Eaton Vance Corp. reported a 39% profit increase for the second quarter 2004 over the second quarter 2003, with the firm’s separately managed account (SMA) and mutual fund units helping lead the way.

A 27% increase in mutual fund service fee revenues and a 27% increase in revenue from the consolidation of two Eaton-controlled investment companies helped the company, as did a 42% jump in investment advisor fees to $194.9 million. This offset a huge increase in operating expenses of 28%, which the company said stemmed from a 47% increase in compensation, much of which was sales-driven commission incentives.

Assets under management rose 47% from $57.9 billion at the end of the first half of fiscal year 2003 to $85.1 billion at the end of first half of fiscal year 2004, explaining the jump in advisor fees, the company said.

The company's repurchase and retiring of four million shares, which took place over the first half of fiscal year 2004, is still in progress, with the company scheduled to repurchase 2.7 billion shares.

The Boston-based firm said a new IRS stipulation that mutual fund sponsors could deduct Class B shares sales commissions also contributed to its increased assets.

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