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

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 2003
Commission File Number 1-8100

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

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

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

Securities registered pursuant to Section 12(g) of the Act:
Non-Voting Common Stock par value $0.0078125 per share
Title of Class

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, and (2) has been subject to such filing requirements for the past 90 days.

Yes    x                    No    o

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes    x                    No    o

Aggregate market value of Non-Voting Common Stock held by non-affiliates of the Registrant, based on the closing price of $29.80 on April 30, 2003 on the New York Stock Exchange was $1,669,112,419. Calculation of holdings by non-affiliates is based upon the assumption, for these purposes only, that executive officers, directors, and persons holding 5 percent or more of the registrant’s Non-Voting Common Stock are affiliates.

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

Eaton Vance Corp.
Form 10-K
For the Fiscal Year Ended October 31, 2003
Index

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PART I

Item 1. Business

General

Eaton Vance Corp. (the “Company”) has been in the investment management business for almost eighty years, tracing its history to two Boston-based investment managers: Eaton & Howard, formed in 1924, and Vance, Sanders & Company, organized in 1934. The Company’s principal business is creating, marketing and managing investment funds and providing investment management services to institutions and individuals. As of October 31, 2003, the Company managed $75.0 billion in assets with investment objectives ranging from high current income to maximum long-term capital gain.

In fiscal 2001, the Company expanded its strategic focus to encompass two major potential growth areas: managing assets for institutions, including pension plans and endowments; and managing individual portfolios for higher-net-worth clients who want a more customized form of asset management than provided by mutual funds. In an effort to build a leadership position in the institutional and separately managed account business, the Company acquired 70 percent of Atlanta Capital Management, LLC (“Atlanta Capital”) and 80 percent of Fox Asset Management LLC (“Fox Asset Management”), two institutional investment management firms focusing, respectively, on growth and value investment styles. These strategic acquisitions, completed on September 30, 2001, complement the strengths of the Company and provide new opportunities to broaden the Company’s mix of asset management disciplines, clients and distribution channels.

In fiscal 2003, the Company acquired an 80 percent interest in Parametric Portfolio Associates (“Parametric”), an innovative investment management firm based in Seattle, Washington. Parametric offers two principal products: core investment portfolios that seek to outperform client-specified benchmarks on an after-tax basis through active tax management, and overlay portfolio management utilizing proprietary technology to implement and coordinate the investing activities of multi-manager or multi-style accounts in a tax-efficient way. The strategic acquisition of Parametric, completed on September 10, 2003, builds on the Company’s strong commitment to offering a comprehensive managed account capability and complements the investment management strengths of the Company’s previous acquisitions. With $5.3 billion in assets at acquisition date, Parametric has clients that include family offices, individual high-net-worth investors, financial intermediaries and large financial services organizations.

The Company operates in one business segment, namely as an investment adviser managing fund and separate account assets. The Company conducts its investment management business through its two wholly owned subsidiaries, Eaton Vance Management (“EVM”) and Boston Management and Research (“BMR”), and its three majority-owned subsidiaries, Atlanta Capital, Fox Asset Management and Parametric. All five entities are registered with the Securities and Exchange Commission (“SEC”) as investment advisers under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). Eaton Vance Distributors, Inc. (“EVD”), a wholly owned broker/dealer registered under the Securities Exchange Act of 1934 (the “Exchange Act”), markets and sells the Eaton Vance funds. Eaton Vance Management (International) Limited, (“EVMI”), a wholly owned financial services company registered under the Financial Services and Market Act in the United Kingdom, markets and sells the Company’s investment products in Europe and certain other international markets. The Company is headquartered in Boston, Massachusetts, has offices in Atlanta, Georgia, Little Silver, New Jersey and Seattle, Washington and has sales representatives located throughout the United States.

Development of Business

The Company’s business strategy is focused primarily on providing investors with the innovative investment products necessary to address each major stage of their financial lives – creating and growing wealth, protecting and preserving wealth and distributing wealth. To that end, the Company has developed

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investment expertise in targeted asset classes – tax-managed equity, municipal bond, bank loan, mortgage-backed security and high yield bond funds – and honed its ability to bring mutual fund and managed account products quickly to market as economic conditions and investor needs change.

The Company’s wealth management expertise is available to a wide range of individual and institutional investors through a variety of products and services designed to meet specific needs. The Company provides investment advisory or administration services to 195 funds, 1,648 separately managed individual and institutional accounts, and participates in more than 41 retail managed account broker/dealer programs. The following table shows fund and separate account assets for the dates indicated:

Funds

Eaton Vance and its affiliates manage more than 80 portfolios, with a particular focus on the investment goals of wealthy investors. The Company is a recognized leader in tax-managed investing, having pioneered the first equity funds designed to minimize the impact of taxes on investment returns. Tax-managed investing addresses the roughly 50 percent of equity fund assets held by taxpaying investors outside of qualified retirement plans such as IRAs and 401(k)s. The Company now offers two families of mutual funds, one managed with tax considerations in mind for investors seeking after-tax returns, the second managed without regard to taxes, seeking pre-tax returns for qualified retirement plan clients and tax-free investors.

The Company began building its tax-managed equity fund family in the spring of 1996 with the introduction of Eaton Vance Tax-Managed Growth Fund 1.1, followed by the introduction of Eaton Vance Tax-Managed Small-Cap Growth Fund 1.1 in fiscal 1997 and Eaton Vance Tax-Managed International Growth Fund in fiscal 1998. In fiscal 2000, the Company introduced Eaton Vance Tax-Managed Value Fund and Eaton Vance Tax-Managed Multi-Cap Opportunity Fund, each focusing on maximizing long-term after-tax returns. In fiscal 2001, Eaton Vance Tax-Managed Growth Fund 1.2 and Eaton Vance Tax-Managed Small-Cap Growth Fund 1.2 were introduced, making use of an innovative structure to invest in the same portfolios as their respective predecessor funds while shielding new investors from potential tax liability for historical portfolio gains. In fiscal 2002, the Company capitalized on the investment strengths of its newly acquired subsidiaries and introduced Eaton Vance Tax-Managed Mid-Cap Core Fund, for which Atlanta Capital is the subadvisor, and Eaton Vance Tax-Managed Small-Cap Value Fund, for which Fox Asset Management is the subadvisor. The expanded lineup of tax-managed funds made possible by the acquisitions of Atlanta Capital and Fox Asset Management led to the creation of Eaton Vance Tax-Managed Equity Asset Allocation Fund,

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an innovative new fund that invests in all seven tax-managed investment portfolios, providing investors with broad diversification, professional asset allocation and a consistent tax-managed investment approach.

In fiscal 2003, the Company further expanded its lineup of tax-managed equity funds to include Eaton Vance Tax-Advantaged Dividend Income Fund (a closed-end fund) and Eaton Vance Tax-Managed Dividend Income Fund (an open-end fund), both designed to take advantage of the lower tax rate on qualifying dividends resulting from the federal income tax law enacted in May of 2003. Eaton Vance Tax-Advantaged Dividend Income Fund, the Company’s first closed-end equity fund, raised $1.3 billion in the initial public offering of its common shares and an additional $0.8 billion in the offering of its preferred shares and exercise of the underwriters’ overallotment subsequent to the end of the fiscal year.

The Company’s retail tax-managed equity fund products are complemented by the Company’s line of privately offered equity funds designed to meet the diversification and tax-management needs of qualifying high-net-worth investors.

In addition to its retail and privately offered tax-managed equity funds, the Company offers a family of open-end and exchange-listed municipal bond funds that continue to be an important part of the Company’s tax-managed product offering. In August of 2002, the Company completed the successful offering of three new closed-end municipal bond funds, raising $2.5 billion in new assets. This offering was followed by the introduction of nine municipal bond closed-end funds in November of 2002, which raised $0.7 billion in their initial public offerings of common and preferred shares. At October 31, 2003, the Company’s tax-advantaged municipal bond fund lineup included eleven open-end and closed-end national funds and 56 open-end and closed-end state-specific municipal bond funds in 29 different states.

In addition to its tax-managed products, the Company offers a variety of taxable fixed-income funds, floating-rate bank loan funds and taxable equity funds. In fiscal 2003, the Company significantly expanded its taxable fixed-income product line with the launch of Eaton Vance Limited Duration Income Fund, a closed-end fund that invests in floating-rate bank loans, high-yield bonds and mortgage-backed securities. The initial public offerings of its common and preferred shares raised $3.1 billion in fiscal 2003. The Company also introduced Eaton Vance Low Duration Fund in fiscal 2003, an open-end fund that invests primarily in investment grade fixed-income securities.

Charitable Gift Programs

The Company expanded the scope of its high-net-worth investment products in fiscal 2000 to include The U.S. Charitable Gift Trust and its Pooled Income Funds, designed to simplify the process of donating to U.S. charities and to provide professional management of pools of donated assets. The U.S. Charitable Gift Trust is one of the first charities to use professional investment advisers to assist high net worth individuals with their philanthropic, estate and tax planning needs. The Pooled Income Funds, sponsored by the Trust, are similar to charitable remainder trusts, providing donors with income during their lifetimes and leaving the principal to the Gift Trust and designated charities upon their deaths. The Trust and its Pooled Income Funds encourage long-term philanthropy, while allowing individuals to avoid the high costs associated with setting up their own charitable foundations and charitable remainder trusts.

Managed Accounts

The Company continues to focus on expanding its presence in the managed accounts marketplace. The addition of Parametric gives the Company the ability to provide institutional, high-net-worth (“HNW”) and retail managed account clients with a broader range of investment products and asset allocation strategies. Parametric’s unique technological expertise, combined with the individual investment strengths of Atlanta Capital and Fox Asset Management in growth equity and value equity investing, respectively, complements the investment strengths of Eaton Vance and provides new opportunities to further broaden the Company’s mix of asset management disciplines, clients and distribution channels. The Company has a 15-person managed accounts marketing team, including a highly experienced sales force in the field calling on brokers

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and consultants and now manages $3.6 billion in retail managed account assets and $14.7 billion in institutional and high-net-worth client assets as of October 31, 2003.

Investment Management and Administrative Activities

Portfolio managers employed by the Company make investment decisions for all but five of the Eaton Vance funds in accordance with each fund’s investment objectives and policies. Investment decisions for four international equity funds are made by Lloyd George Management (“LGM”), an independent investment management company based in Hong Kong in which the Company owns a 20 percent equity position. The portfolio managers of the Company and LGM jointly manage one international equity fund. OrbiMed Advisors LLC. (“OrbiMed”), an independent investment management company based in New York, makes investment decisions for Eaton Vance Worldwide Health Sciences Fund. The Company’s portfolio management staff has, on average, more than 19 years of experience in the securities industry. The Company’s investment advisory agreements for management services with each of the funds provide for fees ranging from 10 to 100 basis points of average net assets annually. For funds that are registered under the Investment Company Act of 1940, as amended (“Registered Funds”), a majority of the independent trustees (i.e., those unaffiliated with the management company) of these Registered Funds must approve the investment advisory agreements annually. The fund trustees generally may terminate these agreements upon 30 to 60 days notice without penalty. Registered Fund shareholders must approve any material amendments to the investment advisory agreements.

Investment counselors and separate account portfolio managers employed by the Company’s wholly-owned and majority-owned subsidiaries make decisions for the Company’s separate accounts. The Company’s investment counselors and separate account portfolio managers use the same types of information as fund portfolio managers, but tailor investment decisions to the needs of individual and institutional clients. The Company receives investment advisory fees for separate accounts on a quarterly basis based on the value of the assets managed on a particular date, such as the first or last calendar day of a quarter, or, in some instances, on the average net assets for the period. These fees generally range from 20 to 100 basis points of assets under management and are generally terminable upon 30 to 60 days notice without penalty.

The following table shows investment advisory and administration fees earned for the past five years ended October 31, 2003:

* Administration fees decreased in fiscal 2000 primarily as a result of the change in fee structure associated with the implementation of Rule 12b-1 equivalent distribution plans by the bank loan interval funds on May 1, 1999.

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Investment Advisory Agreements and Distribution Plans

The Company uses the Master/Feeder structure for most of its funds. Master/Feeder is a two-tiered arrangement in which funds (“Feeder Funds”) with substantially identical investment objectives pool their assets by investing in a common portfolio (“Master Fund”). Each Eaton Vance Master Fund (except funds managed by LGM or OrbiMed) has entered into an investment advisory agreement with EVM or BMR. Although the specific terms of these agreements vary, the basic terms of the agreements are similar. Pursuant to the agreements, EVM or BMR provides overall investment management services to each of the Master Funds, subject to the supervision of each fund’s Board of Trustees in accordance with each fund’s fundamental investment objectives and policies. In certain cases, Atlanta Capital and Fox Asset Management act as subadvisors to EVM and BMR.

EVM also serves as administrator or manager under an Administration Service Agreement or Management Contract (each an “Agreement”) to the funds (including those managed by LGM and OrbiMed). Under such Agreements EVM is responsible for managing the business affairs of these funds, subject to the oversight of each funds’ Board of Trustees. EVM’s services include recordkeeping, preparing and filing documents required to comply with federal and state securities laws, supervising the activities of the funds’ custodian and transfer agent, providing assistance in connection with the funds’ shareholder meetings and other administrative services, including furnishing office space and office facilities, equipment and personnel that may be necessary for managing and administering the business affairs of the funds. For the services provided under the Agreements, certain funds pay EVM a monthly fee calculated at an annual rate of up to 0.35% of average daily net assets. Each Agreement remains in full force and effect indefinitely, but only to the extent that the continuance of such Agreement is specifically approved at least annually by the fund’s Board of Trustees.

In addition, certain funds have adopted distribution plans, which, subject to applicable law, provide for reimbursement to the Company for the payment of applicable sales commissions to retail distribution firms and for distribution services through the payment of an ongoing distribution fee (i.e., a Rule 12b-1 fee). These distribution plans are implemented through distribution agreements between EVD and the funds. Although the specific terms of the agreements vary, the basic terms of the agreements are similar. Pursuant to the agreements, EVD acts as underwriter for the fund and distributes shares of the fund through unaffiliated dealers. Each distribution plan and agreement is initially approved and its subsequent continuance must be approved annually by the trustees of the respective funds, including a majority of the independent trustees.

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

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

EVM has entered into an investment advisory and administrative agreement with The U.S. Charitable Gift Trust. In addition, The U.S. Charitable Gift Trust and its Pooled Income Funds have entered into distribution agreements with EVD that provide for reimbursement of the costs of fundraising and servicing donor accounts. EVD does not profit from the raising of contributions for the Gift Trust.

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Marketing and Distribution of Fund Shares

The Company markets and distributes shares of continuously offered and closed-end funds through EVD. EVD sells fund shares through a retail network of national and regional broker/dealers, banks, insurance companies and financial planning firms. Although the firms in the Company’s retail distribution network have each entered into selling agreements with the Company, such agreements (which generally are terminable by either party) do not legally obligate the firms to sell any specific amount of the Company’s investment products. For the 2003, 2002 and 2001 calendar years, the five dealer firms responsible for the largest volume of fund sales accounted for approximately 38 percent, 35 percent, and 34 percent, respectively, of the Company’s fund sales volume. EVD currently maintains a sales force of 47 external wholesalers and 47 internal wholesalers. External and internal wholesalers work closely with investment professionals in the retail distribution network to assist in selling shares of funds.

The Company also offers its funds to investors without charging sales commissions or other transaction fees through fee-based registered investment advisors via various institutional programs both domestically and internationally.

EVD currently sells its Registered Funds with up to five separate pricing structures: 1) front-end load commission (“Class A”); 2) spread-load commission (“Class B”); 3) level-load commission (“Class C”); 4) modified spread-load commission (“Class D”); and 5) institutional (no-load) (“Class I”). For Class A shares, the shareholder pays the broker’s commission and EVD receives an underwriting commission of up to 75 basis points of the dollar value of the shares sold. Under certain conditions, the Company waives the sales load on Class A shares. In such cases, the shares are sold at net asset value. EVD pays a service fee to authorized firms after one year not to exceed 25 basis points of average net assets and may also pay a Rule 12b-1 fee not to exceed 50 basis points of average daily net assets.

For Class B and D shares, EVD pays a commission to the dealer at the time of sale and such payments are capitalized and amortized in the Company’s financial statements over a four- to six-year period. The shareholder pays a contingent deferred sales charge to EVD if he or she redeems shares within a four-, five- or six-year period from the date of purchase. EVD uses its own funds (which may be borrowed) to pay such commissions. EVD recovers the dealer commissions paid on behalf of the shareholder through distribution plan payments limited to an annual rate of 75 basis points of the average net assets of the fund or Class in accordance with a distribution plan adopted by the fund pursuant to Rule 12b-1 under the Investment Company Act of 1940. Like the investment advisory agreement, the distribution plan and related payments must be approved annually by a vote of the fund trustees, including a majority of the independent trustees. The SEC has taken the position that Rule 12b-1 would not permit a fund to continue making compensation payments to EVD after termination of the plan and that any continuance of such payments may subject the fund to legal action. These distribution plans are terminable at any time without notice or penalty. In addition, EVD pays a service fee to authorized firms after one year not to exceed 25 basis points of average net assets.

For Class C shares, the shareholder pays no front-end commissions and no contingent deferred sales charges on redemptions after the first year. EVD pays a commission and the first year’s service fees to the dealer at the time of sale. The fund makes monthly distribution plan payments to EVD similar to those for Class B shares, equal to 75 basis points of average net assets of the Class. EVD pays a service fee to the dealer after one year not to exceed 25 basis points of average net assets and a distribution fee to the dealer after one year not to exceed 75 basis points of average net assets. Offering level-load Class C shares is consistent with the efforts of many broker/dealers to rely less on transaction fees and more on continuing fees for servicing assets.

For Class I shares, a minimum investment of $250,000 or higher is required and the shareholder pays no sales charges. The introduction of institutional (“Class I”) shares has made a number of funds available to a broader group of financial intermediaries.

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

In fiscal 2002, the Company introduced the Eaton Vance Emerald Funds, a new family of funds for non-U.S. investors. The Emerald Funds are Undertakings for Collective Investments in Transferable Securities (“UCITS”) funds domiciled in Dublin, Ireland and are sold by certain dealer firms through EVMI to investors who are citizens of the European Union countries. The Company earns distribution, administration and advisory fees directly or indirectly from the Emerald Funds.

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

Competitive Conditions and Risk Factors

From time to time, information provided by the Company or information included in its filings with the Securities and Exchange Commission (“SEC”) (including this Annual Report on Form 10-K) may contain statements that are not historical facts, for this purpose referred to as “forward-looking statements.” The Company’s actual future results may differ significantly from those stated in any forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to, the factors discussed below.

The Company is subject to substantial competition in all aspects of its business. The Company’s ability to market investment products is highly dependent on access to the various distribution systems of national and regional securities dealer firms, which generally offer competing internally and externally managed investment products. Although the Company has historically been successful in maintaining access to these channels, there can be no assurance that it will continue to do so. The inability to have such access could have a material adverse effect on the Company’s business.

There are few barriers to entry in the investment management business. The Company’s funds and separate accounts compete against an ever-increasing number of investment products sold to the public by investment dealers, banks, insurance companies and others that sell tax-free or tax-advantaged investments, taxable income funds, equity funds and other investment products. Many institutions competing with the Company have greater resources than the Company. The Company competes with other providers of investment products on the basis of the products offered, the investment performance of such products, quality of service, fees charged, the level and type of financial intermediary compensation, the manner in which such products are marketed and distributed, and the services provided to investors.

The Company derives almost all of its revenue from investment adviser and administration fees and distribution income received from the Eaton Vance funds, other pooled investment vehicles and separate accounts. As a result, the Company is dependent upon management contracts, administration contracts, underwriting contracts or service contracts under which these fees and income are paid. If any of these contracts are terminated, not renewed, or amended to reduce fees, the Company’s financial results may be adversely affected.

The major sources of revenue for the Company (i.e., investment adviser, administration, distribution and service fees) are calculated as percentages of assets under management. A decline in securities prices or in the sale of investment products or an increase in fund redemptions generally would reduce fee income. Financial market declines or adverse changes in interest rates would generally negatively impact the level of the Company’s assets under management and consequently its revenue and net income. A recession or

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other economic or political events could also adversely impact the Company’s revenues if it led to a decreased demand for products, a higher redemption rate, or a decline in securities prices. Like other businesses, the Company’s actual results could be affected by the loss of key employees through competition or retirement. The Company’s operations and actual results could also be affected by increased expenses due to such factors as greater competition for personnel, higher costs for distribution of mutual funds and other investment products, or costs for insurance and other services by outside providers, or by the disruption of services such as power, communications, information technology, fund transfer agency or fund administration.

The Company’s business is subject to substantial governmental regulation. Changes in legal, regulatory, accounting, tax and compliance requirements could have a significant effect on the Company’s operations and results, including but not limited to increased expenses and reduced investor interest in certain funds and other investment products offered by the Company. The Company continually monitors legislative, tax, regulatory, accounting, and compliance developments that could impact its business.

Regulation

EVM, BMR, Atlanta Capital, Fox Asset Management and Parametric are each registered with the SEC under the Advisers Act. The Advisers Act imposes numerous obligations on registered investment advisers, including fiduciary duties, recordkeeping requirements, operational requirements and disclosure obligations. Most Eaton Vance funds are registered with the SEC under the Investment Company Act of 1940, as amended. Except for privately-offered funds exempt from registration, each U.S. fund is also required to make notice filings with all states where it is offered for sale. Virtually all aspects of the Company’s investment management business are subject to various federal and state laws and regulations. These laws and regulations are primarily intended to benefit shareholders of the funds and separate account investment clients and generally grant supervisory agencies and bodies broad administrative powers, including the power to limit or restrict the Company from carrying on its investment management business in the event that it fails to comply with such laws and regulations. In such event, the possible sanctions, which may be imposed, include the suspension of individual employees, business limitations on EVM, BMR, Atlanta Capital, Fox Asset Management or Parametric engaging in the investment management business for specified periods of time, the revocation of any such company’s registration as an investment adviser, and other censures or fines.

EVD is registered as a broker/dealer under the Securities Exchange Act of 1934 and is subject to regulation by the SEC, the National Association of Securities Dealers, Inc. (“NASD”) and other federal and state agencies. EVD is subject to the SEC’s net capital rule designed to enforce minimum standards regarding the general financial condition and liquidity of a broker/dealer. Under certain circumstances, this rule limits the ability of the Company to make withdrawals of capital and receive dividends from EVD. EVD’s regulatory net capital has consistently exceeded such minimum net capital requirements in fiscal 2003. The securities industry is one of the most highly regulated in the United States, and failure to comply with related laws and regulations can result in the revocation of broker/dealer licenses, the imposition of censures or fines and the suspension or expulsion from the securities business of a firm, its officers or employees.

EVMI was granted permission in March 2002 by the Financial Services Authority (“FSA”) to conduct a regulated business in the United Kingdom. EVMI’s primary business purpose is to distribute the Company’s investment products in Europe and certain other international markets. Under the FSA’s Financial Services and Markets Act, EVMI is subject to certain liquidity and capital requirements. Such capital requirements may limit the company’s ability to make withdrawals of capital from EVMI. In addition, failure to comply with such capital requirements could jeopardize EVMI’s approval to conduct business in the United Kingdom. There were no violations of the capital requirements in fiscal 2003.

The Company’s officers, directors and employees may from time to time own securities that are held by one or more of the Funds. The Company’s internal policies with respect to individual investments by investment

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professionals require prior clearance of most types of transactions and reporting of all securities transactions, and restrict certain transactions to avoid the possibility of conflicts of interest.

Employees

On October 31, 2003, the Company and its subsidiaries had 616 full-time employees. On October 31, 2002, the comparable figure was 575.

Available information

The Company makes available free of charge its annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K as soon as reasonably practicable after such filing has been made with the SEC. Reports may be obtained through the Company’s website at eatonvance.com or by calling Investor Relations at 617-482-8260.

Item 2. Properties

The Company conducts its principal operations through leased offices located in Boston, Massachusetts, Atlanta, Georgia, Little Silver, New Jersey, Seattle, Washington and London, England. Management believes that the Company’s facilities are adequate to serve its currently anticipated business needs.

Item 3. Legal Proceedings

On October 15, 2001, a consolidated complaint was filed in the United States District Court for the District of Massachusetts against Eaton Vance Classic Senior Floating-Rate Fund (“Classic Fund”), Eaton Vance Prime Rate Reserves (“Prime Rate”), Eaton Vance Institutional Senior Floating-Rate Fund (“Institutional Fund”), Eaton Vance Advisers Senior Floating-Rate Fund (“Advisers Fund”) (collectively, the “Funds”), the trustees and certain officers of the Funds; Eaton Vance Management (“EVM”), the Funds’ administrator; Boston Management and Research (“BMR”), the Funds’ investment adviser; and the Company, the parent of EVM and BMR. The complaint, framed as a class action, alleges that for the period between May 25, 1998 and March 5, 2001, the Funds’ assets were incorrectly valued and certain matters were not properly disclosed, in violation of the federal securities laws. The complaint seeks unspecified damages. The Company and the other named defendants believe that the complaint is without merit and are vigorously contesting the lawsuit.

On December 16, 2003, The District Court issued a Memorandum and Order dismissing plaintiff’s claims against the Institutional Fund and the Advisers Fund, denying class certification as to Prime Rate, and granting class certification as to the Classic Fund, but only as to a class of investors who purchased shares pursuant to prospectuses dated April 1, 1998, November 2, 1998 and March 15, 2000.

On December 3, 2003, a complaint was filed in the United States District Court for the District of Massachusetts against Eaton Vance Distributors, Inc., a subsidiary of the Company, on behalf of Eaton Vance Tax-Managed Growth 1.1 (“Fund”) by Michelle Yameen, a shareholder owning approximately 613 Class B shares of the Fund. The complaint alleges that EVD violated Section 36(b) of the Investment Company Act of 1940 by charging the Fund excessive distribution fees. The complaint seeks injunctive relief and the award to the Fund of the amount of allegedly excessive distribution fees received by EVD during a one-year period preceding December 3, 2003. EVD and the Company believe that the complaint is without merit and are vigorously contesting the lawsuit.

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

On October 1, 2003, the holders of all of the outstanding Voting Common Stock, by unanimous written consent, approved an amendment to their Voting Trust Agreement to renew the Trust for an additional three-year term until October 31, 2006.

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PART II

Item 5. Market Price of Dividends on the Registrants’ Common Equity and Related Stockholder Matters

The Company’s Voting Common Stock, $0.0078125 par value, is not publicly traded and is held by 11 Voting Trustees pursuant to the Voting Trust described in paragraph (A) of Item 12 hereof, which paragraph (A) is incorporated herein by reference.

The Company’s Non-Voting Common Stock, $0.0078125 par value, is traded on the New York Stock Exchange under the symbol EV. The approximate number of registered holders of record of the Company’s Non-Voting Common Stock at October 31, 2003 was 1,300. The high and low common stock prices and dividends per share were as follows:

The following table sets forth certain information concerning equity compensation plans at October 31, 2003:

Equity Compensation Plan Information

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Item 6. Selected Financial Data

Financial Highlights

(1) In October 1998, the Financial Accounting Standards Board (“FASB”) staff addressed the accounting for offering costs incurred in connection with the distribution of funds when the adviser does not receive both Rule 12b-1 fees and contingent deferred sales charges. In its announcement, the FASB staff concluded that such offering costs, including sales commissions paid, were to be considered start-up costs in accordance with American Institute of Certified Public Accountants Statement of Position (“SOP”) 98-5, “Reporting on the Costs of Start-Up Activities.” Accordingly, the FASB staff concluded offering costs should be expensed as incurred under the provisions of SOP 98-5. Prior to the FASB staff announcement, it had been the Company’s policy to capitalize and amortize these costs over a period not to exceed five years.

As a result, closed-end, interval and private fund sales commissions paid and capitalized prior to the Company’s adoption of SOP 98-5 were expensed as a cumulative effect of a change in accounting principle, as described in APB Opinion No. 20, “Accounting Changes.” The cumulative effect of the change in accounting principle upon adoption on November 1, 1998 was a charge to the Consolidated Statement of Income of $36.6 million, net of income taxes of $23.4 million.

In April of 1999, the bank loan interval funds received the necessary approvals to implement Rule 12b-1 equivalent distribution plans. Beginning May 1, 1999, with the implementation of these plans, the Company resumed capitalizing and amortizing sales commissions paid to broker/dealers for sales of these funds effective May 1, 1999, the beginning of the third fiscal quarter of 1999. Closed-end and bank loan interval fund sales commissions expensed from November 1, 1998 to April 30, 1999 totaled $71.3 million.

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Item 7. Management’s Discussion and Analysis

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

The Company’s principal business is creating, marketing and managing investment companies (“funds”) and providing investment management and counseling services to institutions and individuals. The Company distributes its funds through third-party broker/dealers, independent financial institutions and investment advisers.

The Company’s revenue is primarily derived from investment adviser, administration, distribution and service fees received from the Eaton Vance funds and investment adviser fees received from separate accounts. Fees paid to the Company are based primarily on the value of the investment portfolios managed by the Company and fluctuate with changes in the total value of the assets under management. Such fees are recognized over the period that these assets are managed by the Company. The Company’s major expenses are employee compensation, the amortization of deferred sales commissions and distribution and service fee expenses.

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

Assets Under Management

Assets under management of $75.0 billion on October 31, 2003 were 35 percent higher than the $55.6 billion reported a year earlier. The Company experienced asset growth in every asset category in 2003, reflecting recovering equity markets, successful closed-end fund offerings, a strategic acquisition and strong net sales of the Company’s open-end mutual funds. In fiscal 2002 total assets under management declined to $55.6 billion from $56.6 billion a year earlier, primarily due to the overall decline in equity markets and net redemptions in the floating-rate income asset category, partially offset by strong net sales in the fixed income asset category.

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Equity fund assets represented 51 percent of total fund assets under management at October 31, 2003, consistent with October 31, 2002, and down from 55 percent at October 31, 2001. Fixed income fund assets represented 32 percent of total fund assets under management at October 31, 2003, up from 30 percent at October 31, 2002, and 24 percent at October 31, 2001. Floating-rate income fund assets represented 17 percent of total fund assets under management at October 31, 2003, consistent with October 31, 2002 and down from 21 percent at October 31, 2001. The shift in fund asset mix from equity fund assets to fixed income fund assets reflects investor response to the recent decline in equity markets. This trend may reverse as equity markets continue to recover. The following table summarizes ending assets under management by investment objective at October 31, 2003, 2002 and 2001:

Ending Assets Under Management by Investment Objective

The Company had positive net inflows in both long-term fund assets and separate accounts in each of the last three years. The following table summarizes the asset flows for each of the years ended October 31, 2003, 2002 and 2001:

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Asset Flows

Net inflows of long-term fund assets in fiscal 2003 were $7.2 billion compared to $3.5 billion last year and $6.0 billion in fiscal 2001. Closed-end fund offerings contributed significantly to net inflows in both fiscal 2003 and 2002, with $5.0 billion in closed-end fund assets added in fiscal 2003 and $2.5 billion added in fiscal 2002. Excluding closed-end fund offerings, other net inflows totaled $2.2 billion, $1.0 billion and $6.0

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billion in fiscal 2003, 2002 and 2001, respectively. The increase in other net inflows in fiscal 2003 primarily reflects a 16 percent increase in open-end mutual fund sales and a 7 percent decline in open-end mutual fund redemptions, offset by a 48 percent decline in net inflows into privately offered equity funds. The decrease in other net inflows in fiscal 2002 primarily reflects a 16 percent decline in open-end mutual fund sales, a 10 percent increase in open-end mutual fund redemptions and a 43 percent decline in net inflows into privately offered equity funds. As a result of market value changes, long-term fund assets increased by $4.5 billion in fiscal 2003, following declines of $4.5 billion and $6.3 billion in fiscal 2002 and 2001, respectively.

Net inflows of separate account assets under management were $1.0 billion in fiscal 2003, down from $1.5 billion in fiscal 2002 and up from $0.3 billion in fiscal 2001. These net inflows are in addition to the assets gained in the acquisitions of Atlanta Capital Management Company, LLC (“Atlanta Capital”) and Fox Asset Management LLC in the fourth quarter of fiscal 2001, and Parametric Portfolio Associates (“Parametric”) in the fourth quarter of fiscal 2003. Net inflows in high-net-worth and institutional accounts in fiscal 2003 reflect the loss of certain high-net-worth (“HNW”) assets following the departure of a senior investment counselor at a wholly owned subsidiary, Eaton Vance Management (“EVM”), during the year. Net inflows in retail managed account assets in fiscal 2003 reflect the expansion of the Company’s retail managed account product line resulting from the acquisitions of Atlanta Capital, Fox Asset Management and Parametric and an increase in the number of managed account programs in which the Company participates. As a result of market value changes, separate account assets increased by $2.0 billion in fiscal 2003, following declines of $1.1 billion and $0.3 billion in fiscal 2002 and 2001, respectively.

The Company currently sells its sponsored mutual funds under four primary pricing structures: 1) front-end load commission (“Class A”); 2) spread-load commission (“Class B”); 3) level-load commission (“Class C”); and 4) institutional no-load (“Class I”). Under certain conditions, the Company waives the sales load on Class A shares. In such cases, the shares are sold at net asset value. The increase in ending assets under management in fiscal 2003 was primarily a result of growth in Class A, closed-end fund and separate account assets. The decline in ending assets under management in fiscal 2002 was primarily the result of declines in Class B, Class C and private fund assets under management. The following table summarizes ending assets under management by asset class for each of the years ended October 31, 2003, 2002 and 2001:

Ending Assets Under Management by Asset Class

The average assets under management presented below represent a monthly average by asset class. With the exception of the Company’s separate account investment adviser fees, which are calculated as a percentage of either beginning or ending quarterly assets, the Company’s investment adviser, administration, distribution and service fees are calculated primarily as a percentage of average daily assets. This analysis may provide useful information in the analysis of the Company’s revenue, as well as distribution-related expenses tied to asset levels.

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Average Assets Under Management by Asset Class *

Results of Operations

Revenue

Investment Adviser and Administration Fees

Investment adviser and administration fees are generally calculated under contractual agreements with the Company’s sponsored funds and separate accounts and are based upon a percentage of the market value of assets under management. Changes in the market value of managed assets can affect the amount of investment adviser and administration fees earned, while shifts in asset mix can affect the Company’s effective fee rate.

The increase in investment adviser and administration fees of 6 percent in fiscal 2003 can be attributed to a 6 percent increase in average assets under management. The acquisition of Parametric, which occurred on September 10, 2003, did not significantly affect either the Company’s revenue or effective fee rate in fiscal 2003.

The increase in investment adviser and administration fees of 11 percent in fiscal 2002 can be primarily attributed to the 16 percent increase in average assets under management, tempered by a 4 percent decrease in the Company’s effective fee rate. The decrease in the effective fee rate can be attributed to the lower average fee rates of the Atlanta Capital and Fox Asset Management assets acquired on September 30, 2001.

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Distribution and Underwriter Fees

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

Distribution and underwriter fees decreased by 9 percent in fiscal 2003, reflecting a 6 percent decrease in average Class B, Class C and private assets under management and an increase in Class A shares offered without a sales charge. The decrease in average assets under management in these share classes can be principally attributed to a gradual shift in asset mix from Class B assets under management to Class A assets under management and the overall decline in equity markets over the last two years.

Distribution and underwriter fees decreased by 5 percent in fiscal 2002, reflecting the 4 percent decrease in average Class B, C and private fund assets under management and an increase in Class A shares offered without a sales charge.

Service Fees

Service fees consist of service plan payments calculated under contractual agreements with the Company’s sponsored funds. These fees are calculated as a percent of average assets under management in specific share classes of the Company’s mutual funds (principally Classes A, B and C) as well as certain private funds.

Service fees decreased by 4 percent in fiscal 2003, reflecting a 4 percent decrease in average Class A, B, C and private fund assets under management. Service fees were essentially flat in fiscal 2002 compared to fiscal 2001, reflecting a 3 percent decrease in average assets under management subject to a service fee.

Other Revenue

Other revenue increased by 131 percent in fiscal 2003 and 47 percent in fiscal 2002, primarily as a result of an increase in shareholder service fees and an increase in interest income earned by a majority-owned mutual fund consolidated by the Company for the first time in fiscal 2003.

Expenses

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Compensation of officers and employees

Compensation expense increased by 10 percent in fiscal 2003 and by 15 percent in fiscal 2002. The increase in compensation expense in fiscal 2003 can be primarily attributed to an increase in incentive compensation associated with the increase in fund sales, driven primarily by the $5.0 billion in closed-end fund offerings in fiscal 2003, and increases in base salaries and benefits resulting from the acquisition of Parametric on September 10, 2003. Compensation expense in fiscal 2002 reflects incentive costs associated with $2.5 billion of closed-end fund offerings, and increases in base salaries, benefits and incentives resulting from the acquisitions of Atlanta Capital and Fox Asset Management on September 30, 2001, and the staffing of the Company’s retail managed account sales and marketing organization, which was largely completed in fiscal 2002.

Amortization of deferred sales commissions

Amortization of deferred sales commissions increased by 2 percent in fiscal 2003 and by 5 percent in fiscal 2002. Amortization expense is effected by ongoing sales of mutual fund Class B shares, Class C shares and equity fund private placements, and the residual effect of accounting changes mandated by the SEC in fiscal 1998 and 1999. For a nine-month period ending April 30, 1999, sales commissions for certain funds were required to be expensed rather than capitalized and deferred, extinguishing future amortization charges. Subsequent to April 30, 1999, and pursuant to the implementation of new distribution plans, commission payments on new sales of these funds were once again capitalized and amortized. The Company anticipates that the ongoing effect of these accounting changes will diminish over the next fiscal year. As noted above, the Company has experienced an overall shift in sales from Class B shares to Class A shares. As amortization expense is ultimately a function of the Company’s product mix, a shift from Class B sales to Class A sales may result in a reduction in amortization expense in the future.

Service fees

Service fees the Company receives from sponsored mutual funds are retained by the Company in the first year and paid to broker/dealers after the first year pursuant to third-party service arrangements. These fees are calculated as a percent of average assets under management in specific share classes of the Company’s mutual funds (principally Classes A, B and C) as well as certain private funds. Service fee expense increased by 1 percent in fiscal 2003 and 5 percent in fiscal 2002, reflecting increases in average long-term fund assets retained more than one year that are subject to service fees.

Distribution expense

Distribution expense consists primarily of payments made to distribution partners pursuant to third-party distribution arrangements (calculated as a percentage of average assets under management), commissions paid to broker/dealers on the sale of Class A shares at net asset value and other marketing expenses. Distribution expense increased by 9 percent in fiscal 2003, following a decrease of 1 percent in fiscal 2002, largely as a result of increases in average assets under management subject to third-party distribution arrangements and an increase in Class A shares sold at net asset value. The decrease in distribution expense in fiscal 2002 can be attributed to a decrease in other marketing expenses.

Other expenses

Other operating expenses consist primarily of travel, facilities, information technology, consulting, fund expenses assumed by the Company, communications and other corporate expenses, including the amortization of intangible assets. Other operating expenses increased by 13 percent in fiscal 2003, primarily as a result of increases in travel and fund expenses associated with the $5.0 billion in closed-end fund offerings completed this year. Other operating expenses increased by 24 percent in fiscal 2002, primarily as a result of increases in travel and fund expenses associated with the $2.5 billion in closed-end fund offerings completed last year and increases in amortization expense and facilities expense associated with the acquisitions of Atlanta Capital and Fox Asset Management in the fourth quarter of fiscal 2001.

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Other Income and Expense

Interest income decreased 46 percent in fiscal 2003, following a 33 percent increase in interest income in fiscal 2002. The decrease in interest income in fiscal 2003 was due to the decrease in short-term interest rates and the Company’s investment in and consolidation of a sponsored mutual fund in fiscal 2003. The consolidated fund, which invests in short-term debt instruments, generated $1.0 million in interest income in fiscal 2003, which is classified as other revenue in the Company’s Consolidated Statements of Income. The increase in interest income in 2002 can be primarily attributed to the increase in average cash and cash equivalent balances maintained by the Company.

Interest expense decreased to $5.8 million in fiscal 2003 from $7.1 million a year ago, following a $4.9 million increase in interest expense in fiscal 2002. Fiscal 2003 interest expense reflects a decrease in average long-term debt balances, net of additional interest expense related to the 1.5% zero-coupon exchangeable senior notes issued by EVM. Note holders will receive incremental cash interest payments of 1.672 percent per year from November 13, 2002 to August 13, 2004. Fiscal 2002 interest expense reflects the issuance of EVM’s senior notes in the fourth quarter of fiscal 2001, the expensing of $2.1 million of previously capitalized debt offering costs associated with the repurchase of $87.0 million of these notes on August 14, 2002, and a one-time interest payment of $0.6 million made to remaining note holders on August 15, 2002.

In fiscal 2001, the Company recognized a $15.1 million impairment loss related to the Company’s minority equity investments in three collateralized debt obligation (“CDO”) entities whose collateral assets are managed by the Company. The impairment loss resulted from higher than forecasted default rates in the high-yield bond market and the effects of the higher default rates on the value of the Company’s equity investments in these CDO entities. The Company anticipates that it will continue to earn management fees from managing the assets in the collateral pools of these CDO entities.

Income Taxes

The Company’s effective tax rate was 35 percent during fiscal 2003, 2002 and 2001.

Net Income

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Net income decreased by 12 percent in fiscal 2003, following an increase of 4 percent in fiscal 2002. The decrease in fiscal 2003 can be attributed to weak equity markets in the first half of the year, which significantly impacted average assets under management, and the impact of marketing costs associated with the $5.0 billion in closed-end fund offerings completed this year. The increase in fiscal 2002 reflects the 16 percent increase in average assets under management, tempered by the impact of marketing costs associated with the $2.5 billion in closed-end fund offerings completed last year.

Changes in Financial Condition and Liquidity and Capital Resources

The following table summarizes certain key financial data relating to the Company’s liquidity and capital resources as of October 31, 2003, 2002 and 2001:

The Company’s financial condition is highly liquid, with a significant percentage of the Company’s assets represented by cash, cash equivalents and short-term investments. Short-term investments consist principally of short-term debt instruments and investments in the Company’s sponsored mutual funds. Long-term investments consist principally of seed investments in the Company’s sponsored mutual funds and minority equity investments in CDO entities.

Deferred sales commissions paid to broker/dealers in connection with the distribution of the Company’s Class B and Class C fund shares, as well as certain private funds, decreased by 17 percent in fiscal 2003 and 10 percent in fiscal 2002, primarily reflecting the decline in Class B share and private fund sales over the last two fiscal years. Deferred income taxes, which relate principally to deferred sales commissions, decreased by 34 percent in fiscal 2003 and 32 percent in fiscal 2002, reflecting a change in the treatment of deferred sales commissions for tax purposes. Prior to January 1, 2001, commission payments were deducted for tax purposes at the time of payment. Commission payments made subsequent to January 1, 2001 have been capitalized for tax purposes and deducted over their estimated useful lives. The change in the timing of the deduction of commission payments has had the effect of increasing current income tax payments and reducing deferred income taxes.

The following table details the Company’s future contractual obligations under its senior notes and operating lease arrangements:

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Excluded from the table above are Eaton Vance Management’s (“EVM’s”) zero-coupon exchangeable senior notes (“Notes”). On August 13, 2001, EVM issued the Notes at a principal amount of $314.0 million due August 13, 2031, resulting in gross proceeds of approximately $200.6 million. The net proceeds of the offering were approximately $195.5 million after payment of debt issuance costs. The Notes were issued in a private placement to qualified institutional buyers at an initial offering price of $638.70 per $1,000 principal amount at maturity. The discounted price reflects a yield to maturity of 1.5 percent per year. Upon certain events, each Note is exchangeable into 14.3657 shares of the Company’s non-voting common stock, subject to adjustment. EVM may redeem the Notes for cash on or after August 13, 2006, at their accreted value. At the option of Note holders, EVM may be required to repurchase the Notes at their accreted value on various dates beginning on the first, third and fifth anniversaries of the issue date and at five-year intervals thereafter until maturity. At the option of the Note holders, EVM may also be required to repurchase the Notes at their accreted value if the credit rating of the Notes is decreased by three or more rating subcategories below its initial rating by either Moody’s or Standard & Poor’s. Such repurchases can be paid in cash, shares of the Company’s non-voting common stock, or a combination of both. Although Note holders have the option to require EVM to repurchase Notes with an accreted value of up to $120.1 million on the next scheduled repurchase date, August 13, 2004, EVM does not expect to repurchase any of its zero-coupon exchangeable senior notes during the fiscal year ending October 31, 2004.

On August 9, 2002, EVM amended the terms of the Notes to permit Note holders, at their option, to require the repurchase of the Notes on November 13, 2002. EVM further amended the terms of the Notes to provide that each holder electing not to require the Company to repurchase their Notes on August 13, 2002 would receive a one-time cash payment equal to approximately 0.50 percent of each Note’s accreted value. On August 14, 2002, EVM repurchased for cash $87.0 million of the Notes ($134.1 million principal amount at maturity). On August 15, 2002, EVM made a one-time cash payment totaling $0.6 million to holders of the Notes as of the close of business on August 14, 2002. The Company expensed approximately $2.1 million of deferred debt offering costs in conjunction with this repurchase in the fourth quarter of fiscal 2002.

On November 12, 2002, EVM amended the terms of its Notes to provide that each holder electing not to require EVM to repurchase the holder’s Notes on November 13, 2002 would receive cash interest payments equal to 1.627 percent per year of each Note’s principal amount at maturity (approximately 2.5 percent of each notes accreted value) for a period of 21 months. With the exception of the first interest payment due on February 13, 2003, which was paid in arrears for the three-month period ending on that date, these interest payments are accrued over the six-month period prior to payment and are recorded in interest expense. No Notes were tendered for repurchase on November 13, 2002.

Holders of the Notes have the option to require EVM to repurchase the Notes on August 13, 2004. Such repurchase can be paid in shares of the Company’s non-voting common stock in lieu of cash at EVM’s discretion. As a result, the Notes have been classified as long-term in the Company’s Consolidated Balance Sheet at October 31, 2003.

In December 2001, EVM executed a revolving credit facility with several banks. This facility, which expires December 21, 2004, provides that EVM may borrow up to $170 million at LIBOR-based rates of interest that vary depending on the level of usage of the facility and credit ratings of the Notes. The agreement contains financial covenants with respect to leverage and interest coverage and requires EVM to pay an annual commitment fee on any unused portion. At October 31, 2003, EVM had no borrowings outstanding under its revolving credit facility.

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Operating Cash Flows

Operating cash flows consist primarily of the operating results of the Company adjusted to reflect changes in current assets and liabilities, deferred sales commissions, deferred income taxes and investments classified as trading. Cash provided by operating activities totaled $43.8 million, $134.1 million and $140.3 million in fiscal 2003, 2002 and 2001, respectively. The decrease in cash provided by operating activities in fiscal 2003 is primarily a result of the consolidation of the Company’s investment in a sponsored mutual fund. The Company was required to consolidate its investment in Eaton Vance Short-term Income Fund (“EVSI”) in fiscal 2003 when it became the fund’s majority investor. Cash flows associated with the purchase and sale of trading securities included in operating cash flows primarily represent EVSI’s purchase and sale of short-term debt securities. Cash flows associated with the Company’s investments in sponsored mutual funds that are not consolidated are accounted for in cash flows from investing activities.

Capitalized sales commissions paid to financial intermediaries for the distribution of the Company’s Class B and Class C fund shares, as well as the Company’s equity fund private placements, decreased by $18.0 million in fiscal 2003 and $47.2 million in fiscal 2002 due to a decline in Class B share sales and equity fund private placements. Although the Company anticipates that the payment of capitalized sales commissions will continue to be a significant use of cash in the future, the payment of sales commissions will likely continue to decline if sales of Class B shares and equity fund private placements continue to decline. The amortization of deferred sales commissions and contingent deferred sales charges received will likely be similarly affected.

Investing Cash Flows

Investing activities consist primarily of the purchase and sale of investments in the Company’s sponsored mutual funds and the acquisition of majority-owned subsidiaries. Cash provided by (used for) investing activities totaled $25.7 million, $42.0 million and ($177.4) million in fiscal 2003, 2002 and 2001, respectively.

In fiscal 2001, the Company made two strategic acquisitions to expand the Company’s separately managed account business. On September 30, 2001, the Company acquired 70 percent of Atlanta Capital for an aggregate initial payment of $75.0 million, consisting of cash of $60.0 million and Eaton Vance Corp. non-voting common stock valued at $15.0 million. Atlanta Capital’s principals will continue to hold 30 percent of the equity of Atlanta Capital through December 31, 2004. Beginning in calendar 2005, Atlanta Capital’s principals will have the right to sell and the Company will have the right to purchase the remaining 30 percent of Atlanta Capital over a five-year period. The price for acquiring the remaining 30 percent of Atlanta Capital will be based on a multiple of earnings before taxes (a measure that is intended to approximate fair market value) in those years.

On September 30, 2001, the Company also acquired 80 percent of Fox Asset Management for an aggregate initial payment of $32.0 million, consisting of cash of $22.4 million and Eaton Vance Corp. non-voting common stock valued at $9.6 million. Additional payments in 2005 and 2006 of up to $30.0 million are contingent upon Fox Asset Management achieving certain financial performance criteria. Fox Asset Management’s principals will continue to hold 20 percent of the equity of Fox Asset Management through December 31, 2007. Beginning in calendar 2008, Fox Asset Management’s principals will have the right to sell and the Company will have the right to purchase the remaining 20 percent of Fox Asset Management over a four-year period. The price for acquiring the remaining 20 percent of Fox Asset Management will be based on a multiple of earnings before interest and taxes (a measure that is intended to approximate fair market value) in those years.

On September 10, 2003, the Company further expanded its separate account business by acquiring an 80 percent capital interest and an 81.2 percent profits interest in Parametric Portfolio Associates (“Parametric”) for an aggregate initial payment of $28.0 million in cash. Beginning in calendar 2005, certain sellers of Parametric will have the right to sell and the Company will have the right to purchase an additional 8.6 percent of the capital of Parametric over a three-year period. Beginning in calendar 2007,

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certain sellers of Parametric will have the right to sell and the Company will have the right to purchase the remaining 11.4 percent of the capital of Parametric (which entitles the holder to the remaining 18.8 percent profits interest) over a six-year period. The price for acquiring the remaining capital and profits interests in Parametric will be based on a multiple of earnings before interest and taxes (a measure that is intended to approximate fair market value) in those years.

The Company anticipates that the purchase of the remaining minority interests in its majority-owned subsidiaries will likely be a significant use of cash in the future.

Financing Cash Flows

Financing cash flows primarily reflect the issuance and repayment of long-term debt, the issuance and repurchase of the Company’s non-voting common stock and the payment of dividends to the Company’s shareholders. Cash provided by (used for) financing activities totaled ($75.3) million, ($147.7) million and $92.4 million in fiscal 2003, 2002 and 2001, respectively.

The Company repaid $18.0 million, $144.1 million and $7.1 million in long-term debt in fiscal 2003, 2002, and 2001 respectively. Debt repayments in fiscal 2003 included a principal installment of $7.1 million on EVM’s 6.22 percent senior loan and the retirement of $10.8 million of debt carried by Parametric at the date of acquisition. Debt repayments in fiscal 2002 included a principal installment of $7.1 million on EVM’s 6.22 percent senior loan, the repurchase of $87.0 million at accreted value of EVM’s zero-coupon exchangeable notes (issued in August 2001), and the repayment of $50.0 million in short-term borrowings under EVM’s revolving credit facility. Debt repayments in fiscal 2001 consisted of a principal installment of $7.1 million on EVM’s 6.22 percent senior loan.

The Company repurchased a total of 1.4 million shares of its non-voting common stock for $44.9 million in fiscal 2003 under its authorized repurchase program and issued 565,000 shares of non-voting common stock in connection with the exercise of stock options and employee stock purchases for total proceeds of $9.4 million. The Company has authorization to purchase an additional 3.9 million shares under its present share repurchase authorization program and anticipates that future repurchases will continue to be a significant use of cash. The Company’s dividend was $0.40 per share in fiscal 2003 compared to $0.30 in fiscal 2002 and $0.25 in fiscal 2001. The Company increased its fiscal 2003 third quarter cash dividend by 50 percent to $0.12 per share in response to a decrease in the federal income tax rate on qualifying dividend income of individual taxpayers.

Off-Balance Sheet Arrangements

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

Critical Accounting Policies

Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Deferred Sales Commissions

Sales commissions paid to broker/dealers in connection with the sale of shares of open-end funds, bank loan interval funds and private funds are generally capitalized and amortized over the period during which the shareholder is subject to a contingent deferred sales charge, none of which exceeds six years. Distribution plan payments received from these funds are recorded in revenue as earned. Contingent deferred sales charges and early withdrawal charges received by the Company from redeeming shareholders of open-end and bank loan interval funds reduce unamortized deferred sales commissions first, with any remaining amount recorded in income. Should the Company lose its ability to recover such

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sales commissions through distribution plan payments and contingent deferred sales charges, the value of these assets would immediately decline, as would future cash flows. The Company periodically reviews the amortization period for deferred sales commission assets as events or changes in circumstances indicate that the carrying amount of deferred sales commission assets may not be recoverable over their amortization period and makes adjustments to the assets’ useful lives as required.

Goodwill and Intangible Assets

Identifiable intangible assets generally represent the cost of management contracts acquired. The Company periodically reviews identifiable intangibles for impairment as events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Goodwill represents the excess of the cost of the Company’s investment in the net assets of acquired companies over the fair value of the underlying identifiable net assets at the dates of acquisition. Goodwill is not amortized but is tested at least annually for impairment by comparing the fair values of the companies acquired to their carrying amounts, including goodwill. If the carrying amounts of the companies exceed their respective fair values, additional impairment tests will be performed to measure the amount of the impairment loss, if any.

Deferred Income Taxes

Deferred income taxes reflect the expected future tax consequences of temporary differences between the carrying amounts and tax bases of the Company’s assets and liabilities. Such deferred taxes relate principally to capitalized sales commissions paid to broker/dealers. Prior to January 1, 2001, these commissions were deducted as paid for tax purposes. Since January 1, 2001, sales commissions are deducted for income tax purposes over their estimated useful lives, consistent with guidelines established by the Internal Revenue Service, rather than at the time of payment. While the Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing its taxes, changes in tax laws or the inability of the Company to meet the criteria for mutual fund state tax incentives may result in a change to the Company’s tax position and effective tax rate.

Investments in Collateralized Debt Obligation Entities

The Company accounts for its investments in collateralized debt obligation (“CDO”) entities under Emerging Issues Task Force (“EITF”) 99-20, “Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets.” The excess of future cash flows over the initial investment at the date of purchase is recognized as interest income over the life of the investment using the effective yield method. The Company reviews cash flow estimates throughout the life of each CDO investment pool to determine whether an impairment loss relating to its equity investments should be recognized. Cash flow estimates are based on the underlying pool of collateral securities and take into account the overall credit quality of the issuers of the collateral securities, the forecasted default rate of the collateral securities and the Company’s past experience in managing similar securities. If the updated estimate of future cash flows (taking into account both timing and amounts) is less than the last revised estimate, an impairment loss is recognized based on the excess of the carrying amount of the investment over its fair value. In periods of rising credit default rates and lower debt recovery rates, the carrying value of the Company’s investments in these CDO entities may be adversely affected by unfavorable changes in cash flow estimates and expected returns.

A CDO entity issues non-recourse debt securities, which are sold in a private offering by an underwriter to institutional and high-net-worth investors. The CDO debt securities issued by the CDO entity are secured by collateral in the form of high-yield bonds and/or floating-rate income instruments that the CDO entity purchases with proceeds from its issuance of non-recourse debt securities. The Company manages the collateral securities for a fee and, in most cases, is a minority investor in the equity interests of the CDO entity. An equity interest in a CDO entity is subordinated to all other interests in the CDO entity and entitles the investor to receive the residual cash flows, if any, from the CDO entity. As a result, the Company’s equity investment in a CDO entity is sensitive to changes in the credit quality of the issuers of the collateral securities including changes in the forecasted default rates and any declines in

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anticipated recovery rates. The Company’s financial exposure to the CDOs it manages is limited to its equity interests in the CDO entities as reflected in the Company’s Consolidated Balance Sheets.

Loss Contingencies

The Company continuously reviews any investor, employee or vendor complaints and pending or threatened litigation. The likelihood that a loss contingency exists is evaluated under the criteria of SFAS No. 5, “Accounting for Contingencies,” through consultation with legal counsel and a loss contingency is recorded if the contingency is probable and reasonably estimable at the date of the financial statements. No losses of this nature have been recorded in the financial statements included in this report.

Accounting Developments

In January 2003, the FASB issued FIN No. 46, “Consolidation of Variable Interest Entities.” FIN No. 46 addresses reporting and disclosure requirements for Variable Interest Entities (“VIEs”) and defines a VIE as an entity that either does not have equity investors with voting rights or has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN No. 46 requires consolidation of a VIE by the enterprise that absorbs a majority of the VIE’s expected losses. If no enterprise absorbs a majority of the expected losses, FIN No. 46 requires consolidation by the enterprise that receives a majority of the expected residual returns. The calculation of expected residual returns includes the expected variability in the entity’s net income or loss as well as all fees earned by the entity’s decision maker, thereby creating a bias in favor of the decision maker in the determination of who receives a majority of the expected residual returns. The consolidation and disclosure provisions of FIN No. 46 are effective immediately for VIEs created after January 31, 2003, and were originally effective for interim or annual reporting periods beginning after June 15, 2003 for VIEs created before February 1, 2003. Such transition provisions were subsequently amended so that the Company will not be required to apply FIN No. 46 until the first quarter of fiscal 2004, which ends on January 31, 2004.

The Company acts as collateral manager for six collateralized debt obligation entities (“CDO entities”) pursuant to collateral management agreements between the Company and each CDO entity. At October 31, 2003, combined assets under management in the collateral pools of all six of these CDO entities were approximately $2.0 billion. The Company has minority equity investments in three of these entities totaling $15.8 million at October 31, 2003, which represents the Company’s maximum exposure to loss over the remaining lives of the CDO entities.

In December 2003, the FASB issued FIN No. 46 (revised December 2003), which removed the bias in favor of the decision maker in the determination of who receives a majority of the expected residual return. As a result, management has concluded that the Company will not be required to consolidate any of the CDO entities for which it acts as collateral manager.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The Company is routinely subjected to different types of risk, including market risk. Market risk is the risk that the Company will incur losses due to adverse changes in equity prices, interest rates, credit risk, or currency exchange rates.

The Company’s primary exposure to equity price risk arises from its investments in sponsored equity funds. Equity price risk as it relates to these investments represents the potential future loss of value that would result from a decline in the fair values of the fund shares. The Company’s investments in sponsored equity funds totaled $9.4 million at October 31, 2003, and are carried at fair value on the Company’s Consolidated Balance Sheets.

The Company’s primary exposure to interest rate risk arises from its investment in fixed- and floating-rate income funds sponsored by the Company and short-term debt securities. The negative effect on the

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Company’s pre-tax interest income of a 50 basis point decline in interest rates would be approximately $0.5 million based on fixed-income and floating-rate income investments of $105.5 million as of October 31, 2003. A 50 basis point decline in interest rates is a hypothetical scenario used to demonstrate potential risk and does not represent management’s view of future market changes. The Company is not exposed to interest rate risk in its debt instruments as all of the Company’s funded debt instruments carry fixed interest rates.

The Company’s primary exposure to credit risk arises from its minority equity interests in several CDO entities that are included in long-term investments in the Company’s Consolidated Balance Sheets. As a minority equity investor in a CDO entity, the Company is only entitled to a residual interest in the CDO entity, making these investments sensitive to the default rates of the underlying issuers of the high-yield bonds or floating-rate income instruments held by the CDO entity. The Company’s minority equity investments are subject to an impairment loss in the event that the cash flows generated by the collateral securities are not sufficient to allow equity holders to recover their investments. If there is a deterioration in the credit quality of the issuers underlying the collateral securities and a corresponding increase in the number of defaults, cash flows generated by the collateral securities may be adversely impacted and the Company may be unable to recover its investment. The Company’s total investment in minority equity interests in CDO entities is approximately $15.8 million at October 31, 2003, which represents the total value at risk with respect to such entities as of October 31, 2003.

The Company does not enter into foreign currency transactions for speculative purposes and currently has no material investments that would expose it to foreign currency exchange risk.

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

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   Index to Consolidated Financial Statements and Supplementary Data
For the Fiscal Year Ended October 31, 2003, 2002 and 2001

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

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Consolidated Statements of Income

See notes to consolidated financial statements.

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Consolidated Balance Sheets

See notes to consolidated financial statements.

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Consolidated Balance Sheets

See notes to consolidated financial statements.

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Consolidated Statements of Shareholders’ Equity and Comprehensive Income

See notes to consolidated financial statements.

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Consolidated Statements of Shareholders’ Equity and Comprehensive Income