News Release

 

Contacts: Laurie G. Hylton 617.672.8527

Eric Senay 617.672.6744

 

Eaton Vance Corp.

Report for the Three and Nine Month Periods Ended July 31, 2020

 

Boston, MA, August 26, 2020 – Eaton Vance Corp. (NYSE: EV) today reported earnings per diluted share of ($0.01) for the third quarter of fiscal 2020, reflecting a $0.90 per diluted share charge against earnings in connection with a $100.5 million impairment loss recognized during the quarter on the Company’s investment in 49 percent-owned affiliate Hexavest Inc. (Hexavest). For comparison, the Company earned $0.90 per diluted share in the third quarter of fiscal 2019 and $0.65 per diluted share in the second quarter of fiscal 2020.

 

The Company reported adjusted earnings per diluted share⁽¹⁾ of $0.82 for the third quarter of fiscal 2020, a decrease of 7 percent from $0.88 of adjusted earnings per diluted share in the third quarter of fiscal 2019 and an increase of 3 percent from $0.80 of adjusted earnings per diluted share in the second quarter of fiscal 2020.

 

In the third quarter of fiscal 2020, adjusted earnings exceeded earnings under U.S. generally accepted accounting principles (U.S. GAAP) by $0.83 per diluted share, reflecting the reversal of the $100.5 million impairment loss recognized on the Company’s investment in Hexavest, the reversal of $8.5 million of net gains of consolidated sponsored funds and consolidated collateralized loan obligation (CLO) entities (collectively, consolidated investment entities) and the Company’s other seed capital investments, the add-back of $1.6 million of management fees and expenses of consolidated investment entities, and the reversal of $0.2 million of net excess tax benefits related to stock-based compensation awards. Earnings under U.S. GAAP exceeded adjusted earnings by $0.02 per diluted share in the third quarter of fiscal 2019, reflecting the reversal of $4.6 million of net gains of consolidated investment entities and other seed capital investments, the add-back of $2.3 million of management fees and expenses of consolidated investment entities, and the reversal of $0.6 million of net excess tax benefits related to stock-based compensation awards. In the second quarter of fiscal 2020, adjusted earnings exceeded earnings under U.S. GAAP by $0.15 per diluted share, reflecting the reversal of $16.8 million of net losses of consolidated investment entities and other seed capital investments, the add-back of $1.8 million of management fees and expenses of consolidated investment entities, and the reversal of $1.1 million of net excess tax benefits related to stock-based compensation awards.

 

 

⁽¹⁾Adjusted financial measures represent non-U.S GAAP financial measures. See Attachment 2 for reconciliations to the most directly comparable U.S. GAAP financial measures and other important disclosures.

 

In the third quarter of fiscal 2020, the Company had consolidated net inflows of $2.7 billion, representing 2 percent annualized internal growth in managed assets (consolidated net flows divided by beginning of period consolidated assets under management). This compares to net inflows of $8.0 billion and 7 percent annualized internal growth in managed assets in the third quarter of fiscal 2019 and net outflows of $9.3 billion and -7 percent annualized internal growth in managed assets in the second quarter of fiscal 2020. Excluding Parametric overlay services, the Company had net inflows of $1.2 billion and 1 percent annualized internal growth in managed assets in the third quarter of fiscal 2020, net inflows of $5.3 billion and 5 percent annualized internal growth in managed assets in the third quarter of fiscal 2019 and net outflows of $2.8 billion and -3 percent annualized internal growth in managed assets in the second quarter of fiscal 2020.

 

The Company’s annualized internal management fee revenue growth (management fees attributable to consolidated inflows less management fees attributable to consolidated outflows, divided by beginning of period consolidated management fee revenue) was 2 percent in both the third quarter of fiscal 2020 and the third quarter of fiscal 2019 and -6 percent in the second quarter of fiscal 2020.

 

Consolidated assets under management were $507.4 billion on July 31, 2020, up 5 percent from $482.8 billion of consolidated managed assets on July 31, 2019 and up 9 percent from $465.3 billion of consolidated managed assets on April 30, 2020. The year-over-year increase in consolidated assets under management reflects net inflows of $9.3 billion and market price appreciation of $15.3 billion. The sequential quarterly increase in consolidated assets under management reflects net inflows of $2.7 billion and market price appreciation of $39.4 billion in the third quarter of fiscal 2020.

 

“Supported by positive organic revenue growth and rising equity markets, Eaton Vance’s business and financial results have snapped back sharply from the pandemic-related lows of our second fiscal quarter,” said Thomas E. Faust Jr., Chairman and Chief Executive Officer. “While significant uncertainties remain, our business momentum is building and our outlook is increasingly optimistic.”

 

Average consolidated assets under management were $484.5 billion in the third quarter of fiscal 2020, up 3 percent from $471.0 billion in the third quarter of fiscal 2019 and up 1 percent from $479.5 billion in the second quarter of fiscal 2020.

 

As shown in Attachment 10, excluding performance-based fees, annualized management fee rates on consolidated assets under management averaged 30.3 basis points in the third quarter of fiscal 2020, down 5 percent from 31.8 basis points in the third quarter of fiscal 2019 and up 2 percent from 29.7 basis points in the second quarter of fiscal 2020. Changes in average annualized management fee rates for the compared periods primarily reflect shifts in the Company’s mix of business.

 

Attachments 5 and 6 summarize the Company’s consolidated assets under management and net flows by investment mandate and investment vehicle reporting categories. Attachments 7, 8 and 9 summarize the Company’s ending consolidated assets under management by investment mandate, investment vehicle and investment affiliate. Attachment 10 shows the Company’s average annualized management fee rates by investment mandate.

 

As of July 31, 2020, managed assets of the Company’s 49 percent-owned affiliate Hexavest decreased to $6.8 billion, down 49 percent from $13.4 billion of managed assets on July 31, 2019 and down 21 percent from $8.6 billion of managed assets on April 30, 2020. Hexavest had net outflows of $2.7 billion in the third quarter of fiscal 2020, $0.6 billion in the third quarter of fiscal 2019 and $2.2 billion in the second quarter of fiscal 2020. The impairment loss recognized on the Company’s investment in Hexavest in the third quarter of fiscal 2020 reflects the net outflows experienced by Hexavest and the associated decline in Hexavest’s revenue and profits. The Company remains supportive of Hexavest’s leadership and investment approach, and has no plans to change its ownership position in Hexavest. Attachment 11 summarizes the assets under management and net flows of Hexavest. Other than Eaton Vance-sponsored funds for which Hexavest is the adviser or sub-adviser, the managed assets and flows of Hexavest are not included in our consolidated totals.

 

Financial Highlights

 

(in thousands, except per share figures)
		Three Months Ended
		July 31,		April 30,		July 31,
		2020		2020		2019
Revenue		$	420,819	$	405,911	$	431,235
Expenses			289,598		283,955		294,100
Operating income			131,221		121,956		137,135
Operating margin			31.2%		30.0%		31.8%
Adjusted operating margin(1)			31.6%		30.5%		32.4%
Non-operating income (expense)			32,311		(73,364)		5,470
Income taxes			(36,899)		(22,017)		(36,304)
Equity in net income (loss) of affiliates, net of tax			(100,244)		1,481		2,235
Net income			26,389		28,056		108,536
Net (income) loss attributable to non-
controlling and other beneficial interests			(27,982)		44,002		(6,315)
Net income (loss) attributable to
Eaton Vance Corp. shareholders		$	(1,593)	$	72,058	$	102,221
Adjusted net income attributable to
Eaton Vance Corp. shareholders(1)		$	91,830	$	89,627	$	99,327
Earnings (loss) per diluted share		$	(0.01)	$	0.65	$	0.90
Adjusted earnings per diluted share(1)		$	0.82	$	0.80	$	0.88
Weighted average shares outstanding:
	Basic		109,183		109,224		109,111
	Diluted		111,694		111,610		113,464
(1)	Adjusted financial measures represent non-U.S GAAP financial measures. See Attachment 2 for reconciliations to the most directly comparable U.S. GAAP financial measures and other important disclosures.

 

Third Quarter Fiscal 2020 vs. Third Quarter Fiscal 2019

 

In the third quarter of fiscal 2020, revenue decreased 2 percent to $420.8 million from $431.2 million in the third quarter of fiscal 2019. Management fees were down 2 percent, as a 5 percent decrease in the Company’s consolidated average annualized management fee rate more than offset a 3 percent increase in average consolidated assets under management. Performance fees were $0.9 million in the third quarter of fiscal 2020, versus $0.1 million in the third quarter of fiscal 2019. Distribution and service fee revenues for the third quarter of fiscal 2020 were collectively down 5 percent from the third quarter of fiscal 2019, reflecting lower average managed assets in fund share classes that are subject to these fees.

 

Operating expenses decreased 2 percent to $289.6 million in the third quarter of fiscal 2020 from $294.1 million in the third quarter of fiscal 2019, reflecting decreases in compensation, distribution expense and fund-related expenses, partially offset by increases in service fee expense, amortization of deferred sales commissions and other operating expenses. The decrease in compensation reflects lower operating income-based bonus accruals, lower sales-based incentive compensation and lower severance expenses, partially offset by higher salaries and benefit expenses associated with increases in headcount and higher stock-based compensation expense. The decline in distribution expense reflects a decrease in up-front sales commission expense, a decrease in marketing and promotion costs, lower Class C distribution fee payments and lower intermediary marketing support payments. The decrease in fund-related expenses reflects a reduction in fund expenses borne by the Company, partially offset by higher sub-advisory fees paid. The increase in service fee expense reflects higher private fund service fee payments, partially offset by lower Class A and Class C service fee payments. The increase in amortization of deferred sales commissions reflects higher private fund commission amortization. Other operating expenses increased 5 percent, primarily reflecting increases in information technology spending, facilities expenses and other corporate expenses, partially offset by lower travel expenses.

 

Operating income decreased 4 percent to $131.2 million in the third quarter of fiscal 2020 from $137.1 million in the third quarter of fiscal 2019. The Company’s operating margin decreased to 31.2 percent in the third quarter of fiscal 2020 from 31.8 percent in the third quarter of fiscal 2019. As shown in Attachment 2, on an adjusted basis including the management fee revenue and excluding the operating expenses of consolidated investment entities, operating income was down 5 percent year-over-year. Our adjusted operating margin decreased to 31.6 percent in the third quarter of fiscal 2020 from 32.4 percent in the third quarter of fiscal 2019.

 

Non-operating income totaled $32.3 million in the third quarter of fiscal 2020 and $5.5 million in the third quarter of fiscal 2019. The year-over-year change primarily reflects an $18.8 million increase in net gains and other investment income of consolidated sponsored funds and the Company’s investments in other sponsored strategies, and an $8.0 million improvement in net income (expense) of consolidated CLO entities.

 

The Company’s effective tax rate, calculated as a percentage of income before income taxes and equity in net income of affiliates, was 22.6 percent in the third quarter of fiscal 2020 and 25.5 percent in the third quarter of fiscal 2019. The Company’s effective tax rate is discussed in greater detail under “Taxation” below.

 

Equity in net income (loss) of affiliates was ($100.2) million and $2.2 million in the third quarters of fiscal 2020 and 2019, respectively. Equity in net income (loss) of affiliates in the third quarter of fiscal 2020 included the $100.5 million impairment loss recognized on the Company’s investment in Hexavest discussed above. In the third quarter of fiscal 2019, substantially all of equity in net income of affiliates related to the Company’s investment in Hexavest.

 

As detailed in Attachment 3, net income attributable to non-controlling and other beneficial interests was $28.0 million in the third quarter of fiscal 2020 and $6.3 million in the third quarter of fiscal 2019. The year-over-year change reflects an increase in income earned by consolidated sponsored funds, partially offset by a decrease in net income allocated to non-controlling interest holders of majority-owned subsidiaries due to the Company’s accelerated repurchase of certain profit and capital interests in Parametric entities held by current and former employees, which settled at the end of the fourth quarter of fiscal 2019.

 

The Company’s weighted average basic shares outstanding were 109.2 million in the third quarter of fiscal 2020 and 109.1 million in the third quarter of fiscal 2019. The year-over-year increase reflects new shares issued upon the vesting of restricted stock awards and the exercise of employee stock options in excess of share repurchases. On a diluted basis, the Company’s weighted average shares outstanding were 111.7 million in the third quarter of fiscal 2020 and 113.5 million in the third quarter of fiscal 2019, a decrease of 2 percent. The decline in weighted average diluted shares outstanding reflects a decrease in the dilutive effect of in-the-money options and unvested restricted stock awards due to lower market prices of the Company’s shares.

 

Third Quarter Fiscal 2020 vs. Second Quarter Fiscal 2020

 

In the third quarter of fiscal 2020, revenue increased 4 percent to $420.8 million from $405.9 million in the second quarter of fiscal 2020. Management fees were up 4 percent, primarily reflecting a 1 percent increase in average consolidated assets under management, a 2 percent increase in the Company’s consolidated average annualized management fee rate and the impact of two more fee days in the third quarter of fiscal 2020. Performance fees were $0.9 million in the third quarter of fiscal 2020, versus $2.5 million in the second quarter of fiscal 2020. Distribution and service fee revenues for the third quarter of fiscal 2020 were collectively up 2 percent from the second quarter of fiscal 2020, reflecting higher average managed assets in fund share classes that are subject to these fees.

 

Operating expenses increased 2 percent to $289.6 million in the third quarter of fiscal 2020 from $284.0 million in the second quarter of fiscal 2020, primarily reflecting increases in compensation and service fee expense, partially offset by decreases in distribution expense, fund-related expenses and other operating expenses. The increase in compensation reflects higher operating income-based and investment performance-based bonus accruals, higher stock-based compensation expense and higher salary and benefit expenses associated with increases in headcount and the impact of two additional payroll days, partially offset by lower sales-based incentive compensation. The increase in service fee expense reflects higher private fund and Class A service fee payments. The decrease in distribution expense reflects a reduction in up-front sales commission expense, partially offset by an increase in marketing costs. The decrease in fund-related expenses reflects lower fund expenses borne by the Company. Other operating expenses decreased 2 percent, primarily reflecting lower travel expenses, partially offset by an increase in other corporate expenses. Amortization of deferred sales commissions in the third quarter of fiscal 2020 was substantially unchanged from the second quarter of fiscal 2020.

 

Operating income increased 8 percent to $131.2 million in the third quarter of fiscal 2020 from $122.0 million in the second quarter of fiscal 2020. The Company’s operating margin increased to 31.2 percent in the third quarter of fiscal 2020 from 30.0 percent in the second quarter of fiscal 2020. As shown in Attachment 2, on an adjusted basis including the management fee revenue and excluding the operating expenses of consolidated investment entities, operating income was up 7 percent sequentially. Our adjusted operating margin increased to 31.6 percent in the third quarter of fiscal 2020 from 30.5 percent in the second quarter of fiscal 2020.

 

Non-operating income totaled $32.3 million in the third quarter of fiscal 2020 versus $73.4 million of non-operating expense in the second quarter of fiscal 2020. The sequential change reflects an $84.2 million positive change in net gains (losses) and other investment income of consolidated sponsored funds and the Company’s investments in other sponsored strategies, a $21.0 million improvement in net income (expense) of consolidated CLO entities and a $0.5 million decrease in interest expense. The decrease in interest expense reflects the repayment of borrowings under the Company’s line of credit made in the second quarter of fiscal 2020. Such borrowings were fully repaid before the end of the second quarter.

 

The Company’s effective tax rate, calculated as a percentage of income before income taxes and equity in net income of affiliates, was 22.6 percent in the third quarter of fiscal 2020 and 45.3 percent in the second quarter of fiscal 2020. The Company’s effective tax rate is discussed in greater detail under “Taxation” below.

 

Equity in net income (loss) of affiliates was ($100.2) million in the third quarter of fiscal 2020 and $1.5 million in the second quarter of fiscal 2020. Equity in net income (loss) of affiliates in the third quarter of fiscal 2020 included the $100.5 million impairment loss recognized on the Company’s investment in Hexavest discussed above. In the second quarter of fiscal 2020, substantially all of equity in net income of affiliates related to the Company’s investment in Hexavest.

 

As detailed in Attachment 3, net income (loss) attributable to non-controlling and other beneficial interests was $28.0 million in the third quarter of fiscal 2020 and $(44.0) million in the second quarter of fiscal 2020. The sequential change reflects improved income (expense) of consolidated sponsored funds.

 

The Company’s weighted average basic shares outstanding were 109.2 million in both the third quarter and the second quarter of fiscal 2020. On a diluted basis, the Company’s weighted average shares outstanding were 111.7 million in the third quarter of fiscal 2020 and 111.6 million in the second quarter of fiscal 2020. The increase in weighted average diluted shares outstanding reflects an increase in the dilutive effect of unvested restricted stock awards due to a decrease in the unrecognized compensation expense on these awards.

 

Taxation

 

The following table reconciles the U.S. statutory federal income tax rate to the Company’s effective income tax rate:

 

		Three Months Ended
		July 31,		April 30,		July 31,
		2020		2020		2019
Statutory U.S. federal income tax rate		21.0	%	21.0	%	21.0	%
State income tax, net of federal income
tax benefits		4.0		8.8		5.0
Net income attributable to non-controlling
and other beneficial interests		(3.6)		16.7		(1.3)
Other items		1.3		1.0		1.2
Net excess tax benefits from stock-based
compensation plans		(0.1)		(2.2)		(0.4)
Effective income tax rate		22.6	%	45.3	%	25.5	%

 

The Company’s income tax provision for the third quarter of fiscal 2020, third quarter of fiscal 2019 and second quarter of fiscal 2020 includes $0.5 million, $1.1 million and $0.9 million, respectively, of charges associated with certain provisions of the Tax Cuts and Jobs Act that took effect for the Company in fiscal 2019, relating principally to limitations on the deductibility of executive compensation.

 

The Company’s income tax provision was reduced by net excess tax benefits related to stock-based compensation awards totaling $0.2 million in the third quarter of fiscal 2020, $0.6 million in the third quarter of fiscal 2019 and $1.1 million in the second quarter of fiscal 2020.

 

As shown in Attachment 2, the Company’s calculations of adjusted net income and adjusted earnings per diluted share remove the impairment loss recognized in the third quarter of fiscal 2020 on the Company’s investment in 49 percent-owned affiliate Hexavest, exclude gains (losses) and other investment income (expense) of consolidated investment entities and other seed capital investments, add back the management fees and expenses of consolidated investment entities, and exclude the tax impact of stock-based compensation shortfalls or windfalls. On this basis, the Company’s adjusted effective tax rate was 27.1 percent in the third quarter of fiscal 2020, 26.4 percent in the third quarter of fiscal 2019 and 24.9 percent in the second quarter of fiscal 2020. On the same adjusted basis, the Company estimates that its effective tax rate will be approximately 26.4 to 26.9 percent for the balance of fiscal 2020 and for the fiscal year as a whole. The Company’s actual adjusted effective tax rate for fiscal 2020 may vary from this estimate due to changes in the Company’s tax policy interpretations and assumptions, additional regulatory guidance that may be issued and other factors.

 

Balance Sheet Information

 

As of July 31, 2020, the Company held cash and cash equivalents of $878.9 million and its investments included $170.6 million of short-term debt securities with maturities between 90 days and one year. There were no outstanding borrowings under the Company’s $300 million credit facility at such date. During the first nine months of fiscal 2020, the Company used $98.9 million to repurchase and retire approximately 2.4 million shares of its Non-Voting Common Stock under its repurchase authorizations. Of the current 8.0 million share repurchase authorization, approximately 4.0 million shares remain available.

 

Conference Call Information

 

Eaton Vance Corp. will host a conference call and webcast at 11:00 AM eastern time today to discuss the financial results for the three and nine months ended July 31, 2020. To participate in the conference call, please dial 866-521-4909 (domestic) or 647-427-2311 (international) and refer to “Eaton Vance Corp. Third Fiscal Quarter Earnings.” A webcast of the conference call can also be accessed via Eaton Vance’s website, eatonvance.com.

 

A replay of the call will be available for one week by calling 800-585-8367 (domestic) or 416-621-4642 (international) or by accessing Eaton Vance’s website, eatonvance.com. To listen to the replay, enter the conference ID number 6157816 when instructed.

 

About Eaton Vance Corp.

 

Eaton Vance Corp. (NYSE: EV) provides advanced investment strategies and wealth management solutions to forward-thinking investors around the world. Through principal investment affiliates Eaton Vance Management, Parametric, Atlanta Capital, Calvert and Hexavest, the Company offers a diversity of investment approaches, encompassing bottom-up and top-down fundamental active management, responsible investing, systematic investing and customized implementation of client-specified portfolio exposures. As of July 31, 2020, Eaton Vance had consolidated assets under management of $507.4 billion. Exemplary service, timely innovation and attractive returns across market cycles have been hallmarks of Eaton Vance since 1924. For more information, visit eatonvance.com.

 

Forward-Looking Statements

 

This news release may contain statements that are not historical facts, referred to as “forward-looking statements.” The Company’s actual future results may differ significantly from those stated in any forward-looking statements, depending on factors such as changes in securities or financial markets or general economic conditions, the scope and duration of the COVID-19 pandemic and its impact on the global economy or capital markets, client sales and redemption activity, the continuation of investment advisory, administration, distribution and service contracts, and other risks discussed in the Company’s filings with the Securities and Exchange Commission.

 

																Attachment 1
Consolidated Statements of Income
(in thousands, except per share figures)
		Three Months Ended											Nine Months Ended
								%		%
								Change		Change
								Q3 2020		Q3 2020
		July 31,		April 30,		July 31,		vs.		vs.			July 31,		July 31,		%
		2020		2020		2019		Q2 2020		Q3 2019			2020		2019		Change
Revenue:
Management fees		$	369,198	$	354,121	$	375,747	4	%	(2)	%		$	1,118,120	$	1,085,881	3	%
Distribution and underwriter fees			18,141		19,122		21,281	(5)		(15)				58,841		64,425	(9)
Service fees			32,322		30,557		31,855	6		1				96,818		90,801	7
Other revenue			1,158		2,111		2,352	(45)		(51)				5,505		8,405	(35)
	Total revenue		420,819		405,911		431,235	4		(2)				1,279,284		1,249,512	2
Expenses:
Compensation and related costs			156,780		149,072		158,642	5		(1)				477,834		466,072	3
Distribution expense			32,198		33,533		38,070	(4)		(15)				105,734		111,508	(5)
Service fee expense			28,266		26,648		28,037	6		1				84,669		79,475	7
Amortization of deferred sales commissions			6,329		6,289		5,644	1		12				18,586		16,762	11
Fund-related expenses			9,545		10,897		9,715	(12)		(2)				31,509		29,320	7
Other expenses			56,480		57,516		53,992	(2)		5				173,056		160,937	8
	Total expenses		289,598		283,955		294,100	2		(2)				891,388		864,074	3
Operating income			131,221		121,956		137,135	8		(4)				387,896		385,438	1
Non-operating income (expense):
Gains (losses) and other investment income, net			33,671		(50,512)		14,846	NM		127				(751)		35,885	NM
Interest expense			(5,888)		(6,364)		(5,888)	(7)		-				(18,140)		(17,907)	1
Other income (expense) of consolidated
	collateralized loan obligation (CLO) entities:
	Gains (losses) and other investment income, net		14,440		(4,841)		18,260	NM		(21)				25,162		45,495	(45)
	Interest and other expense		(9,912)		(11,647)		(21,748)	(15)		(54)				(38,955)		(40,905)	(5)
	Total non-operating income (expense)		32,311		(73,364)		5,470	NM		491				(32,684)		22,568	NM
Income before income taxes and equity
in net income (loss) of affiliates			163,532		48,592		142,605	237		15				355,212		408,006	(13)
Income taxes			(36,899)		(22,017)		(36,304)	68		2				(91,494)		(100,998)	(9)
Equity in net income (loss) of affiliates, net of tax			(100,244)		1,481		2,235	NM		NM				(96,438)		6,918	NM
Net income			26,389		28,056		108,536	(6)		(76)				167,280		313,926	(47)
Net (income) loss attributable to non-controlling
and other beneficial interests			(27,982)		44,002		(6,315)	NM		343				7,170		(23,097)	NM
Net income (loss) attributable to
Eaton Vance Corp. shareholders		$	(1,593)	$	72,058	$	102,221	NM		NM			$	174,450	$	290,829	(40)
Earnings (loss) per share:
Basic		$	(0.01)	$	0.66	$	0.94	NM		NM			$	1.60	$	2.63	(39)
Diluted		$	(0.01)	$	0.65	$	0.90	NM		NM			$	1.55	$	2.54	(39)
Weighted average shares outstanding:
Basic			109,183		109,224		109,111	-		-				109,255		110,553	(1)
Diluted			111,694		111,610		113,464	-		(2)				112,879		114,510	(1)
Dividends declared per share		$	0.375	$	0.375	$	0.350	-		7			$	1.125	$	1.050	7

Attachment 2

Non-U.S. GAAP Information and Reconciliations

 

Management believes that certain non-U.S. GAAP financial measures, specifically, adjusted operating income, adjusted net income attributable to Eaton Vance Corp. shareholders and adjusted earnings per diluted share, while not a substitute for U.S. GAAP financial measures, may be effective indicators of the Company’s performance over time. Non-U.S. GAAP financial measures should not be construed to be superior to U.S. GAAP measures. In calculating these non-U.S. GAAP financial measures, operating income, net income attributable to Eaton Vance Corp. shareholders and earnings per diluted share are adjusted to exclude items management deems non-operating or non-recurring in nature, or otherwise outside the ordinary course of business. These adjustments may include, when applicable, the add back of closed-end fund structuring fees, costs associated with debt repayments and tax settlements, the tax impact of stock-based compensation shortfalls or windfalls, impairment charges and non-recurring charges for the effect of tax law changes. The adjusted measures also exclude the impact of consolidated investment entities and other seed capital investments. Management and our Board of Directors, as well as certain of our outside investors, consider the adjusted numbers a measure of the Company’s underlying operating performance. Management believes adjusted net income attributable to Eaton Vance Corp. shareholders and adjusted earnings per diluted share are important indicators of our operations because they exclude items that may not be indicative of, or are unrelated to, our core operating results, and may provide a useful baseline for analyzing trends in our underlying business.

 

Effective in the second quarter of fiscal 2020, the Company’s calculation of non-U.S. GAAP financial measures excludes the impact of consolidated investment entities and other seed capital investments. Adjustments to U.S. GAAP operating income include the add-back of management fee revenue received from consolidated investment entities that are eliminated in consolidation and the non-management expenses of consolidated sponsored funds recognized in consolidation. Adjustments to U.S. GAAP net income attributable to Eaton Vance Corp. shareholders include the after-tax impact of these adjustments to operating income and the elimination of gains (losses) and other investment income (expense) of consolidated investment entities and other seed capital investments included in non-operating income (expense), as determined net of tax and non-controlling and other beneficial interests. All prior period non-U.S. GAAP financial measures have been updated to reflect this change.

 

Reconciliation of operating income and operating margin to adjusted operating income and adjusted operating margin:
(in thousands)
		Three Months Ended												Nine Months Ended
									%		%
									Change		Change
									Q3 2020		Q3 2020
		July 31,		April 30,		July 31,			vs.		vs.			July 31,		July 31,			%
		2020		2020		2019			Q2 2020		Q3 2019			2020		2019			Change
Total revenue		$	420,819	$	405,911	$	431,235		4	%	(2)	%		$	1,279,284	$	1,249,512		2	%
Management fees of consolidated sponsored
	funds and consolidated CLO entities(1)		1,193		1,277		1,813		(7)		(34)				4,396		3,614		22
Adjusted total revenue		$	422,012	$	407,188	$	433,048		4		(3)			$	1,283,680	$	1,253,126		2
Total expenses		$	289,598	$	283,955	$	294,100		2	%	(2)	%		$	891,388	$	864,074		3	%
Non-management expenses of consolidated
	sponsored funds(2)		(1,014)		(1,144)		(1,297)		(11)		(22)				(3,446)		(4,078)		(15)
Adjusted total expenses		$	288,584	$	282,811	$	292,803		2		(1)			$	887,942	$	859,996		3
Operating income		$	131,221	$	121,956	$	137,135		8	%	(4)	%		$	387,896	$	385,438		1	%
Management fees of consolidated sponsored
	funds and consolidated CLO entities(1)		1,193		1,277		1,813		(7)		(34)				4,396		3,614		22
Non-management expenses of consolidated
	sponsored funds(2)		1,014		1,144		1,297		(11)		(22)				3,446		4,078		(15)
Adjusted operating income		$	133,428	$	124,377	$	140,245		7		(5)			$	395,738	$	393,130		1
Operating margin			31.2	%	30.0	%	31.8	%	4		(2)				30.3	%	30.8	%	(2)
Adjusted operating margin			31.6	%	30.5	%	32.4	%	4		(2)				30.8	%	31.4	%	(2)

 

 

Reconciliation of income before income taxes and equity in net income of affiliates to adjusted income before income taxes and equity in net income of affiliates:
(in thousands, except as noted)
		Three Months Ended												Nine Months Ended
									%		%
									Change		Change
									Q3 2020		Q3 2020
		July 31,		April 30,		July 31,			vs.		vs.			July 31,		July 31,			%
		2020		2020		2019			Q2 2020		Q3 2019			2020		2019			Change
Income before income taxes and equity in net
	income (loss) of affiliates	$	163,532	$	48,592	$	142,605		237	%	15	%		$	355,212	$	408,006		(13)	%
Management fees of consolidated sponsored
	funds and consolidated CLO entities, pre-tax(1)		1,193		1,277		1,813		(7)		(34)				4,396		3,614		22
Non-management expenses of consolidated
	sponsored funds, pre-tax(2)		1,014		1,144		1,297		(11)		(22)				3,446		4,078		(15)
Net (gains) losses and other investment income
	related to consolidated sponsored funds and
	other seed capital investments, pre-tax(3)		(33,419)		51,489		(12,394)		NM		170				4,258		(27,764)		NM
Other (income) expense of consolidated CLO
	entities, pre-tax(4)		(4,528)		16,488		3,488		NM		NM				13,793		(4,589)		NM
Adjusted income before income taxes and equity
	in net income (loss) of affiliates	$	127,792	$	118,990	$	136,809		7		(7)			$	381,105	$	383,345		(1)
Income tax expense		$	36,899	$	22,017	$	36,304		68	%	2	%		$	91,494	$	100,998		(9)	%
Management fees of consolidated sponsored
	funds and consolidated CLO entities(1)		308		330		466		(7)		(34)				1,136		925		23
Non-management expenses of consolidated
	sponsored funds(2)		262		296		333		(11)		(21)				891		1,041		(14)
Net (gains) losses and other investment income
	related to consolidated sponsored funds and
	other seed capital investments(3)		(1,789)		1,606		(2,474)		NM		(28)				(1,898)		(3,697)		(49)
Other (income) expense of consolidated CLO
	entities(4)		(1,170)		4,262		895		NM		NM				3,565		(1,162)		NM
Net excess tax benefits from stock-based
	compensation plans		176		1,059		637		(83)		(72)				6,095		3,863		58
Adjusted income tax expense		$	34,686	$	29,570	$	36,161		17		(4)			$	101,283	$	101,968		(1)
Effective income tax rate			22.6	%	45.3	%	25.5	%	(50)		(11)				25.8	%	24.8	%	4
Adjusted effective income tax rate			27.1	%	24.9	%	26.4	%	9		3				26.6	%	26.6	%	-

 

 

Reconciliation of net income attributable to Eaton Vance Corp. shareholders to adjusted net income attributable to Eaton Vance Corp. shareholders and earnings per diluted share to adjusted earnings per diluted share:
(in thousands, except per share figures)
		Three Months Ended												Nine Months Ended
									%		%
									Change		Change
									Q3 2020		Q3 2020
		July 31,		April 30,		July 31,			vs.		vs.			July 31,		July 31,			%
		2020		2020		2019			Q2 2020		Q3 2019			2020		2019			Change
Net income (loss) attributable to Eaton Vance
	Corp. shareholders	$	(1,593)	$	72,058	$	102,221		NM	%	NM	%		$	174,450	$	290,829		(40)	%
Management fees of consolidated sponsored
	funds and consolidated CLO entities, net of tax(1)		885		947		1,348		(7)		(34)				3,260		2,690		21
Non-management expenses of consolidated
	sponsored funds, net of tax(2)		752		848		964		(11)		(22)				2,555		3,037		(16)
Net (gains) losses and other investment income
	related to consolidated sponsored funds and
	other seed capital investments, net of tax(3)		(5,131)		4,607		(7,161)		NM		(28)				(5,444)		(10,743)		(49)
Other (income) expense of consolidated CLO
	entities, net of tax(4)		(3,357)		12,226		2,592		NM		NM				10,227		(3,430)		NM
Net excess tax benefit from stock-based
	compensation plans		(176)		(1,059)		(637)		(83)		(72)				(6,095)		(3,863)		58
Impairment loss(5)			100,450		-		-		NM		NM				100,450		-		NM
Adjusted net income attributable to Eaton
	Vance Corp. shareholders	$	91,830	$	89,627	$	99,327		2		(8)			$	279,403	$	278,520		-
Earnings (loss) per diluted share		$	(0.01)	$	0.65	$	0.90		NM		NM			$	1.55	$	2.54		(39)
Management fees of consolidated sponsored
	funds and consolidated CLO entities, net of tax		0.01		0.01		0.01		-		-				0.03		0.02		50
Non-management expenses of consolidated
	sponsored funds, net of tax		-		0.01		0.01		(100)		(100)				0.02		0.03		(33)
Net (gains) losses and other investment income
	related to consolidated sponsored funds and
	other seed capital investments, net of tax		(0.05)		0.04		(0.06)		NM		(17)				(0.05)		(0.09)		(44)
Other (income) expense of consolidated CLO
	entities, net of tax		(0.03)		0.11		0.02		NM		NM				0.09		(0.04)		NM
Net excess tax benefit from stock-based
	compensation plans		-		(0.02)		-		(100)		NM				(0.05)		(0.03)		67
Impairment loss			0.90		-		-		NM		NM				0.89		-		NM
Adjusted earnings per diluted share		$	0.82	$	0.80	$	0.88		3		(7)			$	2.48	$	2.43		2

 

Notes to Reconciliations:
(1)	Represents management fees eliminated upon the consolidation of sponsored funds and CLO entities.
(2)	Represents expenses of consolidated sponsored funds.
(3)	Represents gains, losses and other investment income earned on investments in sponsored strategies, whether accounted for as consolidated funds, separate accounts or equity investments, as well as the gains and losses recognized on derivatives used to hedge these investments. Stated amounts are net of non-controlling interests.
(4)	Represents other income and expenses of consolidated CLO entities.
(5)	Represents an impairment loss recognized on the Company’s investment in 49 percent-owned affiliate Hexavest.

 

 

															Attachment 3
Components of net income (loss) attributable
to non-controlling and other beneficial interests
(in thousands)
		Three Months Ended												Nine Months Ended
									%		%
									Change		Change
									Q3 2020		Q3 2020
		July 31,		April 30,		July 31,			vs.		vs.			July 31,		July 31,		%
		2020		2020		2019			Q2 2020		Q3 2019			2020		2019		Change
Consolidated sponsored funds		$	26,500	$	(45,276)	$	2,760		NM	%	860	%		$	(11,598)	$	13,323	NM	%
Majority-owned subsidiaries			1,482		1,274		3,555		16		(58)				4,428		9,774	(55)
Net income (loss) attributable to non-controlling
	and other beneficial interests	$	27,982	$	(44,002)	$	6,315		NM		343			$	(7,170)	$	23,097	NM

 

						Attachment 4
	Consolidated Balance Sheet
	(in thousands, except per share figures)
			July 31,			October 31,(1)
			2020			2019
	Assets
	Cash and cash equivalents	$	878,875		$	557,668
	Management fees and other receivables		231,115			237,864
	Investments		657,444			1,060,739
	Assets of consolidated CLO entities:
	Cash		51,854			48,704
	Bank loans and other investments		1,484,671			1,704,270
	Other assets		19,145			28,039
	Deferred sales commissions		59,622			55,211
	Deferred income taxes		55,127			62,661
	Equipment and leasehold improvements, net		71,251			72,798
	Operating lease right-of-use assets		257,700			-
	Intangible assets, net		72,956			75,907
	Goodwill		259,681			259,681
	Loan to affiliate		5,000			5,000
	Other assets		77,956			85,087
	Total assets	$	4,182,397		$	4,253,629
	Liabilities, Temporary Equity and Permanent Equity
	Liabilities:
	Accrued compensation	$	173,311		$	240,722
	Accounts payable and accrued expenses		71,063			89,984
	Dividend payable		55,600			55,177
	Debt		621,139			620,513
	Operating lease liabilities		306,493			-
	Liabilities of consolidated CLO entities:
	Senior and subordinated note obligations		1,170,800			1,617,095
	Other liabilities		298,282			51,122
	Other liabilities		24,912			108,982
	Total liabilities		2,721,600			2,783,595
	Commitments and contingencies
	Temporary Equity:
	Redeemable non-controlling interests		185,510			285,915
	Total temporary equity		185,510			285,915
	Permanent Equity:
	Voting Common Stock, par value $0.00390625 per share:
	Authorized, 1,280,000 shares
	Issued and outstanding, 464,716 and 422,935 shares, respectively		2			2
	Non-Voting Common Stock, par value $0.00390625 per share:
	Authorized, 190,720,000 shares
	Issued and outstanding, 114,173,283 and 113,143,567 shares, respectively		446			442
	Additional paid-in capital		49,122			-
	Notes receivable from stock option exercises		(7,153)			(8,447)
	Accumulated other comprehensive loss		(63,132)			(58,317)
	Retained earnings		1,296,002			1,250,439
	Total permanent equity		1,275,287			1,184,119
	Total liabilities, temporary equity and permanent equity	$	4,182,397		$	4,253,629

 

 

													Attachment 5
	Consolidated Assets under Management and Net Flows by Investment Mandate(1)
	(in millions)
			Three Months Ended									Nine Months Ended
			July 31,			April 30,			July 31,			July 31,			July 31,
			2020			2020			2019			2020			2019
Equity assets – beginning of period(2)			$	122,273		$	138,708		$	125,869		$	131,895		$	115,772
		Sales and other inflows		6,587			8,316			6,749			22,709			18,019
		Redemptions/outflows		(8,757)			(8,793)			(5,130)			(23,732)			(15,161)
		Net flows		(2,170)			(477)			1,619			(1,023)			2,858
		Exchanges		(19)			(205)			(43)			(221)			(1)
		Market value change		12,924			(15,753)			1,551			2,357			10,367
Equity assets – end of period			$	133,008		$	122,273		$	128,996		$	133,008		$	128,996
Fixed income assets – beginning of period(3)				61,347			64,262			58,531			62,378			54,339
		Sales and other inflows		8,573			7,898			5,237			21,557			17,019
		Redemptions/outflows		(4,080)			(7,719)			(3,495)			(15,746)			(12,813)
		Net flows		4,493			179			1,742			5,811			4,206
		Exchanges		51			154			69			228			466
		Market value change		3,064			(3,248)			626			538			1,957
Fixed income assets – end of period			$	68,955		$	61,347		$	60,968		$	68,955		$	60,968
Floating-rate income assets – beginning of period				27,822			33,836			39,750			35,103			44,837
		Sales and other inflows		1,495			1,937			1,772			5,121			7,417
		Redemptions/outflows		(2,068)			(5,096)			(2,963)			(10,210)			(13,098)
		Net flows		(573)			(3,159)			(1,191)			(5,089)			(5,681)
		Exchanges		4			(119)			(38)			(142)			(361)
		Market value change		1,316			(2,736)			(182)			(1,303)			(456)
Floating-rate income assets – end of period			$	28,569		$	27,822		$	38,339		$	28,569		$	38,339
Alternative assets – beginning of period(4)				7,226			8,553			9,409			8,372			12,139
		Sales and other inflows		575			498			466			1,748			2,312
		Redemptions/outflows		(622)			(1,182)			(1,109)			(2,397)			(5,648)
		Net flows		(47)			(684)			(643)			(649)			(3,336)
		Exchanges		(38)			(14)			9			(52)			(167)
		Market value change		326			(629)			256			(204)			395
Alternative assets – end of period			$	7,467		$	7,226		$	9,031		$	7,467		$	9,031
Parametric custom portfolios assets – beginning of period(5)				158,696			175,318			153,604			164,895			134,345
		Sales and other inflows		9,917			13,896			9,236			33,558			28,499
		Redemptions/outflows		(10,385)			(12,596)			(5,449)			(29,202)			(16,445)
		Net flows		(468)			1,300			3,787			4,356			12,054
		Exchanges		3			4			3			8			56
		Market value change		16,808			(17,926)			1,673			5,780			12,612
Parametric custom portfolios assets – end of period			$	175,039		$	158,696		$	159,067		$	175,039		$	159,067
Parametric overlay services assets – beginning of period				87,919			97,514			82,775			94,789			77,871
		Sales and other inflows		22,638			29,025			17,307			72,976			48,988
		Redemptions/outflows		(21,143)			(35,494)			(14,611)			(76,836)			(44,963)
		Net flows		1,495			(6,469)			2,696			(3,860)			4,025
		Exchanges		-			178			-			178			-
		Market value change		4,936			(3,304)			908			3,243			4,483
Parametric overlay services assets – end of period			$	94,350		$	87,919		$	86,379		$	94,350		$	86,379
Total assets under management – beginning of period				465,283			518,191			469,938			497,432			439,303
		Sales and other inflows		49,785			61,570			40,767			157,669			122,254
		Redemptions/outflows		(47,055)			(70,880)			(32,757)			(158,123)			(108,128)
		Net flows		2,730			(9,310)			8,010			(454)			14,126
		Exchanges		1			(2)			-			(1)			(7)
		Market value change		39,374			(43,596)			4,832			10,411			29,358
Total assets under management – end of period			$	507,388		$	465,283		$	482,780		$	507,388		$	482,780
(1)	Consolidated Eaton Vance Corp. See Attachment 11 for directly managed assets and flows of 49 percent-owned Hexavest, which are not included in the table above.
(2)	Includes balanced and other multi-asset mandates. Excludes equity mandates reported as Parametric custom portfolios.
(3)	Includes cash management mandates. Excludes benchmark-based fixed income separate accounts reported as Parametric custom portfolios. Amounts for periods prior to fiscal 2020 have been revised to reflect the reclassification of benchmark-based fixed income separate accounts from fixed income to Parametric custom portfolios in the first quarter of fiscal 2020.
(4)	Consists of absolute return, commodity and currency mandates.
(5)	Equity, fixed income and multi-asset separate accounts managed by Parametric for which customization is a primary feature; other Parametric strategies may also be customized. Amounts for periods prior to fiscal 2020 have been revised to reflect the reclassification of benchmark-based fixed income separate accounts from fixed income to Parametric custom portfolios in the first quarter of fiscal 2020.

 

 

													Attachment 6
	Consolidated Assets under Management and Net Flows by Investment Vehicle(1)
	(in millions)
			Three Months Ended									Nine Months Ended
			July 31,			April 30,			July 31,			July 31,			July 31,
			2020			2020			2019			2020			2019
Funds – beginning of period			$	160,404		$	180,539		$	170,962		$	174,068		$	164,968
		Sales and other inflows		12,816			14,316			10,084			38,628			34,317
		Redemptions/outflows		(10,281)			(17,297)			(8,912)			(36,739)			(33,736)
		Net flows		2,535			(2,981)			1,172			1,889			581
		Exchanges		1			(3)			22			(2)			(83)
		Market value change		13,275			(17,151)			1,277			260			7,967
Funds – end of period			$	176,215		$	160,404		$	173,433		$	176,215		$	173,433
Institutional separate accounts – beginning of period				154,755			175,258			160,460			173,331			153,996
		Sales and other inflows		26,296			33,732			20,903			83,633			58,059
		Redemptions/outflows		(28,399)			(41,869)			(17,861)			(95,717)			(56,689)
		Net flows		(2,103)			(8,137)			3,042			(12,084)			1,370
		Exchanges		-			6			(16)			6			82
		Market value change		11,166			(12,372)			1,825			2,565			9,863
Institutional separate accounts – end of period			$	163,818		$	154,755		$	165,311		$	163,818		$	165,311
Individual separate accounts – beginning of period				150,124			162,394			138,516			150,033			120,339
		Sales and other inflows		10,673			13,522			9,780			35,408			29,878
		Redemptions/outflows		(8,375)			(11,714)			(5,984)			(25,667)			(17,703)
		Net flows		2,298			1,808			3,796			9,741			12,175
		Exchanges		-			(5)			(6)			(5)			(6)
		Market value change		14,933			(14,073)			1,730			7,586			11,528
Individual separate accounts – end of period			$	167,355		$	150,124		$	144,036		$	167,355		$	144,036
Total assets under management – beginning of period				465,283			518,191			469,938			497,432			439,303
		Sales and other inflows		49,785			61,570			40,767			157,669			122,254
		Redemptions/outflows		(47,055)			(70,880)			(32,757)			(158,123)			(108,128)
		Net flows		2,730			(9,310)			8,010			(454)			14,126
		Exchanges		1			(2)			-			(1)			(7)
		Market value change		39,374			(43,596)			4,832			10,411			29,358
Total assets under management – end of period			$	507,388		$	465,283		$	482,780		$	507,388		$	482,780
(1)	Consolidated Eaton Vance Corp. See Attachment 11 for directly managed assets and flows of 49 percent-owned Hexavest, which are not included in the table above.

 

 

												Attachment 7
	Consolidated Assets under Management by Investment Mandate(1)
	(in millions)
				July 31,			April 30,		%			July 31,		%
				2020			2020		Change			2019		Change
Equity(2)			$	133,008		$	122,273		9%		$	128,996		3%
Fixed income(3)				68,955			61,347		12%			60,968		13%
Floating-rate income				28,569			27,822		3%			38,339		-25%
Alternative(4)				7,467			7,226		3%			9,031		-17%
Parametric custom portfolios(5)				175,039			158,696		10%			159,067		10%
Parametric overlay services				94,350			87,919		7%			86,379		9%
Total			$	507,388		$	465,283		9%		$	482,780		5%
(1)	Consolidated Eaton Vance Corp. See Attachment 11 for directly managed assets and flows of 49 percent-owned Hexavest, which are not included in the table above.
(2)	Includes balanced and other multi-asset mandates. Excludes equity mandates reported as Parametric custom portfolios.
(3)	Includes cash management mandates. Excludes benchmark-based fixed income separate accounts reported as Parametric custom portfolios.
(4)	Consists of absolute return, commodity and currency mandates.
(5)	Equity, fixed income and multi-asset separate accounts managed by Parametric for which customization is a primary feature; other Parametric strategies may also be customized.
												Attachment 8
	Consolidated Assets under Management by Investment Vehicle(1)
	(in millions)
				July 31,			April 30,		%			July 31,		%
				2020			2020		Change			2019		Change
Open-end funds			$	104,948		$	94,717		11%		$	105,614		-1%
Closed-end funds				23,214			21,712		7%			24,307		-4%
Private funds(2)				48,053			43,975		9%			43,512		10%
Institutional separate accounts				163,818			154,755		6%			165,311		-1%
Individual separate accounts				167,355			150,124		11%			144,036		16%
Total			$	507,388		$	465,283		9%		$	482,780		5%
(1)	Consolidated Eaton Vance Corp. See Attachment 11 for directly managed assets and flows of 49 percent-owned Hexavest, which are not included in the table above.
(2)	Includes privately offered equity, fixed and floating-rate income, and alternative funds and CLO entities.
												Attachment 9
	Consolidated Assets under Management by Investment Affiliate(1)(2)
	(in millions)
				July 31,			April 30,		%			July 31,		%
				2020			2020		Change			2019		Change
	Eaton Vance Management(3)		$	147,165		$	133,927		10%		$	148,379		-1%
	Parametric			310,557			287,426		8%			292,212		6%
	Atlanta Capital			24,982			22,645		10%			23,978		4%
	Calvert(4)			24,684			21,285		16%			18,211		36%
	Total		$	507,388		$	465,283		9%		$	482,780		5%
(1)	Consolidated Eaton Vance Corp. See Attachment 11 for directly managed assets and flows of 49 percent-owned Hexavest, which are not included in the table above.
(2)	The Company’s policy for reporting managed assets of investment portfolios overseen by multiple Eaton Vance affiliates is to base the classification on the strategy’s primary identity.
(3)	Includes managed assets of Eaton Vance-sponsored funds and separate accounts managed by Hexavest and unaffiliated third-party advisers under Eaton Vance supervision.
(4)	Includes managed assets of Calvert Equity Fund, which is sub-advised by Atlanta Capital, and Calvert-sponsored funds managed by unaffiliated third-party advisers under Calvert supervision.

 

 

	Attachment 10
	Average Annualized Management Fee Rates by Investment Mandate(1)(2)
	(in basis points on average managed assets)
		Three Months Ended						Nine Months Ended
					%	%
					Change	Change
					Q3 2020	Q3 2020
		July 31,	April 30,	July 31,	vs.	vs.		July 31,	July 31,	%
		2020	2020	2019	Q2 2020	Q3 2019		2020	2019	Change
	Equity(3)	55.7	55.1	57.1	1%	-2%		56.0	57.1	-2%
	Fixed income(4)	40.1	40.1	41.7	0%	-4%		40.4	41.7	-3%
	Floating-rate income	49.9	49.8	49.7	0%	0%		49.8	49.8	0%
	Alternative(5)	64.3	62.2	66.9	3%	-4%		63.6	61.0	4%
	Parametric custom portfolios(6)	15.5	14.5	15.0	7%	3%		15.1	14.7	3%
	Parametric overlay services	5.2	4.9	5.2	6%	0%		5.0	5.2	-4%
	Total	30.3	29.7	31.8	2%	-5%		30.3	31.9	-5%
(1)	Excludes performance-based fees, which were $0.9 million in the three months ended July 31, 2020, $2.5 million in the three months ended April 30, 2020, $0.1 million in the three months ended July 31, 2019, $3.6 million in the nine months ended July 31, 2020 and $1.6 million in the nine months ended July 31, 2019.
(2)	Excludes management fees earned on consolidated investment entities that are eliminated in consolidation, which were $1.2 million in the three months ended July 31, 2020, $1.3 million in the three months ended April 30, 2020, $1.8 million in the three months ended July 31, 2019, $4.4 million in the nine months ended July 31, 2020 and $3.6 million in the nine months ended July 31, 2019. The managed assets and flows of consolidated investment entities are reflected in our consolidated totals.
(3)	Includes balanced and other multi-asset mandates. Excludes equity mandates reported as Parametric custom portfolios.
(4)	Includes cash management mandates. Excludes benchmark-based fixed income separate accounts reported as Parametric custom portfolios. Amounts for periods prior to fiscal 2020 have been revised to reflect the reclassification of benchmark-based fixed income separate accounts from fixed income to Parametric custom portfolios in the first quarter of fiscal 2020.
(5)	Consists of absolute return, commodity and currency mandates.
(6)	Equity, fixed income and multi-asset separate accounts managed by Parametric for which customization is a primary feature; other Parametric strategies may also be customized. Amounts for periods prior to fiscal 2020 have been revised to reflect the reclassification of benchmark-based fixed income separate accounts from fixed income to Parametric custom portfolios in the first quarter of fiscal 2020.

 

 

	Attachment 11
	Hexavest Inc. Assets under Management and Net Flows
	(in millions)
				Three Months Ended									Nine Months Ended
				July 31,			April 30,			July 31,			July 31,			July 31,
				2020			2020			2019			2020			2019
Eaton Vance distributed:
Eaton Vance sponsored funds – beginning of period(1)				$	70		$	130		$	184		$	152		$	159
		Sales and other inflows			31			4			3			38			47
		Redemptions/outflows			(17)			(42)			(17)			(85)			(45)
		Net flows			14			(38)			(14)			(47)			2
		Market value change			9			(22)			-			(12)			9
Eaton Vance sponsored funds – end of period				$	93		$	70		$	170		$	93		$	170
Eaton Vance distributed separate accounts –
	beginning of period(2)			$	1,001		$	1,566		$	2,076		$	1,563		$	2,169
		Sales and other inflows			19			24			79			49			103
		Redemptions/outflows			(519)			(338)			(414)			(879)			(633)
		Net flows			(500)			(314)			(335)			(830)			(530)
		Market value change			83			(251)			4			(149)			106
Eaton Vance distributed separate accounts – end of period				$	584		$	1,001		$	1,745		$	584		$	1,745
Total Eaton Vance distributed – beginning of period				$	1,071		$	1,696		$	2,260		$	1,715		$	2,328
		Sales and other inflows			50			28			82			87			150
		Redemptions/outflows			(536)			(380)			(431)			(964)			(678)
		Net flows			(486)			(352)			(349)			(877)			(528)
		Market value change			92			(273)			4			(161)			115
Total Eaton Vance distributed – end of period				$	677		$	1,071		$	1,915		$	677		$	1,915
Hexavest directly distributed – beginning of period(3)				$	7,559		$	11,296		$	11,634		$	11,640		$	11,467
		Sales and other inflows			30			304			410			430			1,629
		Redemptions/outflows			(2,253)			(2,120)			(646)			(4,927)			(2,253)
		Net flows			(2,223)			(1,816)			(236)			(4,497)			(624)
		Market value change			793			(1,921)			76			(1,014)			631
Hexavest directly distributed – end of period				$	6,129		$	7,559		$	11,474		$	6,129		$	11,474
Total Hexavest managed assets – beginning of period				$	8,630		$	12,992		$	13,894		$	13,355		$	13,795
		Sales and other inflows			80			332			492			517			1,779
		Redemptions/outflows			(2,789)			(2,500)			(1,077)			(5,891)			(2,931)
		Net flows			(2,709)			(2,168)			(585)			(5,374)			(1,152)
		Market value change			885			(2,194)			80			(1,175)			746
Total Hexavest managed assets – end of period				$	6,806		$	8,630		$	13,389		$	6,806		$	13,389
(1)	Managed assets and flows of Eaton Vance-sponsored funds for which Hexavest is adviser or sub-adviser. Eaton Vance receives management fees (and in some cases also distribution fees) on these assets, which are included in the consolidated assets under management, flows and average annualized management fee rates reported in Attachments 5 through 10.
(2)	Managed assets and flows of Eaton Vance-distributed separate accounts managed by Hexavest. Eaton Vance receives distribution fees, but not management fees, on these assets, which are not included in the consolidated assets under management, flows and average annualized management fee rates reported in Attachments 5 through 10.
(3)	Managed assets and flows of pre-transaction Hexavest clients and post-transaction Hexavest clients in Canada. Eaton Vance receives no management fees or distribution fees on these assets, which are not included in the consolidated assets under management, flows and average annualized management fee rates reported in Attachments 5 through 10.