Eaton Vance Corp. at Merrill Lynch Banking & Financial Services Conference - Final.(Broadcast transcript)

CYNTHIA MAYER, ANALYST, MERRILL LYNCH: The next presentation is from Eaton Vance. Eaton Vance is distinguished by having one of the more interesting product sets in the industry, with strengths in munis, bank loan funds, tax-managed equities, and closed-end funds. Needless to say, it's been an interesting year for a few of these products, some of which involve leverage. Eaton Vance has been on the forefront of dealing with issues like auction rate preferreds.

With the new administration in Washington, it could also be an interesting year next year for Eaton Vance as tax managed practice and products, though I think, given the losses we've all experienced, we may not need help immediately offsetting gains.

With us here today is Tom Faust, President and CEO. He is going to take you through the slides and I am required to note that Merrill has a banking relationship with Eaton Vance.

TOM FAUST, CHAIRMAN, CEO, EATON VANCE CORP.: Good morning and thanks, everyone, for joining us. Some say timing is everything. If you think back a year ago, when I first addressed this conference as Chief Executive of Eaton Vance, we had just concluded the first -- the best year in the history of Eaton Vance, and my first few days as CEO.

October 31, 2007, was a landmark date for Eaton Vance. It marked the retirement of Jim Hawkes, who was our long-time and very successful chief executive. It marked Eaton Vance closing that day at a record price of $50.03 a share. Our assets under management that day were a record $161.7 billion. We had concluded a year with record gross flows of approximately $46 billion and net flows of about $23 billion, by far records for the Company. And those included flows of $10 billion into closed-end funds. Not only our best year in the closed-end funds business, but indeed anyone's best year ever in the closed-end funds business.

At that point, of course, both the Dow and the S&P were very close to all-time highs, and for those of you that are sports fans, particularly New England sports fans, you'll recall that at that point, the Patriots were eight and zero, heading toward a landmark season.

Our plans for the new year were pretty straightforward. We were aspiring to a smooth management transition, working to continue the record of strong investment performance that has driven much of the Company's growth in recent years, we were continuing the realignment of our retail distribution under new head Matt Witkos, who had joined us at midyear 2007. We were looking to enhance flows into our institutional and high net worth businesses, representing the culmination of several years of efforts to build our positions outside of retail markets. We were certainly, in anticipation of a somewhat dicier economic and market climate, were focusing on prudent financial management and were certainly looking forward to year of profitable growth.

Again, for those who are sports fans, it was our anticipation that the Patriots would win the Super Bowl this year to cap a perfect season, the first 19-0 season in NFL history.

We have, no surprise to the people here, we have encountered a few bumps in the road. I'm not sure whether the thing hanging down from the truck is the driver or is a piece of debris, but, in either case, it's been a year of challenge, not only for off-road drivers but for new CEOs of financial services companies. So I've absorbed my share of bumps and bruises like many of you.

And, of course, those sports fans will recognize this moment, one of the great moments in Super Bowl history, though not a great moment in the history of the New England Patriots, which represented the culmination of their season, not going 19 and zero, but going 18 and 1, and falling just short of their goal.

But it's been a year of turmoil. We've all experienced this. I don't need to go through this list in great detail for those of you. Anyone listening or anyone here will certainly know the factors that have been common to financial services businesses generally over the last 12 months and, unfortunately, Eaton Vance has not been immune from the effects of any of these.

But through it all, fiscal 2008 was a very solid year for Eaton Vance. And really, in many ways, an extraordinary year, given all the pressures that were working against us. It was a year that saw us continuing with strong net inflows, and these flows continuing positive through the challenging fourth quarter, the period ending October.

For the year, on a gross basis, our flows just about matched last year's record levels, and you think -- see from the green shaded area that fourth-quarter net flows were actually significantly -- gross flows actually were significantly higher than last year's gross flows. On a net basis, we finished the year with about $14.7 billion of net flows, second strongest year in Company history.

If you look at the fourth quarter there, you see a little bit of a sliver showing $300 million of net inflows for the period. It's actually a little more complicated, and a better story than that. If you just simply take sales, including reinvested distributions less redemptions and client withdrawals, it was positive to the tune of about $1.6 billion. But because we count leverage on funds where we get paid on the gross asset basis inflows, the fact that we had forced deleveraging on a number of products, primarily in the closed-end funds space, brought net flows overall for the quarter to just approximately $300 million. But we certainly feel that the abilities of our sales team to achieve sales success and continuing net flows in this very tough environment of late is a noteworthy achievement.

On an overall basis, for the year, we had about 10% organic growth. That is, I think by any standard, a commendable result, certainly among the leaders in our business, and are particularly proud of the fact that we have been positive flows throughout this whole period.

In terms of our gross business, looking at some of the segments, our open-end fund business had a terrific year, indeed, record open-end fund sales for the year. You can see strong sales for each of the last four quarters. You can see that that sales growth was powered primarily by strong inflows into our equity funds. And I'll talk a bit about our equity fund lineup as the presentation goes forward.

We also have seen significant growth and record sales in our retail separate managed account businesses. This is highlighted by sales of products managed by Eaton Vance management in Boston, as well as products by our subsidiary, Parametric, based in Seattle. But it's been a strong year in retail sales across the board, reflecting not only good product performance, good product placement, …