UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
x		Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
		For the quarterly period ended January 31, 2012
or
o		Transition Report Pursuant to Section 13 or 15 (d) of The Securities Exchange Act of 1934
		For the transition period from  to

Commission file no. 1-8100

EATON VANCE CORP.

(Exact name of registrant as specified in its charter)

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

Two International Place, Boston, Massachusetts 02110

(Address of principal executive offices) (zip code)

(617) 482-8260

(Registrant's telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes x No o

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

Large accelerated filer x		Accelerated filer          o
Non-accelerated filer  o (Do not check if smaller reporting company)		Smaller reporting company o

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

Shares outstanding as of January 31, 2012:
    Voting Common Stock — 399,240 shares
    Non-Voting Common Stock — 115,435,234 shares

TABLE OF CONTENTS

Eaton Vance Corp.
Form 10-Q
As of January 31, 2012 and for the
Three Month Period Ended January 31, 2012

Table of Contents

Required Information		Page Number Reference
Part I Financial Information
Item 1. Consolidated Financial Statements			3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of   Operations			31
Item 3. Quantitative and Qualitative Disclosures About Market Risk			50
Item 4. Controls and Procedures			50
Part II Other Information
Item 1. Legal Proceedings			50
Item 1A. Risk Factors			50
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			51
Item 6. Exhibits			51
Signatures			52

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Part I — Financial Information
  
Item 1. Consolidated Financial Statements
  
Eaton Vance Corp.
Consolidated Balance Sheets (unaudited)

(in thousands)		January 31, 2012				October 31, 2011
Assets
Cash and cash equivalents		$	475,370			$	510,913
Investment advisory fees and other receivables			126,885				130,525
Investments			333,404				287,735
Assets of consolidated collateralized loan obligation (“CLO”) entity:
Cash and cash equivalents			16,832				16,521
Bank loans and other investments			472,933				462,586
Other assets			1,222				2,715
Deferred sales commissions			24,377				27,884
Deferred income taxes			44,768				41,343
Equipment and leasehold improvements, net			64,443				67,227
Intangible assets, net			65,225				67,224
Goodwill			142,302				142,302
Other assets			66,772				74,325
Total assets		$	1,834,533			$	1,831,300

 
 
See notes to Consolidated Financial Statements.

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Eaton Vance Corp.
Consolidated Balance Sheets (unaudited) (continued)

(in thousands, except share figures)		January 31, 2012				October 31, 2011
Liabilities, Temporary Equity and Permanent Equity
Liabilities:
Accrued compensation		$	49,748			$	137,431
Accounts payable and accrued expenses			60,788				51,333
Dividend payable			22,023				21,959
Debt			500,000				500,000
Liabilities of consolidated CLO entity:
Senior and subordinated note obligations			480,345				477,699
Other liabilities			6,777				5,193
Other liabilities			118,979				75,557
Total liabilities			1,238,660				1,269,172
Commitments and contingencies
Temporary Equity:
Redeemable non-controlling interests			118,494				100,824
Permanent Equity:
Voting Common Stock, par value $0.00390625 per share:
Authorized, 1,280,000 shares
Issued and outstanding, 399,240 and 399,240 shares, respectively			2				2
Non-Voting Common Stock, par value $0.00390625 per share:
Authorized, 190,720,000 shares
Issued and outstanding, 115,435,234 and 115,223,827 shares, respectively			451				450
Notes receivable from stock option exercises			(4,118	)			(4,441	)
Accumulated other comprehensive income			2,003				1,340
Appropriated retained earnings (deficit)			1,124				(3,867	)
Retained earnings			477,152				466,931
Total Eaton Vance Corp. shareholders' equity			476,614				460,415
Non-redeemable non-controlling interests			765				889
Total permanent equity			477,379				461,304
Total liabilities, temporary equity and permanent equity		$	1,834,533			$	1,831,300

 
 
See notes to Consolidated Financial Statements.

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Eaton Vance Corp.
Consolidated Statements of Income (unaudited)

		Three Months Ended January 31,
(in thousands, except per share figures)		2012				2011
Revenue:
Investment advisory and administration fees		$	239,452			$	242,734
Distribution and underwriter fees			22,515				27,327
Service fees			32,299				37,345
Other revenue			1,340				1,208
Total revenue			295,606				308,614
Expenses:
Compensation of officers and employees			96,683				97,050
Distribution expense			32,328				32,697
Service fee expense			28,673				31,329
Amortization of deferred sales commissions			5,820				10,350
Fund expenses			6,651				4,544
Other expenses			32,631				33,299
Total expenses			202,786				209,269
Operating income			92,820				99,345
Other income (expense):
Interest and other income			1,737				2,063
Interest expense			(8,413	)			(8,413	)
Net gains (losses) on investments and derivatives			6,430				(746	)
Net foreign currency gains			10				3
Other income (expense) of consolidated CLO entity:
Interest income			5,544				5,220
Interest expense			(4,311	)			(1,514	)
Net gains (losses) on bank loans, other investments and note obligations			4,736				(3,385	)
Income before income taxes and equity in net income of affiliates			98,553				92,573
Income taxes			(35,187	)			(34,522	)
Equity in net income of affiliates, net of tax			1,504				1,234
Net income			64,870				59,285
Net income attributable to non-controlling and other beneficial interests			(17,599	)			(21,750	)
Net income attributable to Eaton Vance Corp. shareholders		$	47,271			$	37,535
Earnings per share:
Basic		$	0.41			$	0.31
Diluted		$	0.40			$	0.30
Weighted average shares outstanding:
Basic			112,768				116,741
Diluted			114,901				122,175
Dividends declared per share		$	0.19			$	0.18

 
 
See notes to Consolidated Financial Statements.

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Eaton Vance Corp.
Consolidated Statements of Comprehensive Income (unaudited)

		Three Months Ended January 31,
(in thousands)		2012				2011
Net income		$	64,870			$	59,285
Other comprehensive income (loss):
Amortization of loss on derivatives, net of income taxes of $39 and $39, respectively			72				72
Unrealized holding gains on available-for-sale investments, net of income taxes of $440 and $886, respectively			733				1,444
Foreign currency translation adjustments, net of income taxes of $85 and $0, respectively			(142	)			7
Total comprehensive income			65,533				60,808
Comprehensive income attributable to non-controlling and other beneficial interests			(17,599	)			(21,750	)
Total comprehensive income attributable to Eaton Vance Corp. shareholders		$	47,934			$	39,058

 
 
See notes to Consolidated Financial Statements.

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Eaton Vance Corp.
Consolidated Statements of Shareholders' Equity (unaudited)

		Permanent Equity																																				Temporary Equity
(in thousands)		Voting Common Stock				Non-Voting Common Stock				Additional Paid-In Capital				Notes Receivable from Stock Option Exercises				Accumulated Other Comprehensive Income				Appropriated Retained Earnings (Deficit)				Retained Earnings				Non-Redeemable Non-Controlling Interests				Total Permanent Equity				Redeemable Non-Controlling Interests
Balance, November 1, 2011		$	2			$	450			$	—			$	(4,441	)		$	1,340			$	(3,867	)		$	466,931			$	889			$	461,304			$	100,824
Net income			—				—				—				—				—				4,991				47,271				808				53,070				11,800
Other comprehensive income			—				—				—				—				663				—				—				—				663				—
Dividends declared			—				—				—				—				—				—				(22,022	)			—				(22,022	)			—
Issuance of Non-Voting Common Stock:
On exercise of stock options			—				1				2,735				(137	)			—				—				—				—				2,599				—
Under employee stock purchase plan			—				1				1,823				—				—				—				—				—				1,824				—
Under employee incentive plan			—				—				1,609				—				—				—				—				—				1,609				—
Under restricted stock plan, net of forfeitures			—				5				—				—				—				—				—				—				5				—
Stock-based compensation			—				—				16,342				—				—				—				—				—				16,342				—
Tax benefit of stock option exercises			—				—				225				—				—				—				—				—				225				—
Repurchase of Non-Voting Common Stock			—				(6	)			(19,766	)			—				—				—				(15,028	)			—				(34,800	)			—
Principal repayments on notes receivable from stock option exercises			—				—				—				460				—				—				—				—				460				—
Net subscriptions (redemptions/distributions) of non-controlling interest holders			—				—				—				—				—				—				—				(800	)			(800	)			19,334
Deconsolidation			—				—				—				—				—				—				—				—				—				(16,564	)
Reclass to temporary equity			—				—				—				—				—				—				—				(132	)			(132	)			132
Other changes in non-controlling interests			—				—				(2,968	)			—				—				—				—				—				(2,968	)			2,968
Balance, January 31, 2012		$	2			$	451			$	—			$	(4,118	)		$	2,003			$	1,124			$	477,152			$	765			$	477,379			$	118,494

 
 
See notes to Consolidated Financial Statements.

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Eaton Vance Corp.
Consolidated Statements of Shareholders' Equity (unaudited)

		Permanent Equity																																				Temporary Equity
(in thousands)		Voting Common Stock				Non-Voting Common Stock				Additional Paid-In Capital				Notes Receivable from Stock Option Exercises				Accumulated Other Comprehensive (Loss) Income				Appropriated Retained Earnings				Retained Earnings				Non-Redeemable Non-Controlling Interests				Total Permanent Equity				Redeemable Non-Controlling Interests
Balance, November 1, 2010		$	2			$	461			$	50,225			$	(3,158	)		$	(435	)		$	—			$	363,190			$	570			$	410,855			$	67,019
Cumulative effect of change in accounting principle			—				—				—				—				—				30,666				1,665				—				32,331				—
Net income			—				—				—				—				—				(626	)			37,535				599				37,508				21,777
Other comprehensive income			—				—				—				—				1,523				—				—				—				1,523				—
Dividends declared			—				—				—				—				—				—				(21,452	)			—				(21,452	)			—
Issuance of Non-Voting Common Stock:
On exercise of stock options			—				2				10,147				(490	)			—				—				—				—				9,659				—
Under employee stock purchase plan			—				—				1,876				—				—				—				—				—				1,876				—
Under employee incentive plan			—				—				2,567				—				—				—				—				—				2,567				—
Under restricted stock plan, net of forfeitures			—				4				—				—				—				—				—				—				4				—
Stock-based compensation			—				—				14,973				—				—				—				—				—				14,973				—
Tax benefit of stock option exercises			—				—				1,484				—				—				—				—				—				1,484				—
Repurchase of Non-Voting Common Stock			—				(3	)			(26,803	)			—				—				—				—				—				(26,806	)			—
Principal repayments on notes receivable from stock option exercises			—				—				—				664				—				—				—				—				664				—
Net subscriptions (redemptions/distributions) of non-controlling interest holders			—				—				—				—				—				—				—				(198	)			(198	)			60,235
Deconsolidation			—				—				—				—				—				—				—				—				—				(28,335	)
Reclass to temporary equity			—				—				—				—				—				—				—				(66	)			(66	)			66
Other changes in non-controlling interests			—				—				(857	)			—				—				—				—				—				(857	)			857
Balance, January 31, 2011		$	2			$	464			$	53,612			$	(2,984	)		$	1,088			$	30,040			$	380,938			$	905			$	464,065			$	121,619

 
 
See notes to Consolidated Financial Statements.

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Eaton Vance Corp.
Consolidated Statements of Cash Flows (unaudited)

		Three Months Ended January 31,
(in thousands)		2012				2011
Cash Flows From Operating Activities:
Net income		$	64,870			$	59,285
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Depreciation and amortization			6,314				6,224
Amortization of deferred sales commissions			5,827				10,332
Stock-based compensation			16,342				14,973
Deferred income taxes			(3,821	)			82,678
Net (gains) losses on investments and derivatives			(6,430	)			741
Equity in net income of affiliates			(2,417	)			(1,985	)
Dividends received from affiliates			10,225				—
Consolidated CLO entity operating activities:
Net (gains) losses on bank loans, other investments and note obligations			(4,736	)			3,385
Amortization of investments			(256	)			(400	)
Net increase (decrease) in other assets and liabilities, including cash			2,771				(8,303	)
Changes in operating assets and liabilities:
Investment advisory fees and other receivables			3,785				(3,506	)
Investments in trading securities			(70,263	)			(41,314	)
Deferred sales commissions			(2,322	)			(5,280	)
Other assets			3,964				(20,782	)
Accrued compensation			(87,633	)			(68,981	)
Accounts payable and accrued expenses			9,647				3,929
Other liabilities			45,918				27,141
Net cash (used for) provided by operating activities			(8,215	)			58,137
Cash Flows From Investing Activities:
Additions to equipment and leasehold improvements			(1,486	)			(3,316	)
Net cash paid in acquisition			—				(1,000	)
Proceeds from sale of investments			14,542				59,135
Purchase of investments			(6,126	)			(638	)
Consolidated CLO entity investing activities:
Proceeds from sales and maturities of bank loans and other investments			32,512				85,264
Purchase of bank loans and other investments			(35,221	)			(80,162	)
Net cash provided by investing activities			4,221				59,283

 
 
See notes to Consolidated Financial Statements.

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Eaton Vance Corp.
Consolidated Statements of Cash Flows (unaudited) (continued)

		Three Months Ended January 31,
(in thousands)		2012				2011
Cash Flows From Financing Activities:
Proceeds from issuance of Non-Voting Common Stock			6,037				14,106
Repurchase of Non-Voting Common Stock			(34,800	)			(26,806	)
Principal repayments on notes receivable from stock option exercises			460				664
Excess tax benefit of stock option exercises			225				1,484
Dividends paid			(21,967	)			(21,319	)
Net subscriptions received from (redemptions/distributions paid to) non-controlling interest holders			18,534				56,975
Net cash (used for) provided by financing activities			(31,511	)			25,104
Effect of currency rate changes on cash and cash equivalents			(38	)			(82	)
Net (decrease) increase in cash and cash equivalents			(35,543	)			142,442
Cash and cash equivalents, beginning of period			510,913				307,886
Cash and cash equivalents, end of period		$	475,370			$	450,328
Supplemental Cash Flow Information:
Cash paid for interest		$	36			$	36
Cash paid for interest by consolidated CLO entity			722				1,792
Cash paid for income taxes, net of refunds			9,683				63
Supplemental Disclosure of Non-Cash Information:
Increase in equipment and leasehold improvements due to non-cash additions		$	142			$	5,791
Exercise of stock options through issuance of notes receivable			137				490
Consolidation of CLO entity:
Increase in other assets, net of other liabilities		$	—			$	10,418
Increase in investments			—				466,440
Increase in borrowings			—				446,192
Deconsolidations of Sponsored Investment Funds:
Decrease in investments		$	(16,470	)		$	(28,599	)
Decrease in non-controlling interests			(16,564	)			(28,335	)

 
 
See notes to Consolidated Financial Statements.

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Eaton Vance Corp.
Notes to Consolidated Financial Statements (unaudited)

1. Basis of Presentation

In the opinion of management, the accompanying unaudited interim Consolidated Financial Statements of Eaton Vance Corp. (“the Company”) include all adjustments necessary to present fairly the results for the interim periods in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Such financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures have been omitted pursuant to such rules and regulations. As a result, these financial statements should be read in conjunction with the audited Consolidated Financial Statements and related notes included in the Company’s latest annual report on Form 10-K.

In the quarter ended January 31, 2012, the Company changed the presentation of its Consolidated Statements of Income. The change relates to the classification of net investment income and net investment gains or losses of consolidated sponsored funds. Net investment income earned by consolidated sponsored funds, previously included in other revenue, is now presented as a component of interest and other income. Net investment gains or losses of consolidated sponsored funds, also previously included in other revenue, are now presented as a component of net gains (losses) on investments and derivatives. Management believes the revised presentation is more useful to readers of its financial statements by better highlighting the current earnings effect of the investment results of consolidated sponsored funds. Amounts for the comparative prior fiscal year period have been reclassified to conform to the current year presentation. These reclassifications had no impact on previously reported net income or financial position and do not represent a restatement of any previously reported financial results.

The following table presents the effects of the change in presentation of net investment income and net investment gains or losses earned by consolidated sponsored funds to the Company’s previously reported Consolidated Statement of Income:

		Three Months Ended January 31, 2011
(in thousands)		As Previously Reported				Reclassifications				As Reclassified
Other revenue		$	4,881			$	(3,673	)		$	1,208
Total revenue			312,287				(3,673	)			308,614
Operating income			103,018				(3,673	)			99,345
Interest and other income			721				1,342				2,063
Net gains (losses) on investments and derivatives			(3,077	)			2,331				(746	)
Net income			59,285				—				59,285
Net income attributable to Eaton Vance Corp. shareholders			37,535				—				37,535

2. Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its controlled subsidiaries. The Company consolidates all investments in affiliates in which the Company’s ownership exceeds 50 percent or where the Company has control. In addition, the Company consolidates any variable interest entities (“VIEs”) (including the below-referenced CLO entity) for which the Company is considered the primary beneficiary. The Company provides for non-controlling and other beneficial interests in consolidated subsidiaries for which the Company’s ownership is less than 100 percent. The equity method of accounting is used for investments in non-controlled affiliates in which the Company’s ownership ranges from 20 to 50 percent, or in instances in which the Company is able to exercise significant influence but not control (such as representation on the investee’s Board of Directors). All intercompany accounts and transactions have been eliminated.

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The Company adopted the provisions of a new consolidation standard on November 1, 2010. In conjunction with the adoption, the Company concluded that it was the primary beneficiary of one of the CLO entities for which it acts as collateral manager. As a result, the Company consolidated the assets, liabilities and results of operations of that entity in the Company’s Consolidated Financial Statements beginning on November 1, 2010. The assets of the CLO entity cannot be used by the Company, and the note holders of the entity have no recourse to the general credit or assets of the Company.

From time to time, the Company may maintain a controlling financial interest in a sponsored fund. Upon consolidation, the Company assumes the specialized accounting treatment of the fund. All of the underlying investments held by consolidated funds are carried at fair value, with corresponding changes in fair value reflected in net gains (losses) on investments and derivatives in the Company’s Consolidated Statements of Income. When the Company is no longer deemed to control the fund, the fund is deconsolidated and accounted for under another accounting method.

3. New Accounting Standards Not Yet Adopted

Testing goodwill for impairment

In September 2011, the Financial Accounting Standards Board (“FASB”) issued an amendment to the existing goodwill impairment guidance. The terms of the amendment permit a reporting entity to first assess qualitative factors to determine whether it is necessary to perform step one of the two-step goodwill impairment test. The new guidance is effective for the Company for the fiscal year that begins on November 1, 2012. The adoption of this new guidance is not expected to have a material effect on the Company’s Consolidated Financial Statements.

Fair value measurements

In May 2011, the FASB issued an amendment that modifies and clarifies existing fair value measurement and disclosure guidance. The amendment results in common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and International Financial Reporting Requirements. In some instances, the amendment changes principles and requirements for measuring fair value and for disclosing information about fair value measurements. The amendment is effective for the Company’s fiscal quarter that begins on February 1, 2012. Early application is prohibited. The adoption of this new guidance is not expected to have a material effect on the Company’s Consolidated Financial Statements.

4. Investments

The following is a summary of investments at January 31, 2012 and October 31, 2011:

(in thousands)		January 31, 2012				October 31, 2011
Corporate debt securities		$	—			$	4,832
Consolidated funds:
Debt securities			78,425				69,083
Equity securities			102,276				74,434
Separately managed accounts:
Debt securities			21,067				11,307
Equity securities			33,107				33,553
Sponsored funds			48,348				39,841
CLO entities			376				278
Investments in affiliates			42,298				46,900
Other investments			7,507				7,507
Total investments		$	333,404			$	287,735

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Investments classified as trading

The following is a summary of the cost and fair value of investments classified as trading at January 31, 2012 and October 31, 2011. These investments include corporate debt securities held directly by the Company, debt and equity securities held in the portfolios of consolidated funds and separately managed accounts seeded for product development purposes.

January 31, 2012

(in thousands)		Cost				Fair Value
Debt securities		$	95,985			$	99,492
Equity securities			129,006				135,383
Total investments		$	224,991			$	234,875

October 31, 2011

(in thousands)		Cost				Fair Value
Debt securities		$	83,852			$	85,222
Equity securities			105,230				107,987
Total investments		$	189,082			$	193,209

The Company recognized $5.8 million and $0.2 million of net unrealized gains related to investments classified as trading for the three months ended January 31, 2012 and 2011, respectively.

During the first quarter of fiscal 2012, the Company deconsolidated its investment in Eaton Vance Diversified Currency Income Fund when its ownership fell below 50 percent. The Company’s remaining investment is classified as an investment in affiliate at January 31, 2012.

Investments classified as available-for-sale

The following is a summary of the cost, gross unrealized gains and losses, and fair value of investments classified as available-for-sale at January 31, 2012 and October 31, 2011:

January 31, 2012

		Gross Unrealized
(in thousands)		Cost				Gains				Losses				Fair Value
Sponsored funds		$	41,702			$	6,683			$	(37	)		$	48,348

October 31, 2011

		Gross Unrealized
(in thousands)		Cost				Gains				Losses				Fair Value
Sponsored funds		$	34,368			$	5,518			$	(45	)		$	39,841

Gross unrealized gains and losses on investments in sponsored funds classified as available-for-sale have been excluded from earnings and reported as a component of accumulated other comprehensive income (loss), net of deferred taxes. No investment with a gross unrealized loss has been in a loss position for greater than one year.

The Company reviewed the gross unrealized losses of $37,000 at January 31, 2012 and determined that these losses were not other-than-temporary, primarily because the Company has both the ability and intent to hold the investments for a period of time sufficient to recover such losses. The aggregate fair value of investments associated with the unrealized losses was $0.7 million at January 31, 2012.

The following is a summary of the Company’s realized gains and losses upon disposition of sponsored funds classified as available-for-sale for the three months ended January 31, 2012 and 2011.

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		Three Months Ended January 31,
(in thousands)		2012				2011
Gains		$	84			$	2,021
Losses			(21	)			(1,554	)
Net realized gains		$	63			$	467

Investments in non-consolidated CLO entities

The Company did not recognize any impairment losses related to its investments in non-consolidated CLO entities in either the three months ended January 31, 2012 or 2011.

Investments in affiliates

The Company has a 7 percent equity interest in a private equity partnership managed by a third party that invests in companies in the financial services industry. The Company’s investment in the partnership was $9.8 million and $18.4 million at January 31, 2012 and October 31, 2011, respectively.

The Company had equity interests in the following sponsored funds as of January 31, 2012 and October 31, 2011.

		Equity Ownership Interest (%)								Equity Ownership Interest ($)
(dollar amounts in thousands)		January 31, 2012				October 31, 2011				January 31, 2012				October 31, 2011
Eaton Vance Parametric Structured
Commodity Strategy Fund			20	%			47	%		$	9,030			$	9,190
Eaton Vance Diversified Currency Income Fund			40	%			—				16,758				—
Eaton Vance Real Estate Fund			38	%			—				6,721				—
Eaton Vance Parametric Option Absolute Return Strategy Fund			—				27	%			—				19,298

The Company recognized a $2.4 million gain in the first quarter of fiscal 2012 related to its April 2011 sale of its equity interest in Lloyd George Management (BVI) Limited, representing additional settlement payments received during the quarter.

The Company did not recognize any impairment losses related to its investments in affiliates in either the three months ended January 31, 2012 or the three months ended January 31, 2011.

Other investments

Included in other investments are certain investments carried at cost totaling $7.5 million as of both January 31, 2012 and October 31, 2011. Management believes that the carrying value of its other investments approximates their fair value.

5. Fair Value Measurements

Substantially all of the Company’s investments are carried at fair value, with the exception of its investments in non-consolidated CLO entities that have not been impaired in the current fiscal period and certain non-marketable investments, which are accounted for using the equity or cost method.

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The following is a description of the valuation methodologies used for financial assets and liabilities measured at fair value, as well as the general classification of such financial assets and liabilities pursuant to the valuation hierarchy.

Financial Instrument		Hierarchy		Valuation Methodology
Cash Equivalents		Level 1		Includes investments in money market funds. Fair value is determined based upon unadjusted quoted market prices.
		Level 2		Includes agency securities. Fair value is determined based upon observable inputs other than Level 1 unadjusted quoted market prices, such as quoted market prices for similar assets in active markets, quoted prices for identical or similar assets that are not active, and inputs other than quoted prices that are observable or corroborated by observable market data.
Investments		Level 1		Includes certain debt and certain equity securities held in the portfolios of consolidated funds and separately managed accounts, which are classified as trading, and investments in sponsored funds. Fair value is determined based upon unadjusted quoted market prices.
		Level 2		Includes commercial paper, certain debt securities, certain equity securities, investments in privately offered equity funds that are not listed but have a net asset value that is comparable to mutual funds and investments in portfolios that have a net asset value that is comparable to mutual funds. Fair value is determined using observable inputs other than Level 1 unadjusted quoted market prices, such as quoted market prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities that are not active, and inputs other than quoted prices that are observable or corroborated by observable market data. If events occur after the close of the primary market for any security, the quoted market prices may be adjusted for the observable price movements of country-specific market proxies.

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Financial Instrument		Hierarchy		Valuation Methodology
Derivative assets and liabilities		Level 2		Includes foreign exchange contracts, stock index futures contracts and commodity futures contracts. Foreign exchange contract pricing is determined by interpolating a value using the spot foreign currency rate based on spot rate and currency exchange rate differentials, which are all observable inputs. Index futures contracts and commodity futures contracts pricing is determined by a third-party pricing service that determines fair value based on bid and ask prices.
Securities sold, not yet purchased		Level 2		Pricing is determined by a third-party pricing service that determines fair value based on bid and ask prices.
Assets of consolidated CLO entity		Level 1		Includes investments in money market funds and certain equity securities. Fair value is determined based upon unadjusted quoted market prices.
		Level 2		Includes bank loans and certain debt and certain equity securities. Fair value is determined based upon valuations obtained from independent third-party broker or dealer prices and are derived from such services matrix pricing models, which considers information regarding securities with similar characteristics to determine the valuation.
		Level 3		Includes warrants, bank loans and certain equity securities. In certain instances the fair value has been determined using discounted cash flow analyses. Fair value in which pricing is received from one non-binding broker quote is also considered to be Level 3.
Liabilities of consolidated CLO entity		Level 3		Includes senior and subordinated note obligations. Fair value is determined primarily from model-based valuation techniques in which one or more significant inputs are unobservable in the market.

Other assets not held at fair value includes investments in equity method investees and other investments carried at cost which, in accordance with GAAP, are not measured at fair value.

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The following tables summarize the assets and liabilities measured at fair value on a recurring basis and their assigned levels within the hierarchy at January 31, 2012 and October 31, 2011:

January 31, 2012

(in thousands)		Level 1				Level 2				Level 3				Other Assets Not Held at Fair Value				Total
Cash equivalents		$	—			$	253,416			$	—			$	—			$	253,416
Investments:
Consolidated funds:
Debt securities		$	—			$	78,425			$	—			$	—			$	78,425
Equity securities			96,200				6,076				—				—				102,276
Separately managed accounts:
Debt securities			4,467				16,600				—				—				21,067
Equity securities			30,186				2,921				—				—				33,107
Sponsored funds			44,373				3,975				—				—				48,348
CLO entities			—				—				—				376				376
Investments in affiliates			—				—				—				42,298				42,298
Other investments			—				37				—				7,470				7,507
Total investments		$	175,226			$	108,034			$	—			$	50,144			$	333,404
Other financial assets:
Derivative financial assets		$	—			$	399			$	—			$	—			$	399
Assets of consolidated CLO entity:
Cash equivalents			15,561				—				—				—				15,561
Bank loans and other investments			87				468,118				4,728				—				472,933
Total other financial assets		$	15,648			$	468,517			$	4,728			$	—			$	488,893
Financial liabilities:
Derivative financial liabilities		$	—			$	6,849			$	—			$	—			$	6,849
Securities sold, not yet purchased			—				19,070				—				—				19,070
Liabilities of consolidated CLO entity:
Senior and subordinated note obligations			—				—				480,345				—				480,345
Total financial liabilities		$	—			$	25,919			$	480,345			$	—			$	506,264

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October 31, 2011

(in thousands)		Level 1				Level 2				Level 3				Other Assets Not Held at Fair Value				Total
Cash equivalents		$	6,691			$	360,676			$	—			$	—			$	367,367
Investments:
Corporate debt securities		$	—			$	4,832			$	—			$	—			$	4,832
Consolidated funds:
Debt securities			6,879				62,204				—				—				69,083
Equity securities			69,279				5,155				—				—				74,434
Separately managed accounts:
Debt securities			4,429				6,878				—				—				11,307
Equity securities			33,511				42				—				—				33,553
Sponsored funds			36,128				3,713				—				—				39,841
CLO entities			—				—				—				278				278
Investments in affiliates			—				—				—				46,900				46,900
Other investments			—				37				—				7,470				7,507
Total investments		$	150,226			$	82,861			$	—			$	54,648			$	287,735
Other financial assets:
Derivative financial assets		$	—			$	1,060			$	—			$	—			$	1,060
Assets of consolidated CLO entity:
Cash equivalents			15,829				—				—				—				15,829
Bank loans and other investments			85				456,591				5,910				—				462,586
Total other financial assets		$	15,914			$	457,651			$	5,910			$	—			$	479,475
Financial liabilities:
Derivative financial liabilities		$	—			$	6,654			$	—			$	—			$	6,654
Securities sold, not yet purchased			—				6,270				—				—				6,270
Liabilities of consolidated CLO entity:
Senior and subordinated note obligations			—				—				477,699				—				477,699
Total financial liabilities		$	—			$	12,924			$	477,699			$	—			$	490,623

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The changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the three months ended January 31, 2012 and 2011 were as follows:

Three Months Ended January 31, 2012

(in thousands)		Bank loans and other investments of consolidated CLO entity				Senior and subordinated note obligations of consolidated CLO entity
Balance at November 1, 2011		$	5,910			$	477,699
Net losses on investments and note obligations(1)			(40	)			2,646
Net transfers out of Level 3			(1,142	)			—
Balance at January 31, 2012		$	4,728			$	480,345
Change in unrealized gains and (losses) included in net income relating to assets and liabilities held at January 31, 2012		$	(40	)		$	2,646

Three Months Ended January 31, 2011

(in thousands)		Bank loans and other investments of consolidated CLO entity				Senior and subordinated note obligations of consolidated CLO entity
Balance at November 1, 2010		$	—			$	—
Adjustment for adoption of new consolidation guidance			5,265				444,087
Net losses on investments and note obligations(1)			429				12,876
Purchases, sales and settlements, net			(1,315	)			—
Balance at January 31, 2011		$	4,379			$	456,963
Change in unrealized gains and (losses) included in net income relating to assets and liabilities held at January 31, 2011		$	429			$	12,876

There were no significant transfers between Level 1 and Level 2 during the three months ended January 31, 2012. The transfers out of Level 3 in the first quarter of fiscal 2012 were the result of changes in the observability of the inputs in the valuation model.

Although the Company believes the valuation methods described above are appropriate, the use of different methodologies or assumptions to determine fair value could result in a different estimate of fair value at the reporting date.

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The Company maintains an investment in one non-consolidated CLO entity totaling $0.4 million at January 31, 2012. The Company’s investment in this CLO entity is carried at amortized cost unless facts and circumstances indicate that the investment has been impaired, at which point the investment is written down to fair value.

6. Derivative Financial Instruments

Derivative financial instruments designated as cash flow hedges

During the three months ended January 31, 2012 and 2011, the Company reclassified into interest expense $0.1 million of the loss on the Treasury lock transaction in connection with the Company’s issuance of ten-year senior notes in October 2007. At January 31, 2012, the remaining unamortized loss on this transaction was $2.5 million. During the next twelve months, the Company expects to reclassify approximately $0.4 million of the loss on the Treasury lock transaction into interest expense.

Other derivative financial instruments not designated for hedge accounting

The Company has entered into a series of foreign exchange contracts, stock index futures contracts and commodity futures contracts to structurally hedge currency risk exposure and market risk associated with its investments in separately managed accounts and consolidated funds seeded for new product development purposes.

At January 31, 2012, the Company had 13 outstanding foreign exchange contracts with five counterparties with an aggregate notional value of approximately $12.4 million, ten outstanding stock index futures contracts with one counterparty with an aggregate notional value of approximately $103.2 million and 29 outstanding commodity futures contracts with one counterparty with an aggregate notional value of approximately $23.7 million.

The following tables present the fair value of derivative instruments not designated as hedging instruments as of January 31, 2012 and October 31, 2011:

January 31, 2012

		Assets								Liabilities
(in thousands)		Balance Sheet Location				Fair Value				Balance Sheet Location				Fair Value
Foreign exchange contracts			Other assets			$	—				Other liabilities			$	150
Stock index futures contracts			Other assets				10				Other liabilities				6,028
Commodity futures contracts			Other assets				389				Other liabilities				671
Total						$	399							$	6,849

October 31, 2011

		Assets								Liabilities
(in thousands)		Balance Sheet Location				Fair Value				Balance Sheet Location				Fair Value
Foreign exchange contracts			Other assets			$	24				Other liabilities			$	124
Stock index futures contracts			Other assets				157				Other liabilities				6,363
Commodity futures contracts			Other assets				879				Other liabilities				167
Total						$	1,060							$	6,654

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The following is a summary of the net gains (losses) recognized in income for the three months ended January 31, 2012 and 2011:

						Three Months Ended January 31,
(in thousands)		Income Statement Location				2012				2011
Foreign exchange contracts			Net gains (losses) on investments and derivatives			$	233			$	279
Stock index futures contracts			Net gains (losses) on investments and derivatives				(4,145	)			(4,468	)
Commodity futures contracts			Net gains (losses) on investments and derivatives				494				(1,464	)
Total						$	(3,418	)		$	(5,653	)

7. Fair Value Measurements of Other Financial Instruments

Certain financial instruments are not required to be carried on the Consolidated Balance Sheet at fair value. The following is a summary of the carrying amounts and estimated fair values of these financial instruments at January 31, 2012 and October 31, 2011:

		January 31, 2012								October 31, 2011
(in thousands)		Carrying Value				Fair Value				Carrying Value				Fair Value
Other investments		$	7,470			$	7,470			$	7,470			$	7,470
Notes receivable from stock option exercises		$	4,118			$	4,118			$	4,441			$	4,441
Debt		$	500,000			$	573,584			$	500,000			$	566,047

For fair value purposes the carrying value of the other investments and notes receivable from stock option exercises approximates fair value. The carrying value of the Company’s debt has been determined using publicly available market prices, which are considered Level 1 inputs.

8. VIEs

In the normal course of business, the Company maintains investments in sponsored CLO entities and privately offered equity funds that are considered VIEs. These variable interests generally represent seed investments made by the Company, as collateral manager or investment advisor, to launch or market these vehicles. The Company receives management fees for the services it provides as collateral manager or investment advisor to these entities. These fees may also be considered variable interests.

To determine whether or not the Company should be treated as the primary beneficiary of a VIE, management must make significant estimates and assumptions regarding probable future cash flows of the VIE. These estimates and assumptions relate primarily to market interest rates, credit default rates, pre-payment rates, discount rates, the marketability of certain securities and the probability of certain outcomes.

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Investments in VIEs that are consolidated

Consolidated CLO entity

As described in Note 2, the Company adopted the provisions of a new consolidation standard on November 1, 2010 that resulted in the consolidation of a CLO entity.

The Company irrevocably elected the fair value option for all financial assets and liabilities of the consolidated CLO entity upon adoption of new accounting guidance. Unrealized gains and losses on assets and liabilities for which the fair value option has been elected are reported in earnings. Although the subordinated note obligations of the CLO entity have certain equity characteristics, the Company has determined that the subordinated notes should be recorded as liabilities on the Company’s Consolidated Balance Sheet.

The assets of this CLO entity are held solely as collateral to satisfy the obligations of the entity. The Company has no right to the benefits from, nor does the Company bear the risks associated with, the assets held by the entity beyond the Company’s minimal direct investment and beneficial interest therein and management fees generated from the entity. The note holders of the CLO entity have no recourse to the Company’s general assets. There are neither explicit arrangements nor does the Company hold implicit variable interests that would require the Company to provide any ongoing financial support to the entity.

The following tables present, as of January 31, 2012 and October 31, 2011, the fair value of the consolidated CLO entity’s assets and liabilities subject to fair value accounting:

January 31, 2012

		CLO Bank Loan Investments
(in thousands)		Total CLO bank loan investments				90 days or more past due				Senior and subordinated note obligations
Unpaid principal balance		$	477,994			$	500			$	500,094
Excess unpaid principal balance over fair value			(10,834	)			(489	)			(19,749	)
Fair Value		$	467,160			$	11			$	480,345

October 31, 2011

		CLO Bank Loan Investments
(in thousands)		Total CLO bank loan investments				90 days or more past due				Senior and subordinated note obligations
Unpaid principal balance		$	474,515			$	1,192			$	500,066
Excess unpaid principal balance over fair value			(17,820	)			(617	)			(22,367	)
Fair Value		$	456,695			$	575			$	477,699

During the three months ended January 31, 2012 and 2011, the changes in the fair values of the CLO entity’s bank loans and other investments resulted in net gains of $7.3 million and $9.5 million respectively, while an increase in the fair value of the CLO’s note obligations resulted in net losses of $2.6 million and $12.9 million, respectively. The combined net gains of $4.7 million and net losses of $3.4 million for three months ended January 31, 2012 and 2011, respectively, were recorded as net gains (losses) on bank loans, other investments and note obligations of the consolidated CLO entity on the Company’s Consolidated Statement of Income for those periods. Substantially all gains (losses) related to the CLO entity’s bank loans, other investments and note obligations recorded in earnings for the periods were attributable to changes in instrument-specific credit risk.

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The CLO entity’s note obligations bear interest at variable rates based on LIBOR plus a pre-defined spread, which ranges from 0.21 percent to 1.50 percent. The principal amounts outstanding of the note obligations issued by the CLO entity mature on April 20, 2019. The CLO entity may elect to reinvest any prepayments received on bank loans or other investments prior to April 2013. Any subsequent prepayments received must be used to pay down its note obligations.

Interest income and expense are recorded on an accrual basis and reported as interest income and interest expense in other income (expense) of the consolidated CLO entity on the Company’s Consolidated Statements of Income for the three months ended January 31, 2012 and 2011.

At January 31, 2012 and October 31, 2011, the following carrying amounts related to the consolidated CLO entity were included in the Company’s Consolidated Balance Sheet:

(in thousands)		January 31, 2012				October 31, 2011
Assets of consolidated CLO entity:
Cash and cash equivalents		$	16,832			$	16,521
Bank loans and other investments			472,933				462,586
Other assets			1,222				2,715
Liabilities of consolidated CLO entity:
Senior and subordinated note obligations			480,345				477,699
Other liabilities			6,777				5,193
Appropriated retained earnings (deficit)			1,124				(3,867	)
Total net interest in consolidated CLO entity		$	2,741			$	2,797

For the three months ended January 31, 2012 and 2011, the Company recorded net income of $5.8 million and $0.2 million, respectively, related to the consolidated CLO entity. A net gain of $5.0 million and a net loss of $0.6 million for the three months ended January 31, 2012 and 2011, respectively, was included in net income attributable to non-controlling interests and other beneficial interests for those periods, reflecting the interests of third-party note holders of the consolidated CLO entity. Net income attributable to Eaton Vance Corp. shareholders included $0.8 million related to the consolidated CLO entity for each of the three months ended January 31, 2012 and 2011.

Other entities

Our controlled subsidiary Parametric Portfolio Associates LLC (“Parametric Portfolio Associates”) maintains a 60 percent economic interest in Parametric Risk Advisors LLC (“Parametric Risk Advisors”), which meets the definition of a VIE. Consistent with its majority economic interest and other considerations, the Company has determined that Parametric Portfolio Associates is the primary beneficiary of the VIE.

Parametric Risk Advisors had assets of $5.7 million and $4.9 million on January 31, 2012 and October 31, 2011, respectively, consisting primarily of cash and cash equivalents and investment advisory fees receivable, and liabilities of $2.6 million and $2.5 million on January 31, 2012 and October 31, 2011, respectively, consisting primarily of accrued compensation, accounts payable, accrued expenses and intercompany payables. Neither the Company’s variable interest nor maximum risk of loss related to this VIE was material to the Company’s Consolidated Financial Statements at either balance sheet date.

Investments in VIEs that are not consolidated

Non-consolidated CLO entities

The Company is not deemed the primary beneficiary of three CLO entities in which it holds variable interests. These non-consolidated entities had total assets of $1.8 billion and $1.9 billion as of January 31, 2012 and

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October 31, 2011, respectively. The Company’s variable interests in these entities consist of the Company’s direct ownership in these entities and any collateral management fees earned but uncollected. The Company maintains an investment in one of these entities totaling $0.4 million and $0.3 million on January 31, 2012 and October 31, 2011, respectively. Collateral management fees receivable for these three CLO entities totaled $1.8 million and $3.0 million on January 31, 2012 and October 31, 2011, respectively. In the first three months of fiscal 2012, the Company did not provide any financial or other support to these entities that it was not previously contractually required to provide. The Company’s risk of loss with respect to these managed CLO entities is limited to the carrying value of its investments in and collateral management fees receivable from the CLO entities as of January 31, 2012.

The Company’s investment in the CLO entity identified above is carried at amortized cost and is disclosed as a component of investments in Note 4. Income from these entities is recorded as a component of interest and other income based upon projected investment yields.

Other entities

The Company holds variable interests in, but is not deemed to be the primary beneficiary of, certain sponsored privately offered equity funds with total assets of $9.7 billion and $9.6 billion as of January 31, 2012 and October 31, 2011, respectively. The Company’s variable interests in these entities consist of the Company’s direct ownership in these entities and any investment advisory fees earned but uncollected. The Company held investments in these entities totaling $4.0 million and $3.7 million on January 31, 2012 and October 31, 2011, respectively, and collateral management fees receivable totaling $0.4 million on January 31, 2012 and October 31, 2011. In the first three months of fiscal 2012, the Company did not provide any financial or other support to these entities that it was not previously contractually required to provide. The Company’s risk of loss with respect to these managed entities is limited to the carrying value of its investments in and investment advisory fees receivable from the entities as of January 31, 2012.

The Company’s investments in privately offered equity funds are carried at fair value and included in investments in sponsored funds, which are disclosed as a component of investments in Note 4. These investments are classified as available-for-sale and the Company records any change in fair value, net of tax, in other comprehensive income (loss).

9. Acquisitions

Tax Advantaged Bond Strategies (“TABS”)

In December 2008, the Company acquired the TABS business of M.D. Sass Investors Services for cash and future consideration. The Company will make a contingent payment of $12.3 million in the second quarter of fiscal 2012 to the selling group based upon prescribed multiples of TABS’s revenue for the twelve months ended December 31, 2011. The payment will increase goodwill by $12.3 million as the acquisition was completed prior to the change in accounting for contingent purchase price consideration. The Company will be obligated to make four additional annual contingent payments to the selling group based on prescribed multiples of TABS’s revenue for the twelve months ending December 31, 2012, 2014, 2015 and 2016. All future payments will be in cash and will result in an addition to goodwill. These payments are not contingent upon any member of the selling group remaining an employee of the Company.

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10. Intangible Assets

The following is a summary of intangible assets at January 31, 2012 and October 31, 2011:

January 31, 2012

(dollars in thousands)		Gross carrying amount				Accumulated amortization				Net carrying amount
Amortizing intangible assets:
Client relationships acquired		$	110,327			$	(52,738	)		$	57,589
Intellectual property acquired			1,000				(72	)			928
Non-amortizing intangible assets:
Mutual fund management contract acquired			6,708				—				6,708
Total		$	118,035			$	(52,810	)		$	65,225

October 31, 2011

(dollars in thousands)		Gross carrying amount				Accumulated amortization				Net carrying amount
Amortizing intangible assets:
Client relationships acquired		$	110,327			$	(50,749	)		$	59,578
Intellectual property acquired			1,000				(62	)			938
Non-amortizing intangible assets:
Mutual fund management contract acquired			6,708				—				6,708
Total		$	118,035			$	(50,811	)		$	67,224

Amortization expense was $2.0 million for both the three months ended January 31, 2012 and 2011.

11. Stock-Based Compensation Plans

The Company recognized total compensation cost related to its stock-based compensation plans as follows:

		Three Months Ended January 31,
(in thousands)		2012				2011
2008 Plan:
Stock options		$	9,183			$	9,548
Restricted shares			6,115				4,367
Phantom stock units			55				99
Employee Stock Purchase Plan			108				253
Incentive Plan – Stock Alternative			126				265
ACM Plan			231				160
PPA Plan			579				380
Total stock-based compensation expense		$	16,397			$	15,072

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The total income tax benefit recognized for stock-based compensation arrangements was $5.3 million and $4.9 million for the three months ended January 31, 2012 and 2011, respectively.

2008 Omnibus Incentive Plan

The 2008 Plan, which is administered by the Compensation Committee of the Board, allows for awards of stock options, restricted shares and phantom stock units to eligible employees and non-employee Directors. A total of 16.8 million shares of Non-Voting Common Stock have been reserved for issuance under the 2008 Plan. Through January 31, 2012, 4.4 million restricted shares and options to purchase 11.6 million shares have been issued pursuant to the 2008 Plan.

Stock Options

The fair value of each stock 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. The Company’s stock volatility assumption is based upon its historical stock price fluctuations. The Company uses historical data to estimate option forfeiture rates and the expected term of options granted. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The weighted-average fair value per share of stock options granted during the three months ended January 31, 2012 and 2011 using the Black-Scholes option pricing model were as follows:

		2012				2011
Weighted-average grant date fair value of options granted		$	6.68			$	8.54
Assumptions:
Dividend yield			3.0% to 3.1%				2.3% to 2.4%
Volatility			35% to 36%				34%
Risk-free interest rate			1.5% to 1.6%				2.2% to 2.9%
Expected life of options			7.2 years				7.3 years

Stock option transactions under the 2008 Plan and predecessor plans for the three months ended January 31, 2012 are summarized as follows:

(share and intrinsic value figures in thousands)		Shares				Weighted- Average Exercise Price				Weighted- Average Remaining Contractual Term				Aggregate Intrinsic Value
Options outstanding, beginning of period			27,799			$	26.50
Granted			3,091				25.06
Exercised			(156	)			17.56
Forfeited/expired			(188	)			31.24
Options outstanding, end of period			30,546			$	26.37				5.2			$	81,345
Options exercisable, end of period			20,827			$	25.43				3.7			$	73,783
Vested or expected to vest			30,157			$	26.34				5.1			$	81,042

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The Company received $2.6 million and $9.7 million related to the exercise of options for the three months ended January 31, 2012 and 2011, respectively. Options exercised represent newly issued shares. The total intrinsic value of options exercised during the three months ended January 31, 2012 and 2011 was $1.1 million and $6.4 million, respectively. The total fair value of options that vested during the three months ended January 31, 2012 was $29.4 million.

As of January 31, 2012, there was $46.9 million of compensation cost related to unvested stock options granted under the 2008 Plan and predecessor plans not yet recognized. That cost is expected to be recognized over a weighted-average period of 2.8 years.

Restricted Shares

Compensation expense related to restricted share grants is recorded over the forfeiture period of the restricted shares, as they are contingently forfeitable. As of January 31, 2012, there was $74.2 million of compensation cost related to unvested awards not yet recognized. That cost is expected to be recognized over a weighted-average period of 3.5 years.

A summary of the Company's restricted share activity for the three months ended January 31, 2012 under the 2008 Plan and predecessor plans is presented below:

(share figures in thousands)		Shares				Weighted- Average Grant Date Fair Value
Unvested, beginning of period			2,482			$	27.29
Granted			1,376				25.06
Vested			(458	)			26.33
Forfeited/expired			(44	)			26.55
Unvested, end of period			3,356			$	26.51

Phantom Stock Units

In the three months ended January 31, 2012, 10,125 phantom stock units were issued to non-employee Directors pursuant to the 2008 Plan. Because these units are contingently forfeitable, compensation expense is recorded over the forfeiture period. As of January 31, 2012, there was $0.3 million of compensation cost related to unvested awards not yet recognized. That cost is expected to be recognized over a weighted-average period of 1.5 years.

12. Common Stock Repurchases

The Company’s current share repurchase program was announced on October 26, 2011. The Board authorized management to repurchase and retire up to 8.0 million shares of its Non-Voting Common Stock on the open market and in private transactions in accordance with applicable securities laws. The timing and amount of share purchases are subject to management’s discretion. The Company’s share repurchase program is not subject to an expiration date.

In the first three months of fiscal 2012, the Company purchased and retired approximately 1.4 million shares of its Non-Voting Common Stock under the current repurchase authorization. Approximately 6.6 million additional shares may be repurchased under the current authorization.

13. Income Taxes

The provision for income taxes was $35.2 million and $34.5 million, or 35.7 percent and 37.3 percent of pre-tax income, for the three months ended January 31, 2012 and 2011, respectively. The provision for income taxes in

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the three months ended January 31, 2012 and 2011 is comprised of federal, state, and foreign taxes. The primary difference between the Company’s effective tax rate and the statutory federal rate of 35.0 percent are state income taxes, income recognized by the consolidated CLO entity and other minority interests.

The Company records a valuation allowance when necessary to reduce deferred tax assets to an amount that is more likely than not to be realized. There was no valuation allowance recorded as of January 31, 2012 or 2011.

The Company is currently under audit by several states. One state previously provided the Company with a draft position that may result in a proposed adjustment to the Company’s previously filed tax returns. The state is currently reevaluating its draft position. The Company believes that its tax positions related to this potential adjustment were correct, and if an adjustment is proposed, the Company intends to vigorously defend its positions. It is possible the ultimate resolution of the proposed adjustment, if unfavorable, may be material to the results of operations in the period it occurs. Pending receipt of a formal assessment, an estimate of the range of the reasonably possible change in unrecognized tax benefits over the next twelve months cannot be made.

14. Non-controlling and Other Beneficial Interests

Net income attributable to non-controlling and other beneficial interest holders totaled $17.6 million and $21.8 million for the three months ended January 31, 2012 and 2011, respectively. In the three months ended January 31, 2012, net income attributable to non-controlling and other beneficial interests included $5.0 million of income attributed to other beneficial holders of the consolidated CLO entity and $8.1 million of adjustments to the redemption value of non-controlling interests redeemable at other than fair value. In the three months ended January 31, 2011, net income attributable to non-controlling and other beneficial interests included $0.6 million of losses borne by other beneficial holders of the consolidated CLO entity and $18.2 million of adjustments to the redemption value of non-controlling interests redeemable at other than fair value.

15. Earnings per Share

The following table provides a reconciliation of common shares used in the earnings per basic share and earnings per diluted share computations as follows:

		Three Months Ended January 31,
(in thousands, except per share data)		2012				2011
Net income allocated to:
Common shares		$	45,900			$	36,752
Participating restricted shares			1,371				783
Total net income attributable to Eaton Vance Corp. shareholders		$	47,271			$	37,535
Weighted-average shares outstanding – basic			112,768				116,741
Incremental common shares			2,133				5,434
Weighted-average shares outstanding – diluted			114,901				122,175
Earnings per common share attributable to Eaton Vance Corp. shareholders:
Basic		$	0.41			$	0.31
Diluted		$	0.40			$	0.30

The Company uses the treasury stock method to account for the dilutive effect of unexercised stock options in earnings per diluted share. Antidilutive common shares related to stock options excluded from the computation of earnings per diluted share were approximately 19.9 million and 11.1 million for the three months ended January 31, 2012 and 2011, respectively.

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16. Commitments and Contingencies

In the normal course of business, the Company enters into agreements that include indemnities in favor of third parties, such as engagement letters with advisors and consultants, information technology agreements, distribution agreements and service agreements. In certain circumstances, these indemnities in favor of third parties relate to service agreements entered into by investment funds managed and/or advised by Eaton Vance Management or Boston Management and Research. The Company has also agreed to indemnify its directors, officers and employees in accordance with the Company’s Articles of Incorporation, as amended. Certain agreements do not contain any limits on the Company’s liability and, therefore, it is not possible to estimate the Company’s potential liability under these indemnities. In certain cases, the Company has recourse against third parties with respect to these indemnities. Further, the Company maintains insurance policies that may provide coverage against certain claims under these indemnities.

The Company and its subsidiaries are subject to various legal proceedings. In the opinion of management, after discussions with legal counsel, the ultimate resolution of these matters will not have a material adverse effect on the consolidated financial condition or results of operations of the Company.

In July 2006, the Company committed to invest $15.0 million in a private equity partnership managed by a third party that invests in companies in the financial services industry. The Company had invested $13.8 million of the total $15.0 million of committed capital at January 31, 2012. The Company believes the remaining $1.2 million will likely be invested by March 2015.

The Company has entered into transactions in financial instruments in which it has sold securities, not yet purchased as part of its corporate hedging program. As of January 31, 2012 the Company has $19.1 million included within other liabilities on its Consolidated Balance Sheet related to securities sold, not yet purchased.

17. Related Party Transactions

Sponsored funds

The Company is an investment advisor to, and has administrative agreements with, sponsored open-end and closed-end funds for which certain employees are officers and/or directors. Substantially all of the services to these entities for which the Company earns a fee, including investment advisory, distribution, shareholder and administrative, are provided under contracts that set forth the services to be provided and the fees to be charged. These contracts are subject to annual review and approval by the funds’ boards of directors or trustees. Revenue for services provided or related to these funds for the three months ended January 31, 2012 and 2011 are as follows:

		Three Months Ended January 31,
(in thousands)		2012				2011
Investment advisory and administrative fees		$	183,484			$	186,957
Distribution fees			20,477				24,423
Service fees			32,299				37,345
Shareholder services fees			597				518
Total		$	236,857			$	249,243

For the three months ended January 31, 2012 and 2011, the Company had investment advisory agreements with certain sponsored funds pursuant to which the Company contractually waived $2.4 million and $4.5 million, respectively, of investment advisory fees it was otherwise entitled to receive.

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Sales proceeds and net realized gains from investments in sponsored funds classified as available-for-sale for the three months ended January 31, 2012 and 2011 are as follows:

		Three Months Ended January 31,
(in thousands)		2012				2011
Proceeds from sales		$	7,202			$	28,271
Net realized gains			63				467

The Company bears the non-advisory expenses of certain sponsored funds for which it earns an all-in management fee and provides subsidies to startup and other smaller sponsored funds to enhance their competitiveness. For the three months ended January 31, 2012 and 2011, expenses of $4.4 million and $3.2 million, respectively, were incurred by the Company pursuant to these arrangements.

Included in investment advisory and other receivables at January 31, 2012 and October 31, 2011 are receivables due from sponsored funds of $83.2 million and $82.5 million, respectively.

Employee Loan Program

The Company has established an Employee Loan Program under which a program maximum of $10.0 million is available for loans to officers (other than executive officers) and other key employees of the Company for purposes of financing the exercise of employee stock options. Loans are written for a seven-year period, at varying fixed interest rates (currently ranging from 1.3 percent to 5.0 percent), are payable in annual installments commencing with the third year in which the loan is outstanding, and are collateralized by the stock issued upon exercise of the option. Loans outstanding under this program, which are full recourse in nature, are reflected as notes receivable from stock option exercises in shareholders’ equity and were $4.1 million and $4.4 million at January 31, 2012 and October 31, 2011, respectively.

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Item 2. 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-Q regarding our financial position, business strategy and other plans and objectives for future operations are forward-looking statements. The terms “may”, “will”, “could”, “anticipate”, “plan”, “continue”, “project”, “intend”, “estimate”, “believe”, “expect” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. Although we believe that the assumptions and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that they will prove to have been correct or that we will take any actions that may now be planned. Certain important factors that could cause actual results to differ materially from our expectations are disclosed in the “Risk Factors” section of this Form 10-Q. 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 principal business is managing investment funds and providing investment management and counseling services to high-net-worth individuals and institutions. Our core strategy is to develop and sustain management expertise across a range of investment disciplines and to offer leading investment products and services through multiple distribution channels. In executing this strategy, we have developed broadly diversified investment management capabilities and a powerful marketing, distribution and customer service organization. Although we manage and distribute a wide range of investment products and services, we operate in one business segment, namely as an investment adviser to funds and separate accounts.

We are a market leader in a number of investment areas, including tax-managed equity, value equity, equity income, structured emerging market equity, floating-rate bank loan, municipal bond, investment grade, global and high-yield bond investing. Our breadth of investment management capabilities supports a wide range of products and services offered to fund shareholders, retail managed account investors, institutional investors and high-net-worth clients. Our equity strategies encompass a diversity of investment objectives, risk profiles, income levels and geographic representation. Our income investment strategies cover a broad duration and credit quality range and encompass both taxable and tax-free investments. We also offer a range of alternative investment strategies, including commodity-based investments and a spectrum of absolute return strategies. As of January 31, 2012, we had $191.7 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 approximately130 sales professionals covering U.S. and international markets.

We also commit significant resources to serving institutional and high-net-worth clients who access investment management services on a direct basis. Through our wholly owned affiliates and consolidated subsidiaries 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.

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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, amortization of deferred sales commissions, facilities expense and information technology expense.

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 (“GAAP”). 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 and stock-based compensation. 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.

Market Developments

Prevailing market conditions affect our managed asset levels, operating results and the recoverability of our investments. The first quarter of our fiscal 2011 was a period of generally favorable market action, as reflected by the 5% increase in the S&P 500 Index and the positive returns of most income strategies.

Average assets under management of $187.4 billion in the first quarter of fiscal 2012 were substantially unchanged from the $187.2 billion reported in the first quarter of fiscal 2011. Gross inflows were well diversified among major investment categories and well balanced between funds and separate accounts. Growth in separate account assets, which earn lower fees on average than funds, contributed to a decline in our average fee rate to 63 basis points in the first quarter of fiscal 2012 from 66 basis points in the first quarter of fiscal 2011.

As a matter of course, investors in our sponsored open-end funds and separate accounts have the ability to redeem their shares or investments at any time, without prior notice, and there are no material restrictions that would prevent them from doing so.

Assets under Management

Assets under management of $191.7 billion on January 31, 2012 were unchanged from the $191.7 billion reported a year earlier. Long-term fund net outflows of $2.0 billion over the last twelve months reflect $2.2 billion of open-end fund net outflows offset by $0.2 billion of closed-end fund net inflows. Long-term fund net outflows include net reductions in fund leverage of $0.3 billion. Over the last twelve months, institutional separate account net inflows were $1.7 billion, high-net-worth separate account net inflows were $0.7 billion, and retail managed account net inflows were $0.5 billion. Net price declines in managed assets reduced assets under management by $1.0 billion over the last twelve months, while net exchanges out of long-term funds and a decrease in cash management assets reduced assets under management by $0.1 billion and $0.2 billion, respectively. Acquired assets contributed $0.4 billion to growth in assets under management over the last twelve months.

We report managed assets and flow data by investment mandate, using fund or separate account investment strategy as the primary driver. The “Alternative” category includes a range of absolute return strategies, as well as commodity-linked investments.

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Ending Assets Under Management by Investment Mandate⁽¹⁾

		January 31,
(in millions)		2012				% of Total				2011				% of Total				% Change
Equity		$	110,834				58	%		$	114,722				60	%			-3	%
Fixed income			45,514				24	%			43,013				22	%			6	%
Floating-rate bank loan			24,376				13	%			21,939				12	%			11	%
Alternative			10,449				5	%			11,367				6	%			-8	%
Cash management			533				0	%			703				0	%			-24	%
Total		$	191,706				100	%		$	191,744				100	%			0	%

Equity assets under management included $29.0 billion and $32.1 billion of equity funds managed for after-tax returns on January 31, 2012 and 2011, respectively. Fixed income assets included $15.6 billion and $14.3 billion of tax-exempt municipal bond fund assets on January 31, 2012 and 2011, respectively.

Assets under management for which we estimate fair value are not material relative to the total value of the assets we manage.

Long-Term Fund and Separate Account Net Flows

		Three Months Ended January 31,
(in millions)		2012				2011				% Change
Long-term funds:
Open-end funds		$	(1,518	)		$	2,061				NM(1)
Closed-end funds			(47	)			(111	)			-58	%
Private funds			357				(598	)			NM
Total long-term fund net (outflows) inflows			(1,208	)			1,352				NM
Institutional accounts			(391	)			471				NM
High-net-worth accounts			469				156				201	%
Retail managed accounts			10				(131	)			NM
Total separate account net inflows			88				496				-82	%
Total net (outflows) inflows		$	(1,120	)		$	1,848				NM