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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 22, 2007

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

            Maryland                    1-8100                  04-2718215 
(State or other jurisdiction    (Commission File Number)    (IRS Employer Identification No.) 
 of incorporation)         
 
 
                   255 State Street, Boston, Massachusetts                       02109 
                     (Address of principal executive offices)    (Zip Code) 

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

  Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing
obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
     (17 CFR 240.14d -2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
     (17 CFR 240.13e -4(c))

Page 1 of 11


INFORMATION INCLUDED IN THE REPORT

Item 9.01. Financial Statements and Exhibits

Registrant has reported its results of operations for the three and nine months ended July 31, 2007, as described in Registrant’s news release dated August 22, 2007, a copy of which is filed herewith as Exhibit 99.1 and incorporated herein by reference.

Exhibit No.    Document 

 

99.1 

  Press release issued by the Registrant dated August 22, 2007. 

Page 2 of 11


SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

        EATON VANCE CORP. 
        (Registrant) 
 
 
Date:    August 22, 2007    /s/ William M. Steul 
        William M. Steul, Chief Financial Officer 

Page 3 of 11


EXHIBIT INDEX

     Each exhibit is listed in this index according to the number assigned to it in the exhibit table set forth in Item 601 of Regulation S-K. The following exhibit is filed as part of this Report:

Exhibit No.    Description 

 

99.1 

  Copy of Registrant's news release dated August 22, 2007. 

Page 4 of 11


Exhibit 99.1


August 22, 2007

                                                                                                                                          FOR IMMEDIATE RELEASE

EATON VANCE CORP.
REPORT FOR THE THREE MONTHS AND NINE MONTHS ENDED
JULY 31, 2007

Boston, MA—“Eaton Vance achieved another quarter of outstanding progress in growth of assets under management and profits, despite the emergence of a global credit crunch and associated turmoil in financial markets toward the end of the period,” said James B. Hawkes, Chairman and CEO of Eaton Vance Corp. “While we experienced an increase in retail mutual fund redemptions in July and August, solid retail managed account inflows have more than offset these outflows. Net flows in institutional, high-net-worth and offshore fund products have all remained positive. Our lack of exposure to sub-prime mortgage loans, private equity and hedge funds, combined with our broad stable asset mix and strong financial condition should help shield the Company from highly volatile financial markets. As of August 15th, Eaton Vance’s assets under management remained over $150 billion.”

Eaton Vance reported diluted earnings per share of $0.41 in the third quarter of fiscal 2007 compared to diluted earnings per share of $0.31 in the third quarter of fiscal 2006, an increase of 32 percent. Third quarter earnings were reduced by $14.8 million or $0.07 per diluted share by expenses associated with the $1.3 billion initial public offering of the closed-end Eaton Vance Risk-Managed Diversified Equity Income Fund in July. These expenses consisted of $12.6 million of structuring fees paid to distribution partners in the underwriting group and $2.2 million of sales-based incentives to members of the Eaton Vance sales and marketing organization.

The Company earned $0.60 per diluted share in the first nine months of fiscal 2007 compared to earnings of $0.88 per diluted share in the first nine months of fiscal 2006. Year-to-date earnings per share were reduced by $0.65 per diluted share by closed-end fund related expenses. These expenses consisted of structuring fee payments of $76.0 million, sales-based incentives of $14.8 million and one-time payments of $52.2 million made to terminate compensation agreements of the Company with Merrill Lynch and AG Edwards related to certain closed-end funds offered in prior periods. The Company expects to earn significant future management fees from the $9.9 billion in new closed-end fund assets raised in the first nine months of the fiscal year and increased operating income resulting from the termination of the compensation agreements on earlier closed-end funds.

Page 5 of 11


Assets under management of $152.3 billion at the end of the third quarter of fiscal 2007 were $31.9 billion or 26 percent greater than the $120.4 billion at the end of the third fiscal quarter last year. In the 12-month period ended July 31, 2007, the Company’s assets under management were positively affected by long-term fund and separate account net inflows of $22.8 billion and market price appreciation of $9.9 billion. Gross sales and other inflows into long-term funds and separate accounts in the last 12 months were $45.1 billion.

Net inflows of $4.2 billion in the third quarter of fiscal 2007 were 56 percent greater than net inflows of $2.7 billion in the third quarter of fiscal 2006, helped by the $1.3 billion closed-end Eaton Vance Risk-Managed Diversified Equity Income Fund offering and higher net inflows into open-end funds and separate accounts. Excluding closed-end funds, total long-term fund and separate account net inflows in the third quarter of fiscal 2007 increased 14 percent compared to the third quarter of fiscal 2006. Open-end fund net inflows increased 31 percent to $2.1 billion from $1.6 billion. Retail managed account net inflows increased to $1.2 billion from less than $0.1 billion in the same period last year. Private fund net outflows of $0.2 billion resulted from the liquidation of a bank loan warehouse facility managed by the Company in anticipation of a pending collateralized loan obligation fund that has been withdrawn due to unfavorable market conditions. Institutional and high-net-worth net outflows of $0.3 billion resulted primarily from withdrawals from relatively low-fee separate accounts at Atlanta Capital Management. Tables 1-4 on page 6 summarize the Company’s assets under management and asset flows by investment objective.

As a result of higher average assets under management, revenue in the third quarter of fiscal 2007 increased by $70.4 million or 32 percent to $286.9 million compared to revenue in the third quarter of fiscal 2006 of $216.6 million. Investment adviser and administration fees increased 37 percent to $205.9 million, compared to a 28 percent increase in average assets under management. Distribution and underwriter fees increased 16 percent and service fee revenue increased 27 percent due to the increase in fund assets that pay these fees.

Operating expenses increased 33 percent in the third quarter of fiscal 2007 to $198.1 million compared to operating expenses of $148.7 million in the third quarter of fiscal 2006 because of $14.8 million of onetime expenses associated with the closed-end fund offering referred to earlier, as well as higher compensation, service fee, distribution and other expenses. Compensation expense (including closed-end fund-related compensation expenses) increased 29 percent because of significantly higher sales-based incentive payments and increases in employee headcount, base salaries, stock-option expense and higher management bonus accruals.

Amortization of deferred sales commissions increased 15 percent in the third quarter of fiscal 2007 compared to the third quarter of fiscal 2006 primarily because the growth in class C share fund sales and assets more than offset the continuing decline in class B share fund sales and assets. Service fee expense increased 31 percent, in line with the increase in assets that provide service fee revenue. Distribution expense increased 47 percent as a result of the $12.6 million of one-time closed-end fund structuring fees and increases in sales support expenses and distribution fees on class C fund shares. Fund expenses increased 35 percent because of increases in asset-based sub-advisory fees and other fund related expenses paid by the Company. Other expenses increased 40 percent primarily due to increases in information technology, facilities, travel, consulting and other miscellaneous expenses in the third quarter of fiscal 2007.

Operating income increased 31 percent to $88.9 million in the third quarter of fiscal 2007 from $67.9 million in the third quarter of fiscal 2006.

Page 6 of 11


In evaluating operating performance, the Company considers operating income and net income, which are calculated on a basis consistent with accounting principles generally accepted in the United States (“GAAP”), as well as adjusted operating income, a non-GAAP performance measure. Adjusted operating income is defined as operating income plus closed-end fund structuring fees and one-time payments, stock-based compensation and the write-off of any intangible assets associated with the Company’s acquisitions. The Company believes that adjusted operating income is a key indicator of the Company’s ongoing profitability and therefore uses 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, 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:

  Reconciliation of Operating Income to Adjusted Operating Income

    For the Three        For the Nine     
    Months Ended        Months Ended     
    July 31,        July 31,     


                 %            % 
(in thousands)       2007    2006    Change    2007    2006    Change 

 
Operating income    $88,858    $67,885    31%    $127,147    $192,581         -34% 
   Closed-end fund                         
structuring    12,562    1,486    745%    75,998    1,486    NM 
           fees                         
   Payments to terminate                         
closed-                         
           end fund compensation          52,178      NM 
           agreements                         
   Write-off of intangible            8,876    NM 
assets                         
   Stock-based compensation    10,914    8,271    32%    33,390    28,770    16% 

Adjusted operating income    $112,334    $77,642    45%    $288,713    $231,713    25% 

 

Net income increased 33 percent to $55.8 million in the third quarter of fiscal 2007 compared to $41.8 million in the third quarter of fiscal 2006. Interest income increased 21 percent because of higher interest earned on cash and short-term investments. Interest expense declined 91 percent due to the extinguishment of the Company’s long-term debt in August 2006. The Company’s effective tax rate, before minority interest and equity in net income of affiliates, was 38.8 percent in the third quarter of fiscal 2007 and 39.2 percent in the third quarter of fiscal 2006.

Cash, cash equivalents and short-term investments were $136.1 million on July 31, 2007, and $295.7 million on July 31, 2006. The Company’s strong operating cash flow in the last 12 months enabled it to pay $251.4 million to repurchase 6.8 million shares of its non-voting common stock, $86.2 million to retire its long-term debt and $58.2 million in dividends to shareholders, in addition to $128.2 million of

Page 7 of 11


closed-end fund structuring fees and compensation agreement buyouts. There were no outstanding borrowings against the Company’s $180.0 million credit facility on July 31, 2007. The credit facility was expanded to $200.0 million and extended for five years on August 13, 2007.

During the first nine months of fiscal 2007, the Company repurchased and retired 5.1 million shares of its non-voting common stock at an average price of $40.05 per share under its current repurchase authorization. Approximately 6.7 million shares remain of the current 8.0 million share authorization.

Eaton Vance Corp., a Boston-based investment management firm, is traded on the New York Stock Exchange under the symbol EV.

This news release contains statements that are not historical facts, referred to as “forward- looking statements.” The Company’s actual future results may differ significantly from those stated in any forward-looking statements, depending on factors such as changes in securities or financial markets or general economic conditions, the volume of sales and repurchases of fund shares, the continuation of investment advisory, administration, distribution and service contracts, and other risks discussed from time to time in the Company’s filings with the Securities and Exchange Commission.

Page 8 of 11


Eaton Vance Corp.
Summary of Results of Operations
(in thousands, except per share amounts)

    Three Months Ended            Nine Months Ended   

 
    July 31,    July 31,    %        July 31,    July 31,    % 
    2007    2006    Change        2007    2006    Change 

 
Revenue:                             
     Investment adviser and administration fees    $ 205,892    $ 149,823    37    %    $ 560,726    $ 437,176         28 % 
     Distribution and underwriter fees    40,021    34,598    16        113,657    105,379    8 
     Service fees    39,597    31,235    27        111,166    89,238    25 
     Other revenue    1,422    919    55        4,743    3,118    52 

 
     Total revenue    286,932    216,575    32        790,292    634,911    24 

 
Expenses:                             
     Compensation of officers and employees    79,862    61,989    29        237,005    181,926    30 
     Amortization of deferred sales commissions    13,931    12,119    15        40,902    39,168    4 
     Service fee expense    31,420    24,063    31        86,320    69,896    23 
     Distribution expense    45,481    30,861    47        223,802    85,479    162 
     Fund expenses    5,490    4,074    35        14,164    11,873    19 
     Other expenses    21,890    15,584    40        60,952    53,988    13 

 
     Total expenses    198,074    148,690    33        663,145    442,330    50 

 
Operating Income    88,858    67,885    31        127,147    192,581    (34) 
 
Other Income/(Expense):                             
     Interest income    2,667    2,197    21        7,002    5,938    18 
     Interest expense    (58)    (655)    (91)        (142)    (1,380)    (90) 
     Gain on investments    1,106    41    NM        2,779    3,589    (23) 
     Foreign currency loss    (95)    (55)    73        (228)    (182)    25 
     Impairment loss on investments    -    -    NM        -    (592)    NM 

 
Income Before Income Taxes, Minority Interest,                             
     Equity in Net Income of Affiliates and Cumulative                             
     Effect of Change in Accounting Principle    92,478    69,413    33        136,558    199,954    (32) 
 
Income Taxes    (35,869)    (27,233)    32        (52,840)    (77,451)    (32) 
 
Minority Interest    (1,440)    (1,011)    42        (4,316)    (3,830)    13 
 
Equity in Net Income of Affiliates, Net of Tax    607    650    (7)        2,026    2,803    (28) 

 
Net Income Before Cumulative Effect of Change in                             
     Accounting Principle    55,776    41,819    33        81,428    121,476    (33) 
 
Cumulative Effect of Change in Accounting Principle,                             
     Net of Tax    -    -    NM        -    (626)    NM 

 
Net Income    $ 55,776    $ 41,819    33        $ 81,428    $ 120,850    (33) 

 
Earnings Per Share Before Cumulative Effect of                             
     Change in Accounting Principle:                             
         Basic    $ 0.45    $ 0.33    36        $ 0.65    $ 0.95    (32) 

         Diluted    $ 0.41    $ 0.31    32        $ 0.60    $ 0.88    (32) 

 
Earnings Per Share:                             
         Basic    $ 0.45    $ 0.33    36        $ 0.65    $ 0.94    (31) 

         Diluted    $ 0.41    $ 0.31    32        $ 0.60    $ 0.88    (32) 

 
Dividends Declared, Per Share    $ 0.12    $ 0.10    20        $ 0.36    $ 0.30    20 

 
Weighted Average Shares Outstanding:                             
         Basic    124,818    127,211    (2)        125,649    128,292    (2) 

         Diluted    135,824    136,601    (1)        135,890    138,141    (2) 


Page 9 of 11


Eaton Vance Corp.
Balance Sheet
(in thousands, except per share figures)

    July 31,    October 31,    July 31, 
    2007    2006    2006 

 
ASSETS             
Current Assets:             
 Cash and cash equivalents    $ 136,081    $ 206,705    $ 165,771 
 Short-term investments    -    20,669    129,926 
 Investment adviser fees and other receivables    112,581    94,669    89,391 
 Other current assets    8,111    7,324    6,371 

     Total current assets    256,773    329,367    391,459 

 
Other Assets:             
 Deferred sales commissions    105,821    112,314    114,825 
 Goodwill    103,003    96,837    96,834 
 Other intangible assets, net    35,953    34,549    34,704 
 Long-term investments    87,595    73,075    61,552 
 Equipment and leasehold improvements, net    22,987    21,495    20,228 
 Other assets    558    558    2,026 

     Total other assets    355,917    338,828    330,169 

 
Total assets    $ 612,690    $ 668,195    $ 721,628 

 
LIABILITIES AND SHAREHOLDERS' EQUITY             
 
Current Liabilities:             
 Accrued compensation    $ 77,906    $ 80,975    $ 59,664 
 Accounts payable and accrued expenses    52,000    33,660    32,303 
 Dividend payable    14,886    15,187    12,704 
 Current portion of long-term debt    -    -    76,316 
 Other current liabilities    30,805    9,823    7,920 

     Total current liabilities    175,597    139,645    188,907 

Long-Term Liabilities:             
 Deferred income taxes    17,490    22,520    26,168 

     Total long-term liabilities    17,490    22,520    26,168 

Total liabilities    193,087    162,165    215,075 

Minority interest    9,561    9,545    9,246 

Commitments and contingencies    -    -    - 
 
Shareholders' Equity:             
 Common stock, par value $0.00390625 per share:             
     Authorized, 1,280,000 shares             
     Issued, 371,386, 309,760 and 309,760 shares, respectively    1    1    1 
 Non-voting common stock, par value $0.00390625 per share:             
     Authorized, 190,720,000 shares             
     Issued, 123,223,109, 126,125,717 and 126,735,035 shares, respectively    481    493    495 
 Notes receivable from stock option exercises    (2,574)    (1,891)    (2,043) 
 Accumulated other comprehensive income    6,091    4,383    2,700 
 Retained earnings    406,043    493,499    496,154 

 
     Total shareholders' equity    410,042    496,485    497,307 

 
Total liabilities and shareholders' equity    $ 612,690    $ 668,195    $ 721,628 


Page 10 of 11


Table 1            Table 2           
Asset Flows (in millions)          Assets Under Management         
Twelve Months Ended July 31, 2007        By Investment Objective (in millions)         
 
Assets 7/31/2006 - beginning of period    $ 120,390        July 31,    October 31,      July 31,     % 
Long-term fund sales and inflows    35,692           2007       2006    Change       2006    Change 

Long-term fund redemptions and outflows    (15,136)    Equity Funds    $ 69,705    $ 53,220    31%    $ 49,636    40% 
Long-term fund net exchanges    (146)    Fixed Income Funds    24,449    21,482    14%    19,872    23% 
Long-term fund mkt. value change    5,730    Bank Loan Funds    21,006    19,982    5%    19,511    8% 
Institutional/HNW account inflows    3,699    Money Market Funds    1,615    3,728    -57%    2,472    -35% 
Institutional/HNW account outflows    (5,070)    Separate Accounts    35,564    30,494    17%    28,899    23% 

Institutional/HNW account assets acquired 1    270    Total    $ 152,339    $ 128,906    18%    $ 120,390    27% 

Retail managed account inflows    5,665                         
Retail managed account outflows    (2,061)                         
Separate account mkt. value change    4,163                         
Change in money market funds    (857)                         

Net change    31,949                         

Assets 7/31/2007 - end of period    $ 152,339                         


Table 3
Asset Flows by Investment Objective (in millions)
    Three Months Ended      Nine Months Ended 

    July 31,        July 31,    July 31,    July 31, 
    2007        2006      2007     2006 

Equity fund assets - beginning of period    $ 68,207    $ 50,116    $ 53,220    $ 45,146 
Sales/inflows    4,191        2,137        18,667    5,810 
Redemptions/outflows    (1,703)        (1,432)        (5,138)    (4,093) 
Exchanges    10        (43)          (6) 
Market value change    (1,000)        (1,142)        2,956    2,779 

Net change    1,498        (480)        16,485    4,490 

Equity assets - end of period    $ 69,705    $ 49,636    $ 69,705    $ 49,636 

 
Fixed income fund assets - beginning of period    24,493        19,141        21,482    18,213 
Sales/inflows    1,967        1,336        6,093    3,325 
Redemptions/outflows    (1,110)        (552)        (2,427)    (1,613) 
Exchanges    (62)              (43)    (7) 
Market value change    (839)        (56)        (656)    (46) 

Net change    (44)        731        2,967    1,659 

Fixed income assets - end of period    $ 24,449    $ 19,872    $ 24,449    $ 19,872 

 
Bank loan fund assets - beginning of period    21,413        17,792        19,982    16,816 
Sales/inflows    1,996        2,522        5,668    5,546 
Redemptions/outflows    (2,145)        (814)        (4,571)    (3,095) 
Exchanges    (82)        (14)        (105)    (42) 
Market value change    (176)        25        32    286 

Net change    (407)        1,719        1,024    2,695 

Bank loan assets - end of period    $ 21,006    $ 19,511    $ 21,006    $ 19,511 

 
Long-term fund assets - beginning of period    114,113        87,049        94,684    80,175 
Sales/inflows    8,154        5,995        30,428    14,681 
Redemptions/outflows    (4,958)        (2,798)        (12,136)    (8,801) 
Exchanges    (134)        (54)        (148)    (55) 
Market value change    (2,015)        (1,173)        2,332    3,019 

Net change    1,047        1,970        20,476    8,844 

Total long-term fund assets - end of period    $ 115,160    $ 89,019    $ 115,160    $ 89,019 

 
Separate accounts - beginning of period    34,153        30,181        30,494    27,650 
Institutional/HNW account inflows    1,389        381        3,109    1,730 
Institutional/HNW account outflows    (1,643)        (904)        (3,677)    (3,048) 
Institutional/HNW assets acquired 1,2    270              270    427 
Retail managed account inflows    1,874        859        4,635    2,526 
Retail managed account outflows    (633)        (823)        (1,676)    (1,769) 
Retail managed account assets acquired 2                  23 
Separate accounts market value change    154        (795)        2,409    1,360 

Net change    1,411        (1,282)        5,070    1,249 

Separate accounts - end of period    $ 35,564    $ 28,899    $ 35,564    $ 28,899 

Money market fund assets - end of period    1,615        2,472        1,615    2,472 

Total assets under management - end of period    $ 152,339    $ 120,390    $ 152,339    $ 120,390 

 
        Table 4             
    Long-Term Fund and Separate Account Net Flows (in millions)         
    Three Months Ended      Nine Months Ended 

    July 31,        July 31,    July 31,    July 31, 
    2007        2006      2007     2006 

               Long-term funds:                         
                   Open-end and other funds    $ 2,111    $ 1,559    $ 7,180    $ 3,801 
                   Closed-end funds    1,266        162        9,900    269 
                   Private funds    (181)        1,476        1,212    1,810 
               Institutional/HNW accounts    (254)        (523)        (568)    (1,318) 
               Retail managed accounts    1,241        36        2,959    757 

               Total net flows    $ 4,183    $ 2,710    $ 20,683    $ 5,319 

       

1      Managed Risk Advisors, LLC acquired by Eaton Vance subsidiary, Parametric Portfolio Advisors, in May 2007.
 
2      Voyageur Asset Management (MA) acquired by Eaton Vance in December 2005.
 

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