other fund-related expenses can be attributed to an increase in fund expenses for certain institutional funds for which we are paid an all-in management fee and bear the funds’ non-advisory expenses.

Other expenses
Other expenses consist primarily of travel, facilities, information technology, consulting, communications and other corporate expenses, including the amortization of intangible assets.

Other expenses increased by 17 percent, or $12.4 million, in fiscal 2007, primarily reflecting increases in travel expense of $2.8 million, facilities-related expenses of $5.9 million, information technology expense of $8.9 million and consulting expense of $3.2 million offset by a decrease in the amortization of intangible assets of $9.0 million. The increase in travel expense can be attributed primarily to additional travel costs incurred in connection with the three closed-end fund offerings during the fiscal year. The increase in facilities-related expenses can be attributed to an increase in rent and insurance associated with additional office space leased to support the growth in headcount and accelerated amortization of leasehold improvements in anticipation of our move to new corporate headquarters in Boston in fiscal 2009. The increase in information technology expense can be attributed to an increase in outside data services and consulting costs incurred in conjunction with several significant system implementations. The increase in consulting costs can be attributed primarily to increases in recruiting, other general consulting and audit costs

in fiscal 2007. The decrease in the amortization of intangible assets reflects the $8.9 million write-off of intangible assets relating to the termination of certain institutional and high-net-worth asset management contracts at Fox Asset Management in fiscal 2006.

Other expenses increased by 44 percent, or $22.0 million, in fiscal 2006, primarily reflecting increases in facilities-related expenses of $3.7 million, information technology expense of $8.4 million and amortization of intangible assets of $7.7 million. The increase in facilities-related expenses can be attributed to an increase in rent associated with additional office space leased in our existing facilities to support the increase in headcount, additional building expenses associated with the build-out of that office space and related increases in insurance and depreciation. The increase in information technology expense can be attributed to an overall increase in data services and costs incurred in fiscal 2006 in conjunction with several significant system implementations.

The increase in the amortization of intangible assets in fiscal 2006 reflects the write-off of intangible assets relating to the termination of certain institutional and high-net-worth asset management contracts at Fox Asset Management. The write-off, which totaled $8.9 million, or $0.04 per diluted share, was computed by comparing the net present value of the projected future client cash flows to the carrying value of the intangible asset at April 30, 2006.

Other Income and Expense

	For the Years Ended October 31,
(in thousands)	2007			2006			2005			2007 vs. 2006			2006 vs. 2005
Interest income	$	10,511		$	8,033		$	4,354			31	%		84	%
Interest expense		(2,894	)		(12,850	)		(1,464	)		–77	%		778	%
Gains (loss) on investments		(1,943	)		3,667			38			NM			NM
Foreign currency losses		(262	)		(222	)		(32	)		18	%		594	%
Impairment loss on investments		—			(592	)		(2,120	)		NM			–72	%
Total other income (expense)	$	5,412		$	(1,964	)	$	776			NM			NM

Interest income increased by $2.5 million, or 31 percent, in fiscal 2007, primarily reflecting additional interest income earned on proceeds from our $500.0 million senior notes offering that funded on October 2, 2007. Interest income increased by 84 percent in fiscal 2006, primarily due to an increase in short-term interest rates offset by a decrease in interest income earned on our minority equity investments in CDO entities.

Interest expense decreased by $10.0 million, or 77 percent, in fiscal 2007, primarily due to EVM’s redemption of its zero-coupon exchangeable senior notes (“Exchangeable Notes”) in August 2006 offset by interest accrued on our senior notes issued in October.

Interest expense increased by $11.4 million, or 778 percent, in fiscal 2006, primarily due to EVM’s redemption of the Exchangeable Notes in August 2006. Upon receipt of EVM’s notice of its intent to redeem the Exchangeable Notes for cash, noteholders had the option to exchange the Exchangeable Notes into Eaton Vance Corp. Non-Voting Common Stock. EVM ultimately had the right to settle the exchange in cash in lieu of shares. As a result of the redemption and resultant settlement in cash, EVM recognized $9.8 million in additional interest expense representing the premium value of the shares that would have been issued upon exchange in excess of the accreted value of the Exchangeable Notes on the redemption date. EVM recognized an additional $1.5 million in interest expense representing the write-off of related remaining debt issuance costs.

In fiscal 2007, we incurred net realized losses on investments totaling $1.9 million, consisting of a $6.7 million loss on the termination of an interest rate lock offset by net investment gains of $3.0 million realized on the disposition of certain investments in sponsored funds and $1.8 million realized on the liquidation of an investment in a collateralized debt obligation entity, respectively. The interest rate lock was entered into as a hedge against adverse movements in Treasury rates in anticipation of the issuance of senior notes with a maturity in excess of ten years. When we determined that we would not issue senior notes with a maturity in excess of ten years, the interest rate lock was terminated and the net settlement amount was recorded as a loss on investments.

In fiscal 2006, we recognized net gains of $2.2 million upon the disposition of certain investments in sponsored funds and $1.4 million in gains on liquidation of investments in two CDO entities.

In addition, we recognized an impairment loss of $0.6 million in fiscal 2006 related to our investments in two CDO entities. The impairment loss resulted from the effect of tightening credit spreads and higher than forecasted prepayment rates on the entities’ investments.

Income Taxes

Our effective tax rate (income taxes as a percentage of income before income taxes, minority interest, equity in net income of affiliates, and the cumulative effect of a change in accounting principle) was 39 percent in fiscal 2007, 2006 and 2005.

Our policy for accounting for income taxes includes monitoring our business activities and tax policies to ensure that we are in compliance with federal, state and foreign tax laws. In the ordinary course of business, various taxing authorities may not agree with certain tax positions we have taken, or applicable law may not be clear. We periodically review these tax positions and provide for and adjust as necessary estimated liabilities relating to such positions as part of our overall tax provision. There were no significant changes to our overall tax position during fiscal 2007.

Minority Interest

Minority interest increased by 23 percent, 1 percent and 10 percent in fiscal 2007, 2006 and 2005, respectively, primarily due to the increased profitability of majority-owned subsidiaries Atlanta Capital and Parametric Portfolio Associates.

Minority interest is not adjusted for taxes due to the underlying tax status of our consolidated subsidiaries. Atlanta Capital, Fox Asset Management, Parametric Portfolio Associates and Parametric Risk Advisors are limited liability companies that are treated as partnerships for tax purposes. Funds we consolidate are registered investment companies or private funds that are treated as pass-through entities for tax purposes.

Equity in Net Income of Affiliates, Net of Tax

Equity in net income of affiliates, net of tax, at October 31, 2007 reflects our 20 percent minority equity interest in Lloyd George Management and a 7 percent minority equity interest in a private equity partnership. Equity in net income of affiliates, net of tax, decreased by $0.4 million, or 10 percent, in fiscal 2007 primarily due to our sale of certain investments in sponsored mutual funds that were accounted for under the equity method in prior periods, offset by increases in equity in net income of both Lloyd George Management and the private equity partnership. Equity in net income of affiliates, net of tax, increased by $3.1 million, or 253 percent, in fiscal 2006, primarily due to a $2.8 million increase in net income (after tax) attributed to our minority equity investment in Eaton Vance Institutional Short Term Income Fund.

Changes in Financial Condition and Liquidity and Capital Resources

The following table summarizes certain key financial data relating to our liquidity and capital resources on October 31, 2007, 2006 and 2005 and for the years then ended:

Balance Sheet and Cash Flow Data

	October 31,
(in thousands)	2007		2006		2005		2007 vs. 2006			2006 vs. 2005
Balance sheet data:
Cash and cash equivalents	$	434,957	$	206,705	$	146,389		110	%		41	%
Short-term investments		50,183		20,669		127,858		143	%		–84	%
Long-term investments		86,111		73,075		61,766		18	%		18	%
Deferred sales commissions		99,670		112,314		126,113		–11	%		–11	%

Long-term debt		500,000		—		75,467		NM			–100	%
Deferred income taxes		11,740		22,520		29,804		–48	%		–24	%

	For the Years Ended October 31,
(in thousands)	2007			2006			2005			2007 vs. 2006			2006 vs. 2005
Cash flow data:
Operating cash flows	$	266,357		$	262,851		$	104,052			1	%		153	%
Investing cash flows		(75,354	)		(26,197	)		(30,868	)		188	%		–15	%
Financing cash flows		37,196			(176,407	)		(73,856	)		NM			139	%

Our financial condition is highly liquid, with a significant percentage of our assets represented by cash and cash equivalents. Short-term investments include investments in our sponsored cash management funds. Long-term investments consist principally of investments in certain of our sponsored mutual funds, investments in affiliates and investments in CDO entities.

We had significant demands on our cash flow during fiscal 2007. Cash outflows included $52.2 million in one-time payments made by the Company to terminate certain closed-end fund compensation agreements, $76.0 million in structuring fee payments related to new closed-end fund offerings and $14.8 million in sales-based incentives related to new closed-end fund offerings.

Deferred sales commissions paid to broker/dealers in connection with the distribution of the Company’s Class B and Class C fund shares, as well as certain private funds, decreased by 11 percent in both fiscal 2007 and fiscal 2006, primarily reflecting the ongoing decline in Class B share sales and assets. Deferred income taxes, which relate principally to the deferred tax liability for deferred sales commissions offset by the deferred tax benefit for stock-based compensation, decreased by 48 percent in fiscal 2007 and 24 percent in fiscal 2006. Upon adoption of SFAS No. 123R in the first quarter of fiscal 2006, the Company established a deferred tax asset of $21.3 million.

In October 2007, we issued $500.0 million in aggregate principal amount of 6.5% ten-year senior notes due 2017.

The following table details our future contractual obligations as of October 31, 2007:

Contractual Obligations	Payments due
(in millions)	Total		Less than 1 Year		1–3 Years		4–5 Years		After 5 Years
Operating leases — facilities and equipment	$	198.9	$	10.4	$	25.4	$	26.1	$	137.0
Senior notes		500.0		—		—		—		500.0
Investment in private equity partnership		7.4		—		7.4		—		—
Total	$	706.3	$	10.4	$	32.8	$	26.1	$	637.0

In July 2006, we committed to invest $15.0 million in a private equity partnership that invests in companies in the financial services industry. As of October 31, 2007, we had invested $7.6 million of the total $15.0 million of committed capital.

In September 2006, we signed a long-term lease to move the Company’s corporate headquarters to a new location in Boston. The lease will commence in May 2009.

Excluded from the table above are future payments to be made by us to purchase the interests retained by minority investors in Atlanta Capital, Fox Asset Management, Parametric Portfolio Associates and Parmetric Risk Advisors. The acquisition agreements provide the minority shareholders the right to require us to purchase these retained interests at specific intervals over time. These agreements also provide us with the right to require the minority shareholders to sell their retained equity interests to us at specific intervals over time, as well as upon the occurrence of certain events such as death and permanent disability. These purchases and sales can occur at varying times in varying amounts over the next six years, and will generally be based upon a multiple of earnings before interest and taxes, a measure that is intended to represent fair market value. Although the timing and amounts of these purchases cannot be predicted with certainty, we anticipate that the purchase of minority interests in our consolidated subsidiaries may be a significant use of cash in future years.

In the third quarter of fiscal 2007, minority shareholders of Parametric Portfolio Associates exercised a put option whereby units representing a 2 percent capital interest in Parametric Portfolio Associates were sold to us for $6.1 million, increasing our capital ownership interest from 82 to 84 percent. In addition, we purchased a 3 percent interest in Atlanta Capital from minority interest holders for $2.9 million upon exercise of a minority investor put option in the third quarter of fiscal 2007, increasing the Company’s ownership interest from 77 percent to 80 percent. The additional purchase price in each case was allocated between intangible assets and goodwill based on an independent valuation. Minority interest decreased by $0.3 million as a result of these transactions.

In April 2007, Parametric Portfolio Associates announced the signing of a definitive agreement with Managed Risk Advisors, LLC, an investment management and derivatives investment advisory firm based in Westport, Connecticut, to merge with Parametric Risk Advisors LLC, a newly formed Parametric Portfolio Associates’ affiliate. The transaction was completed on May 1, 2007. Parametric Risk Advisors is owned 60 percent by its principals and 40 percent by Parametric Portfolio Associates. Pursuant to the acquisition agreements, Parametric Portfolio Associates will have the right to require the other shareholders in Parametric Risk Advisors to sell their equity interests to Parametric Portfolio Associates at specific intervals over time at a price based upon a multiple of earnings before interest and taxes, a measure that is intended to represent fair market value.

In fiscal 2006, the Company exercised a call option and purchased an additional 2 percent interest in Parametric Portfolio Associates from minority interest holders for $4.0 million, increasing the Company’s capital ownership interest from 80 percent to 82 percent. In addition, the Company purchased an additional 7 percent interest in Atlanta Capital from minority interest holders for $7.2 million upon exercise of a minority

investor put option, increasing the Company’s ownership from 70 to 77 percent. The additional purchase price in each case was allocated between intangible assets and goodwill based on independent valuations. Minority interest decreased by $0.3 million as a result of these transactions.

On July 28, 2006, EVM announced its intention to redeem for cash all of its outstanding Exchangeable Notes ($110.9 million principal amount at maturity with an accreted value on redemption date of $76.4 million). Upon receipt of EVM’s notice of its intent to redeem, holders of the Exchangeable Notes had the option to exchange the Exchangeable Notes into Eaton Vance Corp. Non-Voting Common Stock at a rate of 28.7314 shares of common stock per $1,000 principal amount at maturity. All but $6,000 principal amount at maturity of the Exchangeable Notes were tendered for exchange into the Company’s Non-Voting Common Stock. EVM elected to pay the holders cash in lieu of delivering stock as provided for in the indenture agreement governing the Exchangeable Notes. As a result, EVM paid $86.2 million to holders who presented their Exchangeable Notes for exchange. The remaining Exchangeable Notes with a principal amount at maturity of $6,000 were redeemed by the Company for cash in the aggregate amount of $4,130.

The redemption of the Exchangeable Notes described above resulted in the elimination of all of the Company’s then-outstanding long-term debt and reduced its diluted shares outstanding by 3.2 million shares. The $9.8 million premium value of the shares in excess of the accreted value of the Exchangeable Notes was recorded as interest expense, as was $1.5 million of related debt issuance costs that was written off. Approximately $2.6 million of the premium value was not deductible for tax purposes.

We maintain a revolving credit facility with several banks, which expires on August 13, 2012. The facility, which was extended in August 2007, provides that we may borrow up to $200.0 million at LIBOR-based rates of interest that vary depending on the level of usage of the facility and our credit ratings. The agreement contains financial covenants with respect to leverage and interest coverage and requires us to pay an annual commitment fee on any unused portion. On October 31, 2007, we had no outstanding borrowings under our revolving credit facility.

Operating Cash Flows

Our operating cash flows are calculated by adjusting net income to reflect changes in assets and liabilities, deferred sales commissions, stock-based compensation, deferred income taxes and investments classified as trading. Cash provided by operating activities totaled $266.4 million, $262.9 million and $104.1 million in the fiscal years ended October 31, 2007, 2006 and 2005, respectively. The increase in cash provided by operating activities in fiscal 2007 can be attributed primarily to an increase in cash provided by the purchase and sale of trading securities by consolidated mutual funds, which regularly purchase and sell securities. In fiscal 2007, net proceeds received from the purchase and sale of trading securities by our consolidated funds increased cash by $16.0 million. Net cash provided by (used for) the purchase and sale of trading securities totaled $30.6 million and ($68.8) million in fiscal 2006 and 2005. Operating cash flows in 2007 were reduced by $52.2 million in payments made to terminate certain closed-end fund compensation agreements and $76.0 million in structuring fee payments related to the offering of three closed-end funds.

Operating cash flows in 2007 also include the payment of $4.5 million to settle an interest rate lock transaction associated with our ten-year senior note offering. We entered into the interest rate lock to hedge against movement in ten-year Treasury prices between the time at which the decision was made to issue the debt and the pricing of the securities. At the time the debt was issued, we terminated the interest rate lock and settled the transaction in cash. At termination, the interest rate lock was determined to be a fully effective cash flow hedge and the $4.5 million settlement cost was recorded as a component of other comprehensive income. The amount recorded in other comprehensive income will ultimately be amortized over the life of the senior notes and recorded as a component of interest expense.

Capitalized sales commissions paid to financial intermediaries for the distribution of our Class B and Class C fund shares and certain private funds increased by $1.9 million in fiscal 2007, due primarily to a 38 percent increase in Class C share sales. Capitalized sales commissions increased by $6.9 million in fiscal 2006 due primarily to a 23 percent increase in Class C share sales. We anticipate that the payment of capitalized sales commissions will continue to be a significant use of cash in the future.

Investing Cash Flows

Investing activities consist primarily of the purchase of equipment and leasehold improvements, the purchase of equity interests from minority investors in our majority owned subsidiaries, and the purchase and sale of investments in our sponsored mutual funds and other sponsored investment products that we do not consolidate. Cash used for investing activities totaled $75.4 million, $26.2 million and $30.9 million in fiscal 2007, 2006 and 2005, respectively.

In fiscal 2007, additions to equipment and leasehold improvements totaled $12.7 million, compared to $12.7 million in fiscal 2006 and $3.4 million in fiscal 2005. Fiscal 2007 and 2006 additions reflect leasehold improvements made in conjunction with additional office space leased to accommodate the increase in headcount in those years. Investing cash flows in fiscal 2007 also reflect the purchase of an additional 2 percent interest in Parametric Portfolio Associates and an additional 3 percent interest in Atlanta Capital for a total of $9.1 million. These purchases increased our ownership interests in Parametric Portfolio Associates and Atlanta Capital to 84 percent and 80 percent, respectively. Fiscal 2006 and 2005 purchases of additional interests in majority-owned subsidiaries totaled $11.3 million and $0.4 million, respectively. In fiscal 2007, the purchase and sale of available-for-sale investments resulted in a net use of cash totaling $52.9 million. In fiscal 2006 and 2005, the purchase and sale of available-for-sale investments reduced investing cash flows by $0.5 million and $26.6 million, respectively.

Financing Cash Flows

Financing cash flows primarily reflect the issuance and repayment of long-term debt, the issuance and repurchase of our Non-Voting Common Stock, excess tax benefits associated with stock option exercises and the payment of dividends to our shareholders. Financing cash flows also include proceeds from the issuance of capital stock by consolidated investment companies and cash paid to meet redemptions by minority shareholders of these funds. Cash provided by (used for) financing activities totaled $37.2 million, ($176.4) million and ($73.9) million in fiscal 2007, 2006 and 2005.

In fiscal 2007, we repurchased a total of 10.8 million shares of our Non-Voting Common Stock for $442.3 million under our authorized repurchase programs and issued 2.5 million shares of Non-Voting Common Stock in connection with the exercise of stock options and other employee stock purchases for total proceeds of $41.9 million. We have authorization to purchase an additional 7.2 million shares under our current share repurchase authorization and anticipate that future repurchases will continue to be a significant use of cash. Our dividends per share were $0.51 in fiscal 2007, $0.42 in fiscal 2006 and $0.34 in fiscal 2005. We increased our quarterly dividend by 25 percent to $0.15 per share in the fourth quarter of fiscal 2007. We currently expect to continue to declare and pay comparable dividends on our Voting and Non-Voting Common Stock on a quarterly basis.

In October 2007, we issued $500.0 million in aggregate principal amount of 6.5% ten year senior notes due 2017. In conjunction with the senior note offering, we paid approximately $5.2 million in debt offering costs that will be amortized over the life of the notes and recognized as a component of interest expense.

In August 2006, EVM retired in full its then outstanding Exchangeable Notes with an accreted value on redemption date of $76.4 million. We made no long-term debt payments in fiscal 2005.

We believe that proceeds from our $500.0 million senior note offering, cash provided by current operating activities and borrowings available under our $200.0 million credit facility will provide us with sufficient liquidity to meet our short-term and long-term operating needs.

Off-Balance Sheet Arrangements

We do not invest in any off-balance sheet vehicles that provide financing, liquidity, market or credit risk support or engage in any leasing activities that expose us to any liability that is not reflected in the Consolidated Financial Statements.

Critical Accounting Policies

We believe the following critical accounting policies, among others, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. Actual results may differ from these estimates.

Deferred Sales Commissions

Sales commissions paid to broker/dealers in connection with the sale of certain classes of shares of open-end funds and private funds are generally capitalized and amortized over the period during which redemptions by the purchasing shareholder are subject to a contingent deferred sales charge, which does not exceed six years from purchase. Distribution plan payments received from these funds are recorded in revenue as earned. Contingent deferred sales charges and early withdrawal charges received from redeeming shareholders of these funds are generally applied to reduce the Company’s unamortized deferred sales commission assets. Should we lose our ability to recover such sales commissions through distribution plan payments and contingent deferred sales charges, the value of these assets would immediately decline, as would future cash flows. We periodically review the recoverability of deferred sales commission assets as events or changes in circumstances indicate that the carrying amount of deferred sales commission assets may not be recoverable and adjust the deferred sales commission assets accordingly.

Goodwill and Intangible Assets

Goodwill represents the excess of the cost of our investment in the net assets of acquired companies over the fair value of the underlying identifiable net assets at the dates of acquisition. We attribute all goodwill associated with the acquisitions of Atlanta Capital, Fox Asset Management and Parametric Portfolio Associates to a single reporting unit. Goodwill is not amortized but is tested at least annually for impairment by comparing the fair value of the reporting unit to its carrying amount, including goodwill. We establish fair value for the purpose of impairment testing using discounted cash flow analyses and appropriate market multiples. In this process, we make assumptions related to projected future earnings and cash flow, market multiples and applicable discount rates. Changes in these estimates could materially affect our impairment conclusion.

Identifiable intangible assets generally represent the cost of client relationships and management contracts acquired. In valuing these assets, we make assumptions regarding useful lives and projected growth rates, and significant judgment is required. In most instances, we engage third party consultants to perform these valuations. We periodically review identifiable intangibles for impairment as events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If the carrying amounts of the assets exceed their respective fair values, additional impairment tests are performed to measure the amount of the impairment loss, if any.

Accounting for Income Taxes

Our effective tax rate reflects the statutory tax rates of the many jurisdictions in which we operate. Significant judgment is required in determining our effective tax rate and in evaluating our tax positions. In the ordinary course of business, many transactions occur for which the ultimate tax outcome is uncertain, and we adjust our income tax provision in the period in which we determine that actual outcomes will likely be different from our estimates. Contingent tax liabilities are established when, despite our belief that the tax return positions are fully supportable, there is the potential that they may be successfully challenged. These contingent tax liabilities, as well as the related interest, are adjusted regularly to reflect changing facts and circumstances. While we have considered future taxable income and ongoing tax planning in assessing our taxes, changes in tax laws may result in a change to our tax position and effective tax rate. The Company classifies any interest or penalties incurred as a component of income tax expense.

Deferred income taxes reflect the expected future tax consequences of temporary differences between the carrying amounts and tax bases of our assets and liabilities. Our deferred taxes relate principally to stock-based compensation expense and capitalized sales commissions paid to broker/dealers. Under IRS regulations, stock-based compensation is deductible for tax purposes at the time the employee recognizes the income (upon vesting of restricted stock, exercise of non-qualified stock option grants and any disqualifying dispositions of incentive stock options). Capitalized sales commission payments are deductible for tax purposes at the time of payment.

As discussed in “Accounting Developments” below, our accounting for income taxes will be impacted by the adoption of FASB Interpretation No. 48, “Accounting for the Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”).

Investments in CDO Entities

We act as collateral or investment manager for a number of CDO entities pursuant to management agreements between us and each CDO entity. At October 31, 2007, combined assets under management in these CDO entities upon which we earn a management fee were approximately $3.3 billion. We had combined investments of $19.0 million in five of these entities on October 31, 2007.

We account for our investments in CDO entities under Emerging Issues Task Force (“EITF”) 99-20, “Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets.” The excess of future cash flows over the initial investment at the date of purchase is recognized as interest income over the life of the investment using the effective yield method. We review cash flow estimates throughout the life of each CDO investment pool to determine whether an impairment of its investments should be recognized. Cash flow estimates are based on the underlying pool of collateral securities and take into account the overall credit quality of the issuers of the collateral securities, the forecasted default rate of the collateral securities and our past experience in managing similar securities. If the updated estimate of future cash flows (taking into account both timing and amounts) is less than the last revised estimate, an impairment loss is recognized based on the excess of the carrying amount of the investment over its fair value. Fair value is determined using current information, notably market yields and projected cash flows based on forecasted default and recovery rates that a market participant would use in determining the current fair value of the interest. Market yields, default rates and recovery rates used in our estimate of fair value vary based on the nature of the investments in the underlying collateral pools. In periods of rising credit default rates and lower debt recovery rates, the fair value, and therefore carrying value, of our investments in these CDO entities may be adversely affected. Our risk of loss in the CDO entities is limited to the $19.0 million carrying value of the investments on our Consolidated Balance Sheet at October 31, 2007.

A CDO entity issues non-recourse debt and equity securities, which are sold in a private offering to institutional and high-net-worth investors. The CDO debt securities issued by the CDO entity are secured by collateral in the form of floating-rate bank loans, high-yield bonds and/or other types of approved securities that the CDO entity purchases. We manage the collateral securities for a fee and, in most cases, are a minority investor in the equity interests of the CDO entity. An equity interest in a CDO entity is subordinated to all other interests in the CDO entity and entitles the investor to receive the residual cash flows, if any, from the CDO entity. As a result, our equity investment in a CDO entity is highly sensitive to changes in the credit quality of the issuers of the collateral securities, including changes in the forecasted default rates and any declines in anticipated recovery rates. Our financial exposure to the CDO entities we manage is limited to our interests in the CDO entities as reflected in our Consolidated Balance Sheet.

Stock-Based Compensation

Stock-based compensation expense reflects the fair value of stock-based awards measured at grant date, is recognized over the relevant service period, and is adjusted each period for anticipated forfeitures. The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model. The Black-Scholes option valuation model incorporates assumptions as to dividend yield, volatility, an appropriate risk-free interest rate and the expected life of the option. Many of these assumptions require management’s judgment. Management must also apply judgment in developing an expectation of awards that may be forfeited. If actual experience differs significantly from these estimates, stock-based compensation expense and our results of operations could be materially affected.

Loss Contingencies

We continually review any investor, employee or vendor complaints and pending or threatened litigation. The likelihood that a loss contingency exists is evaluated under the criteria of SFAS No. 5, “Accounting for Contingencies,” through consultation with legal counsel and a loss contingency is recorded if the contingency is probable and reasonably estimable at the date of the financial statements. There are no losses of this nature that are currently deemed probable and reasonably estimable, and thus none have been recorded in the financial statements included in this report.

Inflation

Our assets are, to a large extent, liquid in nature and therefore we do not believe that inflation has had a material impact on our results of operations. To the extent that inflation or the expectation thereof results in rising interest rates, it may adversely affect our financial condition and results of operations. A substantial decline in the value of fixed-income or equity investments could adversely affect the net asset value of funds and accounts we manage, which in turn would result in a decline in revenue.

Accounting Developments

In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51.” SFAS No. 160 amends ARB No. 51 to establish accounting and reporting standards for noncontrolling interests in subsidiaries and for the deconsolidation of subsidiaries. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest that should be reported as equity in the consolidated financial statements. The provisions of SFAS No. 160 are effective for fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. SFAS No. 160 is effective for the Company’s fiscal year that begins on November 1, 2009. We are currently evaluating the potential impact, if any, on our consolidated financial statements.

In December 2007, the FASB amended SFAS No. 141, “Business Combinations.” SFAS No. 141, as amended, establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The provisions of SFAS No. 141, as amended, are effective for fiscal years beginning on or after December 15, 2008. SFAS No. 141, as amended, is effective for the Company’s fiscal year that begins on November 1, 2009. We are currently evaluating the potential impact, if any, on our consolidated financial statements.

In June 2007, the FASB ratified the consensus reached by the EITF in EITF Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards” (“EITF 06-11”). Under the provisions of EITF 06-11, a realized income tax benefit from dividends or dividend equivalents that are charged to retained earnings and are paid to employees for equity classified non-vested equity shares, non-vested equity share units, and outstanding equity share options should be recognized as an increase to additional paid-in capital. The amount recognized in additional paid-in capital for the realized income tax benefit from dividends on those awards should be included in the pool of excess tax benefits available to absorb tax deficiencies on share-based payment awards. EITF 06-11 should be applied prospectively to the income tax benefits that result from dividends on equity-classified employee share-based payment awards that are declared in fiscal years beginning after December 15, 2007, and interim periods within those fiscal years. EITF 06-11 is effective for the Company’s fiscal year that begins on November 1, 2008. We are currently evaluating the potential impact of EITF 06-11, if any, on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective of the statement is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The provisions of SFAS No. 159 are effective for fiscal years beginning after November 15, 2007. SFAS No. 159 is effective for the Company’s fiscal year that begins on November 1, 2008. We are currently evaluating this standard and its impact, if any, on our consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosure requirements about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements but does not in itself require any new fair value measurements. The provisions of SFAS No. 157 are effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. SFAS No. 157 is effective for the Company’s fiscal year that begins on November 1, 2008. We are currently evaluating this standard and its impact, if any, on our consolidated financial statements.

In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”), to clarify certain aspects of accounting for uncertain tax positions. FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold for tax positions, “more-likely-than-not” (i.e. greater than 50 percent), before being recognized in the financial statements. FIN 48 is effective for fiscal years beginning after December 15, 2006. We will adopt FIN 48 as of November 1, 2007, as required.

FIN 48 provides that interest recognized as a result of the application of FIN 48 may be classified as either income taxes or interest expense. FIN 48 further provides that any penalties recognized as a result of applying FIN 48 may be classified in the financial statements as either income taxes or another expense classification. The classification of these items is based upon the accounting policy election of the company. Our historical accounting policy with respect to interest and penalties recognized for tax uncertainties has been to classify these amounts as income taxes. We will continue this classification upon the adoption of FIN 48.

We are continuing to evaluate the impact of FIN 48 on our financial statements and currently anticipate recognizing a charge to retained earnings of approximately $5.0 million upon adoption. In addition, we anticipate that, upon adoption, our deferred tax assets and income taxes payable will increase by approximately $85.0 million on the Company’s Consolidated Balance Sheet.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

In the normal course of business, our financial position is subject to different types of risk, including market risk. Market risk is the risk that we will incur losses due to adverse changes in equity and bond prices, interest rates, credit risk or currency exchange rates. Management is responsible for identifying, assessing and managing market and other risks.

In evaluating market risk, it is important to note that most of our revenue is based on the market value of assets under management. As noted in “Risk Factors” in Item 1A, declines of financial market values will negatively impact our revenue and net income.

Our primary direct exposure to equity price risk arises from our investments in sponsored equity funds, our equity interest in affiliates and equity securities held by sponsored funds we consolidate. Our investments in sponsored equity funds and equity securities are carried at fair value on our Consolidated Balance Sheets. Equity price risk as it relates to these investments represents the potential future loss of value that would result from a decline in the fair values of the fund shares or underlying equity securities. The following is a summary of the effect that a 10 percent increase or decrease in equity prices would have on our investments subject to equity price fluctuation at October 31, 2007:

(in thousands)	Carrying Value		Carrying Value assuming a 10% increase		Carrying Value assuming a 10% decrease
Trading:
Equity securities	$	14,368	$	15,805	$	12,931
Available-for-sale securities:
Sponsored funds		82,627		90,890		74,364
Investment in affiliates		16,297		17,927		14,667
Total	$	113,292	$	124,622	$	101,962

Our primary direct exposure to interest rate risk arises from our investment in fixed and floating-rate income funds sponsored by us and debt securities held by sponsored funds we consolidate. We considered the negative effect on pre-tax interest income of a 50 basis point (0.50 percent) decline in interest rates as of October 31, 2007. A 50 basis point decline in interest rates is a hypothetical scenario used to demonstrate potential risk and does not represent our management’s view of future market changes. The following is a summary of the effect that a 50 basis point percent (0.50 percent) decline in interest rates would have on our pre-tax net income as of October 31, 2007:

(in thousands)	Carrying Value		Pre-tax interest income impact of a 50 basis point decline in interest rates
Trading:
Debt securities	$	770		$ 4
Available-for-sale securities:
Sponsored funds		2,320		12
Total	$	3,090		$16

From time to time, we seek to offset our exposure to changing interest rates associated with our debt financing. In October 2007, we issued $500.0 million in aggregate principal amount of 6.5 percent ten year senior notes due 2017. In conjunction with the offering, we entered into an interest rate lock intended to hedge against adverse Treasury rate movements between the time at which the decision was made to issue the debt and the pricing of the securities. At the time the debt was issued, we terminated the lock and settled the transaction in cash. At termination, the lock was determined to be a fully effective cash flow hedge and the $4.5 million settlement cost was recorded as a component of other comprehensive income. There can be no assurance that our hedge instruments will meet their overall objective of reducing our interest expense or that we will be successful in obtaining hedging contracts on any future debt offerings.

Our primary direct exposure to credit risk arises from our interests in CDO entities that are included in long-term investments in our Consolidated Balance Sheets. As an investor in a CDO entity, we are entitled to only a residual interest in the CDO entity, making these investments highly sensitive to the default rates of the underlying issuers of the high-yield bonds or floating-rate income instruments held by the CDO entity. Our investments are subject to an impairment loss in the event that the cash flows generated by the collateral securities are not sufficient to allow equity holders to recover their investments. If there is deterioration in the credit quality of the issuers underlying the collateral securities and a corresponding increase in the number of defaults, cash flows generated by the collateral securities may be adversely impacted and we may be unable to recover our investment. Our total investment in interests in CDO entities is approximately $19.0 million at October 31, 2007, which represents our total value at risk with respect to such entities as of October 31, 2007.

We operate primarily in the United States, and accordingly most of our consolidated revenue and associated expenses are denominated in U.S. dollars. We also provide services and earn revenue outside of the United States; therefore, the portion of our revenue and expenses denominated in foreign currencies may be impacted by movements in currency exchange rates. This situation may change in the future as our business continues to grow outside of the United States. We do not enter into foreign currency transactions for speculative purposes and currently have no material investments that would expose us to foreign currency exchange risk.

Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements and Supplementary Data
For the Fiscal Years Ended October 31, 2007, 2006 and 2005

Contents				Page number reference
Consolidated Financial Statements of Eaton Vance Corp.:
Consolidated Statements of Income for each of the three years in the period ended October 31, 2007					45
Consolidated Balance Sheets as of October 31, 2007 and 2006					46
Consolidated Statements of Shareholders’ Equity and Comprehensive Income for each of the three years in the period ended October 31, 2007					47
Consolidated Statements of Cash Flows for each of the three years in the period ended October 31, 2007					49
Notes to Consolidated Financial Statements					50
Report of Independent Registered Public Accounting Firm					74

All schedules have been omitted because they are not required, are not applicable or the information is otherwise shown in the consolidated financial statements or notes thereto.

Consolidated Statements of Income

	Years Ended October 31,
(in thousands, except per share data)	2007			2006			2005
*Revenue:*
Investment advisory and administration fees	$	773,612		$	594,632		$	503,085
Distribution and underwriter fees		148,369			139,111			138,485
Service fees		154,736			124,025			105,202
Other revenue		7,383			4,426			6,403
Total revenue		1,084,100			862,194			753,175

*Expenses:*
Compensation of officers and employees		316,963			244,620			205,663
Distribution expense		253,344			114,052			101,661
Service fee expense		121,748			98,262			87,983
Amortization of deferred sales commissions		55,060			52,048			63,535
Fund expenses		19,974			16,589			12,019
Other expenses		84,074			71,657			49,707
Total expenses		851,163			597,228			520,568

Operating income		232,937			264,966			232,607

*Other Income (Expense):*
Interest income		10,511			8,033			4,354
Interest expense		(2,894	)		(12,850	)		(1,464	)
Gains/(losses) on investments		(1,943	)		3,667			38
Foreign currency losses		(262	)		(222	)		(32	)
Impairment loss on investments		—			(592	)		(2,120	)

Income before income taxes, minority interest, equity in net income of affiliates and cumulative effect of change in accounting principle		238,349			263,002			233,383
Income taxes		(93,200	)		(102,245	)		(90,871	)
Minority interest		(6,258	)		(5,103	)		(5,037	)
Equity in net income of affiliates, net of tax		3,920			4,349			1,231

Income before cumulative effect of change in accounting principle		142,811			160,003			138,706
Cumulative effect of change in accounting principle, net of tax		—			(626	)		—
Net income	$	142,811		$	159,377		$	138,706

Earnings per share before cumulative effect of change in accounting principle:
Basic	$	1.15		$	1.25		$	1.05
Diluted	$	1.06		$	1.18		$	0.99
Earnings per share:
Basic	$	1.15		$	1.25		$	1.05
Diluted	$	1.06		$	1.17		$	0.99
Weighted average shares outstanding:
Basic		124,527			127,807			131,591
Diluted		135,252			137,004			140,520

See notes to consolidated financial statements.

Consolidated Balance Sheets

	October 31,
(in thousands, except share data)	2007			2006
ASSETS
*Current Assets:*
Cash and cash equivalents	$	434,957		$	206,705
Short-term investments		50,183			20,669
Investment advisory fees and other receivables		116,979			94,669
Other current assets		8,033			7,324
Total current assets		610,152			329,367

*Other Assets:*
Deferred sales commissions		99,670			112,314
Goodwill		103,003			96,837
Other intangible assets, net		35,988			34,549
Long-term investments		86,111			73,075
Equipment and leasehold improvements, net		26,247			21,495
Other assets		5,660			558
Total other assets		356,679			338,828
Total assets	$	966,831		$	668,195

LIABILITIES AND SHAREHOLDERS’ EQUITY
*Current Liabilities:*
Accrued compensation	$	106,167		$	80,975
Accounts payable and accrued expenses		66,955			33,660
Dividends payable		17,780			15,187
Other current liabilities		26,797			9,823
Total current liabilities		217,699			139,645

*Long-Term Liabilities:*
Long-term debt		500,000			—
Deferred income taxes		11,740			22,520
Total long-term liabilities		511,740			22,520
Total liabilities		729,439			162,165

Minority interest		8,224			9,545
Commitments and contingencies (See Note 7)		—			—

*Shareholders’ Equity:*
Voting Common Stock, par value $0.00390625 per share:
Authorized, 1,280,000 shares
Issued and outstanding, 371,386 and 309,760 shares, respectively		1			1
Non-Voting Common Stock, par value $0.00390625 per share:
Authorized, 190,720,000 shares
Issued and outstanding, 117,798,378 and 126,125,717 shares, respectively		460			493
Notes receivable from stock option exercises		(2,342	)		(1,891	)
Accumulated other comprehensive income		3,193			4,383
Retained earnings		227,856			493,499
Total shareholders’ equity		229,168			496,485
Total liabilities and shareholders’ equity	$	966,831		$	668,195

See notes to consolidated financial statements.

Consolidated Statements of Shareholders’ Equity and Comprehensive Income

(in thousands, except per share data)	Common and Non-Voting Common Shares			Common Stock		Non-Voting Common Stock			Additional Paid-In Capital			Notes Receivable From Stock Option Exercises
Balance, November 1, 2004		133,581		$	1	$	521		$	—		$	(2,718	)
Net income		—			—		—			—			—
Other comprehensive income:
Unrealized holding gains on investments, net of tax		—			—		—			—			—
Foreign currency translation adjustments, net of tax		—			—		—			—			—
Total comprehensive income
Dividends declared ($0.34 per share)		—			—		—			—			—
Issuance of Non-Voting Common Stock:
On exercise of stock options		1,075			—		4			12,623			(615	)
Under employee stock purchase plan		134			—		1			2,424			—
Under employee incentive plan		126			—		—			2,641			—
Under restricted stock plan		46			—		—			—			—
Stock-based compensation		—			—		—			28,607			—
Tax benefit of stock option exercises		—			—		—			3,434			—
Repurchase of Non-Voting Common Stock		(5,409	)		—		(21	)		(49,729	)		—
Principal repayments		—			—		—			—			592
Balance, October 31, 2005		129,553			1		505			—			(2,741	)
Net income		—			—		—			—			—
Other comprehensive income:
Unrealized holding gains on investments, net of tax		—			—		—			—			—
Foreign currency translation adjustments, net of tax		—			—		—			—			—
Total comprehensive income
Dividends declared ($0.42 per share)		—			—		—			—			—
Issuance of Non-Voting Common Stock:
On exercise of stock options		2,388			—		9			22,238			(552	)
Under employee stock purchase plan		134			—		1			2,910			—
Under employee incentive plan		153			—		1			3,589			—
Under restricted stock plan		40			—		—			—			—
Stock-based compensation		—			—		—			36,867			—
Tax benefit of stock option exercises		—			—		—			6,073			—
Repurchase of Non-Voting Common Stock		(5,833	)		—		(23	)		(71,677	)		—
Principal repayments		—			—		—			—			1,402
Balance, October 31, 2006		126,435			1		493			—			(1,891	)
Net income		—			—		—			—			—
Other comprehensive income:
Unamortized loss on derivative instrument, net of tax		—			—		—			—			—
Unrealized holding gains on investments, net of tax		—			—		—			—			—
Foreign currency translation adjustments, net of tax		—			—		—			—			—
Total comprehensive income
Dividends declared ($0.51 per share)		—			—		—			—			—
Issuance of Voting Common Stock		99			—		—			388			—
Issuance of Non-Voting Common Stock:
On exercise of stock options		2,176			—		8			34,290			(1,291	)
Under employee stock purchase plan		128			—		—			3,311			—
Under employee incentive plan		182			—		1			5,585			—
Under restricted stock plan		13			—		—			—			—
Stock-based compensation		—			—		—			43,305			—
Tax benefit of stock option exercises		—			—		—			9,915			—
Repurchase of Voting Common Stock		(37	)		—		—			(146	)
Repurchase of Non-Voting Common Stock		(10,826	)		—		(42	)		(96,648	)		—
Principal repayments		-			—		—			—			840
Balance, October 31, 2007		118,170		$	1	$	460		$	—		$	(2,342	)

See notes to consolidated financial statements.

Consolidated Statements of Shareholders’ Equity and Comprehensive Income (Continued)

(in thousands, except per share data)	Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total Shareholders’ Equity			Comprehensive Income (Loss)
Balance, November 1, 2004	$	1,854		$	464,670		$	464,328
Net income		—			138,706			138,706		$	138,706
Other comprehensive income:
Unrealized holding gains on investments, net of tax		760			—			760			760
Foreign currency translation adjustments, net of tax		(48	)		—			(48	)		(48	)
Total comprehensive income										$	139,418
Dividends declared ($0.34 per share)		—			(44,539	)		(44,539	)
Issuance of Non-Voting Common Stock:
On exercise of stock options		—			—			12,012
Under employee stock purchase plan		—			—			2,425
Under employee incentive plan		—			—			2,641
Under restricted stock plan		—			—			—
Stock-based compensation		—			—			28,607
Tax benefit of stock option exercises		—			—			3,434
Repurchase of Non-Voting Common Stock		—			(82,872	)		(132,622	)
Principal repayments		—			—			592
Balance, October 31, 2005		2,566			475,965			476,296
Net income		—			159,377			159,377		$	159,377
Other comprehensive income:
Unrealized holding gains on investments, net of tax		1,754			—			1,754			1,754
Foreign currency translation adjustments, net of tax		63			—			63			63
Total comprehensive income										$	161,194
Dividends declared ($0.42 per share)		—			(53,629	)		(53,629	)
Issuance of Non-Voting Common Stock:
On exercise of stock options		—			—			21,695
Under employee stock purchase plan		—			—			2,911
Under employee incentive plan		—			—			3,590
Under restricted stock plan		—			—			—
Stock-based compensation		—			—			36,867
Tax benefit of stock option exercises		—			—			6,073
Repurchase of Non-Voting Common Stock		—			(88,214	)		(159,914	)
Principal repayments		—			—			1,402
Balance, October 31, 2006		4,383			493,499			496,485
Net income		—			142,811			142,811		$	142,811
Other comprehensive income:
Unamortized loss on derivative instrument, net of tax		(2,872	)		—			(2,872	)		(2,872	)
Unrealized holding gains on investments, net of tax		1,628			—			1,628			1,628
Foreign currency translation adjustments, net of tax		54			—			54			54
Total comprehensive income										$	141,621
Dividends declared ($0.51 per share)		—			(62,893	)		(62,893	)
Issuance of Voting Common Stock		—			—			388
Issuance of Non-Voting Common Stock:
On exercise of stock options		—			—			33,007
Under employee stock purchase plan		—			—			3,311
Under employee incentive plan		—			—			5,586
Under restricted stock plan		—			—			—
Stock-based compensation		—			—			43,305
Tax benefit of stock option exercises		—			—			9,915
Repurchase of Voting Common Stock		—			—			(146	)
Repurchase of Non-Voting Common Stock		—			(345,561	)		(442,251	)
Principal repayments		—			—			840
Balance, October 31, 2007	$	3,193		$	227,856		$	229,168

See notes to consolidated financial statements.

Consolidated Statements of Cash Flows

	Years Ended October 31,
(in thousands)	2007		2006		2005
Cash and cash equivalents, beginning of year	$	206,705	$	146,389	$	147,137