Edgar Filing: EATON VANCE CORP

Investments valued using unadjusted quoted market prices in active markets for identical assets at the reporting date. Assets classified as Level 1 include debt and equity securities held in the portfolio of consolidated funds and separate accounts that are classified as trading and investments in sponsored mutual funds that are classified as available-for-sale.

Investments valued 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 within country specific market proxies. Investments in this category include 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.

Investments valued using unobservable inputs that are supported by little or no market activity. Level 3 valuations are derived primarily from model-based valuation techniques that require significant management judgment or estimation based on assumptions that the Company believes market participants would use in pricing the asset or liability.

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 April 30, 2010
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
(State or other jurisdiction of
incorporation or organization)

04-2718215
(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 o 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

Accelerated filer

Non-accelerated filer

o (Do not check if smaller reporting company)

Smaller reporting company

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 April 30, 2010:
        Voting Common Stock – 417,863 shares
        Non-Voting Common Stock – 118,143,629 shares

Eaton Vance Corp.
Form 10-Q
As of April 30, 2010 and for the
Three and Six Month Periods Ended April 30, 2010

Table of Contents

Required Information
Part I	Financial Information
Item 1.	Consolidated Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	57
Item 4.	Controls and Procedures	57

Part II	Other Information
Item 1.	Legal Proceedings	57
Item 1A.	Risk Factors	57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 6.	Exhibits	60

Signatures		61

Part I — Financial Information

Item 1. Consolidated Financial Statements

Eaton Vance Corp.
Consolidated Balance Sheets (unaudited)

(in thousands)	April 30, 2010		October 31, 2009
Assets

Current Assets:
Cash and cash equivalents	$	323,715	$	310,586
Short-term investments		—		49,924
Investments advisory fees and other receivables		118,048		107,975
Note receivable from affiliate		2,500		—
Other current assets		40,823		19,677

Total current assets		485,086		488,162

Other Assets:
Deferred sales commissions		51,469		51,966
Goodwill		135,786		135,786
Other intangible assets, net		76,926		80,834
Long-term investments		191,206		133,536
Deferred income taxes		112,447		97,044
Equipment and leasehold improvements, net		73,022		75,201
Note receivable from affiliate		—		8,000
Other assets		4,313		4,538

Total other assets		645,169		586,905

Total assets	$	1,130,255	$	1,075,067

See notes to Consolidated Financial Statements.

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

(in thousands, except share figures)	April 30, 2010			October 31, 2009
Liabilities, Temporary Equity and Permanent Equity

Current Liabilities:
Accrued Compensation	$	60,138		$	85,273
Accounts payable and accrued expenses		58,003			51,881
Dividend payable		18,976			18,812
Deferred income taxes		19,757			15,580
Contingent purchase price liability		5,079			13,876
Other current liabilities		3,873			2,902

Total current liabilities		165,826			188,324

Long-Term Liabilities:
Long-term debt		500,000			500,000
Other long-term liabilities		44,170			35,812
Total long-term liabilities		544,170			535,812

Total liabilities		709,996			724,136

Commitments and contingencies (See Note 19)		—			—

Temporary Equity:
Redeemable non-controlling interests		54,841			43,871

Permanent Equity:
Voting Common Stock, par value $0.00390625 per share:
Authorized, 1,280,000 shares Issued and outstanding, 417,863 and 431,790 shares, respectively		2			2
Non-Voting Common Stock, par value $0.00390625 per share:
Authorized, 190,720,000 shares Issued and outstanding, 118,143,629 and 117,087,810 shares, respectively		461			457
Additional paid in capital		56,346			44,786
Notes receivable from stock option exercises		(2,558	)		(3,078	)
Accumulated other comprehensive loss		(576	)		(1,394	)
Retained earnings		311,327			266,196

Total Eaton Vance Corp. shareholders’ equity		365,002			306,969
Non-redeemable non-controlling interests		416			91
Total permanent equity		365,418			307,060

Total liabilities, temporary equity and permanent equity	$	1,130,255		$	1,075,067

See notes to Consolidated Financial Statements.

Eaton Vance Corp.
Consolidated Statements of Income (unaudited)

	Three Months Ended April 30,						Six Months Ended April 30,
(in thousands, except per share figures)	2010			2009			2010			2009
Revenue:
Investment advisory and administration fees	$	212,141		$	153,158		$	422,528		$	313,670
Distributions and underwriter fees		24,666			18,719			49,700			39,802
Service fees		34,453			25,641			68,443			53,241
Other revenue		1,693			871			4,317			1,147

Total revenue		272,953			198,389			544,988			407,860

Expenses:
Compensation of officers and employees		88,089			67,237			174,963			136,863
Distribution expense		30,598			21,451			59,709			43,507
Service fee expense		29,593			20,827			57,729			43,876
Amortization of deferred sales commissions		8,376			9,523			16,335			19,080
Fund expenses		5,103			4,384			9,396			9,416
Other expenses		30,105			29,844			58,420			57,996

Total expenses		191,864			153,266			376,552			310,738

Operating income		81,089			45,123			168,436			97,122

Other Income (Expense):
Interest income		716			828			1,486			2,099
Interest expense		(8,411	)		(8,407	)		(16,827	)		(16,823	)
Realized gains (losses) on investments		(251	)		(1,256	)		1,497			(2,386	)
Unrealized gains on investments		1,802			2,839			2,595			3,153
Foreign currency gains (losses)		200			(25	)		334			36
Impairment losses on investments		—			(1,162	)		—			(1,268	)

Income before income taxes and equity in net income (loss) of affiliates		75,145			37,940			157,521			81,933
Income taxes		(28,880	)		(10,866	)		(60,525	)		(28,326	)
Equity in net income (loss) of affiliates, net of tax		(281	)		(108	)		533			(1,341	)
Net income		45,984			26,966			97,529			52,266
Net income attributable to non-controlling interests		(9,984	)		(1,213	)		(15,287	)		(1,816	)
Net income attributable to Eaton Vance Corp. shareholders	$	36,000		$	25,753		$	82,242		$	50,450

Earnings Per Share:
Basic	$	0.30		$	0.22		$	0.69		$	0.43
Diluted	$	0.29		$	0.21		$	0.66		$	0.42

Weighted Average Shares Outstanding:
Basic		116,565			115,965			116,557			115,936
Diluted		123,515			119,432			123,218			119,075

Dividends Declared Per Share	$	0.160		$	0.155		$	0.320		$	0.310

See notes to Consolidated Financial Statements.

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

	Three Months Ended April 30,						Six Months Ended April 30,
(in thousands)	2010			2009			2010			2009
Net income	$	45,984		$	26,966		$	97,529		$	52,266

Other comprehensive income (loss):
Amortization of loss on derivative instrument, net of income tax expense of $40, $40, $79 and $79, respectively		72			73			144			145
Unrealized holding gains on investments, net of income tax expense of $953, $985, $644 and $54, respectively		1,535			1,689			926			308
Foreign currency translation adjustments, net of income tax benefit (expense) of $97, $(27), $164 and $133, respectively		(157	)		59			(252	)		(204	)

Total comprehensive income		47,434			28,787			98,347			52,515

Comprehensive income attributable to non-controlling interests		(9,984	)		(1,213	)		(15,287	)		(1,816	)

Total comprehensive income attributable to Eaton Vance Corp. shareholders	$	37,450		$	27,574		$	83,060		$	50,699

See notes to Consolidated Financial Statements.

Eaton Vance Corp.
Consolidated Statements of Shareholder’s Equity (unaudited)

	Permanent Equity
(in thousands, except per share data)	Voting Common Stock		Non-Voting Common Stock			Additional Paid-In Capital			Notes Receivable From Stock Option Exercises
Balance, November 1, 2009	$	2	$	457		$	44,786		$	(3,078	)
Net income		—		—			—			—
Other comprehensive income		—		—			—			—
Dividends declared ($0.32 per share)		—		—			—			—
Issuance of Non-Voting Common Stock:
On exercise of stock options		—		5			23,252			(491	)
Under employee stock purchase plan		—		—			1,992			—
Under employee incentive plan		—		—			1,729			—
Under restricted stock plan		—		4			—			—
Stock-based compensation		—		—			25,045			—
Tax benefit of stock option exercises		—		—			4,240			—
Repurchase of Voting Common Stock		—		—			(41	)		—
Repurchase of Non-Voting Common Stock		—		(5	)		(44,558	)		—
Principal repayments		—		—			—			1,011
Subscriptions (redemptions/distributions) of non-controlling interest holders		—		—			—			—
Deconsolidation		—		—			—			—
Reclass to temporary equity		—		—			—			—
Other changes in non-controlling interests		—		—			(99	)		—
Balance, April 30, 2010	$	2	$	461		$	56,346		$	(2,558	)

Balance, November 1, 2008	$	2	$	451		$	—		$	(4,704	)
Net income		—		—			—			—
Other comprehensive income		—		—			—			—
Dividends declared ($0.31 per share)		—		—			—			—
Issuance of Voting Common Stock		—		—			86			—
Issuance of Non-Voting Common Stock:
On exercise of stock options		—		1			5,801			(851	)
Under employee stock purchase plan		—		—			2,223			—
Under employee incentive plan		—		1			2,874			—
Under restricted stock plan		—		4			—			—
Stock-based compensation		—		—			20,565			—
Tax benefit of stock option exercises		—		—			8,626			—
Repurchase of Non-Voting Common Stock		—		(1	)		(7,651	)		—
Principal repayments		—		—			—			2,305
Subscriptions (redemptions/distributions) of non-controlling interest holders		—		—			—			—
Deconsolidation		—		—			—			—
Other changes in non-controlling interests		—		—			—			—
Balance, April 30, 2009	$	2	$	456		$	32,524		$	(3,250	)

See notes to Consolidated Financial Statements.

Eaton Vance Corp.
Consolidated Statements of Shareholder’s Equity (unaudited) (continued)

	Permanent Equity												Temporary Equity
(in thousands, except per share data)	Accumulated Other Comprehensive Loss			Retained Earnings			Non- Redeemable Non- Controlling Interests			Total Permanent Equity			Redeemable Non- Controlling Interests
Balance, November 1, 2009	$	(1,394	)	$	266,196		$	91		$	307,060		$	43,871
Net income		—			82,242			581			82,823			14,706
Other comprehensive income		818			—			—			818			—
Dividends declared ($0.32 per share)		—			(37,933	)		—			(37,933	)		—
Issuance of Non-Voting Common Stock:
On exercise of stock options		—			—			—			22,766			—
Under employee stock purchase plan		—			—			—			1,992			—
Under employee incentive plan		—			—			—			1,729			—
Under restricted stock plan		—			—			—			4			—
Stock-based compensation		—			—			—			25,045			—
Tax benefit of stock option exercises		—			—			—			4,240			—
Repurchase of Voting Common Stock		—			—			—			(41	)		—
Repurchase of Non-Voting Common Stock		—			—			—			(44,563	)		—
Principal repayments		—			—			—			1,011			—
Subscriptions (redemptions/distributions) of non-controlling interest holders		—			—			(251	)		(251	)		(2,601	)
Deconsolidation		—			—			—			—			(417	)
Reclass to temporary equity		—			—			(5	)		(5	)		5
Other changes in non-controlling interests		—			822			—			723			(723	)
Balance, April 30, 2010	$	(576	)	$	311,327		$	416		$	365,418		$	54,841

Balance, November 1, 2008	$	(5,135	)	$	187,904		$	—		$	178,518		$	72,137
Net income		—			50,450			25			50,475			1,791
Other comprehensive income		249			—			—			249			—
Dividends declared ($0.31 per share)		—			(36,271	)		—			(36,271	)		—
Issuance of Voting Common Stock		—			—			—			86			—
Issuance of Non-Voting Common Stock:
On exercise of stock options		—			—			—			4,951			—
Under employee stock purchase plan		—			—			—			2,223			—
Under employee incentive plan		—			—			—			2,875			—
Under restricted stock plan		—			—			—			4			—
Stock-based compensation		—			—			—			20,565			—
Tax benefit of stock option exercises		—			—			—			8,626			—
Repurchase of Non-Voting Common Stock		—			—			—			(7,652	)		—
Principal repayments		—			—			—			2,305			—
Subscriptions (redemptions/distributions) of non-controlling interest holders		—			—			—			—			(4,438	)
Deconsolidation		—			—			—			—			(4,461	)
Other changes in non-controlling interests		—			2,292			—			2,292			(2,292	)
Balance, April 30, 2009	$	(4,886	)	$	204,375		$	25		$	229,246		$	62,737

See notes to Consolidated Financial Statements.

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

	Six Months Ended April 30,
(in thousands)	2010			2009
Cash and cash equivalents, beginning of period	$	310,586		$	196,923

Cash Flows From Operating Activities:
Net income		97,529			52,266
Adjustments to reconcile net income attributable to net cash provided by operating activities:
(Gains) losses on investments		(5,728	)		549
Amortization of long-term investments		245			1,581
Equity in net (income) loss of affiliates		(861	)		2,091
Dividends received from affiliates		954			2,268
Amortization of debt issuance costs		507			456
Deferred income taxes		(11,789	)		(18,812	)
Stock-based compensation		25,045			20,677
Depreciation and other amortization		11,303			9,712
Amortization of deferred sales commissions		16,325			19,080
Payment of capitalized sales commissions		(18,379	)		(9,215	)
Contingent deferred sales charges received		2,547			4,761
Proceeds from the sale of trading investments		61,684			27,167
Purchase of trading investments		(52,457	)		(28,453	)
Changes in other assets and liabilities:
Investment advisory fees and other receivables		(8,943	)		19,784
Other current assets		(187	)		(702	)
Other assets		(68	)		(2	)
Accrued compensation		(25,081	)		(53,039	)
Accounts payable and accrued expenses		5,894			(8,320	)
Taxes payable — current		(12,944	)		(6,545	)
Other current liabilities		973			(519	)
Other long-term liabilities		192			7,001

Net cash provided by operating activities		86,761			41,786

Cash Flows From Investing Activities:
Additions to equipment and leasehold improvements		(5,614	)		(35,855	)
Net cash paid in acquisition		(8,797	)		(30,398	)
Payment received on note receivable to affiliate		5,500			—
Issuance of note receivable to affiliate		—			(5,000	)
Proceeds from the sale of available-for-sale investments and investments in affiliates		10,208			120,761
Purchase of available-for-sale investments and investments in affiliates		(21,208	)		(1,179	)

Net cash (used for) provided by investing activities		(19,911	)		48,329

See notes to Consolidated Financial Statements.

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

	Six Months Ended April 30,
(in thousands)	2010			2009
Cash Flows From Financing Activities:
Distributions to non-controlling interest holders		(4,969	)		(2,818	)
Excess tax benefit of stock option exercises		4,240			8,626
Proceeds from issuance of Voting Common Stock		—			86
Proceeds from issuance of Non-Voting Common Stock		26,491			10,053
Repurchase of Voting Common Stock		(41	)		—
Repurchase of Non-Voting Common Stock		(44,563	)		(7,652	)
Principal repayments on notes receivable from stock option exercises		1,011			2,305
Dividends paid		(37,770	)		(36,068	)
Proceeds from the issuance of mutual fund subsidiaries’ capital stock		2,136			2,034
Redemption of mutual fund subsidiaries’ capital stock		(19	)		(3,654	)

Net cash used for financing activities		(53,484	)		(27,088	)

Effect of currency rate changes on cash and cash equivalents		(237	)		(38	)

Net increase in cash and cash equivalents		13,129			62,989

Cash and cash equivalents, end of period	$	323,715		$	259,912

Supplemental Cash Flow Information:
Interest paid	$	16,320		$	16,321
Income taxes paid	$	81,335		$	46,621

Supplemental Non-Cash Flow Information:
Supplemental Non-Cash Flow Information from Investing Activities:
Decrease in investments due to net deconsolidations of sponsored investment funds	$	(262	)	$	(4,442	)
Decrease in non-controlling interests due to net deconsolidations of sponsored investment funds	$	(417	)	$	(4,461	)
Increase in fixed assets due to non-cash fixed asset additions	$	2,861		$	6,249

Supplemental Non-Cash Flow Information from Financing Activities:
Exercise of stock options through issuance of notes receivable	$	491		$	851

See notes to Consolidated Financial Statements.

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 and the Company’s current report on Form 8-K filed with the SEC on June 2, 2010, which updated the financial information in the Company’s annual report on Form 10-K for the year ended October 31, 2009.

2. Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its controlled subsidiaries. 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). 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 entity (“VIE”) for which the Company is considered the primary beneficiary. The Company provides for non-controlling interests in consolidated subsidiaries for which the Company’s ownership is less than 100 percent. All intercompany accounts and transactions have been eliminated.

A VIE is an entity in which either (a) the equity investment at risk is not sufficient to permit the entity to finance its own activities without additional financial support or (b) the voting rights of the equity investors are not proportional to their obligations to absorb the expected losses of the entity or their rights to receive the expected residual returns of the entity. The Company evaluates whether entities in which it has an interest are VIEs and whether the Company qualifies as the primary beneficiary of any VIEs identified in its analysis.

3. Revisions to Amounts Previously Presented

Certain prior year amounts have been revised or reclassified to conform to the current year presentation, including those required by the retrospective adoption of new authoritative accounting guidance related to earnings per share and non-controlling interests in subsidiaries. Cash flow activity for the six months ended April 30, 2009 has been corrected to reclassify activity related to the note receivable from affiliate from a financing activity to an investing activity. This resulted in revised cash provided by investing activities of $48.3 million ($53.3 million previously reported) and revised cash used for financing activities of $27.1 million ($32.1 million previously reported).

4. Adoption of New Accounting Standards

The Company adopted the following accounting standards in the six months ended April 30, 2010:

Earnings per Share
On November 1, 2009, the Company adopted a new accounting standard relating to the computation of earnings per share. The standard specified that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in

the computation of earnings per share pursuant to the two-class method. The adoption of this new accounting standard reduced diluted earnings per share for the three months ended April 30, 2009 by $0.01 from the $0.22 that was previously reported to $0.21 and reduced basic earnings per share for the six months ended April 30, 2009 by $0.01 from the $0.44 that was previously reported to $0.43.

Non-controlling Interests
A new accounting standard on non-controlling interests in consolidated financial statements was adopted in the first quarter of 2010. The new accounting standard is intended to establish accounting and reporting standards for non-controlling interests in subsidiaries and for the deconsolidation of subsidiaries. The new accounting standard clarifies that a non-controlling interest in a subsidiary is an ownership interest in that entity that should be reported as equity, separate from the parent’s equity, in the consolidated financial statements. The Company adopted the new accounting standard on November 1, 2009, which required retrospective adoption of the presentation and disclosure requirements for existing non-controlling interests. All other requirements of the new accounting standard were applied prospectively, including the provision that requires that the Company charge or credit the statement of income for an amount equal to the change in amounts redeemable by the non-controlling interest for something other than fair value.

At October 31, 2009, the Company determined that $43.9 million of non-controlling interests related to certain majority-owned subsidiaries were redeemable for cash, resulting in temporary equity classification on the Company’s Consolidated Balance Sheets.

5. Future Accounting Pronouncements

VIEs
In June 2009, the FASB issued literature introducing a new consolidation model. This new literature prescribes how enterprises account for and disclose their involvement with VIEs and other entities whose equity at risk is insufficient or lacks certain characteristics. This new accounting changes how an entity determines whether it is the primary beneficiary of a VIE and whether that VIE should be consolidated and requires additional disclosures. As a result, the Company must comprehensively review its involvements with VIEs and potential VIEs to determine the effect on its Consolidated Financial Statements and related disclosures. The new consolidation standard is effective for the Company’s fiscal year that begins on November 1, 2010 and for interim periods within the first annual reporting period. Earlier application is prohibited. In February 2010, the FASB issued an amendment to this standard. For certain investments held by a reporting entity, the amendment indefinitely defers a requirement to perform a qualitative analysis to determine whether its variable interests give it a controlling financial interest in a VIE. This deferral generally applies to the reporting entities interests in entities that have the attributes of an investment company or that apply the specialized accounting guidance for investment companies. The Company is currently evaluating the potential impact on its Consolidated Financial Statements.

Derivatives
In March 2010, the FASB amended its derivatives and hedging guidance to clarify the embedded credit derivative scope exception guidance. The amended guidance clarifies that the scope exception applies to contracts that contain an embedded credit derivative that is only in the form of subordination of one financial instrument to the other. As a result, the embedded credit derivative feature within contracts may need to be separately accounted for. The amended guidance is effective at the beginning of the first fiscal quarter beginning after June 15, 2010. The Company is currently evaluating the potential impact on its Consolidated Financial Statements.

6. Acquisitions

On December 31, 2008, the Company acquired the Tax Advantaged Bond Strategies (“TABS”) business of M.D. Sass Investors Services (“MD Sass”), a privately held investment manager based in New York, New York. In conjunction with the purchase, the Company recorded $44.8 million of intangible assets representing client relationship intangible assets acquired, which will be amortized over a 10 year period, and a contingent purchase price liability of $13.9 million, which represents the difference between net cash paid at acquisition and the fair value of assets acquired and liabilities assumed. Proforma results of operations have not been presented because the results of operations would not have been materially different from those reported in the accompanying Consolidated Statements of Income.

During the second quarter of fiscal 2010, the Company made its first contingent payment of $8.8 million to the selling group based upon prescribed multiples of TABS revenue for the twelve months ended December 31, 2009. The payment reduced the contingent purchase price liability. The Company will be obligated to make six additional annual contingent payments to the selling group based on prescribed multiples of TABS’s revenue for the twelve months ending December 31, 2010, 2011, 2012, 2014, 2015 and 2016. All future payments will be in cash. These payments are not contingent upon any member of the selling group remaining an employee of the Company.

7. Other Intangible Assets

The following is a summary of other intangible assets at April 30, 2010 and October 31, 2009:

April 30, 2010

(dollars in thousands)	Weighted- average amortization period (in years)		Gross carrying amount		Accumulated amortization			Net carrying amount
Amortizing intangible assets:
Client relationships acquired		9.3	$	109,177	$	(38,959	)	$	70,218

Non-amortizing intangible assets:
Mutual fund management contract acquired				6,708		—			6,708
Total			$	115,885	$	(38,959	)	$	76,926

October 31, 2009

(dollars in thousands)	Weighted- average amortization period (in years)		Gross carrying amount		Accumulated amortization			Net carrying amount
Amortizing intangible assets:
Client relationships acquired		9.8	$	109,177	$	(35,051	)	$	74,126

Non-amortizing intangible assets:
Mutual fund management contract acquired				6,708		—			6,708
Total			$	115,885	$	(35,051	)	$	80,834

Amortization expense was $2.0 million and $1.9 million for the three months ended April 30, 2010 and 2009; respectively and $3.9 million and $3.1 million for the six months ended April 30, 2010 and 2009, respectively.

8. Investments

The following is a summary of investments at April 30, 2010 and October 31, 2009:

(in thousands)	April 30, 2010		October 31, 2009
Short-term investments:
Consolidated funds:
Commercial paper	$	—	$	20,800
Debt securities		—		29,124
Total short-term investments	$	—	$	49,924

(in thousands)	April 30, 2010		October 31, 2009
Long-term investments:
Consolidated funds:
Debt securities	$	15,222	$	15,129
Equity securities		49,529		11,913
Separately managed accounts:
Debt securities		29,880		31,797
Equity securities		12,682		10,450
Corporate bonds		4,925		—
Sponsored funds		27,416		32,405
Collateralized debt obligation entities		1,821		2,066
Investments in affiliates		42,224		22,267
Other investments		7,507		7,509
Total long-term investments	$	191,206	$	133,536

Investments classified as trading

The following is a summary of the cost and fair value of investments held in the portfolios of consolidated funds, separately managed accounts and corporate bonds held by the Company classified as trading at April 30, 2010 and October 31, 2009:

April 30, 2010
(in thousands)	Cost		Fair Value
Long-term investments:
Debt securities	$	45,100	$	50,027
Equity securities		59,772		62,211
Total long-term investments	$	104,872	$	112,238

October 31, 2009
(in thousands)	Cost		Fair Value
Short-term investments:
Commercial paper	$	20,800	$	20,800
Debt securities		29,394		29,124
Total short-term investments	$	50,194	$	49,924

Long-term investments:
Debt securities	$	43,370	$	46,926
Equity securities		21,305		22,363
Total long-term investments	$	64,675	$	69,289

Gross unrealized gains and losses on debt and equity securities held in the portfolios of consolidated sponsored funds have been reported in income as a component of other revenue. Gross unrealized gains and losses on debt and equity securities held in the portfolios of the Company’s separately managed accounts have been reported in income as a component of unrealized gains on investments (below operating income). Gross unrealized gains and losses on corporate bonds held by the Company have been reported in income as a component of unrealized gains on investments (below operating income). The specific identified cost method is used to determine the realized gain or loss on all trading securities sold.

The Company recognized $0.7 million of realized gains and $1.3 million of realized losses related to investments classified as trading for the three months ended April 30, 2010. The Company recognized $1.4 million of realized gains and $1.6 million of realized losses related to investments classified as trading for the six months ended April 30, 2010. The Company had $8.6 million of unrealized gains and $1.2 million of unrealized losses related to trading securities held at April 30, 2010.

During the second quarter of fiscal 2010, the Company deconsolidated its short-term investment in the Eaton Vance Short-Term Income Fund (“EVSI”) upon the closing of the fund. The underlying portfolio holdings were transferred to the Company as a redemption-in-kind.

Investments classified as available-for-sale

The following is a summary of the cost and fair value of investments classified as available-for-sale at April 30, 2010 and October 31, 2009:

April 30, 2010			Gross Unrealized
(in thousands)	Cost		Gains		Losses			Fair Value
Long-term investments:
Sponsored funds	$	23,855	$	3,571	$	(10	)	$	27,416
Total long-term investments	$	23,855	$	3,571	$	(10	)	$	27,416

October 31, 2009			Gross Unrealized
(in thousands)	Cost		Gains		Losses			Fair Value
Long-term investments:
Sponsored funds	$	30,414	$	2,073	$	(82	)	$	32,405
Total long-term investments	$	30,414	$	2,073	$	(82	)	$	32,405

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 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 has reviewed the gross unrealized losses of $10,000 as of April 30, 2010 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 $0.2 million at April 30, 2010.

The following is a summary of the Company’s realized gains and losses upon disposition of sponsored funds and certain equity securities classified as available-for-sale for the three and six months ended April 30, 2010 and 2009. The specific identified cost method is used to determine the realized gain or loss on the sale of shares of sponsored funds.

	Three Months Ended April 30,					Six Months Ended April 30,
(in thousands)	2010			2009		2010			2009
Gains	$	57		$	—	$	2,082		$	—
Losses		(40	)		—		(41	)		(233	)
Net realized gains (losses)	$	17		$	—	$	2,041		$	(233	)

Investments in collateralized debt obligation entities

The Company did not recognize any impairment losses in fiscal 2010. The Company recognized impairment losses totaling $1.2 million in the second quarter of fiscal 2009, representing a loss related to a cash instrument collateralized debt obligation (“CDO”) entity and $1.3 million in the first six months of fiscal 2009, representing losses relating to a synthetic CDO and a cash instrument CDO entity. The impairment loss associated with the synthetic CDO entity, which reduced the Company’s investment in that entity to zero, resulted from a decrease in the estimated cash flows from the entity due to higher realized default rates and lower recovery rates on the reference securities underlying the synthetic CDO entity’s portfolio of credit default swaps. The impairment loss associated with the cash instrument CDO entity resulted from a decrease in the estimated future cash flows from the CDO entity due to an increase in the default rate of the underlying loan portfolio.

Investments in affiliates

The Company has a 20 percent equity interest in Lloyd George Management (BVI) Limited (“LGM”), an independent investment management company based in Hong Kong that primarily manages emerging market equity funds and separate accounts, including several funds sponsored by the Company. The Company’s investment in LGM was $7.6 million and $8.3 million at April 30, 2010 and October 31, 2009, respectively.

The Company has a 7 percent equity interest in a private equity partnership that invests in companies in the financial services industry. The Company’s investment in the partnership was $13.1 million and $12.5 million at April 30, 2010 and October 31, 2009, respectively.

The Company has a 49.7 percent equity interest in Eaton Vance Emerging Markets Local Income Fund. The Company’s $21.0 million investment in the fund at April 30, 2010, was equal to its share of the underlying assets.

The Company had a 27 percent interest in Eaton Vance Enhanced Equity Option Income Fund as of October 31, 2009. As of April 30, 2010, the Company’s interest in this fund had dropped below 20 percent and the Company’s remaining investment is now classified as available-for-sale.

During the second quarter of fiscal 2010, the Company deconsolidated its investment in Eaton Vance Real Estate Fund when its ownership percentage fell below 50 percent. As of April 30, 2010, the Company’s interest in the fund had dropped to 30 percent and the investment is now accounted for under the equity method of accounting. The Company’s $0.5 million investment in the fund at April 30, 2010, was equal to its share of the underlying assets.

The Company reviews its equity method investments annually for impairment in the fourth quarter of each fiscal year.

Other investments

Included in other investments are certain investments carried at cost totaling $7.5 million for the periods ended April 30, 2010 and October 31, 2009, respectively. In the third quarter of fiscal 2009, the Company purchased a non-controlling capital interest in Atlanta Capital Management Holdings LLC (“ACM Holdings”), a partnership that owns the non-controlling interests of Atlanta Capital Management Company, LLC (“Atlanta Capital”), for $6.6 million. The Company’s interest in ACM Holdings is non-voting and entitles the Company to receive $6.6 million when the put or call options for the non-controlling interests of Atlanta Capital are exercised. The Company’s investment in ACM Holdings is included as a component of long-term investments in the Company’s Consolidated Balance Sheet at April 30, 2010. Management believes that the fair value of these investments approximates their carrying value.

Fair Value Measurements

Accounting standards defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a hierarchy that prioritizes inputs to valuation techniques to measure fair value. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value and gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

The Company recognizes transfers between levels at the end of each quarter. There were no material transfers between Level 1 and Level 2 during the six months ended April 30, 2010.

The following table summarizes the assets measured at fair value on a recurring basis and their assigned levels within the hierarchy at April 30, 2010.

(in thousands)	Level 1		Level 2		Level 3		Other Assets Not Held at Fair Value ⁽¹⁾		Total
Cash equivalents	$	19,145	$	145,550	$	—	$	—	$	164,695
Total cash equivalents	$	19,145	$	145,550	$	—	$	—	$	164,695

Long-term investments:
Consolidated funds:
Debt securities	$	9,726	$	5,496	$	—	$	—	$	15,222
Equity securities		18,932		30,597		—		—		49,529
Separately managed accounts:
Debt securities		12,964		16,916		—		—		29,880
Equity securities		12,145		537		—		—		12,682
Corporate bonds		—		4,925		—		—		4,925
Sponsored funds		24,158		3,258		—		—		27,416
Collateralized debt obligation entities		—		—		—		1,821		1,821
Investments in affiliates		—		—		—		42,224		42,224
Other investments		—		37		—		7,470		7,507
Total long-term investments	$	77,925	$	61,766	$	—	$	51,515	$	191,206

⁽¹⁾

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

The following table summarizes the assets measured at fair value on a recurring basis and their assigned levels within the hierarchy at October 31, 2009:

(in thousands)	Level 1		Level 2		Level 3		Other Assets Not Held at Fair Value ⁽¹⁾		Total
Cash equivalents	$	22,956	$	184,709	$	—	$	—	$	207,665
Total cash equivalents	$	22,956	$	184,709	$	—	$	—	$	207,665

Short-term investments:
Consolidated funds:
Commercial paper	$	—	$	20,800	$	—	$	—	$	20,800
Debt securities		—		29,124		—		—		29,124
Total short-term investments	$	—	$	49,924	$	—	$	—	$	49,924

(in thousands)	Level 1		Level 2		Level 3		Other Assets Not Held at Fair Value ⁽¹⁾		Total
Long-term investments:
Consolidated funds:
Debt securities	$	15,129	$	—	$	—	$	—	$	15,129
Equity securities		11,913		—		—		—		11,913
Separately managed accounts:
Debt securities		11,007		20,790		—		—		31,797
Equity securities		10,450		—		—		—		10,450
Sponsored funds		29,643		2,762		—		—		32,405
Collateralized debt obligation entities		—		—		—		1,338		1,338
Investments in affiliates		—		—		—		22,267		22,267
Other investments		—		38		—		7,471		7,509
Total long-term investments	$	78,142	$	23,590	$	—	$	31,076	$	132,808

⁽¹⁾

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

The following table summarizes the assets measured at fair value on a non-recurring basis at October 31, 2009:

(in thousands)	Total Level 3
Collateralized debt obligation entities	$	728
Total	$	728

While 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.

The Company had investments in three CDO entities totaling $1.8 million at April 30, 2010. The Company’s investments in CDO entities are 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.

10.

Fair Value Measurements of Other Financial Instruments

The following is a summary of the carrying amounts and estimated fair values of the Company’s other financial instruments at April 30, 2010 and October 31, 2009:

	April 30, 2010				October 31, 2009
(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Other investments	$	7,507	$	7,507	$	7,509	$	7,509
Note receivable from affiliate	$	2,500	$	2,500	$	8,000	$	8,000
Notes receivable from stock option exercises	$	2,588	$	2,588	$	3,078	$	3,078
Long-term debt	$	500,000	$	556,325	$	500,000	$	530,375

For fair value purposes the carrying value of the other investments, note receivable from affiliate and notes receivable from stock option exercises approximates fair value. The carrying value of the long-term debt has been valued utilizing publicly available market prices, which are considered Level 1 inputs.

11.

Variable Interest Entities

Investments in VIEs That Are Not Consolidated
In the normal course of business, the Company maintains investments in sponsored CDO entities and privately offered equity funds that are considered VIEs. In most instances, these variable interests 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.

As a matter of course, the Company evaluates its investment in each CDO entity and privately offered equity fund that qualifies as a VIE at inception to determine whether or not it qualifies as the primary beneficiary of the entity based on its obligation to absorb a majority of the expected losses or its right to receive the majority of the residual returns. The Company reevaluates its investment in each entity as facts and circumstances indicate that either the obligation to absorb these expected losses or the right to receive these expected residual returns has been reallocated between the existing primary beneficiary and other unrelated parties. At April 30, 2010, the Company did not qualify as the primary beneficiary of any CDO entity or privately offered equity fund in which it invests.

The Company managed CDO entities with total assets of $2.3 billion and $2.5 billion as of April 30, 2010 and October 31, 2009, respectively, on which the Company earns a management fee. The Company held investments in three of these entities totaling $1.8 million and $2.1 million on both April 30, 2010 and October 31, 2009. In fiscal 2010, the Company did not provide any financial or other support that it was not previously contractually required to provide. The Company’s risk of loss with respect to managed CDO entities remains limited to the $1.8 million carrying value of the investments on its Consolidated Balance Sheet at April 30, 2010. There are no arrangements that could require the Company to provide additional financial support to any of the CDO entities in which it invests.

The Company’s investments in CDO entities are carried at amortized cost and collectively disclosed as a component of long-term investments in Note 8. Income from these entities is recorded as a component of interest income based upon projected investment yields.

The Company had investments in 15 privately offered equity funds totaling $3.3 million on April 30, 2010 and investments in 16 privately offered equity funds totaling $2.8 million on October 31, 2009. Assets under management in these entities totaled $11.2 billion and $11.6 billion on April 30, 2010 and October 31, 2009, respectively. In the fourth quarter of fiscal 2008, the Company, as lender, entered into a subordinated term note agreement (the “Note”) with one of the privately offered equity funds in which it invests as further described in Note 12. The Company’s risk of loss in the privately offered equity funds was $5.8 million and $10.8 million on April 30, 2010 and October 31, 2009, respectively, representing the carrying value of the investments held on its Consolidated Balance Sheet plus the stated amount of the Note on each balance sheet date. There are no additional arrangements that could require the Company to provide additional financial support to any of the privately offered equity funds in which it invests.

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 long-term investments in Note 8. 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). The Note is classified in the Company’s Consolidated Balance Sheet as a component of total current assets.

Investments in VIEs That Are Consolidated
Parametric Portfolio Associates LLC (“Parametric Portfolio Associates”) maintains a 40 percent economic interest in Parametric Risk Advisors LLC (“Parametric Risk Advisors”), which meets the definition of a VIE. The Company made the determination at the date of acquisition that Parametric Portfolio Associates is the primary beneficiary of the VIE based on the fact that Parametric Portfolio Associates is committed to providing ongoing working capital and infrastructure support and is obligated to absorb all of the losses of Parametric Risk Advisors.

Parametric Risk Advisors had assets of $3.0 million and $2.7 million on April 30, 2010 and October 31, 2009, respectively, consisting primarily of cash and cash equivalents and investment advisory fees receivable, and current liabilities of $1.1 million and $0.9 million on April 30, 2010 and October 31, 2009, 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 its Consolidated Financial Statements at either balance sheet date.

12.

Note Receivable from Affiliate

In October 2008, the Company, as lender, entered into a $10.0 million subordinated term note agreement (the “Note”) with a sponsored privately offered equity fund. The Note earns daily interest based on the fund’s cost of borrowing under its commercial paper financing facility. Upon expiration of the Note on January 16, 2009, it was extended to December 17, 2009 and increased to $15.0 million. During the first quarter of fiscal 2010 the Note was extended to December 17, 2010. Subject to certain conditions, the fund may prepay the Note in whole or in part, at any time, without premium or penalty. During fiscal 2009, the sponsored privately offered equity fund prepaid $7.0 million of the Note. During fiscal 2010, the sponsored privately offered equity fund prepaid $5.5 million of the Note. The Note had an outstanding balance of $2.5 million as of April 30, 2010, and is classified in the Company’s Consolidated Balance Sheet as a component of total current assets.

13.

Non-controlling Interests

Effective November 1, 2009, the Company adopted new accounting standards related to non-controlling interests and redeemable non-controlling interests, and retrospectively applied such provisions to reported prior periods. Non-redeemable non-controlling interests have been reclassified to permanent equity with no change in the measurement principles previously applied to these interests. Redeemable non-controlling interests remain classified in mezzanine equity as temporary equity and are measured at redemption value as of the balance sheet date. Presentation of net income in the Consolidated Statements of Income has been changed to reflect net

income with and without consideration of the non-controlling interests. Earnings per share continue to be calculated after consideration of the net income attributable to non-controlling interests.

Non-Redeemable Non-controlling Interests
Non-redeemable non-controlling interests consist entirely of interests granted to employees of the Company’s majority-owned subsidiaries under subsidiary-specific long-term equity plans. These grants become subject to put rights upon vesting and will be reclassified to temporary equity as vesting occurs.

Redeemable Non-controlling Interests
Redeemable non-controlling interests consist of interests in the Company’s majority-owned subsidiaries, consolidated funds and interests granted to employees of the Company’s majority-owned subsidiaries under subsidiary-specific long-term equity plans. These interests are currently redeemable to the Company or will become redeemable at certain future dates.

The interests in the Company’s majority owned subsidiaries are puttable at established multiples of earnings before interest and taxes and, as such, are considered redeemable at other than fair value. The recognition of the redemption value of these redeemable non-controlling interests was effected through an increase to redeemable non-controlling interests and a charge to net income attributable to non-controlling interests. Future changes in the redemption value of these interests will be recognized as increases or decreases to net income attributable to non-controlling interests.

The interests in the Company’s consolidated funds and interests granted to employees of the Company’s majority-owned subsidiaries under subsidiary-specific long-term equity plans are considered redeemable at fair value. The recognition of the redemption value of these redeemable non-controlling interests was effected through an increase to redeemable non-controlling interests and a charge to additional paid in capital. Future changes in the redemption value of these interests will be recognized as increases or decreases to additional paid in capital.

14.

Stock-Based Compensation Plans

The Company’s stock-based compensation plans include the 2008 Omnibus Incentive Plan, as amended and restated (the “2008 Plan”), the Employee Stock Purchase Plan, the Incentive Plan — Stock Alternative, the Atlanta Capital Management Company, LLC Long-term Equity Incentive Plan (the “ACM Plan”) and the Parametric Portfolio Associates LLC, Long-term Equity Incentive Plan (the “PPA Plan”). The Company recognized total compensation cost related to its plans as follows:

	Three Months Ended April 30,				Six Months Ended April 30,
(in thousands)	2010		2009		2010		2009
2008 Plan:
Stock options	$	8,141	$	8,127	$	16,674	$	17,331
Restricted shares		3,338		1,462		7,224		2,889
Phantom stock units		141		43		217		111
Employee Stock Purchase Plan		—		—		360		246
Incentive Plan — Stock Alternative		—		—		223		—
ACM Plan		102		50		204		100
PPA Plan		180		—		360		—
Total stock-based compensation expense	$	11,902	$	9,682	$	25,262	$	20,677

The total income tax benefit recognized for stock-based compensation arrangements was $3.9 million and $2.7 million for the three months ended April 30, 2010 and 2009, respectively and $8.1 million and $6.0 million for the six months ended April 30, 2010 and 2009, 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. Options to purchase Non-Voting Common Stock granted under the 2008 Plan expire ten years from the date of grant, vest over five years and may not be granted with an exercise price that is less than the fair market value of the stock as of the close of business on the date of grant. Restricted shares of Non-Voting Common Stock granted under the 2008 Plan vest over five years and may be subject to performance goals. Phantom stock units granted under the 2008 Plan vest over two years. The 2008 Plan contains change in control provisions that may accelerate the vesting of awards. A total of 9.0 million shares of Non-Voting Common Stock have been reserved for issuance under the 2008 Plan. Through April 30, 2010, 2.0 million restricted shares and options to purchase 5.7 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 six months ended April 30, 2010 and 2009 using the Black-Scholes option pricing model were as follows:

	2010		2009
Weighted-average grant date fair value of options granted	$	8.84	$	6.72

*Assumptions:*
Dividend yield		1.8% to 2.3%		2.3% to 3.1%
Volatility		33%		32% to 34%
Risk-free interest rate		3.3% to 3.6%		2.9% to 4.6%
Expected life of options		7.3 years		7.4 years

Stock option transactions under the 2008 Plan and predecessor plans for the six months ended April 30, 2010 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		29,717		$	23.89
Granted		2,594			28.24
Exercised		(1,334	)		17.43
Forfeited/expired		(61	)		31.50
Options outstanding, end of period		30,916		$	24.52		5.3	$	373,290
Options exercisable, end of period		20,320		$	21.05		4.0	$	299,397
Vested or expected to vest		30,492		$	24.42		5.3	$	370,334

The Company received $22.8 million and $5.0 million related to the exercise of options for the six months ended April 30, 2010 and 2009, respectively. Options exercised represent newly issued shares. The total intrinsic value of options exercised during the six months ended April 30, 2010 and 2009 was $20.3 million and $3.6 million, respectively. The total fair value of options that vested during the six months ended April 30, 2010 was $30.1 million.

As of April 30, 2010, there was $62.5 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 2.7 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 April 30, 2010, there was $41.3 million of compensation cost related to unvested awards not yet recognized. That cost is expected to be recognized over a weighted-average period of 3.7 years.

A summary of the Company’s restricted share activity for the six months ended April 30, 2010 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		1,008		$	22.87
Granted		996			28.30
Vested		(158	)		23.80
Forfeited/expired		(11	)		24.83
Unvested, end of period		1,835		$	25.72

Phantom Stock Units
In the six months ended April 30, 2010, 9,076 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 April 30, 2010, there was $0.4 million of compensation cost related to unvested awards not yet recognized. That cost is expected to be recognized over a weighted-average period of 1.2 years.

15.

Common Stock Repurchases

The Company’s current share repurchase program was announced on January 15, 2010. The Board authorized management to repurchase 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 Company’s stock repurchase program is not subject to an expiration date.

In the first six months of fiscal 2010, the Company purchased approximately 0.5 million shares of its Non-Voting Common Stock under a previous repurchase authorization and approximately 0.9 million shares of its Non-Voting Common Stock under the current repurchase authorization. Approximately 7.1 million additional shares may be repurchased under the current authorization.

16.

Income Taxes

The provision for income taxes for the three months ended April 30, 2010 and 2009 was $28.9 million and $10.9 million, or 38.4 percent and 28.6 percent of pre-tax income, respectively. The provision for income taxes for the six months ended April 30, 2010 and 2009 was $60.5 million and $28.3 million, or 38.4 percent and 34.6 percent of pre-tax income, respectively.

The provision for income taxes in the six months ended April 30, 2010 and 2009 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 is state income taxes. In the second quarter of fiscal 2009, the Company executed a state tax voluntary disclosure agreement that resulted in a net reduction in income tax expense in the amount of $3.4 million.

The Company’s net deferred tax asset is primarily comprised of deferred tax assets related to future income deductions attributable to stock-based compensation and certain closed-end fund expenses, partially offset by deferred tax liabilities related to deferred sales commissions, a change in accounting method filed with the IRS in December 2007 and differences between the book and tax bases of goodwill and intangibles that are amortizable for tax.

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 is no valuation allowance recorded as of April 30, 2010 or 2009.

17.

Earnings per Share

Effective November 1, 2009, the Company retroactively adopted a new accounting standard that modifies the Company’s earnings per share calculations to recognize outstanding restricted stock, on which the Company pays non-forfeitable dividends, as if they were a separate class of stock. Basic earnings per share is computed on the basis of the weighted-average number of shares of common stock outstanding during the period. Earnings per diluted share is computed on the basis of the weighted-average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the two-class method. Unvested restricted stock awards are not included as incremental shares in the diluted earnings per share calculation.

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 April 30,				Six Months Ended April 30,
(in thousands, except per share data)	2010		2009		2010		2009
Net income allocated to:
Common shares	$	35,443	$	25,527	$	80,966	$	50,005
Participating restricted shares		557		226		1,276		445
Total net income attributable to Eaton Vance Corp. shareholders	$	36,000	$	25,753	$	82,242	$	50,450
Weighted-average shares outstanding — basic		116,565		115,965		116,557		115,936
Incremental common shares		6,950		3,467		6,661		3,139
Weighted-average shares outstanding — diluted		123,515		119,432		123,218		119,075
Earnings per common share attributable to Eaton Vance Corp. shareholders:
Basic	$	0.30	$	0.22	$	0.69	$	0.43
Diluted	$	0.29	$	0.21	$	0.66	$	0.42

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 8.7 million and 18.9 million for the three months ended April 30, 2010 and 2009, respectively and were approximately 9.1 million and 18.9 million for the six months ended April 30, 2010 and 2009, respectively.

18.

Derivative Financial Instruments

Derivative Financial Instruments Designated as Cash Flow Hedges
During the six months ended April 30, 2010 and 2009, the Company reclassified $0.2 million of the loss on the Treasury lock transaction into interest expense. At April 30, 2010, the remaining unamortized loss on this transaction was $3.3 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
During fiscal 2010, the Company entered into a series of futures contracts and forward foreign exchange contracts to hedge market price and currency risk exposure on its investments in consolidated funds seeded for new product development purposes.

At April 30, 2010, the Company had six outstanding futures contracts with five counterparties with an aggregate notional value of approximately $39.0 million.

At April 30, 2010, the Company had 16 outstanding forward foreign exchange contracts with 15 counterparties with an aggregate notional value of approximately $62.1 million.

The following table presents the fair value as of April 30, 2010, of derivative instruments not designated as hedging instruments:

	Assets		Liabilities
(in thousands)	Balance Sheet Location	Fair Value	Balance Sheet Location	Fair Value
Foreign exchange contracts	Investment advisory fees and other receivables	$ 335	Accounts payable and accrued expenses	$205

Futures contracts	Investment advisory fees and other receivables	861	Accounts payable and accrued expenses	375
Total		$1,196		$580

The following table presents the fair value as of October 31, 2009, of derivative instruments not designated as hedging instruments:

	Assets
(in thousands)	Balance Sheet Location	Fair Value
Futures contracts	Investment advisory fees and other receivables	$ 42
Total		$ 42

The following is a summary of the gains (losses) recognized in income for the three months and six months ended April 30, 2010 and 2009:

	Income Statement	Three Months Ended April 30,					Six Months Ended April 30,
(in thousands)	Location	2010			2009		2010			2009
Foreign exchange contracts	Other income/expense	$	130		$	—	$	130		$	—

Futures contracts	Other income/expense		(288	)		—		(696	)		—
Total		$	(158	)	$	—	$	(566	)	$	—

19.

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 that invests in companies in the financial services industry. The Company had invested $12.8 million of the total $15.0 million of committed capital at April 30, 2010.

20.

Subsequent Events

In May 2010, the Company exercised a call option requiring the non-controlling interest holders of Parametric Portfolio Associates to sell to the Company an additional interest in Parametric Portfolio Associates for approximately $9.0 million. The transaction settled on May 28, 2010 and increased the Company’s capital ownership interest from 92.4 percent to 94.3 percent.

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. Although we believe that the assumptions and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations reflected in such forward-looking statements will prove to have been correct or that we will take any actions that may presently be planned. Certain important factors that could cause actual results to differ materially from our expectations are disclosed in 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 a broadly diversified product line and a powerful marketing, distribution and customer service capability. Although we manage and distribute a wide range of 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, emerging market equity, floating-rate bank loan, municipal bond, investment grade, global and high-yield bond investing. Our diversified product line offers fund shareholders, retail managed account investors, institutional investors and high-net-worth clients a wide range of products and services designed and managed to generate attractive risk-adjusted returns over the long term. Our equity products encompass a diversity of investment objectives, risk profiles, income levels and geographic representation. Our income investment products cover a broad duration and credit quality range and encompass both taxable and tax-free investments. As of April 30, 2010, we had $176.2 billion in assets under management.

Our principal retail marketing strategy is to distribute funds and separately managed accounts through financial intermediaries in the advice channel. We have a broad reach in this marketplace, with distribution partners including national and regional broker/dealers, independent broker/dealers, independent financial advisory firms, banks and insurance companies. We support these distribution partners with a team of more than 130 sales professionals covering U.S. and international markets. Specialized sales and marketing professionals in our Wealth Management Solutions Group serve as a resource to financial advisors seeking to help high-net-worth clients address wealth management issues and support the marketing of our products and services tailored to this marketplace.

We also commit significant resources to serving institutional and high-net-worth clients who access investment 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. Specialized sales teams at our affiliates develop relationships in this market and deal directly with these clients.

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 under different assumptions or conditions.

Market Developments

Global equity and income markets experienced a sharp recovery from previously depressed levels in the twelve months ended April 30, 2010, with the S&P 500 Index increasing 36 percent.

Prevailing market conditions affect our 1) asset levels, 2) operating results and 3) the recoverability of our investments. Since financial markets bottomed in the first half of fiscal 2009, we have experienced significant improvement in our key financial metrics. Average assets under management have increased due to strong gross and net flows and positive market action, revenue has increased faster than our overall expenses, resulting in higher operating margins, and our balance sheet continues to provide financial flexibility as more fully described below.

Asset Levels
In the second quarter of fiscal 2010, revenue increased relative to the second quarter of fiscal 2009, primarily reflecting an increase in average managed assets due to improving equity markets and positive net flows. Average assets under management were $169.0 billion in the second quarter of fiscal 2010 compared to $121.0 billion in the second quarter of fiscal 2009. Significant growth in our separate account business, which earns lower fees on average than funds, contributed to a decline in our average effective fee rate to 64 basis points in the second quarter of fiscal 2010 from 65 basis points in the second quarter of fiscal 2009.

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 investors from doing so.

Operating Results
In the second quarter of fiscal 2010, our revenue increased by $74.6 million, or 38 percent, from the second quarter of fiscal 2009. Our operating expenses increased by $38.6 million, or 25 percent, in the same period, reflecting increases in expenses tied to asset levels that increase as assets under management increase, such as certain distribution and service fees, and increases in expenses that adjust to increases in operating earnings, such as the performance-based management incentives we accrue. Our sales-related expenses, including sales incentives, vary with the level of sales and the rate we pay to acquire those assets.

Recoverability of our Investments
We test our investments, including our investments in collateralized debt obligation (“CDO”) entities and investments classified as available-for-sale, for impairment on a quarterly basis. Our investments in CDO entities, which have been the subject of past impairments, totaled $1.8 million on April 30, 2010. We evaluate our investments in CDO entities and investments classified as available-for-sale for impairment using quantitative factors, including how long the investment has been in a net unrealized loss position, and qualitative factors, including the underlying credit quality of the issuer and our ability and intent to hold the investment. If markets deteriorate during the quarters ahead, our assessment of impairment on a quantitative basis may lead us to impair investments in CDO entities or investments classified as available-for-sale in future quarters that were in an unrealized loss position at April 30, 2010.

We test our investments in affiliates and goodwill in the fourth quarter of each fiscal year, or as facts and circumstances indicate that additional analysis is warranted. There have been no significant changes in financial condition in the second quarter of fiscal 2010 that would indicate that an impairment loss exists at April 30, 2010.

We periodically review our deferred sales commissions and identifiable intangible assets for impairment as events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. There have been no significant changes in financial condition in the second quarter of fiscal 2010 that would indicate that an impairment loss exists at April 30, 2010.

Assets under Management

Assets under management of $176.2 billion on April 30, 2010 were 39 percent higher than the $127.2 billion reported a year earlier, reflecting improving securities prices and strong open-end fund, high-net worth and institutional and retail managed account net inflows. Long-term fund net inflows of $6.8 billion over the last twelve months reflect $9.1 billion of open-end fund net inflows and $0.7 billion of closed-end fund net inflows offset by $3.0 billion of private fund net outflows. Outflows from private and closed-end funds include net reductions in fund leverage of $0.7 billion in the last twelve months. High-net-worth and institutional separate account net inflows were $8.1 billion and retail managed account net inflows were $2.7 billion. Market price appreciation, reflecting recovering equity and income markets, contributed $30.6 billion, while an increase in cash management assets contributed an additional $0.8 billion.

Ending Assets Under Management by Investment Category⁽¹⁾

	April 30,
(in millions)	2010		% of Total			2009		% of Total			% Change
Equity	$	110,186		62	%	$	76,975		60	%		43	%
Fixed income		46,853		27	%		35,586		28	%		32	%
Floating-rate bank loan		19,206		11	%		14,676		12	%		31	%
Total	$	176,245		100	%	$	127,237		100	%		39	%

⁽¹⁾

Includes funds and separate accounts.

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

Equity assets under management included $32.2 billion and $28.8 billion of equity funds managed for after-tax returns on April 30, 2010 and 2009, respectively. Fixed income assets included $16.7 billion and $14.6 billion of tax-exempt municipal bond fund assets and $1.5 billion and $0.8 billion of cash management fund assets on April 30, 2010 and 2009, respectively.

Long-Term Fund and Separate Account Net Flows

	Three Months Ended April 30,								Six Months Ended April 30,
(in millions)	2010			2009			% Change		2010			2009			% Change
Long-term funds:
Open-end funds	$	3,674		$	1,932			90%	$	6,166		$	4,478			38%
Closed-end funds		152			(124	)		NM⁽²⁾		131			(574	)		NM
Private funds		(633	)		(1,073	)		–41%		(1,647	)		(2,663	)		–38%
Total long-term fund net inflows		3,193			735			334%		4,650			1,241			275%
HNW and institutional accounts⁽¹⁾		1,518			(16	)		NM		2,538			2,336			9%
Retail managed accounts		543			69			687%		1,094			481			127%
Total separate account net inflows		2,061			53			NM		3,632			2,817			29%
Total net inflows	$	5,254		$	788			567%	$	8,282		$	4,058			104%

⁽¹⁾

High-net-worth (“HNW”)

⁽²⁾

Not meaningful (“NM”)

Net inflows totaled $5.3 billion in the second quarter of fiscal 2010 compared to $0.8 billion in the second quarter of fiscal 2009. Open-end fund net inflows of $3.7 billion and $1.9 billion in the second quarter of fiscal 2010 and 2009, respectively, reflect gross inflows of $8.2 billion and $5.5 billion, respectively, net of redemptions of $4.5 billion and $3.6 billion in the second quarter of fiscal 2010 and 2009, respectively. Closed-end fund net inflows in the second quarter of fiscal 2010 reflect $96.3 million in increased portfolio leverage and $55.0 million of reinvested dividends. Private funds, which include privately offered equity and bank loan funds as well as CDO entities, had net outflows of $0.6 billion and $1.1 billion in the second quarter of fiscal 2010 and 2009, respectively. Approximately $0.1 billion and $0.8 billion of private fund outflows in the second quarter of fiscal 2010 and 2009, respectively, can be attributed to reductions in portfolio leverage. Reductions in portfolio leverage in private funds reflect paydowns necessary to maintain minimum debt coverage ratios.

Separate account net inflows totaled $2.1 billion in the second quarter of fiscal 2010 compared to net inflows of $0.1 billion in the second quarter of fiscal 2009. High-net-worth and institutional account net inflows totaled $1.5 billion in the second quarter of fiscal 2010 compared to no net inflows in the second quarter of fiscal 2009, reflecting gross inflows of $3.6 billion and $1.6 billion in the second quarter of fiscal 2010 and 2009, respectively, net of redemptions of $2.1 billion and $1.6 billion, respectively. Retail managed account net inflows totaled $0.5 billion and $0.1 billion in the second quarter of fiscal 2010 and 2009, respectively, reflecting gross inflows of $1.8 billion and $2.2 billion, respectively, net of redemptions of $1.3 billion and $2.1 billion, respectively.

The following table summarizes the asset flows by investment category for the three and six months ended April 30, 2010 and 2009:

Asset Flows

	Three Months Ended April 30,								Six Months Ended April 30,
(in millions)	2010			2009			% Change		2010			2009			% Change
Equity fund assets — beginning	$	56,606		$	46,591			21%	$	54,779		$	51,956			5%
Sales/inflows		3,425			3,513			–3%		6,723			8,302			–19%
Redemptions/outflows		(2,985	)		(3,497	)		–15%		(6,165	)		(7,027	)		–12%
Exchanges		(12	)		(53	)		–77%		449			(87	)		NM
Market value change		3,963			583			580%		5,211			(6,007	)		NM
Equity fund assets — ending		60,997			47,137			29%		60,997			47,137			29%
Fixed income fund assets — beginning		26,697			19,851			34%		24,970			20,382			23%
Sales/inflows		3,827			1,388			176%		6,406			2,786			130%
Redemptions/outflows		(1,678	)		(1,051	)		60%		(3,155	)		(2,442	)		29%
Exchanges		(11	)		57			NM		110			86			28%
Market value change		548			1,006			–46%		1,052			439			140%
Fixed income fund assets — ending		29,383			21,251			38%		29,383			21,251			38%
Floating-rate bank loan fund assets — beginning		16,879			12,466			35%		16,452			13,806			19%
Sales/inflows		1,279			948			35%		2,227			1,745			28%
Redemptions/outflows		(675	)		(566	)		19%		(1,386	)		(2,123	)		–35%
Exchanges		20			16			25%		27			(8	)		NM
Market value change		236			922			–74%		419			366			14%
Floating-rate bank loan fund assets — ending		17,739			13,786			29%		17,739			13,786			29%
Total long-term fund assets — beginning		100,182			78,908			27%		96,201			86,144			12%
Sales/inflows		8,531			5,849			46%		15,356			12,833			20%
Redemptions/outflows		(5,338	)		(5,114	)		4%		(10,706	)		(11,592	)		–8%
Exchanges		(3	)		20			NM		586			(9	)		NM
Market value change		4,747			2,511			89%		6,682			(5,202	)		NM
Total long-term fund assets — ending		108,119			82,174			32%		108,119			82,174			32%
Separate accounts — beginning		59,993			42,236			42%		57,278			35,831			60%
Inflows — HNW and institutional		3,571			1,580			126%		6,269			5,011			25%
Outflows — HNW and institutional		(2,053	)		(1,596	)		29%		(3,731	)		(2,675	)		39%
Exchanges — HNW and institutional		—			—			NM		(579	)		—			NM
Inflows — retail managed accounts		1,801			2,179			–17%		3,515			4,058			–13%
Outflows — retail managed accounts		(1,258	)		(2,110	)		–40%		(2,421	)		(3,577	)		–32%
Market value change		4,548			1,993			128%		6,271			(1,219	)		NM
Assets acquired		—			—			NM		—			6,853			NM
Separate accounts — ending		66,602			44,282			50%		66,602			44,282			50%
Cash management fund assets — ending		1,524			781			95%		1,524			781			95%
Assets under management — ending	$	176,245		$	127,237			39%	$	176,245		$	127,237			39%

Ending Assets Under Management by Asset Class

	April 30,
(in millions)	2010		% of Total			2009		% of Total			% Change
Open-end funds:
Class A	$	38,894		22	%	$	29,134		23	%		34	%
Class B		2,124		1	%		2,307		2	%		–8	%
Class C		9,504		6	%		6,687		5	%		42	%
Class I		16,556		9	%		6,271		5	%		164	%
Other⁽¹⁾		1,128		1	%		1,155		1	%		–2	%
Total open-end funds		68,206		39	%		45,554		36	%		50	%
Private funds⁽²⁾		17,620		10	%		17,213		13	%		2	%
Closed-end funds		23,817		14	%		20,188		16	%		18	%
Total fund assets		109,643		63	%		82,955		65	%		32	%
HNW and institutional account assets		42,959		24	%		27,754		22	%		55	%
Retail managed account assets		23,643		13	%		16,528		13	%		43	%
Total separate account assets		66,602		37	%		44,282		35	%		50	%
Total	$	176,245		100	%	$	127,237		100	%		39	%

⁽¹⁾

Includes other classes of Eaton Vance open-end funds.

⁽²⁾

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

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

Fund assets represented 63 percent of total assets under management on April 30, 2010, down from 65 percent on April 30, 2009, while separate account assets, which include high-net-worth, institutional and retail managed account assets, increased to 37 percent of total assets under management on April 30, 2010, from 35 percent on April 30, 2009. The 12 percent increase in fund assets under management in the first six months of fiscal 2010 reflects annualized internal growth before deleveraging of 11 percent, market appreciation of $6.7 billion and net reductions in fund leverage of $0.6 billion. The 16 percent increase in separate account assets under management in the first six months of fiscal 2010 reflects annualized internal growth of 13 percent and market appreciation of $6.3 billion.

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

Average Assets Under Management by Asset Class⁽¹⁾

	Three Months Ended April 30,							Six Months Ended April 30,
(in millions)	2010		2009		% Change			2010		2009		% Change
Open-end funds:
Class A	$	37,651	$	27,418		37	%	$	36,771	$	27,593		33	%
Class B		2,164		2,303		–6	%		2,218		2,446		–9	%
Class C		9,063		6,363		42	%		8,749		6,438		36	%
Class I		14,488		5,327		172	%		13,252		4,915		170	%
Other⁽²⁾		1,102		1,138		–3	%		1,104		1,191		–7	%
Total open-end funds		64,468		42,549		52	%		62,094		42,583		46	%
Private funds⁽³⁾		17,629		16,949		4	%		17,768		18,153		–2	%
Closed-end funds		23,549		19,627		20	%		23,523		20,277		16	%
Total fund assets		105,646		79,125		34	%		103,385		81,013		28	%
HNW and institutional account assets		40,636		26,337		54	%		39,444		24,929		58	%
Retail managed account assets		22,722		15,551		46	%		22,066		15,278		44	%
Total separate account assets		63,358		41,888		51	%		61,510		40,207		53	%
Total	$	169,004	$	121,013		40	%	$	164,895	$	121,220		36	%

⁽¹⁾

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

⁽²⁾

Includes other classes of Eaton Vance open-end funds.

⁽³⁾

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

Results of Operations

	Three Months Ended April 30,						Six Months Ended April 30,
(in thousands, except per share data)	2010		2009		% Change		2010		2009		% Change
Net income attributable to
Eaton Vance Corp. shareholders	$	36,000	$	25,753		40%	$	82,242	$	50,450		63%
Earnings per share:
Basic	$	0.30	$	0.22		36%	$	0.69	$	0.43		60%
Diluted	$	0.29	$	0.21		38%	$	0.66	$	0.42		57%
Operating margin		30%		23%		NM		31%		24%		NM

We reported net income attributable to Eaton Vance Corp. shareholders of $36.0 million, or $0.29 per diluted share, in the second quarter of fiscal 2010 compared to net income attributable to Eaton Vance Corp. shareholders of $25.8 million, or $0.21 per diluted share, in the second quarter of fiscal 2009. The increase in