First-Ever Eaton Vance Dividend Study Surveys Top Finance Executives at Dividend-Paying US Corporations; Corporate Executives and Individual Investors Want Dividend Tax Cut Extended; Financial Officers at U.S. Firms Project Long-Term Dividend Growth.

BOSTON -- Eaton Vance Corp.

PLUS: Seventh Annual Eaton Vance Investor Study Results Shows a Shift in Investor Perceptions and Behaviors Toward Dividend Investing

Eaton Vance Corp. announced today the findings of its survey of senior finance executives at dividend-paying American corporations. The survey found that corporate executives at dividend-paying companies overwhelmingly believe recent tax cuts on dividends should remain in place beyond 2008. Findings of Eaton Vance's recently completed Seventh Annual Investor Survey show the tax cuts enjoy similar support among individual investors.

The nationwide survey of dividend-paying companies, conducted by Penn, Schoen & Berland Associates, Inc., reveals that 3 out of 4 finance executives (75%) at these firms say they think the President's dividend and capital gains tax cuts should remain in place, even as Congress continues to debate the issue. While only 44% expressed optimism that Congress will make the cuts permanent, 43% also said they believed a failure to extend the cuts would negatively affect the economy.

Among respondents to the individual investor study, 3 in 4 (77%) said it was important that Congress extended the provisions of the 2003 Tax Act that reduced the maximum tax rate on qualified dividends to 15%. Nearly half (43%) of investors say President Bush's tax cuts helped

the economy, and a majority of investors (55%) believe the economy would be hurt if provisions of the 2003 Tax Act are not extended beyond 2008.

Individual Investors Prefer Dividends over Stock Buybacks; Finance Execs Applaud Appeal of Dividends

Among individual investors polled, a clear majority (57%) said they prefer regular quarterly dividends over stock buybacks (23%) or special dividends (8%). The majority also had a very positive view of companies that pay dividends (78%), seeing them as predictable cash generators and viewing dividends as a sign of financial strength.

"Compared to the findings of earlier surveys, these results show a significant shift in investor preference from an emphasis on growth investing towards a more value-oriented, conservative investment style," commented Duncan W. Richardson, executive vice president and chief equity investment officer of Eaton Vance Management. "In the 1990s, investors preferred companies that offered buybacks--which increase reported earnings per share--over dividends. Dividends have returned to popularity, and value investing has emerged from the doghouse."

Corporate finance executives understand the appeal of dividends for investors. Among dividend-paying American companies, 6 out of 7 finance executives (86%) polled said they considered a company's track record of increasing annual dividends a way of exhibiting shareholder friendly behavior. Further, 4 out of 5 (80%) said they think a firm's dividend growth rate can give investors confidence in the company's projected long-term growth potential.

Corporate Executives Project Long-Term Dividend Growth

Research by Standard & Poor's shows that 63.2% (316) of S&P 500 companies increased or initiated a dividend during 2005. S&P also reported there were 1,949 dividend increases during 2005, which represents an 11.7% increase over 2004 and is 10.6% higher than the 10-year average of 1,763 dividend increases. In addition, dividends rose faster than corporate earnings over the past year. The Eaton Vance study shows evidence that corporate America expects this trend to continue into 2006. Of polled finance executives at public firms that pay dividends, 47% anticipate that dividend growth will continue to outpace earnings growth into 2006. 24% said they don't expect this to happen and 29% said they weren't sure.

"American companies have the means and motivation to continue to increase dividends," said Mr. Richardson. "Strong balance sheets and cash flows provide the means. The motivation comes from multiple sources. Greater board oversight due to the passage of Sarbanes Oxley legislation, the 2003 change in the tax treatment of dividends, and shareholders starting to reward companies that return excess cash are the three powerful motivators. However, businesses may not continue increasing their dividends if the tax cut extensions fail to go through and dividends once again become taxed at a higher rate."

Of those executives who thought dividends would continue to outpace earnings, a majority (60%) anticipated the trend would last for 1-2 years. Another 25% thought the trend may last up to 5 years, beyond the sunset provisions on the current tax act.

"Dividends growing faster than earnings is a trend that's a friend to income-oriented investors," said Mr. Richardson. "They would be well-served by investing in dividend-paying stocks that offer both current income and potential for growth of income."

Tax Rate Reduction on Dividends Influences Investor's Perceptions and Actions

Three out of four investors polled (78%) said they were aware that not all stock dividends qualify for favorable tax treatment, but only one in six (15%) knew the maximum federal tax rate for qualified dividends is now 15%. That compares to 66% who either thought it was higher than 15% (37%) or weren't sure (29%).

Despite confusion over current tax rates on qualified dividends, the change in the taxation of dividends has clearly influenced many investors' perception of dividend-paying stocks. A majority (55%) said the reduction in the maximum rate on qualified dividends from 35% to 15% in 2003 made them more likely to invest in dividend-paying stocks (25% much more likely and 30% somewhat more likely), while 42% said it had no impact on their decision. A majority of investors polled (55%) also said they were more interested in owning stocks that pay dividends or funds that invest in such stocks due to the favorable tax treatment, while only 30% said the tax rate didn't affect their interest.

The results of the Eaton Vance study also show that investors have put their positive views on dividend-paying stocks into practice. Nearly half of investors polled (46%) said they increased their investments in dividend-paying companies, or funds that invest in such issues, over the past two years. Only 16% said they had decreased investments in these types of investments and 32% said they did not change. Of the investors who said they had increased their investments in dividend-payers, a majority (57%) said the reduction in the tax rate factored in their decision.

"The results are different enough from those of prior surveys to indicate that the change in the tax rate--together with a shift to a more conservative style of investing--has had an influence on both investors' perceptions and behavior when it comes to dividend-paying stocks," said Mr. Richardson. "We may also be starting to see the demographic effect of the aging Baby Boomers who are looking to equities as a source of tax-advantaged income."

Dividend-Payers Show Intention to Step Up Dividends

While Eaton Vance's poll of financial executives at dividend-paying companies shows nearly half (44%) of respondents say they are unconcerned about the danger of a corporate takeover due to burgeoning cash levels, 40% are concerned about excess cash on the balance sheet making them the target of a takeover attempt. Among smaller companies ($250-$500 million), almost half of respondents (45%) agreed with this assessment. So, what to do with the cash?

The study shows many of these companies are using excess cash to increase dividends. Among respondents, 90% of firms that have increased their dividend in the last 5 years have also increased it in the last two years. Among those that increased their dividend over the last 5 years, three out of four (74%) also increased it in the last 12 months. And, 82% of companies who increased their dividend in the last 2 years (since the tax cut), have also increased it over the past 12 month-period. Of the minority (42%) who had not increased their dividend in the past 12 months, 80% said they held it flat while only 12% reduced it (representing only 5% of all dividend-paying companies).

"Unsurprisingly, the trend towards increasing dividends was more dramatic among larger companies polled, including Fortune 500 firms," said Mr. Richardson. "These larger, more mature companies usually pay larger dividends than smaller companies, which tend to reinvest cash so they can grow. The important takeaway is companies are increasingly returning more to investors in the form of dividends."

Some Shift Towards Dividend Investing, but Investors Still Hear the Siren Song of Cap Gains

Increasing dividends and rising numbers of dividend-paying stocks--even technology stocks--are starting to get investors' attention, but old habits of investing for capital gains die hard. Over the past 12 months, 275 companies in the S&P 500 increased their dividends, while only eight cut them. Just in November, 23 companies in the index raised their dividends. And, since the tax cut in 2003, a 25-year decline in the number of dividend-paying companies in the S&P 500 has reversed itself. Today, that figure stands at 385, still down from 469 in 1980--its most recent peak.

Among respondents to Eaton Vance's 2005 investor study, nearly a quarter (23%) correctly identified technology as the market sector that has seen the largest growth in dividends during the past two years--tech dividends have increased at an annual clip of 44% in that time. Almost a third (31%) thought real estate investment trusts - which pay dividends that do not qualify for the maximum 15% tax rate - had seen the largest dividend growth during the time period. In fact, the real estate sector grew dividends at 2.5% over the period 2001-2004 according to Prudential Securities, and dividend growth in the sector has been overshadowed by high stock price appreciation in these issues.

Despite all the positive dividend activity, a majority of investors persist in their affection for capital gains over dividends. Individual investor respondents said they valued capital gains over dividends by a ratio of more than 2 to 1 (65% said they preferred cap gains, while 27% said dividends).

Investor perceptions are off-base about the historical role of dividends in stock returns. Most investors polled (69%) thought that dividends have historically accounted for 5% to 20% of the overall return from stocks. In fact, historically, approximately 65% of the return on stocks has come from the compounding of reinvested dividends--even without reinvestment, dividends accounted for 40% of that return. And, since 1985 (through 9/30/05), dividend-paying stocks in the S&P 500 Index have returned an annualized 10.33%, which is 7.88 percentage points higher than the annualized return of non-dividend-paying stocks in the index over the same period.

"If an investor's experience with equity investing dates back only 10-15 years, he or she might have a historically inaccurate picture of the role of dividends in returns," said Mr. Richardson. "The alluring appreciation from the 1990s was so strong that investors are still hearing that siren song and expecting their return mostly from capital gains. Over the long term, reinvested dividends actually accounted for nearly two-thirds of stock returns. Investors might be well advised to re-acquaint themselves with how dividends can drive total return."

About the Eaton Vance Investor Survey

This summary highlights the major findings of two telephone studies. The first was among 408 U.S. residents who have invested in both qualified retirement plans and investments outside of qualified retirement plans (stock mutual funds, bond mutual funds, individual stocks, individual bonds, variable annuities and money market funds). This study, which represents a portrait of American investors' attitudes and practices about investing, specifically with reference to dividends, was conducted by Penn, Schoen & Berland Associates, Inc. for Eaton Vance Corp. during the third and fourth weeks of November 2005. It is a random census-balanced representative poll of American households. Of respondents, 65% had investable assets greater than $100,000. The margin of error for this study is +/- 4.9% at the 95% confidence level.

The second study was conducted between mid-November and mid-December among 217 senior finance executives at American corporations that have paid dividends. Senior finance executives are influential corporate decision-makers that are familiar with or have direct responsibility for the decision to issue a dividend. We interviewed executives across all major corporate sectors, including financials, industrials, REITs, telecommunications, hospitality, technology, health care, manufacturing, retail, energy and media. Of respondents, 45% represented companies with revenues of between $250 and $500 million last year, 26% between $500 million and $2 billion, and 29% more than $2 billion. The overall margin of error is +/- 5.96% at the 95% confidence level and higher for subgroups by revenue.

Penn, Schoen & Berland Associates, Inc. is a Washington, D.C.-based full-service strategic polling and market research firm.

Eaton Vance Corp., a Boston-based investment management firm, is traded on the New York Stock Exchange under the symbol EV. Through its subsidiaries, Eaton Vance Corp. advises and distributes investment products for individual and institutional clients.