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Eaton Vance Misses Views

Assets under management rose, boosting income, but expenses were also up.

Eaton Vance's (EV) - Get Eaton Vance Corp. Report fiscal fourth-quarter earnings were up 62% as increased assets under management boosted management fees.

The Boston-based money manager's net income for the three months ended Oct. 31 increased to $61.38 million, or 47 cents per diluted share, from $38.53 million, or 30 cents per diluted share, for the same period last year.

The results fell short of Wall Street's expectations; analysts polled by Thomson First Call were looking for net income of 49 cents per diluted share.

Earnings were reduced by 5 cents per diluted share as a result of costs associated with the management reorganization of Eaton Vance's distribution arm as well as a loss realized on an interest-rate lock entered into in connection with the issuance of 10-year senior notes in September.

Eaton Vance's operating expenses also increased during the quarter compared with the same period last year, as compensation expenses rose by 28%.

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The company's assets under management rose 25% to $32.8 billion by the end of October, up from $128.9 billion a year earlier. It said that $22.9 billion of the growth represented new money in its long-term mutual funds separate account net inflows, while $11.9 billion was attributable to market appreciation.

Higher assets under management drove fourth-quarter revenue growth of 29% to $293.8 million from $227.3 million. Revenue was also bolstered by a 9% increase in distribution and underwriter fees, while service fee revenue grew by 20%.

For the full fiscal year, earnings fell to $1.06 per diluted share compared with $1.17 per diluted share in fiscal 2006. Costs associated with closed-end fund expenses earlier in the year knocked off 65 cents per diluted share.

Eaton Vance's total annual revenue surpassed the $1 billion mark for the first time in company history, tallying $1.084 billion for the fiscal year.

"The company's strong operating cash flow combined with proceeds of the recent debt offering allowed us to repurchase our stock aggressively and to increase our quarterly dividend by 25%," said chairman and CEO Thomas E. Faust Jr. "By all measures, it was an exceptional year."