EATON VANCE
Annual Report
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In 2017, Eaton Vance became the presenting sponsor of
the Boston Pops Fireworks Spectacular. Photo: Jay Connor.
1
To Shareholders and Friends of Eaton Vance:
The cover of this year’s annual report and the photo above convey that fiscal 2017 was a
year to celebrate for Eaton Vance and our shareholders. Amid continuing challenges for the
investment management industry as a whole, Eaton Vance achieved outstanding business
and financial results and made notable progress advancing a number of important strategic
priorities. Gross and net inflows, consolidated assets under management and consolidated
revenue all reached new records, and adjusted earnings per diluted share matched the
previous all-time high set in fiscal 2014. Our investment managers realized strong returns
for clients across a broad range of investment mandates. At the end of December 2016, we
acquired the business assets of Calvert Investment Management, Inc. (Calvert Investments),
propelling Eaton Vance into a leadership position in responsible investing and contributing
immediately to the Company’s earnings growth. Consistent with this year’s celebratory theme,
in July Eaton Vance began a three-year commitment as presenting sponsor of the Boston Pops
Fireworks Spectacular, America’s foremost Independence Day celebration.
2
|2017 Annual Report Reflecting the Company’s strong results and the market’s optimism about our future, Eaton
Vance non-voting common stock rose sharply in 2017, reaching new highs in October and
continuing to advance after fiscal year-end. For the 12 months ended October 31, 2017,
holders of Eaton Vance stock realized a total return of 47.6 percent. This compares to an
average total return of 28.9 percent over the same period for our peer group of publicly traded
asset managers in the U.S. As of fiscal year-end, our stock returns also exceeded the average
of peer managers by wide margins over the past three and five years.
Eaton Vance earned $2.42 per diluted share in the fiscal year ended October 31, 2017, an
increase of 14 percent from $2.12 of earnings per diluted share in fiscal 2016. On an adjusted
basis1, the Company earned $2.48 per diluted share in fiscal 2017, an increase of 16 percent
from $2.13 of adjusted earnings per diluted share in fiscal 2016. Fiscal 2017 adjusted
earnings differed from earnings under U.S. generally accepted accounting principles to reflect
$5.4 million of costs associated with refinancing a portion of the Company’s debt, $3.5
million of closed-end fund structuring fees paid and a $0.5 million increase in the estimated
redemption value of non-controlling interests in affiliates redeemable at other than fair value.
Amid continuing challenges for the investment management industry as a
whole, Eaton Vance achieved outstanding business and financial results
and made notable progress advancing a number of our most important
strategic priorities.
The Company’s consolidated revenue increased 14 percent to $1.5 billion in fiscal 2017, as
a 19 percent increase in average managed assets more than offset lower average fee rates.
Adjusting to remove closed-end fund structuring fees paid, operating expenses were up 13
percent and adjusted operating income was 17 percent higher. On an adjusted basis, the
Company’s operating margin increased to 31.8 percent from 31.0 percent in fiscal 2016.
Excluding performance fees, management fee rates averaged 34.5 basis points in fiscal
2017 versus 35.8 basis points in fiscal 2016, a reduction of four percent. Consistent with
prior years, the decline in the Company’s average fee rate reflects a shift in business mix
toward lower-fee offerings and fee-rate compression in selected mandates. Performance fees
contributed $0.4 million in fiscal 2017 compared to $3.4 million in fiscal 2016.
The Company had consolidated net inflows of $37.8 billion in fiscal 2017, which equates
to 11 percent internal growth in managed assets (consolidated net inflows divided by
beginning-of-period consolidated assets under management) and represents our 22nd
consecutive year of positive net flows. This compares to net inflows of $19.3 billion and six
percent internal growth in managed assets in fiscal 2016. On the basis of net contribution to
management fee revenue, the Company’s internal revenue growth rate was seven percent in
fiscal 2017 versus one percent in fiscal 2016.
1See footnote 1 on page 14.
3
2017 Annual Report| Leading contributors to the Company’s fiscal 2017 net inflows included Parametric Portfolio
Associates (Parametric) exposure management mandates, with net inflows of $11.5 billion,
Parametric Custom Core™ equity separate accounts ($11.2 billion), Eaton Vance Management
(EVM) laddered municipal and corporate bond strategies ($6.6 billion), EVM floating-rate
bank loans ($6.3 billion), Parametric defensive equity mandates ($3.2 billion) and EVM global
macro absolute return strategies ($2.1 billion). Each of the Company’s managed asset and flow
reporting categories had positive net flows for the fiscal year.
Consolidated assets under management totaled $422.3 billion on October 31, 2017, up
26 percent from $336.4 billion at the end of fiscal 2016. The year-over-year increase
in consolidated managed assets reflects $37.8 billion of net inflows, market price
appreciation of $38.2 billion and $9.9 billion of new managed assets gained in the
Calvert Investments transaction.
Fiscal 2017 marked the 37th consecutive fiscal year that Eaton Vance
has raised its regular quarterly dividend, which has grown at a compound
annual rate of 17 percent over that nearly four-decade period.
Eaton Vance’s long tradition of maintaining a strong financial position continued in fiscal
2017. At fiscal year-end, we held $824 million of cash, cash equivalents and short-term debt
securities and had $337 million of seed capital investments, against debt obligations of $619
million. During the fiscal year, we refinanced $250 million aggregate principal amount of 6.5
percent senior notes due October 2017 with $300 million of 3.5 percent senior notes due April
2027, reducing the Company’s interest expense by nearly $6 million annually.
In October, our board of directors voted to increase the Company’s quarterly dividend by 11
percent to an annual rate of $1.24 per share. The increase marked the 37th consecutive fiscal
year that Eaton Vance has raised its regular quarterly dividend, which has grown at a compound
annual rate of 17 percent over that nearly four-decade period.
In last year’s report, I outlined Eaton Vance’s most important strategic priorities for the
upcoming fiscal 2017. Looking forward now to fiscal 2018, our focus is mostly the same.
That should not be a surprise, as consistency and continuity have long been hallmarks of
Eaton Vance. Our major priorities for fiscal 2018 include: (a) capitalizing on investment
performance and distribution strengths to increase sales and gain market share in active
strategies; (b) extending the success of our Custom Beta lineup of rules-based separately
managed accounts; (c) becoming a more global company by building our investment and
distribution capabilities outside the U.S.; (d) positioning NextShares™ to become the vehicle
of choice for U.S. investors in actively managed funds; and (e) leveraging the Calvert
Investments acquisition to lead the growth of responsible investing. All but the last of
these priorities are carryovers from last year.
4
|2017 Annual Report Although active managers as a whole remain on the losing end in the competition against
passive, we continue to see opportunities to grow in active management where we have
strong performance. At the end of the fiscal year, we had 68 funds with overall Morningstar
ratings of four or five stars for at least one class of shares, including 30 five star-rated funds.
As measured by total return, as of October 31, roughly half of our mutual fund assets ranked
in the top quartile of their Morningstar peer groups over the past three and five years, and 75
percent ranked above median. On an overall basis, our active investment strategies realized
net inflows of $9.4 billion in fiscal 2017, which equates to five percent internal growth in
managed assets. Maintaining growth in active strategies will continue to be a major area of
focus in fiscal 2018. With a market share of less than one percent, we can certainly grow our
active business even if the overall market for active management remains in decline.
Different from most traditional active managers, Eaton Vance has large and growing
businesses in rules-based passive investments. These consist primarily of Parametric’s
exposure management, Custom Core equity and centralized portfolio management offerings,
and EVM’s laddered municipal and corporate bond strategies. On an overall basis, our
passive strategies account for slightly less than half of total consolidated managed assets
and approximately 15 percent of consolidated management fee revenue. Eaton Vance sales
teams frequently market Parametric Custom Core equity separately managed accounts in
conjunction with EVM bond ladders and refer to these collectively as Custom Beta. In fiscal
2017, our total managed assets in Custom Beta strategies offered as retail and high-net-worth
separate accounts increased 57 percent to $68.3 billion, with net inflows of $17.9 billion.
The success we continue to achieve with Custom Beta reflects both the growing appeal of
passive investing and the potential advantages our separate account strategies can offer
over index mutual funds and exchange-traded funds (ETFs). These potential advantages may
include more favorable tax treatment, due to the ability to fund positions in kind and to pass
through harvested tax losses to offset client gains on other investments. Also different from
index funds and ETFs, Custom Beta strategies can be customized to reflect client-specified
responsible investing criteria and desired portfolio tilts and exclusions. On an overall basis,
many advisors and their clients are finding Custom Beta separate accounts to offer compelling
benefits over alternative approaches to passive investing. Investing in technology and service
enhancements to support the continued rapid growth of these distinctive strategies remains a
key focus for fiscal 2018.
Although active managers as a whole remain on the losing end in the
competition against passive, we continue to see opportunities to grow in
active management where we have strong performance.
While still a small part of our business, our international footprint continues to expand.
In addition to owning 49 percent of Montreal-based global equity manager Hexavest, we
operate internationally from offices in London, Sydney, Singapore and a new location opened
5
2017 Annual Report| earlier this year in Tokyo. In London, we now have a staff of nearly 50 people in investment,
distribution and operations functions, up from just a handful two years ago. Our focus on
growing outside the U.S. began to pay off in fiscal 2017, as assets managed for non-U.S.
clients contributed $5.1 billion to consolidated net inflows, equating to 30 percent internal
growth in managed assets. Leading contributors to international growth included EVM
floating-rate bank loans and Parametric exposure management mandates. Japan is our
largest and fastest-growing international market. Still representing less than six percent of
consolidated managed assets, we see lots of room for Eaton Vance to expand outside the U.S.
NextShares are a new type of investment fund first launched in early 2016, combining
proprietary active management with the conveniences and potential performance and tax
advantages of exchange-traded products. Our NextShares Solutions subsidiary holds patents
and other intellectual property rights relating to NextShares, and is seeking to commercialize
NextShares by entering into licensing and service agreements with fund companies. As of the
end of the fiscal 2017, three Eaton Vance-sponsored NextShares funds and five NextShares
funds offered by third-party managers were available for purchase. To date, the commercial
development of NextShares has been constrained by limited distribution access. In November
2017, UBS and NextShares Solutions announced the availability of NextShares to UBS’s U.S.
financial advisors through its brokerage and Strategic Advisor programs. Launching NextShares
at UBS brings this innovative fund structure to a large audience of financial advisors and their
clients, for the first time providing our distribution team a significant opportunity to promote
NextShares. We expect the number of NextShares funds to be introduced by Eaton Vance and
other sponsors to ramp up over coming months. Our goal remains to position NextShares to
become the fund vehicle of choice for active investing in the U.S.
Our focus on growing outside the U.S. began to pay off in fiscal 2017, as
assets managed for non-U.S. clients contributed $5.1 billion to consolidated
net inflows, equating to 30 percent internal growth in managed assets.
One of the most noteworthy events of fiscal 2017 was our acquisition in December of the
assets of Calvert Investments and the addition of the Calvert Funds to our product lineup.
The Calvert Funds are one of the largest and most diversified families of responsibly invested
mutual funds, encompassing actively and passively managed equity, income and asset
allocation strategies managed in accordance with the Calvert Principles for Responsible
Investment or other responsible investment criteria. Responsible investing continues to be a
leading trend in asset management, appealing to the growing universe of investors who seek
both financial returns and positive societal benefits from their investments. Our objective for
the new Calvert Research and Management (Calvert) is to apply Eaton Vance’s management
6
|2017 Annual Report and distribution resources to Calvert’s 35-year heritage as a leader in responsible investing to
build a larger and more impactful business. Across retail and institutional, active and passive,
equity, income and multi-asset, we see significant potential for Calvert to grow from current
levels. Although only beginning to scratch the surface of identified opportunities, Calvert’s total
managed assets, including amounts subadvised by other Eaton Vance affiliates, increased from
$11.9 billion at acquisition to $12.9 billion at fiscal year-end. Making further progress realizing
Calvert’s potential is an important goal for fiscal 2018.
Our objective for the new Calvert Research and Management is to apply Eaton
Vance’s management and distribution resources to Calvert’s 35-year heritage as a
leader in responsible investing to build a larger and more impactful business.
In closing, I want to congratulate and thank my 1,638 colleagues whose names are listed on
the back of this report for making fiscal 2017 a year to celebrate at Eaton Vance. My optimism
about the Company’s future is based on deep confidence that they can and will continue to
deliver outstanding results for the clients, business partners and shareholders of Eaton Vance.
Sincerely,
Thomas E. Faust Jr.
Chairman, Chief Executive Officer and President
7
2017 Annual Report| 8
|2017 Annual Report 9
2017 Annual Report| Historical Stock Returns
Eaton Vance Corp. was formed by the merger on April 30, 1979 of two Boston-based investment managers:
Eaton & Howard, Inc., founded in 1924, and Vance, Sanders & Company, organized in 1934.
Eaton Vance Corp.
Value of $1,000 invested April 30, 1979
$10,000,000
1,000,000
100,000
10,000
$3,469,451
1,000
4/79
10/85
10/90
10/95
10/00
10/05
10/10
10/17
Assumes reinvestment of all dividends and proceeds of 1995 spinoff of Investors Financial Services Corp.
Sources: FactSet, Eaton Vance.
Best-Performing Publicly Traded U.S. Stocks
April 30, 1979 to October 31, 2017
Company
Eaton Vance Corp.
Helen of Troy Limited
Hasbro, Inc.
Progressive Corporation
Kansas City Southern
Standard & Poor’s 500 Index
Annual Return
23.6%
22.2
22.0
21.7
21.6
11.8
Rank
1
2
3
4
5
Total return with dividends reinvested. Source: FactSet.
10
|2017 Annual Report Assets under Management
as of October 31, 2017
Consolidated Total: $422.3 billion
by Investment Mandate (in billions)
by Investment Affiliate (in billions)
100%
Alternative
$12.6
100%
80
60
40
20
0
Floating-Rate Income
$38.8
Fixed Income
$70.8
Exposure Management
$87.0
Portfolio Implementation
$99.6
Equity $113.5
80
60
40
20
0
by Investment Vehicle (in billions)
Closed-End Funds $24.8
Private Funds $34.4
Hexavest
Calvert Research and Management
Atlanta Capital
$16.01
$10.72
$22.4
Parametric $224.9
Eaton Vance Management $164.33
$160.0 Institutional Separate Accounts
$97.6 Open-End Funds
High-Net-Worth Separate Accounts $39.7
$65.8 Retail Managed Accounts
1Eaton Vance holds a 49% interest in Hexavest Inc., a Montreal-based investment adviser. Other than Eaton Vance-sponsored funds for which Hexavest is
adviser or subadviser, the managed assets of Hexavest are not included in Eaton Vance’s consolidated totals.
2Includes $2.4 billion of Calvert-sponsored funds managed by third-party advisers under Calvert supervision; excludes $2.1 billon of managed assets of the
Calvert Equity Portfolio, for which Atlanta Capital serves as subadviser.
3Includes managed assets of Eaton Vance Investment Counsel, Eaton Vance Trust Company and Boston Management and Research. Also includes $2.1
billion of Eaton Vance-sponsored funds and accounts managed by third-party advisers under Eaton Vance supervision.
11
2017 Annual Report| Eaton Vance Investment Affiliates
Our principal investment affiliates, Eaton Vance Management, Parametric, Atlanta Capital, Calvert Research and Management,
and Hexavest, offer a range of distinctive strategies. Investment approaches include bottom-up and top-down fundamental active
History dating to 1924 | AUM: $164.3 billion1
Fundamental active managers: In-depth fundamental analysis is the primary basis for our investment decision-making across a broad
range of equity, income and alternative strategies.
Equity
Dividend/Global Dividend
Large-Cap Core
Emerging/Frontier Markets
Large-Cap Growth
Equity Option
Global Developed
Global ex U.S.
Global ex U.S. Small-Cap
Global Small-Cap
Health Care
Large-Cap Value
Multi-Cap Growth
Real Estate
Small-Cap
Small/Mid-Cap
Tax-Managed
Alternative
Commodity
Currency
Global Macro
Hedged Equity
Multi-Asset
Asset Allocation
Balanced
Global Diversified Income
Floating-Rate Income
Multi-Strategy Absolute Return
Floating-Rate Loan
Founded in 1987 | AUM: $224.9 billion
Quantitative, systematic investment managers: Leading systematic asset management delivering elevated, transparent, repeatable
outcomes by bringing clarity and accessibility to investment science.
Equity
Dividend
Emerging Markets
Global
Global ex U.S.
Responsible
Tax-Managed
U.S.
Options
Absolute Return
Covered Calls
Defensive Equity
Dynamic Hedged Equity
Put Selling
Alternative
Commodity
Income
Enhanced Income
Implementation
Centralized Portfolio Management
Custom Core™
Exposure Management
Policy Overlay Services
History dating to 1976* | AUM: $10.7 billion2
Global leaders in Responsible Investing: Responsibly managed equity, income and multi-asset strategies.
Active Equity
Global ex U.S.
Global ex U.S. Small/Mid-Cap
Large-Cap
Mid-Cap
Small-Cap
Equity Index
Alternative
Taxable Fixed Income
Global Energy Solutions
Absolute Return Bond
Global ex U.S.
Global Water
U.S. Large-Cap Core
U.S. Large-Cap Growth
U.S. Large-Cap Value
U.S. Mid-Cap Core
Multi-Asset
Asset Allocation
Balanced
Floating-Rate Income
Floating-Rate Loan
Core/Core Plus
Green Bond
High Yield
Long Duration
Short Duration/Ultra-Short
Tax-Exempt Fixed Income
Responsible Municipal
1Includes managed assets of Eaton Vance Investment Counsel, Eaton Vance Trust Company and Boston Management and Research. Also includes Eaton Vance-
sponsored funds and accounts managed by third-party advisers under Eaton Vance supervision.
2Includes Calvert-sponsored funds and accounts managed by third-party advisers under Calvert supervision.
*On December 30, 2016, Calvert Research and Management (Calvert), a newly formed Eaton Vance subsidiary, completed its acquisition of substantially all of the
business assets of Calvert Investment Management, Inc., which was founded in 1976 and in 1982 became the first fund family to launch a mutual fund to avoid
investment in companies that did business in apartheid-era South Africa.
12
|2017 Annual Report management, rules-based systematic alpha investing, implementation of passive strategies and responsible investing. This broad
diversification provides us the opportunity to address a wide range of investor needs and to offer products and services suited for various
market environments.
Taxable Fixed Income
Cash Management
Core Bond/Core Plus
Emerging-Markets Debt
High Yield
Inflation-Linked
Investment-Grade Corporate
Laddered Corporate
Mortgage-Backed Securities
Multisector
Preferred Securities
Short Duration
Taxable Municipal
Tax-Advantaged/
Municipal Income
Laddered Municipal
Municipal Income
Floating Rate
High Yield
National
State Specific
Founded in 1969 | AUM: $22.4 billion
Specialists in high-quality investing: Actively managed high-quality U.S. stock and bond
portfolios constructed using bottom-up fundamental analysis.
Equity
Large-Cap Growth
Mid-Large Cap
Responsible
Small-Cap
SMID-Cap
Fixed Income
Core Bond
Intermediate Duration
Short Duration
Founded in 2004 | AUM: $16.0 billion3
Opportunistic Municipal
Tax-Advantaged Bond
The following external
managers subadvise one
or more Eaton Vance- or
Calvert-sponsored
mutual funds:
Eaton Vance Funds
BMO Global Asset
Management (Asia)
Goldman Sachs Asset
Management
Richard Bernstein
Advisors
Oak Tree Capital
Management
Top-down global managers: Global equity strategies combining fundamental research and
proprietary quantitative models.
Calvert Funds
Equity
Canadian
Emerging Markets
Global – All Country
Global – Developed
Global ex U.S.
Ameritas Investment
Partners
Hermes Investment
Management
Milliman Financial
Risk Management
Eaton Vance and affiliates as of 10/31/2017.
3Eaton Vance holds a 49% interest in Hexavest Inc., a Montreal-based investment adviser. Other than Eaton Vance-sponsored funds for which Hexavest is
adviser or subadviser, the managed assets of Hexavest are not included in Eaton Vance’s consolidated totals.
13
2017 Annual Report| Key Statistics
Fiscal Year Ended October 31,
(in $ millions, except per share and employee amounts)
2017
2016
% Change
Ending assets under management
422,316
336,380
Average assets under management
382,392
320,860
Gross inflows
Net inflows
Revenue
Operating income
168,251
125,057
37,834
19,304
1,529
1,343
483
414
Operating income margin
31.6%
30.8%
Net income attributable to Eaton Vance Corp. shareholders
Adjusted net income attributable to Eaton Vance Corp. shareholders1
Earnings per diluted share
Adjusted earnings per diluted share1
Dividends declared per share
Cash and cash equivalents
Debt2,3
Employees
Market capitalization
Eaton Vance Corp. consolidated totals.
282
288
2.42
2.48
1.15
611
619
1,638
5,959
241
243
2.12
2.13
1.075
424
5742
1,510
3,981
26%
19%
35%
96%
14%
17%
3%
17%
19%
14%
16%
7%
44%
8%
8%
50%
1Although the Company reports its financial results in accordance with U.S. generally accepted accounting principles (U.S. GAAP), management believes
that certain non-U.S. GAAP financial measures, specifically, 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, 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 the add back of adjustments made in
connection with changes in the estimated redemption value of non-controlling interests in our affiliates redeemable at other than fair value (non-controlling
interest value adjustments) and, when applicable, other items such as closed-end fund structuring fees, special dividends, costs associated with retiring
debt and tax settlements. Management and our board of directors, as well as certain of our outside investors, consider these 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. Our use of these adjusted numbers, including
reconciliations 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, is discussed in “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” included within this Annual Report.
2In fiscal 2017, the Company adopted Accounting Standard Update 2015-03, which requires certain debt issuance costs to be presented in the balance
sheet as a direct deduction from the carrying value of the associated debt liability. Total assets and debt were each reduced by $2.2 million as of October
31, 2016 to reflect the reclassification of debt issuance costs from other assets to debt.
3In fiscal 2017, the Company issued $300 million of 3.5 percent Senior Notes due April 2027 and used the net proceeds from the issuance to redeem the
remaining $250 million aggregate principal amount of its 6.5 percent Senior Notes due October 2017. The Company recognized a loss on extinguishment
of debt totaling $5.4 million in conjunction with the retirement in fiscal 2017.
14
|2017 Annual Report
Performance Trends
Assets under Management
(in billions)
Gross Inflows
(in billions)
Net Inflows
(in billions)
$500
400
300
200
100
0
'07
Revenue
(in millions)
$2,000
1,500
1,000
500
$200
150
100
50
'12
'17
0
'07
'12
'17
Operating Income
(in millions)
$600
400
200
$40
30
20
10
0
'07
Employees
2,000
1,500
1,000
500
'12
'17
0
'07
'12
'17
0
'07
'12
'17
0
'07
'12
'17
Earnings per Diluted Share
Adjusted Earnings per
Diluted Share1
Dividends per Share2
$2.50
2.00
1.50
1.00
0.50
$2.50
2.00
1.50
1.00
0.50
$2.50
2.00
1.50
1.00
0.50
0.00
'07
'12
'17
0.00
'07
'12
'17
0.00
'07
'12
'17
Eaton Vance Corp. consolidated totals.
1See footnote 1 on previous page.
2The Company declared and paid a special dividend of $1.00 per share in fiscal 2013.
15
2017 Annual Report| Financial Review
Five-Year Financial Summary
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Investor Information
Page
17
19
62
63
64
65
68
70
123
124
16
|2017 Annual Report Five‐Year Financial Summary
The following table contains selected financial data for the last five years. This data should be read in conjunction with “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and Consolidated Financial Statements and Notes to
Consolidated Financial Statements included elsewhere in this Annual Report.
Financial Highlights
(in thousands, except per share data)
2017
For the Years Ended October 31,
2015
2014
2016
2013
Income Statement Data:
Total revenue
Operating Income(1)
Net income(1)
Net income attributable to non‐controlling
and other beneficial interests(2)
Net income attributable to Eaton Vance
Corp. shareholders(1)
Adjusted net income attributable to Eaton
Vance Corp. shareholders(3)
$ 1,529,010
482,758
306,373
$ 1,342,860
414,268
264,757
$ 1,403,563
400,447
238,191
$ 1,450,294
519,857
321,164
$ 1,357,503
453,007
230,426
24,242
23,450
7,892
16,848
36,585
282,131
241,307
230,299
304,316
193,841
288,187
242,908
274,990
309,627
262,942
Balance Sheet Data:
Total assets(4)(5)
Debt(5)(6)
Redeemable non‐controlling
interests (temporary equity)
Total Eaton Vance Corp.
shareholders' equity
Non‐redeemable non‐controlling
interests
Total permanent equity
Per Share Data:
Earnings per share:
Basic
Diluted
Adjusted diluted(3)
Cash dividends declared
$ 2,330,901
618,843
$ 1,730,382
571,773
$ 2,113,737
571,077
$ 1,856,814
570,382
$ 2,403,473
569,723
250,823
109,028
88,913
107,466
74,856
1,011,396
703,789
620,231
655,176
669,784
864
1,012,260
786
704,575
1,725
621,956
2,305
657,481
1,755
671,539
$
$
2.54
2.42
2.48
1.150
$
2.20
2.12
2.13
1.075
$
2.00
1.92
2.29
1.015
$
2.55
2.44
2.48
0.910
1.60
1.53
2.08
1.820
(1)
(2)
(3)
Operating income, net income and net income attributable to Eaton Vance Corp. shareholders reflect a one‐time payment of $73.0 million to
terminate service and additional compensation arrangements in place with a major distribution partner for certain Eaton Vance closed‐end funds in
fiscal 2015.
Net income attributable to non‐controlling and other beneficial interests reflects an increase (decrease) of $0.5 million, $0.2 million, $(0.2) million,
$5.3 million and $24.3 million in the estimated redemption value of redeemable non‐controlling interests in our majority‐owned subsidiaries in fiscal
2017, 2016, 2015, 2014 and 2013, respectively. Net income attributable to non‐controlling and other beneficial interests also includes net income
(loss) of $9.8 million, $(5.8) million, $(4.1) million and $(8.5) million, respectively, in fiscal 2016, 2015, 2014 and 2013 related to certain consolidated
collateralized loan obligation (CLO) entities and borne by other beneficial interest holders of these consolidated CLO entities. There were no other
beneficial interest holders of the warehousing phase CLO entity consolidated by the Company at the end of fiscal 2017.
Although the Company reports its financial results in accordance with U.S. generally accepted accounting principles (U.S. GAAP), management
believes that certain non‐U.S. GAAP financial measures, specifically, 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, 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 the add back of adjustments made in connection with changes in the estimated redemption value of non‐controlling interests in our
affiliates redeemable at other than fair value (non‐controlling interest value adjustments) and, when applicable, other items such as closed‐end
fund structuring fees, special dividends, costs associated with retiring debt and tax settlements. Management and our Board of Directors, as well as
certain of our outside investors, consider these 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
17
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. Our use of these adjusted numbers, including reconciliations 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, is discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included within
this Annual Report.
Total assets on October 31, 2017, 2015, 2014 and 2013 include $31.3 million, $467.1 million, $156.5 million and $728.1 million of assets held by
consolidated CLO entities, respectively. The Company did not consolidate any CLO entities as of October 31, 2016.
In fiscal 2017, the Company adopted Accounting Standard Update 2015‐03, which requires certain debt issuance costs to be presented in the
balance sheet as a direct deduction from the carrying value of the associated debt liability. Total assets and debt were each reduced by $2.2 million,
$2.7 million, $3.3 million and $3.8 million as of October 31, 2016, 2015, 2014 and 2013, respectively, to reflect the reclassification of debt issuance
costs from other assets to debt.
In fiscal 2017, the Company issued $300 million of 3.5 percent Senior Notes due April 2027 and used the net proceeds from the issuance to redeem
the remaining $250 million aggregate principal amount of its 6.5 percent Senior Notes due October 2017 (2017 Senior Notes). The Company
recognized a loss on extinguishment of debt totaling $5.4 million in conjunction with the retirement in fiscal 2017. In fiscal 2013, the Company
tendered for and repurchased $250 million of its 2017 Senior Notes and issued $325 million of 3.625 percent Senior Notes due June 2023. The
Company recognized a loss on extinguishment of debt totaling $53.0 million in conjunction with the repurchase in fiscal 2013.
(4)
(5)
(6)
18
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Our principal business is managing investment funds and providing investment management and advisory
services to high‐net‐worth individuals and institutions. Our core strategy is to develop and sustain
management expertise across a range of investment disciplines and to offer leading investment products and
services through multiple distribution channels. In executing this strategy, we have developed broadly
diversified investment management capabilities and a highly functional marketing, distribution and customer
service organization. We measure our success as a Company based on investment performance delivered,
reputation in the marketplace, progress achieving strategic objectives, employee development and
satisfaction, business and financial results, and shareholder value created.
We conduct our investment management and advisory business through wholly‐ and majority‐owned
investment affiliates, which include: Eaton Vance Management, Parametric Portfolio Associates LLC
(Parametric), Atlanta Capital Management Company, LLC (Atlanta Capital) and Calvert Research and
Management (Calvert). We also offer investment management advisory services through minority‐owned
Hexavest Inc. (Hexavest).
Through Eaton Vance Management, Atlanta Capital, Calvert and our other affiliates, we manage active equity,
income and alternative strategies across a range of investment styles and asset classes, including U.S. and
global equities, floating‐rate bank loans, municipal bonds, global income, high‐yield and investment grade
bonds. Through Parametric, we manage a range of engineered alpha strategies, including systematic equity,
systematic alternatives and managed options strategies. Through Parametric, we also provide portfolio
implementation and overlay services, including tax‐managed and non‐tax‐managed Custom Core equity
strategies, centralized portfolio management of multi‐manager portfolios and customized exposure
management services. We also oversee the management of, and distribute, investment funds sub‐advised by
unaffiliated third‐party managers, including global, emerging market and regional equity and asset allocation
strategies.
Our breadth of investment management capabilities supports a wide range of products and services offered to
fund shareholders, retail managed account investors, institutional investors and high‐net‐worth clients. Our
equity strategies encompass a diversity of investment objectives, risk profiles, income levels and geographic
representation. Our income investment strategies cover a broad duration, geographic representation and
credit quality range and encompass both taxable and tax‐free investments. We also offer a range of alternative
investment strategies, including commodity‐ and currency‐based investments and a spectrum of absolute
return strategies. Although we manage and distribute a wide range of investment products and services, we
operate in one business segment, namely as an investment adviser to funds and separate accounts. As of
October 31, 2017, we had $422.3 billion in consolidated assets under management.
We distribute our funds and retail managed accounts principally through financial intermediaries. We have
broad market reach, with distribution partners including national and regional broker‐dealers, independent
broker‐dealers, registered investment advisors, banks and insurance companies. We support these distribution
partners with a team of approximately 120 sales professionals covering U.S. and international markets.
We also commit significant resources to serving institutional and high‐net‐worth clients who access investment
management services on a direct basis and through investment consultants. Through our wholly‐owned
affiliates and consolidated subsidiaries, we manage investments for a broad range of clients in the institutional
1
19
and high‐net‐worth marketplace in the U.S. and internationally, including corporations, sovereign wealth
funds, endowments, foundations, family offices and public and private employee retirement plans.
Our revenue is derived primarily from management, distribution and service fees received from Eaton Vance‐,
Parametric‐ and Calvert‐branded funds and management fees received from separate accounts. Our fees are
based primarily on the value of the investment portfolios we manage and fluctuate with changes in the total
value and mix of assets under management. As a matter of course, investors in our sponsored open‐end funds
and separate accounts have the ability to redeem their investments at any time, without prior notice, and
there are no material restrictions that would prevent them from doing so. Our major expenses are employee
compensation, distribution‐related expenses, service fee expense, facilities expense and information
technology expense.
Our discussion and analysis of our financial condition, results of operations and cash flows is based upon our
Consolidated Financial Statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America (U.S. GAAP). The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue
and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our
estimates, including those related to goodwill and intangible assets, income taxes, investments and stock‐
based compensation. We base our estimates on historical experience and on various assumptions that we
believe to be reasonable under current circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not readily available from other sources.
Actual results may differ from these estimates.
Business Developments
We are pursuing five primary strategic priorities to support our long‐term growth. Those priorities are: (1)
capitalizing on our investment performance leadership and distribution strengths to grow sales and gain market
share in actively managed investment strategies; (2) extending the success we have had with our Custom Beta
lineup of rules‐based separately managed accounts; (3) becoming a more global company by building our
investment and distribution capabilities outside the United States; (4) positioning NextShares to become the
vehicle of choice for investors in actively managed funds in the U.S; and (5) leveraging our Calvert acquisition to
lead the growth of responsible investing;.
As of October 31, 2017, we had 68 U.S. mutual funds rated four or five stars by Morningstar™ for at least one class
of shares, including 30 funds rated five stars for at least one class of shares. Although actively managed strategies
as a whole are losing share to passive investments, we believe that top‐performing active strategies can continue
to grow, particularly in asset classes where the competition versus passive alternatives is less acute. In fiscal 2017,
net flows into our active strategies totaled $9.3 billion.
In fiscal 2017, we continued to experience strong growth in our Custom Beta strategies, which include the
Parametric Custom Core equity and Eaton Vance laddered municipal and corporate bond separate account
offerings to the retail and high‐net‐worth markets. Compared to index mutual funds and exchange‐traded funds,
rules‐based separately managed accounts can provide clients with greater ability to tailor their market exposures
to achieve better tax outcomes and to reflect client‐specified responsible investing criteria and desired portfolio
tilts and exclusions. In fiscal 2017, net inflows into our Custom Beta strategies offered as retail managed accounts
and high‐net‐worth separate accounts totaled $17.9 billion.
20
2
Outside the United States, the Company continues to expand investment staff and commit additional client service
and distribution resources to support business growth. On February 1, 2017, Eaton Vance Asia Pacific opened a
Tokyo‐based representative office to provide relationship management and client service support to clients in
Japan and other parts of Asia. In fiscal 2017, the Company’s net inflows from clients outside the United States
totaled $5.1 billion.
Over the past several years, the Company has committed significant resources toward achieving commercial
success of its NextShares fund structure. In fiscal 2017, NextShares continued to progress toward broad market
availability. As of the end of fiscal 2017, eight NextShares funds from three different fund families were available in
the marketplace. On November 20, 2017, together with UBS Financial Services Inc., we announced the availability
of NextShares through the UBS brokerage platforms and UBS Strategic Advisor, a non‐discretionary advisory
program, which the Company believes will stimulate growth in NextShares managed assets beginning in fiscal
2018.
On December 30, 2016, we completed the purchase of substantially all of the business assets of Calvert
Investments. The Calvert Funds are one of the largest and most diversified families of responsibly invested mutual
funds, encompassing actively and passively managed equity, fixed income and asset allocation strategies managed
in accordance with the Calvert Principles for Responsible Investment (Calvert Principles) or other responsible
investment criteria. Responsible investing is a leading trend in asset management, appealing to the growing
universe of investors who seek both financial returns and positive societal impact from their investments. The
Calvert Funds are now being offered through EVD, with greatly expanded market reach.
In developments related to Hexavest, Eaton Vance has elected to maintain the Company’s ownership interest
at 49 percent. On December 11, 2017, we notified the employee‐owners of Hexavest that we would not be
exercising our option to purchase an additional 26 percent interest under the terms of the option agreement
entered into when we acquired our Hexavest position in 2012. After careful review, we concluded that
Hexavest’s current ownership and governance model are most conducive to their business and investment
success at this time. We will continue to work with Hexavest as a major shareholder and as Hexavest’s
exclusive distribution partner for non‐Canadian markets.
Consolidated Assets under Management
Prevailing equity and income market conditions and investor sentiment affect the sales and redemptions of
our investment products, managed asset levels, operating results and the recoverability of our investments.
During fiscal 2017, the S&P 500 Index, a broad measure of U.S. equity market performance, had total returns
of 22.0 percent and the MSCI Emerging Market Index, a broad measure of emerging market equity
performance, had total returns of 24.0 percent. Over the same period, the Barclays U.S. Aggregate Bond Index,
a broad measure of U.S. bond market performance, had total returns of 0.8 percent.
Consolidated assets under management of $422.3 billion on October 31, 2017 increased $85.9 billion, or 26
percent, from the $336.4 billion of consolidated assets under management on October 31, 2016. The year‐
over‐year increase in consolidated assets under management reflects net inflows of $37.8 billion, market
appreciation in managed assets of $38.2 billion, and $9.9 billion of new managed assets gained in the
acquisition of the business assets of Calvert Investment Management, Inc. (Calvert Investments). Consolidated
net inflows of $37.8 billion in fiscal 2017 represent 11 percent internal growth in managed assets (consolidated
net inflows divided by beginning of period consolidated assets under management). For comparison, the
Company had consolidated net inflows of $19.3 billion and $16.7 billion in fiscal 2016 and 2015, respectively,
representing 6 percent internal growth in managed assets in both fiscal 2016 and 2015. Average consolidated
3
21
assets under management of $382.4 billion for the year ended October 31, 2017 increased $61.5 billion, or 19
percent, from the $320.9 billion of average consolidated assets under management for the fiscal year ended
October 31, 2016.
The following tables summarize our consolidated assets under management by investment mandate,
investment vehicle and investment affiliate as of October 31, 2017, 2016 and 2015. Within the investment
mandate table, the “Portfolio implementation” category consists of Parametric’s Custom Core equity
strategies and centralized portfolio management services, and the “Exposure management” category consists
of Parametric’s futures‐ and options‐based customized exposure management services.
Consolidated Assets under Management by Investment Mandate (1)
(in millions)
Equity(2)(3)
Fixed income(3)(4)
Floating‐rate income(3)
Alternative(3)
Portfolio implementation
Exposure management
Total
October 31,
2017
113,472
70,797
38,819
12,637
99,615
86,976
422,316
$
$
% of
Total
27% $
17%
9%
3%
23%
21%
2016
89,981
60,607
32,107
10,687
71,426
71,572
100% $ 336,380
% of
Total
27% $
18%
10%
3%
21%
21%
100% $
2015
89,890
52,465
35,534
10,289
59,487
63,689
311,354
% of
Total
29%
17%
11%
3%
19%
21%
100%
2017
vs.
2016
2016
vs.
2015
26%
17%
21%
18%
39%
22%
26%
0%
16%
‐10%
4%
20%
12%
8%
(1) Consolidated Eaton Vance Corp. See table on page
included in the table above.
(2) Includes balanced and multi‐asset mandates.
(3) In fiscal 2017, the Company reclassified certain managed assets among investment mandates. Prior years' amounts have been revised for
comparability purposes. The reclassification does not affect total consolidated assets under management for any period.
(4) Includes cash management mandates.
for directly managed assets and flows of 49 percent‐owned Hexavest Inc., which are not
29
Equity assets under management included $38.1 billion, $31.4 billion and $31.7 billion of assets managed for
after‐tax returns on October 31, 2017, 2016 and 2015, respectively. Portfolio implementation assets under
management included $70.2 billion, $48.5 billion and $40.0 billion of assets managed for after‐tax returns on
October 31, 2017, 2016 and 2015, respectively. Fixed income assets included $40.6 billion, $36.1 billion and
$30.3 billion of municipal income assets on October 31, 2017, 2016 and 2015, respectively.
22
4
Consolidated Assets under Management by Investment Vehicle(1)
(in millions)
Open‐end funds(2)
Closed‐end funds(3)
Private funds(4)
Institutional separate accounts
High‐net‐worth separate accounts
Retail managed accounts
Total
October 31,
% of
Total
23% $
6%
8%
38%
9%
16%
2016
74,721
23,571
27,430
136,451
25,806
48,401
$
2017
97,601
24,816
34,436
159,986
39,715
65,762
$
422,316
100% $ 336,380
% of
2015
Total
22% $
74,838
24,449
7%
26,647
8%
119,987
41%
24,516
8%
14%
40,917
100% $ 311,354
% of
Total
24%
8%
8%
39%
8%
13%
100%
2017
vs.
2016
2016
vs.
2015
31%
5%
26%
17%
54%
36%
26%
0%
‐4%
3%
14%
5%
18%
8%
(1) Consolidated Eaton Vance Corp. See table on page
are not included in the table above.
(2) Includes assets in NextShares funds.
(3) Includes unit investment trusts.
(4) Includes privately offered equity, fixed income and floating‐rate income funds and collateralized loan obligation (CLO) entities.
for directly managed assets and flows of 49 percent‐owned Hexavest Inc., which
29
The following table summarizes our assets under management by investment affiliate as of October 31, 2017,
2016 and 2015:
Consolidated Assets under Management by Investment Affiliate(1)
October 31,
2017
vs.
2016
2016
vs.
2015
$
$
2017
164,257
224,941
22,379
10,739
422,316
2015
141,514
152,413
17,427
‐
311,354
2016
143,918 $
173,981
18,481
‐
336,380 $
(in millions)
Eaton Vance Management(2)(3)
Parametric(3)
Atlanta Capital(3)(4)
Calvert Research and Management(4)
Total
(1) Consolidated Eaton Vance Corp. See table on page
are not included in the table above.
(2) Includes managed assets of Eaton Vance‐sponsored funds and separate accounts managed by Hexavest and unaffiliated third‐party
advisers under Eaton Vance supervision.
(3) In fiscal 2017, the Company reclassified certain managed assets among investment affiliates. Prior years' amounts have been revised
for comparability purposes. The reclassification does not affect total consolidated assets under management for any period.
(4) Consistent with the Company's policies for reporting the managed assets and flows of investment portfolios for which multiple Eaton
Vance affiliates have management responsibilities, the managed assets of Atlanta Capital indicated above include the assets of Calvert
Equity Portfolio, for which Atlanta Capital serves as sub‐adviser. The total managed assets of Calvert, including assets sub‐advised by
other Eaton Vance affiliates, were $12.9 billion as of October 31, 2017.
(5) Not meaningful (NM).
for directly managed assets and flows of 49 percent‐owned Hexavest Inc., which
14%
29%
21%
NM(5)
26%
2%
14%
6%
NM
8%
29
$
$
5
23
Consolidated average assets under management presented in the following tables are derived by averaging
the beginning and ending assets of each month over the period. The tables are intended to provide
information useful in the analysis of our asset‐based revenue and distribution expenses. Separate account
management fees are generally calculated as a percentage of either beginning, average or ending quarterly
assets. Fund management, distribution and service fees, as well as certain expenses, are generally calculated
as a percentage of average daily assets.
Consolidated Average Assets under Management by Investment Mandate(1)(2)
(in millions)
Equity(3)(4)
Fixed income(4)(5)
Floating‐rate income(4)
Alternative(4)
Portfolio implementation
Exposure management(2)
Total
October 31,
2017
2016
103,660 $
66,405
36,107
11,419
86,257
78,544
382,392 $
88,711 $
56,339
32,759
10,105
65,766
67,180
320,860 $
$
$
2015
93,264
49,361
38,151
10,722
52,703
59,569
303,770
2017
vs.
2016
2016
vs.
2015
17%
18%
10%
13%
31%
17%
19%
‐5%
14%
‐14%
‐6%
25%
13%
6%
(1)
Consolidated Eaton Vance Corp. See table on page
29
for directly managed assets and flows of 49 percent‐owned Hexavest Inc., which are not
included in the table above.
(2)
Reported consolidated average assets under management exclude certain client positions in exposure management mandates identified
as transitory in nature.
(3)
Includes balanced and multi‐asset mandates.
In fiscal 2017, the Company reclassified certain managed assets among investment mandates. Prior years' amounts have been revised for
(4)
comparability purposes. The reclassification does not affect total consolidated average assets under management for any period.
(5)
Includes cash management mandates.
Consolidated Average Assets under Management by Investment Vehicle(1)(2)
(in millions)
Open‐end funds(3)
Closed‐end funds(4)
Private funds(5)
Institutional separate accounts(2)
High‐net‐worth separate accounts
Retail managed accounts
Total
$
October 31,
2017
90,332 $
24,148
30,669
146,835
33,190
57,218
2016
72,910 $
23,736
26,832
128,033
24,873
44,476
$
382,392 $
320,860 $
2015
79,109
24,956
26,141
112,309
23,472
37,783
303,770
2017
vs.
2016
2016
vs.
2015
24%
2%
14%
15%
33%
29%
19%
‐8%
‐5%
3%
14%
6%
18%
6%
(1) Consolidated Eaton Vance Corp. See table on page
included in the table above.
(2) Reported consolidated average assets under management exclude certain client positions in exposure management mandates identified
as transitory in nature.
(3) Includes assets in NextShares funds.
(4) Includes assets in unit investment trusts.
(5) Includes assets in privately offered equity, fixed income and floating‐rate income funds and CLO entities.
for directly managed assets and flows of 49 percent‐owned Hexavest Inc., which are not
29
24
6
Consolidated net inflows of $37.8 billion during fiscal 2017 represent 11 percent internal growth in managed
assets (consolidated net inflows divided by beginning of period consolidated assets under management). For
comparison, the Company had consolidated net inflows of $19.3 billion and $16.7 billion in fiscal 2016 and
2015, respectively, representing 6 percent internal growth in managed assets in both fiscal 2016 and 2015. On
the basis of net contribution to management fee revenue, the Company’s internal revenue growth (calculated
as the management fees attributed to sales and other inflows less management fees attributable to
redemptions and other outflows, divided by beginning of period management fees) was 7 percent in fiscal
2017 and 1 percent in fiscal 2016, as the management fee revenue contribution from new sales and other
inflows during each of these years exceeded the management fee revenue lost from redemptions and other
withdrawals. The Company’s internal revenue growth was ‐2 percent in fiscal 2015, as the management fee
revenue lost from redemptions and other withdrawals exceeded the revenue contribution from new sales and
other inflows during the fiscal year.
The following tables summarize our consolidated assets under management and asset flows by investment
mandate and investment vehicle for the fiscal years ended October 31, 2017, 2016 and 2015:
7
25
Consolidated Assets under Management and Net Flows by Investment Mandate(1)(2)
(in millions)
Equity assets ‐ beginning of period(3)(4)
Sales and other inflows
Redemptions/outflows
Net flows
Assets acquired(5)
Exchanges
Market value change
Equity assets ‐ end of period
Fixed income assets ‐ beginning of period(4)(6)
Market value change
Fixed income assets ‐ end of period
Floating‐rate income assets ‐ beginning of period(4)
Market value change
Floating‐rate income assets ‐ end of period
Alternative assets ‐ beginning of period(4)
Sales and other inflows
Redemptions/outflows
Net flows
Assets acquired(5)
Exchanges
Sales and other inflows
Redemptions/outflows
Net flows
Exchanges
Sales and other inflows
Redemptions/outflows
Net flows
Exchanges
Sales and other inflows
Redemptions/outflows
Net flows
Exchanges
Market value change
Alternative assets ‐ end of period
Portfolio implementation assets ‐ beginning of period
Market value change
Portfolio implementation assets ‐ end of period
Exposure management assets ‐ end of period
Sales and other inflows
Redemptions/outflows
Net flows(2)
Market value change
Exposure management assets ‐ end of period
Total assets under management ‐ beginning of period
Sales and other inflows
Redemptions/outflows
Net flows
Assets acquired(5)
Exchanges
Market value change
Total assets under management ‐ end of period
Years Ended October 31,
2016
2015
2017
89,890
15,321
(15,668)
(347)
‐
(32)
470
89,981
52,465
20,451
(13,033)
7,418
‐
23
701
60,607
35,534
7,232
(11,078)
(3,846)
(16)
435
32,107
10,289
4,183
(3,590)
593
(2)
(193)
10,687
59,487
19,882
(10,455)
9,427
(3)
2,515
71,426
63,689
57,988
(51,929)
6,059
1,824
71,572
311,354
125,057
(105,753)
19,304
‐
(30)
5,752
336,380
$
$
$
$
$
$
$
$
96,224
18,068
(22,957)
(4,889)
‐
47
(1,492)
89,890
46,162
18,532
(11,339)
7,193
‐
51
(941)
52,465
41,920
9,332
(14,376)
(5,044)
(133)
(1,209)
35,534
11,385
3,221
(3,914)
(693)
25
(428)
10,289
48,008
18,034
(7,217)
10,817
‐
662
59,487
54,036
57,586
(48,286)
9,300
353
63,689
297,735
124,773
(108,089)
16,684
‐
(10)
(3,055)
311,354
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
89,981
21,111
(19,828)
1,283
5,704
62
16,442
113,472
60,607
22,097
(16,137)
5,960
4,170
(139)
199
70,797
32,107
15,222
(8,889)
6,333
136
243
38,819
10,687
5,930
(4,067)
1,863
(4)
91
12,637
71,426
23,359
(12,438)
10,921
5
17,263
99,615
71,572
80,532
(69,058)
11,474
3,930
86,976
336,380
168,251
(130,417)
37,834
9,874
60
38,168
422,316
8
2017
vs.
2016
0%
38%
27%
NM
NM
NM
NM
26%
16%
8%
24%
‐20%
NM
NM
‐72%
17%
‐10%
110%
‐20%
NM
NM
‐44%
21%
4%
42%
13%
214%
100%
NM
18%
20%
17%
19%
16%
NM
586%
39%
12%
39%
33%
89%
115%
22%
8%
35%
23%
96%
NM
NM
564%
26%
2016
vs.
2015
‐7%
‐15%
‐32%
‐93%
NM
NM
NM
0%
14%
10%
15%
3%
NM
‐55%
NM
16%
‐15%
‐23%
‐23%
‐24%
‐88%
NM
‐10%
‐10%
30%
‐8%
NM
NM
‐55%
4%
24%
10%
45%
‐13%
NM
280%
20%
18%
1%
8%
‐35%
417%
12%
5%
0%
‐2%
16%
NM
200%
NM
8%
26
29
for directly managed assets and flows of 49 percent‐owned Hexavest Inc., which are not
(1) Consolidated Eaton Vance Corp. See table on page
included in the table above.
(2) Reported consolidated net flows exclude certain client positions in exposure management mandates identified as transitory in nature. There were
no such positions held in exposure management mandates as of October 31, 2017, 2016 or 2015.
(3) Includes balanced and multi‐asset mandates.
(4) In fiscal 2017, the Company reclassified certain managed assets and flows among investment mandates. Prior years' amounts have been revised
for comparability purposes. The reclassification does not affect total consolidated assets under management or total consolidated net flows
for any period.
(5) Represents managed assets gained in the acquisition of the business assets of Calvert Investments on December 30, 2016. Equity assets acquired
and total assets acquired exclude $2.1 billion of managed assets of Calvert Equity Portfolio sub‐advised by Atlanta Capital and previously
included in the Company's consolidated assets under management.
(6) Includes cash management mandates.
9
27
Consolidated Assets under Management and Net Flows by Investment Vehicle(1)(2)
(in millions)
Fund assets ‐ beginning of period(3)
Sales and other inflows
Redemptions/outflows
Net flows
Assets acquired(4)
Exchanges(5)
Market value change
Fund assets ‐ end of period
Institutional separate accounts ‐ beginning of period
Sales and other inflows
Redemptions/outflows
Net flows(2)
Assets acquired(4)
Exchanges(5)
Market value change
Institutional separate accounts ‐ end of period
High‐net‐worth separate accounts ‐ beginning of period
Sales and other inflows
Redemptions/outflows
Net flows
Exchanges
Market value change
High‐net‐worth separate accounts ‐ end of period
Retail managed accounts ‐ beginning of period
Sales and other inflows
Redemptions/outflows
Net flows
Assets acquired(4)
Exchanges
Market value change
Retail managed accounts ‐ end of period
Total assets under management ‐ beginning of period
Sales and other inflows
Redemptions/outflows
Net flows
Assets acquired(4)
Exchanges
Market value change
Total assets under management ‐ end of period
$
$
$
$
$
$
2017
125,722
40,967
(33,350)
7,617
9,821
2,196
11,497
156,853
136,451
93,067
(81,096)
11,971
40
(2,063)
13,587
159,986
25,806
12,965
(5,370)
7,595
(24)
6,338
39,715
48,401
21,252
(10,601)
10,651
13
(49)
6,746
65,762
336,380
168,251
(130,417)
37,834
9,874
60
38,168
422,316
Years Ended October 31,
2016
125,934
$
$
2017
vs.
2016
2016
vs.
2015
2015
134,564
32,029
(36,330)
(4,301)
‐
181
(4,510)
125,934
106,443
75,568
(61,569)
13,999
‐
(208)
(247)
119,987
22,235
4,816
(2,933)
1,883
(99)
497
24,516
34,493
12,360
(7,257)
5,103
‐
116
1,205
40,917
297,735
124,773
(108,089)
16,684
‐
(10)
(3,055)
311,354
0%
37%
13%
NM
NM
NM
NM
25%
14%
25%
29%
4%
NM
NM
201%
17%
5%
122%
11%
666%
‐92%
942%
54%
18%
43%
26%
66%
NM
4%
511%
36%
8%
35%
23%
96%
NM
NM
564%
26%
‐6%
‐7%
‐19%
NM
NM
NM
‐90%
0%
13%
‐1%
2%
‐18%
NM
NM
NM
14%
10%
21%
65%
‐47%
212%
22%
5%
19%
20%
16%
26%
NM
NM
‐8%
18%
5%
0%
‐2%
16%
NM
200%
NM
8%
29,890
(29,535)
355
‐
(94)
(473)
$
125,722
$
119,987
74,476
(62,945)
11,531
‐
420
4,513
$
136,451
$
24,516
5,832
(4,841)
991
(309)
608
$
25,806
$
40,917
14,859
(8,432)
6,427
‐
(47)
1,104
$
48,401
$
311,354
125,057
(105,753)
19,304
‐
(30)
5,752
$
336,380
$
29
for directly managed assets and flows of 49 percent‐owned Hexavest Inc., which
(1) Consolidated Eaton Vance Corp. See the table on page
are not included in the table above.
(2) Reported consolidated net flows exclude certain client positions in exposure management mandates identified as transitory in nature. There
were no such positions held in exposure management mandates as of October 31, 2017, 2016 or 2015.
(3) Includes assets in cash management funds.
(4) Represents managed assets gained in the acquisition of the business assets of Calvert Investments on December 30, 2016. Fund assets
acquired and total assets acquired exclude $2.1 billion of managed assets of Calvert Equity Portfolio, which was sub‐advised by Atlanta
Capital prior to the acquisition and previously included in the Company’s consolidated institutional separate accounts.
(5) Reflects the reclassification from institutional separate accounts to funds of $2.1 billion of managed assets of Calvert Equity Portfolio,
sub‐advised by Atlanta Capital and previously included in the Company's consolidated institutional separate accounts.
28
10
As of October 31, 2017, the Company’s 49 percent‐owned affiliate Hexavest Inc. (Hexavest) managed $16.0
billion of client assets, up 17 percent from $13.7 billion of managed assets on October 31, 2016. Other than
Eaton Vance‐sponsored funds for which Hexavest is adviser or sub‐adviser, the managed assets of Hexavest
are not included in Eaton Vance consolidated totals.
The following table summarizes assets under management and asset flow information for Hexavest for the
fiscal years ended October 31, 2017, 2016 and 2015:
Hexavest Assets under Management and Net Flows
(in millions)
Eaton Vance distributed:
Eaton Vance sponsored funds – beginning of period(1)
Sales and other inflows
Redemptions/outflows
Net flows
Market value change
Eaton Vance sponsored funds – end of period
Eaton Vance distributed separate accounts – beginning of period(2)
Sales and other inflows
Redemptions/outflows
Net flows
Market value change
Eaton Vance distributed separate accounts – end of period
Total Eaton Vance distributed – beginning of period
Sales and other inflows
Redemptions/outflows
Net flows
Market value change
Total Eaton Vance distributed – end of period
Hexavest directly distributed – beginning of period(3)
Sales and other inflows
Redemptions/outflows
Net flows
Market value change
Hexavest directly distributed – end of period
Total Hexavest assets – beginning of period
Sales and other inflows
Redemptions/outflows
Net flows
Market value change
Total Hexavest assets – end of period
Years Ended October 31,
2016
2015
2017
2017
vs.
2016
2016
vs.
2015
$
$
$
$
$
$
$
$
$
$
231
92
(177)
(85)
36
182
2,492
1,124
(920)
204
396
3,092
2,723
1,216
(1,097)
119
432
3,274
11,021
1,140
(1,208)
(68)
1,795
12,748
13,744
2,356
(2,305)
51
2,227
16,022
$
$
$
$
$
$
$
$
$
$
229
22
(33)
(11)
13
231
2,440
131
(236)
(105)
157
2,492
2,669
153
(269)
(116)
170
2,723
11,279
985
(1,919)
(934)
676
11,021
13,948
1,138
(2,188)
(1,050)
846
13,744
$
$
$
$
$
$
$
$
$
$
227
22
(21)
1
1
229
2,367
535
(488)
47
26
2,440
2,594
557
(509)
48
27
2,669
14,101
786
(3,503)
(2,717)
(105)
11,279
16,695
1,343
(4,012)
(2,669)
(78)
13,948
1%
318%
436%
673%
177%
‐21%
2%
758%
290%
NM
152%
24%
2%
695%
308%
NM
154%
20%
‐2%
16%
‐37%
‐93%
166%
16%
‐1%
107%
5%
NM
163%
17%
1%
0%
57%
NM
NM
1%
3%
‐76%
‐52%
NM
504%
2%
3%
‐73%
‐47%
NM
530%
2%
‐20%
25%
‐45%
‐66%
NM
‐2%
‐16%
‐15%
‐45%
‐61%
NM
‐1%
(1) Managed assets and flows of Eaton Vance‐sponsored pooled investment vehicles 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 Eaton Vance's consolidated assets under management
and flows.
(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 Eaton Vance's consolidated assets under management and flows.
(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 Eaton Vance's consolidated assets under management and flows.
11
29
Results of Operations
In evaluating operating performance, we consider net income attributable to Eaton Vance Corp. shareholders
and earnings per diluted share, which are calculated on a basis consistent with U.S. GAAP, as well as adjusted
net income attributable to Eaton Vance Corp. shareholders and adjusted earnings per diluted share, both of
which are internally derived non‐U.S. GAAP performance measures.
Management believes that certain non‐U.S. GAAP financial measures, specifically, 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, 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 the add back of
adjustments made in connection with changes in the estimated redemption value of non‐controlling interests
in our affiliates redeemable at other than fair value (non‐controlling interest value adjustments) and, when
applicable, other items such as closed‐end fund structuring fees, special dividends, costs associated with
retiring debt and tax settlements. Management and our Board of Directors, as well as certain of our outside
investors, consider these 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.
The following table provides a reconciliation of net income attributable to Eaton Vance Corp. shareholders and
earnings per diluted share to adjusted net income attributable to Eaton Vance Corp. shareholders and adjusted
earnings per diluted share, respectively, for the fiscal years ended October 31, 2017, 2016 and 2015:
30
12
(in thousands, except per share data)
Net income attributable to Eaton Vance
Corp. shareholders
Non‐controlling interest value adjustments(1)
Closed‐end fund structuring fees, net of tax(2)
Loss on extinguishment of debt, net of tax(3)
Payments to end certain closed‐end fund
service and additional compensation
arrangements, net of tax(4)
Adjusted net income attributable to
Eaton Vance Corp. shareholders
Earnings per diluted share
Non‐controlling interest value adjustments
Closed‐end fund structuring fees, net of tax
Loss on extinguishment of debt, net of tax
Payments to end certain closed‐end fund
service and additional compensation
arrangements, net of tax
Adjusted earnings per diluted share
$
$
Years Ended October 31,
2016
2017
2015
$ 282,131 $ 241,307 $ 230,299
(204)
‐
‐
531
2,179
3,346
200
1,401
‐
2017
vs.
2016
17%
166%
56%
NM
2016
vs.
2015
5%
NM
NM
NM
‐
‐
44,895
NM
‐100%
$ 288,187 $ 242,908 $ 274,990
2.42 $
0.01
0.02
0.03
2.12 $
‐
0.01
‐
1.92
‐
‐
‐
19%
14%
NM
100%
NM
‐12%
10%
NM
NM
NM
‐
2.48 $
‐
2.13 $
0.37
2.29
NM
16%
‐100%
‐7%
(1)
(1)
(2)
(1)
(3)
(1)
(4)
(1)
41,
"Net Income Attributable to Non‐controlling and Other Beneficial Interests," for a further discussion of the
Please see page
non‐controlling interest value adjustments referenced above.
Reflects closed‐end fund structuring fees paid of $3.5 million (net of the associated impact to taxes of $1.3 million) and $2.3 million
(net of the associated impact to taxes of $0.9 million) for the fiscal years ended October 31, 2017 and 2016, respectively.
Reflects a loss on extinguishment of debt of $5.4 million associated with the retirement of the Company’s remaining $250 million
aggregate principal amount of 6.5 percent senior notes due October 2, 2017, net of the associated impact to taxes of $2.1 million.
Reflects a $73.0 million payment to end certain fund services and additional compensation arrangements for certain Eaton
Vance closed‐end funds, net of the associated impact to taxes of $28.1 million. See page
for a further discussion.
37
The 17% percent increase in net income attributable to Eaton Vance Corp. shareholders in fiscal 2017
compared to fiscal 2016 can be attributed primarily to the following:
An increase in revenue of $186.2 million, or 14 percent, primarily reflecting growth in average
consolidated assets under management, partially offset by lower consolidated average annualized
management fee rates.
An increase in expenses of $117.7 million, or 13 percent, primarily reflecting increases in
compensation, distribution expense, service fee expense, amortization of deferred sales commissions,
fund‐related expenses and other operating expenses. The increase in compensation expense is driven
by the Calvert acquisition at the end of the 2016 calendar year, increased headcount, increased sales‐
and operating income‐based bonus accruals, and increased stock‐based compensation. The increase in
non‐compensation‐related costs is due to an increase in service and distribution fees due to higher
fund average assets under management, an increase in closed‐end fund structuring fees paid, an
13
31
increase in marketing and promotion costs, certain fund reimbursements made by the Company in
fiscal 2017 and an increase in other corporate expenses.
A $6.9 million increase in gains and other investment income, net, primarily due to an increase in
interest income, partially offset by an increase in net investment losses attributable to investments in
sponsored funds and related economic hedges and an increase in foreign currency losses. Gains and
other investment income, net, also includes a $1.9 million gain recognized in fiscal 2017 upon release
from escrow of payments received in connection with the sale of the Company’s equity interest in
Lloyd George Management (BVI) Ltd. (Lloyd George Management) in fiscal 2011.
A $1.9 million decrease in interest expense, primarily reflecting the May 2017 retirement of $250
million in aggregate principal amount of the Company’s 6.5 percent senior notes due October 2, 2017
(2017 Senior Notes) and the April 2017 issuance of $300 million in aggregate principal amount of 3.5
percent senior notes due April 6, 2027 (2027 Senior Notes).
A $5.4 million loss on extinguishment of debt related to the costs incurred on the retirement of the
2017 Senior Notes referenced above.
A $10.8 million decrease in income contribution from the Company’s consolidated CLO entities
attributable to the deconsolidation of a CLO entity in the fourth quarter of fiscal 2016. In the fourth
quarter of fiscal 2017, the Company consolidated a new CLO entity. The income contribution from this
newly consolidated CLO entity was negligible, as the vehicle was consolidated late in the fiscal year and
is in the warehouse phase.
An increase in income taxes of $20.0 million, or 13 percent, reflecting the increase in the Company’s
income before taxes offset by a modest decrease in the effective tax rate.
An increase in equity in net income of affiliates, net of tax, of $0.5 million, primarily reflecting an
increase in the Company’s proportionate net interest in the earnings of Hexavest offset by a decrease
in the Company’s proportionate net interest in the earnings of a private equity partnership, both of
which are accounted for under the equity method.
An increase in net income attributable to non‐controlling and other beneficial interests of $0.8 million,
primarily reflecting an increase in net income attributable to non‐controlling interest holders in the
Company’s consolidated sponsored funds and majority‐owned subsidiaries, partially offset by a
decrease in the net income of consolidated CLOs attributable to other beneficial interest holders.
Weighted average diluted shares outstanding increased by 2.4 million shares, or 2 percent, in fiscal 2017
compared to fiscal 2016, primarily reflecting the impact of employee stock option exercises and vesting of
restricted stock, partially offset by share repurchases in fiscal 2017, as well as an increase in the dilutive effect
of in‐the‐money options and unvested restricted stock.
The 5 percent increase in net income attributable to Eaton Vance Corp. shareholders in fiscal 2016 compared
to fiscal 2015 can be attributed primarily to the following:
A decrease in revenue of $60.7 million, or 4 percent, primarily reflecting lower average managed
assets in higher fee‐rate floating‐rate income, alternative and equity mandates, partially offset by
growth in lower fee‐rate exposure management, portfolio implementation and laddered bond
mandates.
A decrease in expenses of $74.5 million, or 7 percent, reflecting lower distribution fees and service
fees, partially offset by increases in compensation, amortization of deferred sales commissions and
other corporate expenses. The decrease in distribution expense relates principally to the payment of
$73.0 million to terminate certain closed‐end fund service and additional compensation arrangements
in fiscal 2015.
32
14
A $12.4 million increase in gains (losses) and other investment income, net, primarily reflecting
increases in net gains and interest and other income recognized on our seed capital portfolio.
A $12.5 million increase in income related to the Company’s consolidated CLO entities.
An increase in income taxes of $10.4 million, or 7 percent, reflecting an increase in the Company’s
income before taxes. Consolidated CLO entity income that is allocated to other beneficial interest
holders is not subject to tax in the Company’s provision.
A decrease in equity in net income of affiliates, net of tax, of $1.7 million, reflecting a decrease in the
Company’s proportionate net interest in the earnings of Hexavest and sponsored funds accounted for
under the equity method.
An increase in net income attributable to non‐controlling interests of $15.6 million, primarily reflecting
an increase in net income of the Company’s consolidated CLO entities that are borne by other
beneficial interests and a decrease in net losses attributable to non‐controlling interest holders in the
Company’s consolidated sponsored funds, partially offset by a decrease in net income attributable to
non‐controlling interest holders in the Company’s majority‐owned subsidiaries.
Weighted average diluted shares outstanding decreased by 4.2 million shares, or 4 percent, in fiscal 2016
compared to fiscal 2015. The change reflects the impact of shares repurchased over the course of the fiscal
year and the lower dilutive impact of unexercised options, partially offset by the impact of employee stock
option exercises and the annual vesting of restricted stock.
Revenue
Our revenue increased by 14 percent in fiscal 2017, reflecting higher management fees, distribution and
underwriter fees, service fees and other revenue.
The following table shows our management fees, distribution and underwriter fees, service fees and other
revenue for the fiscal years ended October 31, 2017, 2016 and 2015:
Years Ended October 31,
(in thousands)
Management fees
Distribution and underwriter fees
Service fees
Other revenue
Total revenue
$
$
2015
2017
2016
1,318,141 $ 1,151,198 $ 1,196,866
80,815
116,448
9,434
1,529,010 $ 1,342,860 $ 1,403,563
78,776
119,962
12,131
74,822
107,684
9,156
2017
vs.
2016
2016
vs.
2015
15%
5%
11%
32%
14%
‐4%
‐7%
‐8%
‐3%
‐4%
Management fees
The 15 percent increase in management fees in fiscal 2017 can be primarily attributed to an increase in
average consolidated assets under management, partially offset by a decline in our consolidated average
annualized management fee rate due primarily to changes in business mix. The 4 percent decrease in
management fees in fiscal 2016 can be attributed primarily to the loss of assets in higher‐fee investment
mandates. Consolidated average assets under management increased by 19 percent and 6 percent in fiscal
2017 and 2016, respectively.
15
33
Excluding performance‐based fees, our average management fee rate decreased to 34.5 basis points in fiscal
2017 from 35.8 basis points in fiscal 2016 and 39.3 basis points in fiscal 2015. Performance‐based fees were
$0.4 million, $3.4 million and $3.7 million in fiscal 2017, 2016 and 2015, respectively.
The primary drivers of our average management fee rates are the mix of our assets by investment mandate
and distribution channel, and the timing and amount of performance fees recognized. Excluding the impact of
performance‐based fees, changes in consolidated average management fee rates for the compared periods
primarily reflect the ongoing shift in the Company’s mix of business towards investment mandates and
distribution channels with lower fee rates.
Consolidated average management fee rates, excluding performance‐based fees, for the fiscal years ended
October 31, 2017, 2016 and 2015 by investment mandate were as follows:
(in basis points on average managed assets)
Equity(1)
Fixed income(1)
Floating‐rate income(1)
Alternatives(1)
Portfolio implementation
Exposure management(2)
Consolidated average management
fee rates
2017
61.7
38.0
51.6
63.3
14.7
5.2
Years Ended October 31,
2016
2015
2017
vs.
2016
2016
vs.
2015
62.8
40.0
51.8
63.0
14.9
5.1
64.1
43.0
53.2
61.8
15.5
5.4
‐2%
‐5%
0%
0%
‐1%
2%
‐2%
‐7%
‐3%
2%
‐4%
‐6%
34.5
35.8
39.3
‐4%
‐9%
(1) In fiscal 2017, the Company reclassified certain managed assets among investment mandates. Prior years' amounts have
(1) been revised for comparability purposes.
(2) Excludes management fees attributable to certain client positions in exposure management mandates identified as
(1) transitory in nature.
Average assets under management by investment mandate to which these fee rates apply can be found in the
table, “Consolidated Average Assets under Management by Investment Mandate,” on page
24.
Distribution and underwriter fees
Distribution fees, which are earned under contractual agreements with certain sponsored funds, are calculated
as a percentage of, and fluctuate with, average assets under management of the applicable funds and fund
share classes. Underwriter fees and other distribution income includes underwriter commissions earned on
sales of fund share classes subject to those fees, contingent deferred sales charges received on certain Class A
redemptions, unit investment trust sales charges and fundraising and servicing fees associated with The U.S.
Charitable Gift Trust.
Distribution fees, underwriter fees and other distribution income for the fiscal years ended October 31, 2017,
2016 and 2015 were as follows:
34
16
$
(in thousands)
Distribution fees:
Class A
Class B
Class C
Class F
Class N
Class R
Private funds
Total distribution fees
Underwriter fees
Other distribution income
Total distribution and underwriter fees $
$
Years Ended October 31,
2017
2016
2015
2017
vs.
2016
2016
vs.
2015
627
792
61,068
1,354
72
1,624
5,942
71,479 $
2,765
4,532
78,776 $
646
1,338
60,031
‐
78
1,361
4,382
67,836 $
2,763
4,223
74,822 $
876
2,173
64,809
‐
136
1,208
4,267
73,469
2,745
4,601
80,815
‐3%
‐41%
2%
NM
‐8%
19%
36%
5%
0%
7%
5%
‐26%
‐38%
‐7%
NM
‐43%
13%
3%
‐8%
1%
‐8%
‐7%
Service fees
Service fees, which are paid to EVD pursuant to distribution or service plans adopted by our sponsored mutual
funds, are calculated as a percent of, and fluctuate with, average assets under management in specific mutual
fund share classes (principally Classes A, B, C, F, N and R). Certain private funds also make service fee
payments to EVD.
Service fee revenue increased 11 percent in fiscal 2017, primarily reflecting an increase in consolidated
average assets under management in funds and fund share classes subject to service fees. Service fee revenue
decreased 8 percent in fiscal 2016, primarily reflecting a decrease in consolidated average assets under
management in certain classes of funds subject to service fees.
Other revenue
Other revenue, which consists primarily of shareholder servicing fees, miscellaneous dealer income, Hexavest‐
related distribution and service revenue, and sub‐lease income, increased 32 percent in fiscal 2017, primarily
reflecting an increase in shareholder servicing fees and miscellaneous dealer income. Other revenue decreased
3 percent in fiscal 2016, primarily reflecting lower sub‐lease income.
Expenses
Operating expenses increased 13 percent in fiscal 2017 from fiscal 2016, reflecting increases in compensation
and related costs, distribution expense, service fee expense, amortization of deferred sales commissions, fund‐
related expenses and other operating expenses. Expenses in connection with the Company’s NextShares
initiative totaled approximately $7.4 million in fiscal 2017, $8.0 million in fiscal 2016 and $7.4 million in fiscal
2015.
The following table shows our operating expenses for the fiscal years ended October 31, 2017, 2016 and 2015:
17
35
(in thousands)
Compensation and related costs:
Cash compensation
Stock‐based compensation
Total compensation and related
costs
Distribution expense
Service fee expense
Amortization of deferred sales
commissions
Fund‐related expenses
Other expenses
Total expenses
$
$
Years Ended October 31,
2016
2015
2017
473,903 $
80,049
419,515 $
71,600
414,307
69,520
553,952
132,873
112,519
491,115
117,996
98,494
483,827
198,155
106,663
16,239
48,995
181,674
1,046,252 $
15,451
35,899
169,637
928,592 $
14,972
35,886
163,613
1,003,116
2017
vs.
2016
2016
vs.
2015
13%
12%
13%
13%
14%
5%
36%
7%
13%
1%
3%
2%
‐40%
‐8%
3%
0%
4%
‐7%
Compensation and related costs
The following table shows our compensation and related costs for the fiscal years ended October 31, 2017,
2016 and 2015:
(in thousands)
Years Ended October 31,
2017
2016
2015
2017
vs.
2016
2016
vs.
2015
Base salaries and employee benefits $
Stock‐based compensation
Operating income‐based incentives
Sales incentives
Other compensation expense
Total
$
80,049
152,952
72,094
3,164
245,693 $ 226,463 $ 217,289
69,520
71,600
134,052
131,250
57,716
55,550
5,250
6,252
553,952 $ 491,115 $ 483,827
8%
12%
17%
30%
‐49%
13%
4%
3%
‐2%
‐4%
19%
2%
Compensation expense increased by $62.8 million, or 13 percent, in fiscal 2017 compared to fiscal 2016. The
increase was driven primarily by: (i) a $19.2 million increase in base salaries and benefits reflecting annual
merit increases and higher headcount, partially due to the Calvert acquisition on December 30, 2016; (ii) an
$8.4 million increase in stock‐based compensation, primarily due to an increase in annual stock‐based
compensation awards; (iii) a $21.7 million increase in operating income‐based incentives due to an increase in
pre‐bonus adjusted operating income; and (iv) a $16.5 million increase in sales‐based incentive driven by
strong compensation‐eligible sales. The $3.1 million decrease in other compensation expense is related to
lower employee recruiting and termination costs.
Compensation expense increased by $7.3 million, or 2 percent, in fiscal 2016 compared to fiscal 2015. The
increase was driven primarily by: (i) a $9.2 million increase in base salaries and employee benefits reflecting
annual merit increases, higher headcount and a corresponding increase in employee benefits; and (ii) a $2.1
million increase in stock‐based compensation, primarily due to an increase in annual stock‐based
compensation awards due to increased headcount. These increases were partially offset by: (i) a $2.8 million
decrease in operating‐income based incentives due to a decrease in pre‐bonus adjusted operating income; and
18
36
(ii) a $2.2 million decrease in sales‐based incentive resulting from a decrease in compensation‐eligible sales.
The $1.0 million increase in other compensation expense is related to increased costs associated with
employee recruiting and terminations.
Distribution expense
Distribution expense consists primarily of commissions paid to broker‐dealers on the sale of Class A shares at
net asset value, ongoing asset‐based payments made to distribution partners pursuant to third‐party
distribution arrangements for Class C shares and certain closed‐end funds, marketing support payments to
distribution partners and other discretionary marketing expenses.
The following table shows our distribution expense for the fiscal years ended October 31, 2017, 2016 and
2015:
(in thousands)
Class A share commissions
Class C share distribution fees
Closed‐end fund structuring fees
Payments to end certain closed‐end fund service
and additional compensation arrangements
Closed‐end fund dealer compensation payments
Intermediary marketing support payments
Discretionary marketing expenses
Total
Years Ended October 31,
2017
2016
2015
$
2,417 $
2,064 $
52,038
3,515
‐
3,867
47,721
23,315
50,324
2,291
‐
3,836
40,308
19,173
$ 132,873 $ 117,996 $
2,628
53,462
‐
73,000
6,575
41,901
20,589
198,155
2017
vs.
2016
2016
vs.
2015
17%
3%
53%
NM
1%
18%
22%
13%
‐21%
‐6%
NM
‐100%
‐42%
‐4%
‐7%
‐40%
Distribution expense increased by $14.9 million, or 13 percent, in fiscal 2017 compared to fiscal 2016, primarily
attributable to increases in Class A sales on which we pay commissions, Class C share assets held more than
one year on which we pay distribution fees, closed‐end fund structuring fees, intermediary marketing support
payments and discretionary marketing expense related to significant corporate initiatives. The increase in
intermediary market support payments was driven primarily by higher average assets under management
subject to market support payments, attributable in part to the acquisition of the Calvert business in
December 2016.
Distribution expense decreased by $80.2 million, or 40 percent, in fiscal 2016 compared to fiscal 2015,
primarily attributable to a decrease in expense resulting from the inclusion of a one‐time payment of $73.0
million in fiscal 2015 to terminate certain closed‐end fund service and additional compensation arrangements
with a distribution partner pursuant to which we were obligated to make recurring payments over time based
on the assets of the closed‐end funds covered by the arrangements. The decrease also reflects lower Class A
sales on which we pay commissions, declines in Class C share assets held more than one year on which we pay
distribution fees, a decrease in closed‐end fund dealer compensation payments, reflecting the above‐
described termination of fund service and additional compensation arrangements, a decrease in intermediary
marketing support payments driven by lower average managed assets and a decrease in discretionary
marketing expenses, reflecting lower spending on advertising and marketing communications.
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37
Service fee expense
Service fees we receive from sponsored funds are generally retained in the first year and paid to broker‐
dealers thereafter pursuant to third‐party selling agreements. These fees are calculated as a percent of
average assets under management in certain share classes of our mutual funds (principally Classes A, C, N and
R), as well as certain private funds. Service fee expense increased by 14 percent in fiscal 2017, reflecting higher
average fund assets retained more than one year in funds and share classes that are subject to service fees.
Service fee expense decreased by 8 percent in fiscal 2016, reflecting lower average fund assets retained more
than one year in funds and share classes that are subject to service fees.
Amortization of deferred sales commissions
Amortization expense is affected by ongoing sales and redemptions of mutual fund Class C shares and certain
private funds and redemptions of Class B shares. Amortization expense increased 5 percent and 3 percent in
fiscal 2017 and 2016, respectively, reflecting higher private fund commission amortization offset by lower Class
B and Class C commission amortization for both periods. In fiscal 2017, 2 percent of total amortization expense
related to Class B shares, 50 percent to Class C shares and 48 percent to privately offered equity funds. In fiscal
2016, 4 percent of total amortization expense related to Class B shares, 61 percent to Class C shares and 35
percent to privately offered equity funds.
Fund‐related expenses
Fund‐related expenses consist primarily of fees paid to sub‐advisers, compliance costs and other fund‐related
expenses we incur. Fund‐related expenses increased by 36 percent in fiscal 2017, reflecting higher fund
subsidies attributable primarily to the addition of the Calvert Funds, higher sub‐advisory fees paid, an increase
in fund expenses borne by the Company on funds for which it earns an all‐in fee and $1.9 million in one‐time
reimbursements made to the funds by the Company in fiscal 2017. Fund‐related expenses were substantially
unchanged in fiscal 2016 from the prior fiscal year.
Other expenses
The following table shows our other expense for the fiscal years ended October 31, 2017, 2016 and 2015:
Years Ended October 31,
(in thousands)
Information technology
Facilities‐related
Travel
Professional services
Communications
Amortization of intangible assets
Other corporate expense
Total
$
$
2017
77,450 $
40,799
17,351
15,347
5,536
9,014
16,177
2015
2016
67,834
72,718 $
40,771
40,806
16,360
16,663
13,854
13,331
5,272
5,081
9,693
8,648
9,829
12,390
181,674 $ 169,637 $ 163,613
2017
vs.
2016
2016
vs.
2015
7%
0%
4%
15%
9%
4%
31%
7%
7%
0%
2%
‐4%
‐4%
‐11%
26%
4%
The increase in information technology expense in fiscal 2017 can be attributed primarily to increases in
market data and maintenance costs, partially offset by decreases in project‐related consulting and outside
custody and back‐office service costs. The increase in travel expense relates to an increase in travel activity.
The increase in professional services expense can be attributed primarily to one‐time legal and consulting costs
incurred in conjunction with the investigation of fraudulent activities of a former Eaton Vance Management
trader. The increase in communications reflects increases in costs associated with telecommunications,
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38
subscriptions and supplies, partially offset by a decrease in postage. The increase in other corporate expenses
is largely associated with the Calvert acquisition.
The increase in information technology expense in fiscal 2016 can be attributed primarily to increases in
project‐related consulting and software maintenance fees. The increase in travel expense relates to an
increase in travel activity. The decrease in professional services expense can be attributed primarily to a
decrease in corporate consulting engagements and external legal costs. The decrease in communications
reflects a reduction in expenses primarily related to shareholder communications. The increase in other
corporate expenses primarily reflects an increase in other corporate taxes.
Non‐operating Income (Expense)
The main categories of non‐operating income (expense) for the fiscal years ended October 31, 2017, 2016 and
2015 are as follows:
(in thousands)
Gains (losses) and other investment
income, net
Interest expense
Loss on extinguishment of debt
Other income (expense) of
consolidated CLO entities: (1)
Gains and other investment income, net
Interest and other expense
Total non‐operating expense
$
$
Years Ended October 31,
2016
2017
2015
2017
vs.
2016
2016
vs.
2015
19,303 $
(27,496)
(5,396)
12,411 $
(29,410)
‐
(31)
(29,357)
‐
56%
‐7%
NM
NM
0%
NM
‐
‐
(13,589) $
24,069
(13,286)
(6,216) $
5,092
(6,767)
(31,063)
‐100%
‐100%
119%
373%
96%
‐80%
(1)
(1)
Income and expense amounts related to the consolidated CLO entity in fiscal 2017 were negligible as the CLO entity was
consolidated in the fourth quarter of the fiscal year and is in the warehouse phase.
Gains (losses) and other investment income, net, increased by $6.9 million in fiscal 2017 compared to fiscal
2016, reflecting an increase in interest and other income of $11.0 million, which partially offset increases in
net investment losses attributable to investments in sponsored funds and related economic hedges and
foreign currency losses. Fiscal 2017 gains and other investment income, net, include a $1.9 million gain
recognized upon the release from escrow of payments received in connection with the sale of the Company’s
equity interest in Lloyd George Management in fiscal 2011. In fiscal 2017, we recognized $1.9 million of net
losses related to our seed capital investments and associated hedges, compared to $0.1 million of net losses in
fiscal 2016.
Gains (losses) and other investment income, net, improved by $12.4 million in fiscal 2016 compared to fiscal
2015, reflecting increases in net investment gains, interest income and foreign currency gains of $9.0 million,
$2.2 million and $1.2 million, respectively. In fiscal 2016, we recognized $0.1 million of net losses related to
our seed investments and associated hedges, compared to $9.2 million of net losses in fiscal 2015.
Interest expense decreased by $1.9 million in fiscal 2017 compared to fiscal 2016, primarily reflecting the net
effect of the retirement of the remaining $250 million of our 2017 Senior Notes and the issuance of $300
21
39
million of our 2027 Senior Notes. During fiscal 2017, the Company also recognized a $5.4 million loss on
extinguishment of debt related to costs incurred on the retirement of the 2017 Senior Notes. Interest expense
was substantially unchanged in fiscal 2016 compared to fiscal 2015.
Net gains (losses) of consolidated CLO entities were negligible during fiscal 2017 and were $10.8 million and
$(1.7) million in fiscal 2016 and 2015, respectively. The decrease in net gains (losses) of consolidated CLO
entities in fiscal 2017 compared to fiscal 2016 is attributable to the deconsolidation of a CLO entity in the
fourth quarter of fiscal 2016. Consolidated CLO entities’ gains (losses) included in net income attributable to
non‐controlling and other beneficial interest were negligible during fiscal 2017 and were approximately $9.8
million and $(5.8) million during fiscal 2016 and 2015, respectively, reflecting third‐party note holders’
proportionate interests in the net income (loss) of each consolidated CLO entity. Income associated with the
consolidated CLO entities included in net income attributable to Eaton Vance Corp. shareholders was negligible
during fiscal 2017 and was $0.8 million and $4.1 million for fiscal 2016 and 2015, respectively, representing
management fees earned by the Company and the Company’s proportionate interest in net gains (losses) of
the consolidated CLO entities.
Income Taxes
Our effective tax rate, calculated as income taxes as a percentage of income before income taxes and equity in
net income of affiliates, was 37.0 percent, 37.6 percent and 38.8 percent in fiscal 2017, 2016 and 2015,
respectively.
Our policy for accounting for income taxes includes monitoring our business activities and tax policies for
compliance with federal, state and foreign tax laws. In the ordinary course of business, various taxing
authorities may not agree with certain tax positions we have taken, or applicable law may not be clear. We
periodically review these tax positions and provide for and adjust as necessary estimated liabilities relating to
such positions as part of our overall tax provision.
Equity in Net Income of Affiliates, Net of Tax
Equity in net income of affiliates, net of tax, primarily reflects our 49 percent equity interest in Hexavest, our
seven percent minority equity interest in a private equity partnership managed by a third party and equity
interests in certain funds we sponsor or manage.
The following table summarizes the components of equity in net income of affiliates, net of tax, for the fiscal
years ended October 31, 2017, 2016 and 2015:
(in thousands)
Investment in Hexavest, net of tax
and amortization
Investment in private equity partnership,
net of tax
Investment in sponsored funds, net of tax
Total
Years Ended October 31,
2017
2016
2015
2017
vs.
2016
2016
vs.
2015
$ 10,602 $
9,979 $ 10,857
6%
‐8%
268
‐
849
315
$ 10,870 $ 10,335 $ 12,021
356
‐
‐25%
NM
5%
‐58%
‐100%
‐14%
40
22
Net Income Attributable to Non‐controlling and Other Beneficial Interests
The following table summarizes the components of net income attributable to non‐controlling and other
beneficial interests for the fiscal years ended October 31, 2017, 2016 and 2015:
(in thousands)
Consolidated sponsored funds
Majority‐owned subsidiaries
Non‐controlling interest value adjustments(1)
Consolidated CLO entities
Net income attributable to non‐controlling
and other beneficial interests
Years Ended October 31,
$
2017
(6,816) $
(16,895)
(531)
‐
2016
43 $
(13,525)
(200)
(9,768)
2015
1,752
(15,673)
204
5,825
2017
vs.
2016
NM
25%
166%
‐100%
2016
vs.
2015
‐98%
‐14%
NM
NM
$ (24,242) $ (23,450) $
(7,892)
3%
197%
(1) Relates to non‐controlling interests redeemable at other than fair value.
Net income attributable to non‐controlling and other beneficial interests is not adjusted for taxes due to the
underlying tax status of our consolidated majority‐owned subsidiaries, which are treated as partnerships or
other pass‐through entities for tax purposes. Funds and the CLO entities we consolidate are registered
investment companies or private funds that are treated as pass‐through entities for tax purposes.
In fiscal 2017, 2016 and 2015, non‐controlling interest value adjustments reflect changes in the estimated
redemption value of non‐controlling interests in Atlanta Capital.
Changes in Financial Condition, Liquidity and Capital Resources
The assets and liabilities of our consolidated CLO entities do not affect our liquidity or capital resources. The
collateral assets of our consolidated CLO entities are held solely to satisfy the obligations of these entities and
we have no right to these assets beyond our direct investment in, and management fees generated from,
these entities. The note holders and third‐party creditors of these entities have no recourse to the general
credit of the Company. As a result, the assets and liabilities of our consolidated CLO entities are excluded from
the discussion of liquidity and capital resources below.
The following table summarizes certain key financial data relating to our liquidity and capital resources on
October 31, 2017, 2016 and 2015 and uses of cash for the years then ended:
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41
Balance Sheet and Cash Flow Data
(in thousands)
Balance sheet data:
Assets:
Cash and cash equivalents
Management fees and other receivables
Total liquid assets
Investments
Liabilities:
Debt(1)
2017
As of October 31,
2016
2015
$
$
$
610,555
200,453
811,008
$
$
424,174
186,172
610,346
$
$
465,558
187,753
653,311
898,192
$
589,773
$
507,020
$
618,843
$
571,773
$
571,077
(1)
In fiscal 2017, the Company adopted Accounting Standard Update 2015‐03, which requires certain debt issuance costs to
be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability. Total assets
and debt were each reduced by $2.2 million and $2.7 million as of October 31, 2016 and 2015, respectively, to reflect the
reclassification of debt issuance costs from other assets to debt.
(in thousands)
Cash flow data:
Operating cash flows
Investing cash flows
Financing cash flows
Liquidity and Capital Resources
Years Ended October 31,
2016
2017
2015
$
$
64,892
(91,425)
210,213
340,549
(108,278)
(270,199)
$
219,867
84,266
(221,446)
Liquid assets consist of cash and cash equivalents and management fees and other receivables. Cash and cash
equivalents consist of cash and short‐term, highly liquid investments that are readily convertible to cash.
Management fees and other receivables primarily represent receivables due from sponsored funds and
separately managed accounts for investment advisory and distribution services provided. Liquid assets
represented 35 percent of total assets on both October 31, 2017 and 2016, excluding those assets identified as
assets of our consolidated CLO entity. Not included in the liquid asset amounts are $213.5 million and $85.8
million of highly liquid short‐term debt securities with remaining maturities between three and 12 months held
as of October 31, 2017 and 2016, respectively, which are included within investments on our Consolidated
Balance Sheets. Our seed investments in consolidated funds and separate accounts are not treated as liquid
assets because they may be longer term in nature.
The $200.7 million increase in liquid assets in fiscal 2017 primarily reflects net proceeds of $296.1 million from
the issuance of our 2027 Senior Notes in the second quarter of fiscal 2017, proceeds from the issuance of Non‐
Voting Common Stock of $210.9 million in connection with the exercise of employee stock options and other
employee stock purchases, proceeds from net subscriptions received from non‐controlling interest holders of
$188.5 million, cash provided by operating activities of $64.9 million, net proceeds of $16.2 million from the
sale of investments classified as available‐for‐sale, excess tax benefits of $14.8 million associated with stock
option exercises and vesting of restricted stock awards, and principal repayments on notes receivable from
42
24
stock option exercises of $4.5 million, offset by total consideration paid to redeem our 2017 Senior Notes of
$256.8 million, the repurchase of $126.2 million of Non‐Voting Common Stock, the payment of $125.8 million
of dividends to shareholders, net cash paid in acquisitions of $63.6 million, an investment of $18.8 million in
our consolidated CLO entity, the addition of $12.7 million in equipment and leasehold improvements, and the
purchase of additional non‐controlling interests for $9.8 million.
The $43.0 million decrease in liquid assets in fiscal 2016 primarily reflects the repurchase of $253.0 million of
Non‐Voting Common Stock, the payment of $118.6 million of dividends to shareholders, $82.6 million from the
investing and financing activities of consolidated CLO entities, the payment of $15.7 million to acquire
additional interests in Atlanta Capital and Parametric, a $10.1 million contingent payment related to the
Company’s acquisition of the Tax Advantaged Bond Strategies (TABS) business, the addition of $10.7 million in
equipment and leasehold improvements and the issuance of a $5.0 million note receivable to our affiliate
Hexavest, offset by net cash provided by operating activities of $340.6 million, proceeds from the issuance of
Non‐Voting Common Stock of $110.4 million in connection with the exercise of employee stock options and
other employee stock purchases and excess tax benefits of $2.9 million associated with stock option exercises.
Our debt consists of $325 million in aggregate principal amount of 3.625 percent Senior Notes due in June
2023 and $300 million in aggregate principal amount of 3.5 percent Senior Notes due in April 2027.
The 2027 Senior Notes offering resulted in net proceeds of $296.1 million after deducting the underwriting
discount and offering expenses. Interest on the 2027 Senior Notes is payable semi‐annually in arrears on April
6th and October 6th of each year, commencing on October 6, 2017. The 2027 Senior Notes are unsecured and
unsubordinated obligations of the Company. On May 6, 2017, the net proceeds from the issuance of our 2027
Senior Notes were used to redeem the remaining $250 million aggregate principal amount of the 2017 Senior
Notes. We paid total consideration of $256.8 million to the holders of the 2017 Senior Notes at redemption
and recognized a $5.4 million non‐operating loss on the extinguishment of the debt, representing the
difference between the total consideration paid and the net carrying amount of the extinguished debt plus
interest accrued to the date of redemption.
We maintain a $300 million unsecured revolving credit facility with several banks that expires on October 21,
2019. The facility provides that we may borrow at LIBOR‐based rates of interest that vary depending on the
level of usage of the facility and our credit ratings. The agreement contains financial covenants with respect to
leverage and interest coverage and requires us to pay an annual commitment fee on any unused portion. We
had no borrowings under our revolving credit facility at October 31, 2017 or at any point during the fiscal year.
We were in compliance with all debt covenants as of October 31, 2017.
We continue to monitor our liquidity daily. We remain committed to growing our business and returning
capital to shareholders. We expect that our main uses of cash will be paying dividends, acquiring shares of our
Non‐Voting Common Stock, making seed investments in new products and strategic acquisitions, enhancing
our technology infrastructure and paying the operating expenses of our business, which are largely variable in
nature and fluctuate with revenue and assets under management. We believe that our existing liquid assets,
cash flows from operations and borrowing capacity under our existing credit facility are sufficient to meet our
current and forecasted operating cash needs. The risk exists, however, that if we need to raise additional
capital or refinance existing debt in the future, resources may not be available to us in sufficient amounts or on
acceptable terms. Our ability to enter the capital markets in a timely manner depends on a number of factors,
including the state of global credit and equity markets, interest rates, credit spreads and our credit ratings. If
we are unable to access capital markets to issue new debt, refinance existing debt or sell shares of our Non‐
25
43
Voting Common Stock as needed, or if we are unable to obtain such financing on acceptable terms, our
business could be adversely affected.
Recoverability of our Investments
Our $898.2 million of investments as of October 31, 2017 consisted of our 49 percent equity interest in
Hexavest, positions in Company‐sponsored funds and separate accounts entered into for investment and
business development purposes, and certain other investments held directly by the Company. Investments in
Company‐sponsored funds and separate accounts and investments held directly by the Company are generally
in liquid debt or equity securities and are carried at fair market value. We test our investments, other than
trading and equity method investments, for impairment on a quarterly basis. We evaluate our investments in
non‐consolidated CLO entities and investments classified as available‐for‐sale for impairment using
quantitative factors, including how long the investment has been in a net unrealized loss position, and
qualitative factors, including the credit quality of the underlying issuer and our ability and intent to continue
holding the investment. During fiscal 2017, the Company recognized $0.4 million of other‐than‐temporary
impairment losses related to its investment in a non‐consolidated CLO entity. If markets deteriorate in the
quarters ahead, our assessment of impairment on a quantitative basis may lead us to impair additional
investments in future quarters that were in an unrealized loss position at October 31, 2017.
We test our investments in equity method investees, goodwill and indefinite‐lived intangible assets in the
fourth quarter of each fiscal year, or as facts and circumstances indicate that additional analysis is warranted.
There have been no significant changes in financial condition in fiscal 2017 that would indicate that an
impairment loss exists at October 31, 2017.
We periodically review our deferred sales commissions and amortizing identifiable intangible assets for
impairment as events or changes in circumstances indicate that the carrying amount of such assets may not be
recoverable. There have been no significant changes in financial condition in fiscal 2017 that would indicate
that an impairment loss exists at October 31, 2017.
Operating Cash Flows
Our operating cash flows are calculated by adjusting net income to reflect other significant sources and uses of
cash, certain significant non‐cash items and timing differences in the cash settlement of other assets and
liabilities. Significant sources and uses of cash that are not reflected in either revenue or expenses include net
cash flows associated with our deferred sales commission assets (capitalized sales commissions paid net of
contingent deferred sales charges received), as well as net cash flows associated with the purchase and sale of
investments within the portfolios of our consolidated sponsored funds and separate accounts (proceeds
received from the sale of trading investments net of cash outflows associated with the purchase of trading
investments). Significant non‐cash items include the amortization of deferred sales commissions and intangible
assets, depreciation, stock‐based compensation and net change in deferred income taxes.
Cash provided by operating activities totaled $64.9 million in fiscal 2017, a decrease of $275.7 million from
$340.5 million in fiscal 2016. The decrease in net cash provided by operating activities year‐over‐year primarily
reflects an increase in net cash used for the purchase of investments in trading securities and a decrease in the
cash provided by the operating activities of our previously consolidated CLO entity, partially offset by an
increase in the timing differences in the cash settlements of our other assets and liabilities.
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26
Cash provided by operating activities totaled $340.5 million in fiscal 2016, an increase of $120.7 million from
$219.9 million in fiscal 2015. The increase in net cash provided by operating activities primarily reflects an
increase in the cash provided by the operating activities of our consolidated CLO entities and increases in the
timing differences in the cash settlement of other assets and liabilities, offset by an increase in net purchases
of trading securities.
Investing Cash Flows
Cash flows from investing activities consist primarily of the purchase of equipment and leasehold
improvements, cash paid in acquisitions and the purchase and sale of available‐for‐sale investments in
sponsored funds that we do not consolidate.
Cash used for investing activities totaled $91.4 million in fiscal 2017, of which $31.3 million was used for
investing activities of our consolidated CLO entity, compared to cash used for investing activities of $108.3
million in fiscal 2016. Excluding cash flows attributable to investing activities of consolidated CLO entities, the
year‐over year change in cash used by investing activities can be primarily attributed to an increase in net cash
paid in acquisitions of $53.5 million, an increase of $16.0 million in net proceeds from purchases and sales of
available‐for‐sale securities, a decrease in lending to affiliates of $5.0 million and an increase in additions to
equipment and leasehold improvements of $2.0 million.
Cash used for investing activities totaled $108.3 million in fiscal 2016 compared to cash provided by investing
activities of $84.3 million in fiscal 2015. The change in cash provided by (used for) investing activities can be
attributed primarily to a decrease of $128.1 million in the net proceeds from the sales of consolidated CLO
entity investments, a decrease of $59.2 million in the net proceeds from the sales and purchases of available‐
for‐sale securities, the issuance of a $5.0 million note receivable to Hexavest and an increase of $1.0 million in
payment to sellers of the TABS business in fiscal 2016.
Financing Cash Flows
Financing cash flows primarily reflect the proceeds and repayments associated with the Company’s debt, the
issuance and repurchase of our Non‐Voting Common Stock, the payment of dividends to our shareholders, the
purchase of non‐controlling interests in our majority‐owned subsidiaries, distributions to non‐controlling
interest holders of our majority‐owned subsidiaries and excess tax benefits associated with stock option
exercises and the vesting of restricted stock awards. Financing cash flows also reflect the financing activities of
our consolidated funds, including the proceeds from the issuance of capital stock, payments for redemptions
and distributions to non‐controlling interest holders of these funds. In addition, financing cash flows reflect the
financing activities of our consolidated CLO entities, including the issuance and repayment of CLO beneficial
interests (senior and subordinated notes) and proceeds and repayments of CLO borrowings.
Cash provided by (used for) financing activities totaled $210.2 million, $(270.2) million and $(221.4) million in
fiscal 2017, 2016 and 2015, respectively. In fiscal 2017, the Company issued $300 million of 2027 Senior Notes,
resulting in net proceeds of approximately $296.1 million, and redeemed the remaining $250 million of the
Company’s 2017 Notes for $255.4 million. In other financing activities, we paid $9.8 million to acquire
additional interests in Atlanta Capital and Parametric, repurchased and retired a total of 2.9 million shares of
our Non‐Voting Common Stock for $126.2 million under our authorized repurchase programs, and issued 7.4
million shares of our Non‐Voting Common Stock in connection with the grant of restricted share awards, the
exercise of stock options and other employee stock purchases for total proceeds of $210.9 million. As of
October 31, 2017, we have authorization to purchase an additional 6.1 million shares under our current share
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repurchase authorization and anticipate that future repurchases will continue to be an ongoing use of cash.
Our dividends declared per share were $1.15 in fiscal 2017 and $1.075 in fiscal 2016. We currently expect to
declare and pay quarterly dividends on our Voting and Non‐Voting Common Stock comparable to the dividend
declared in the fourth quarter of fiscal 2017.
In fiscal 2016, we paid $15.7 million to acquire additional interests in Atlanta Capital and Parametric,
repurchased and retired approximately 7.3 million shares of our Non‐Voting Common Stock for $253.0 million
under our authorized repurchase programs and issued 5.4 million shares of our Non‐Voting Common Stock in
connection with the grant of restricted share awards, the exercise of stock options and other employee stock
purchases for total proceeds of $110.4 million.
In fiscal 2015, cash used for financing activities included $381.5 million in principal payments made on senior
notes, lines of credit and redeemable preferred shares of consolidated CLO entities, as well as $485.2 million
related to the proceeds from the line of credit and the issuance of new senior notes and redeemable preferred
shares of those entities.
Contractual Obligations
The following table details our contractual obligations as of October 31, 2017:
Payments due by Period
Less
than 1
Year
1‐3
4‐5
More
than 5
Years
Years
Years
(in millions)
Operating leases – facilities and equipment(1)
Senior notes
Interest payment on senior notes
Payments to non‐controlling interest holders of
majority‐owned subsidiaries
Unrecognized tax benefits(2)
Total
Contractual obligations of consolidated CLO entity:
Line of credit
Total for consolidated CLO entity
$
Total
328 $
625
170
13
2
$ 1,138 $
23 $
‐
22
13
1
59 $
47 $
‐
45
‐
1
93 $
40 $
‐
45
‐
‐
85 $
$
$
13 $
13 $
13 $
13 $
‐ $
‐ $
‐ $
‐ $
218
625
58
‐
‐
901
‐
‐
(1) Minimum payments have not been reduced by minimum sublease rentals of $0.1 million to be received in the future under non‐cancelable
subleases.
This amount includes unrecognized tax benefits along with accrued interest and penalties.
(2)
Non‐controlling interests held by employees in Atlanta Capital and Parametric long‐term equity incentive plans
are not subject to mandatory redemption. The purchase of non‐controlling interests is predicated on the
exercise of a series of puts held by non‐controlling interest holders and calls held by us. The puts provide the
non‐controlling interest holders the right to require us to purchase these retained interests at specific intervals
over time, while the calls provide us with the right to require the non‐controlling interest holders to sell their
retained equity interests to us at specified intervals over time, as well as upon the occurrence of certain events
such as death or permanent disability. These non‐controlling interests are redeemable at fair value. There is
significant uncertainty as to the timing and amount of any non‐controlling interest purchase in the future.
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Accordingly, future payments to be made to purchase non‐controlling interests have been excluded from the
above table, unless a put or call option has been exercised and a mandatory firm commitment exists for us to
purchase such non‐controlling interests. Although the timing and amounts of these purchases cannot be
predicted with certainty, we anticipate that the purchase of non‐controlling interests in our consolidated
subsidiaries may be a significant use of cash in future years. In the table above, payments to non‐controlling
interest holders of majority‐owned subsidiaries include $4.2 million and $5.7 million of payments upon the
execution of termination call options by the Company related to indirect profit interests held by terminated
employees of Atlanta Capital and Parametric, respectively. These transactions settled in November 2017.
Within the same line in the table above is $2.8 million related to the Company’s exercise of a final call option
pursuant to the terms of the Atlanta Capital original acquisition agreement, as amended. This transaction is
expected to settle in December 2017.
We have presented all redeemable non‐controlling interests at redemption value on our Consolidated Balance
Sheet as of October 31, 2017. We have recorded the current year change in the estimated redemption value of
non‐controlling interests redeemable at fair value as a component of additional paid‐in capital and have
recorded the current year change in the estimated redemption value of non‐controlling interests redeemable
at other than fair value (non‐controlling interests redeemable based on a multiple of earnings before interest
and taxes of the subsidiary) as a component of net income attributable to non‐controlling and other beneficial
interests. Based on our calculations, the estimated redemption value of our non‐controlling interests totaled
$250.8 million on October 31, 2017 compared to $109.0 million on October 31, 2016. These interests are all
redeemable at fair value. No puts or calls redeemable at other than fair value were outstanding as of October
31, 2017.
Redeemable non‐controlling interests as of October 31, 2017 consisted of third‐party investors’ ownership in
consolidated investment funds of $154.1 million, non‐controlling interests in Parametric issued in conjunction
with the Clifton Group Investment Management Company (Clifton) acquisition of $8.4 million, non‐controlling
interests in Parametric issued in conjunction with the Parametric Risk Advisors LLC (Parametric Risk Advisors)
final put option of $14.7 million and profit interests granted under the long‐term incentive plans of Parametric
and Atlanta Capital of $46.3 million and $27.3 million, respectively, all of which are redeemable at fair value.
We have elected to maintain the Company’s ownership interest in Hexavest at 49 percent. On December 11,
2017, we notified the employee‐owners of Hexavest that we would not be exercising our option to purchase
an additional 26 percent interest under the terms of the option agreement entered into when we acquired our
Hexavest position in 2012. As a result, there will be no future payment related to this option, which has been
excluded from the table above.
In November 2010, we acquired patents and other intellectual property from Managed ETFs LLC, a developer
of intellectual property in the field of exchange‐traded funds. This intellectual property is the foundation of
the Company’s NextShares™ exchange‐traded managed funds initiative. The terms of the acquisition of the
patents and other intellectual property of Managed ETFs LLC include approximately $9.0 million in aggregate
contingent milestone payments that are based on specific events representing key developments in the
commercialization of NextShares. There is no defined timing on these payments, resulting in significant
uncertainty as to when the amount of any payment is due in the future. Accordingly, future payments to be
made have been excluded from the above table until such time as the uncertainty has been resolved. If and
when the milestones are reached, Managed ETFs LLC is also entitled to revenue‐sharing payments that are
calculated as a percentage of licensing revenue that we receive for use of the acquired intellectual property.
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Foreign Subsidiaries
We consider the undistributed earnings of certain of our foreign subsidiaries to be indefinitely reinvested in
foreign operations as of October 31, 2017. Accordingly, no U.S. income taxes have been provided thereon. As
of October 31, 2017, the Company had approximately $61.7 million of undistributed earnings in certain
Canadian, United Kingdom and Australian foreign subsidiaries that are not available to fund domestic
operations or to distribute to shareholders unless repatriated. Repatriation would require the Company to
accrue and pay U.S. corporate income taxes. The unrecognized deferred income tax liability on these un‐
repatriated funds, or temporary difference, is estimated to be $7.7 million at October 31, 2017. The Company
does not intend to repatriate these funds, has not previously repatriated funds from these entities, and has the
financial liquidity to permanently leave these funds offshore.
Off‐Balance Sheet Arrangements
We do not invest in any off‐balance sheet vehicles that provide financing, liquidity, market or credit risk
support or engage in any leasing activities that expose us to any liability that is not reflected in our
Consolidated Financial Statements.
Critical Accounting Policies
We believe the following critical accounting policies reflect our accounting policies that require significant
judgments and estimates used in the preparation of our Consolidated Financial Statements. Actual results may
differ from these estimates.
Consolidation of variable interest entities (VIEs)
Accounting guidance provides a framework for determining whether an entity should be considered a VIE and,
if so, whether our involvement with the entity represents a variable interest in the entity. If we determine that
we have a variable interest in a VIE, we must perform an analysis to determine whether we are the primary
beneficiary of the VIE. If we determine we are the primary beneficiary of the VIE, we are required to
consolidate the assets, liabilities, results of operations and cash flows of the VIE.
Our evaluation of whether we qualify as the primary beneficiary of a VIE is complex. We are the primary
beneficiary of a VIE if we have a controlling financial interest in the VIE. A company is deemed to have a
controlling financial interest in a VIE if it has both (i) the power to direct the activities of the VIE that most
significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE that
could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be
significant to the VIE.
For collateralized loan obligation (CLO) entities, we must evaluate the relative size of our beneficial interest
and the overall magnitude and design of the collateral management fees within each structure. There is also
judgment involved in assessing whether we have the power to direct the activities that most significantly
impact the VIE’s economic performance and the obligation to absorb losses of or the right to receive benefits
from the VIE that could potentially be significant.
While we believe our overall evaluation of VIEs is appropriate, future changes in estimates, judgments and
assumptions or changes in our ownership interests in a VIE may affect the resulting consolidation, or
deconsolidation, of the assets, liabilities, results of operations and cash flows of a VIE.
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Fair value measurements
The accounting standards for fair value measurement provide a framework for measuring fair value and
require expanded disclosures regarding fair value measurements. Fair value is defined as the price that would
be received for an asset or the exit price that would be paid to transfer a liability in the principal or most
advantageous market in an orderly transaction between market participants on the measurement date. The
accounting standards establish a fair value measurement hierarchy, which requires an entity to maximize the
use of observable inputs where available. This fair value measurement hierarchy gives the highest priority to
quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.
We utilize third‐party pricing services to value investments in various asset classes, including interests in senior
floating‐rate loans and other debt obligations, derivatives and certain foreign equity securities, as further
discussed below. Valuations provided by the pricing services are subject to exception reporting that identifies
securities with significant movements in valuation, as well as investments with no movements in valuation.
These exceptions are reviewed by us on a daily basis. We compare the price of trades executed by us to the
valuations provided by the third‐party pricing services to identify and research significant variances. We
periodically compare the pricing service valuations to valuations provided by a secondary independent source
when available. Market data provided by the pricing services and other market participants, such as the Loan
Syndication and Trading Association (LSTA) trade study, is reviewed to assess the reliability of the provided
data. Our Valuation Committee reviews the general assumptions underlying the methodologies used by the
pricing services to value various asset classes at least annually. Throughout the year, members of our Valuation
Committee meet with the service providers to discuss any significant changes to the service providers’
valuation methodologies or operational processes.
Assets and liabilities measured and reported at fair value are classified and disclosed in one of the following
categories based on the nature of the inputs that are significant to the fair value measurements in their
entirety. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value
measurement hierarchy. In such cases, an investment’s classification within the fair value measurement
hierarchy is based on the lowest level of input that is significant to the fair value measurement.
Level 1
Level 2
Unadjusted quoted market prices in active markets for identical assets or liabilities at
the reporting date.
Observable inputs other than Level 1 unadjusted quoted market prices, such as quoted
market prices for similar assets or liabilities in active markets, quoted prices for
identical or similar assets or liabilities that are not active, and inputs other than quoted
prices that are observable or corroborated by observable market data.
Level 3
Unobservable inputs that are supported by little or no market activity.
We recognize any transfers between levels at the end of each quarter.
Income taxes
Deferred income taxes reflect the expected future tax consequences of temporary differences between the
carrying amounts and tax bases of our assets and liabilities measured using rates expected to be in effect when
such differences reverse. To the extent that deferred tax assets are considered more likely than not to be
unrealizable, valuation allowances are provided. Proposed changes in U.S. tax policy, which include a proposal
to reduce federal tax rates for corporations, may impact the carrying value of deferred tax assets and liabilities
due to the change in future tax rates. Remeasurement of deferred taxes for a corporate rate reduction and
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other applicable provisions of tax reform will be recorded as an expense or benefit in the period that the new
legislation is enacted.
Our effective tax rate reflects the statutory tax rates of the many jurisdictions in which we operate. Significant
judgment is required in evaluating our tax positions. In the ordinary course of business, many transactions
occur for which the ultimate tax outcome is uncertain. Accounting standards governing the accounting for
uncertainty in income taxes for a tax position taken or expected to be taken in a tax return require that the tax
effects of a position be recognized only if it is more likely than not to be sustained based solely on its technical
merits as of the reporting date. The more‐likely‐than‐not threshold must be met in each reporting period to
support continued recognition of the benefit. The difference between the tax benefit recognized in the
financial statements for a tax position and the tax benefit claimed in the income tax return is referred to as an
unrecognized tax benefit. Unrecognized tax benefits, as well as the related interest and penalties, are regularly
evaluated and adjusted as appropriate to reflect changing facts and circumstances. We classify any interest or
penalties incurred as a component of income tax expense.
Goodwill
Goodwill represents the excess of the cost of our investment in the net assets of acquired companies over the
fair value of the underlying identifiable net assets at the dates of acquisition. We attribute all goodwill
associated with the acquisitions of Atlanta Capital, Parametric and Clifton, which share similar economic
characteristics, to one reporting unit. We attribute all goodwill associated with the acquisition of the TABS
business of M.D. Sass Investor Services and other acquisitions to a second reporting unit.
Goodwill is not amortized but is tested annually for impairment in the fourth quarter of each fiscal year by
comparing the fair values of identified reporting units to their respective carrying amounts, including goodwill.
We establish fair value for the purpose of impairment testing for each reporting unit by using an income
approach and a market approach.
The income approach employs a discounted cash flow model that takes into account (1) assumptions that
market participants would use in their estimates of fair value, (2) current period actual results and (3) budget
projections for future periods that have been vetted by senior management. The discounted cash flow model
incorporates the same fundamental pricing concepts used to calculate fair value in the acquisition due
diligence process and a discount rate that takes into consideration our estimated cost of capital adjusted for
the uncertainty inherent in the forecasted information.
The market approach employs market multiples based on comparable publicly traded companies in the
financial services industry, calculated with data from industry sources. Estimates of fair value are established
using current and forward multiples of both revenue and earnings before interest, taxes, depreciation and
amortization (EBITDA), adjusted for size and performance of the reporting unit relative to peer companies.
If the carrying amount of the reporting unit exceeds its calculated fair value, the second step of the goodwill
impairment test will be performed to measure the amount of the impairment loss, if any.
Intangible assets
Amortizing identifiable intangible assets generally represent the cost of client relationships, intellectual
property, trademarks, and research systems. In valuing these assets, we make assumptions regarding useful
lives and projected growth rates, and significant judgment is required. We periodically review our amortizing
identifiable intangible assets for impairment as events or changes in circumstances indicate that the carrying
amount of such assets may not be recoverable. If the carrying amounts of those assets exceed their respective
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fair values, additional impairment tests are performed to measure the amounts of the impairment losses, if
any.
Non‐amortizing intangible assets generally represent the cost of mutual fund management contracts acquired.
Non‐amortizing intangible assets are tested for impairment in the fourth quarter of each fiscal year by
comparing the fair values of the management contracts acquired to their carrying values. We establish fair
value for purposes of impairment testing using the income approach. If the carrying value of a management
contract acquired exceeds its fair value, an impairment loss is recognized equal to that excess.
Stock‐based compensation
We account for stock‐based compensation expense at fair value. Under the fair value method, stock‐based
compensation expense, which reflects the fair value of stock‐based awards measured at grant date, is
recognized on a straight‐line basis over the relevant service period (generally five years) and is adjusted each
period for anticipated forfeitures.
The fair value of each option award granted is estimated using the Black‐Scholes option valuation model. The
Black‐Scholes option valuation model incorporates assumptions as to dividend yield, expected volatility, an
appropriate risk‐free interest rate and the expected life of the option.
The fair value of profit interests granted under subsidiary long‐term equity plans is estimated on the grant date
by averaging fair value established using an income approach and fair value established using a market
approach for each subsidiary. The income and fair value approaches used in the determination of grant date
fair value of profit interests are consistent with those described in Goodwill above.
Tax benefits realized upon the exercise of stock options that are in excess of the expense previously recognized
for financial reporting purposes are recorded in shareholders’ equity and reflected as a financing activity in our
Consolidated Statements of Cash Flows. If the tax benefit realized is less than the expense previously recorded,
the shortfall is recorded in shareholders’ equity. To the extent the expense exceeds available windfall tax
benefits, it is recorded in our Consolidated Statements of Income and reflected as an operating activity on our
Consolidated Statements of Cash Flows.
Non‐controlling interests
Non‐redeemable non‐controlling interests consist entirely of unvested interests granted to employees of our
majority‐owned subsidiaries under subsidiary‐specific long‐term equity plans. These grants become subject to
holder put rights upon vesting and are reclassified to temporary equity as vesting occurs.
Non‐controlling interests redeemable at fair value consist of interests in our consolidated sponsored funds and
certain vested interests held by employees of our majority‐owned subsidiaries that were granted under the
subsidiaries’ long‐term equity plans. Our non‐controlling interests redeemable at fair value are recorded in
temporary equity at estimated redemption value and changes in the estimated redemption value of these
interests are recognized as increases or decreases to additional paid‐in capital.
Non‐controlling interests redeemable at other than fair value consisted of certain other interests in our
majority‐owned subsidiaries. During the fiscal year ended October 31, 2017, the Company acquired the
remaining profit interests held by the non‐controlling interest holders of Atlanta Capital. As a result, the
Company had no non‐controlling interests that are redeemable at other than fair value as of October 31, 2017.
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Accounting Developments
See Note 1, “Summary of Significant Accounting Policies – Adoption of new accounting standards,” and Note 2,
“New Accounting Standards Not Yet Adopted,” in the Notes to Consolidated Financial Statements.
Quantitative and Qualitative Disclosures about Market Risk
In the normal course of business, our financial position is subject to different types of risk, including market
risk. Market risk is the risk that we will incur losses due to adverse changes in equity and bond prices, interest
rates, credit events or currency exchange rates. Management is responsible for identifying, assessing and
managing market and other risks.
In evaluating market risk, it is important to note that most of our revenue is based on the market value of
assets under management. As noted in “Risk Factors” in this Annual Report, declines of financial market values
negatively impact our revenue and net income.
Our primary direct exposure to equity price risk arises from investments in equity securities made by consolidated
sponsored funds, investments in equity securities held in separately managed accounts seeded for new product
development purposes and our investments in sponsored equity funds that are not consolidated. Equity price risk
as it relates to these investments represents the potential future loss of value that would result from a decline in
the fair values of the fund shares or underlying equity securities.
The following is a summary of the effect that a 10 percent increase or decrease in equity prices would have on our
investments subject to equity price fluctuations at October 31, 2017:
(in thousands)
Investment securities, trading:
Consolidated sponsored funds and
separately managed accounts
Investment securities, available‐for‐sale:
Sponsored funds
Total
Carrying
Value
Assuming
a 10%
Increase
Carrying
Value
Assuming
a 10%
Decrease
Carrying
Value
$ 181,488 $
199,637 $
163,339
21,063
$ 202,551 $
23,169
222,806 $
18,957
182,296
At October 31, 2017, we were exposed to interest rate risk and credit spread risk as a result of approximately
$527.6 million in investments in fixed and floating‐rate income funds sponsored or managed by us, debt securities
held by sponsored funds we consolidate, debt securities held in separately managed accounts seeded for new
product development purposes and short‐term debt securities held directly by us. Management considered a
hypothetical 100 basis point change in interest rates and determined that an increase of such magnitude would
result in a decrease of approximately $5.3 million in the carrying amount of our debt investments and that a
decrease of 100 basis points would increase the carrying amount of such investments by approximately $5.3
million.
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Currently we have a corporate hedging program in place to hedge currency risk, interest rate risk and market price
exposures on certain investments in consolidated sponsored funds and separately managed accounts seeded for
new product development purposes. As part of this program, we enter into forwards, futures and swap contracts
to hedge certain exposures held within the portfolios of these consolidated sponsored funds and separately
managed accounts. The contracts negotiated are short term in nature. We do not enter into derivative
instruments for speculative purposes.
At October 31, 2017, we had outstanding foreign exchange contracts, stock index futures contracts, currency
futures contracts, commodity futures contracts, interest rate futures contracts and total return swap contracts
with aggregate notional values of approximately $28.1 million, $118.1 million, $14.5 million, $10.2 million, $25.6
million and $50.2 million, respectively. We estimate that a 10 percent adverse change in market prices would
result in a decrease of approximately $59,000, $269,000, $15,000, $6,000, $18,000 and $57,000, respectively, in
the fair value of open foreign exchange contracts, stock index futures contracts, currency futures contracts,
commodity futures contracts, interest rate futures contracts and total return swap contracts held at October 31,
2017.
We are required to maintain cash collateral for margin accounts established to support certain derivative
positions. Our initial margin requirements are currently equal to five percent of the initial underlying value of our
stock index futures contracts, currency futures contracts, commodity futures contracts and interest rate futures
contracts. Additional margin requirements include daily posting of variation margin equal to the daily change in
the position value. We do not have a collateral requirement related to foreign exchange contracts or total return
swap contracts. Cash collateral supporting margin requirements is classified as restricted cash and is included as a
component of other assets on our Consolidated Balance Sheets. At October 31, 2017, cash collateral included in
other assets on our Consolidated Balance Sheet totaled $8.5 million.
Direct exposure to credit risk arises from our interests in non‐consolidated CLO entities that are included in
investments in our Consolidated Balance Sheets, as well as our interests in consolidated CLO entities that are
eliminated in consolidation. Our CLO entity investments entitle us only to a residual interest in the CLO entity,
making these investments highly sensitive to the default and recovery experiences of the underlying instruments
held by the CLO entity. Our CLO investments are subject to an impairment loss in the event that the cash flows
generated by the collateral securities are not sufficient to allow equity holders to recover their investments. If
there is deterioration in the credit quality of collateral and reference securities and a corresponding increase in
defaults, CLO entity cash flows may be adversely impacted and we may be unable to recover our investment. We
had total investments in non‐consolidated CLO entities of $3.6 million and an investment of $18.8 million in our
consolidated CLO entity as of October 31, 2017, representing our total value at risk with respect to such entities as
of that date.
We are subject to foreign currency exchange risk through our international operations. While we operate primarily
in the United States and, accordingly, most of our consolidated revenue and associated expenses are denominated
in U.S. dollars, we also provide services and earn revenue outside of the United States. Revenue and expenses
denominated in foreign currencies may be impacted by movements in foreign currency exchange rates. The
exposure to foreign currency exchange risk in our Consolidated Balance Sheets relates primarily to an equity
method investment and cash and cash equivalents that are denominated in foreign currencies, principally
Canadian dollars. This risk will likely increase as our business outside of the United States grows. We generally do
not use derivative financial instruments to manage the foreign currency exchange risk exposure we assume in
connection with investments in international operations. As a result, both positive and negative currency
fluctuations against the U.S. dollar may affect our results of operations and accumulated other comprehensive
income (loss). We do not enter into foreign currency transactions for speculative purposes.
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Risk Factors
We are subject to substantial competition in all aspects of our investment management business. Our funds
and separate accounts compete against a large number of investment products and services sold to the public
by investment management companies, investment dealers, banks, insurance companies and others. Many
institutions we compete with have greater financial resources than us and there are few barriers to entry. We
compete with these firms on the basis of investment performance, diversity of products, distribution
capability, scope and quality of services, reputation and the ability to develop new investment strategies and
products to meet the changing needs of investors. To the extent that current or potential customers decide to
invest in products sponsored by our competitors, the sales of our products as well as our market share,
revenue and net income could decline. Our actively managed investment strategies compete not only against
other active strategies, but also against similarly positioned index strategies. The continuing shift in market
demand toward index funds and other passive strategies reduces opportunities for active managers and may
accelerate fee compression. To the extent that trend continues, our business could be adversely affected.
The investment management industry is highly competitive and investment management customers are
increasingly fee sensitive. In the event that competitors charge lower fees for substantially similar products,
we may be forced to compete on the basis of price in order to attract and retain customers. Rules and
regulations applicable to registered investment companies provide, in substance, that each investment
advisory agreement between a fund and its investment adviser continues in effect from year to year only if its
continuation is approved at least annually by the fund’s board of trustees. Periodic review of fund advisory
agreements could result in a reduction in the Company’s advisory fee revenues from funds. Fee reductions on
existing or future business and/or the impact of evolving industry fee structures could have an adverse impact
on our future revenue and profitability.
The inability to access clients through intermediaries could have a material adverse effect on our business.
Our ability to market investment products is highly dependent on access to the various distribution systems of
national and regional securities dealer firms, which generally offer competing products that could limit the
distribution of our investment products. There can be no assurance that we will be able to retain access to
these intermediaries. The inability to have such access could have a material adverse effect on our business. To
the extent that existing or potential customers, including securities broker‐dealers, decide to invest in or
broaden distribution relationships with our competitors, the sales of our products as well as our market share,
revenue and net income could decline. Certain intermediaries with which we conduct business charge the
Company fees to maintain access to their distribution networks. If we choose not to pay such fees, our ability
to distribute through those intermediaries would be limited.
Our investment advisory agreements are subject to termination on short notice or non‐renewal. We derive
almost all of our revenue from management fees, distribution income and service fees received from managed
funds and separate accounts. As a result, we are dependent upon management contracts, administrative
contracts, distribution contracts, underwriting contracts or service contracts under which these fees are paid.
Generally, these contracts are terminable upon 30 to 60 days’ notice without penalty. If any of these contracts
are terminated, not renewed, or amended to reduce fees, our financial results could be adversely affected.
Our assets under management, which impact revenue, are subject to significant fluctuations. Our major
sources of revenue, including investment advisory, administrative, distribution and service fees, are generally
calculated as percentages of assets under management. Fee rates for our investment products generally vary
by investment mandate (e.g., equity, fixed income, floating‐rate income, alternative, portfolio implementation
or exposure management services) and vehicle (e.g., fund or separate account). An adverse change in asset
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36
mix by mandate or vehicle, independent of our level of assets under management, may result in a decrease in
our overall average effective fee rate, thereby reducing our revenue and net income. Any decrease in the level
of our assets under management generally would also reduce our revenue and net income. Assets under
management could decrease due to, among other things, a decline in securities prices, a decline in the sales of
our investment products, an increase in open‐end fund redemptions or client withdrawals, repurchases of or
other reductions in closed‐end fund shares outstanding, or reductions in leverage used by investment vehicles.
Adverse market conditions and/or lack of investor confidence in the financial markets could lead to a decrease
in investor risk tolerance. A decrease in investor risk tolerance could result in investors withdrawing from
markets or decreasing their rate of investment, thereby reducing our overall assets under management and
adversely affecting our revenue, earnings and growth prospects. Changes in investor risk tolerance could also
result in investor allocation away from higher‐fee products to lower‐fee products, which could adversely affect
our revenue and earnings. Our overall assets under management may not change in tandem with overall
market conditions, as changes in our total assets under management may lag improvements or declines in the
market based upon product mix and investment performance.
We could be adversely affected by changes in tax laws. Currently proposed and future changes in U.S. tax
policy may affect us to a greater degree than many of our competitors because we manage significant assets in
funds and separate accounts with an after‐tax return objective. In addition, the currently proposed reduction
in the federal tax rate for corporations may lower the carrying value of our deferred tax assets due to change
in future tax rates.
Exposure to additional tax liabilities could have a material impact on our financial condition, results of
operations and/or liquidity. Tax authorities may disagree with certain positions we take and assess additional
taxes. We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our
tax provision. However, there can be no assurance that we will accurately predict the outcomes of these
audits, and the actual outcomes of these audits could have a material impact on our financial statements. We
are subject to ongoing tax audits in various jurisdictions, including several states. Changes in tax laws or tax
rulings could materially impact our effective tax rate.
Poor investment performance of our products could affect our sales or reduce the amount of assets under
management, negatively impacting revenue and net income. Investment performance is critical to our
success. Poor investment performance on an absolute basis or as compared to third‐party benchmarks or
competitor products could lead to a decrease in sales and stimulate higher redemptions, thereby lowering the
amount of assets under management and reducing the investment advisory fees we earn. A decline in
investment performance of any investment franchise could have a material adverse effect on the level of
assets under management, revenue and net income of that franchise. Past or present performance in the
investment products we manage is not indicative of future performance.
Our clients can withdraw the assets we manage on short notice, making our future client and revenue base
unpredictable. Our open‐end fund clients generally may redeem their investments in these funds each
business day without prior notice. While not subject to daily redemption, closed‐end funds that we manage
may shrink in size due to repurchases of shares in open‐market transactions or pursuant to tender offers, or in
connection with distributions in excess of realized returns. Institutional and individual separate account clients
can terminate their relationships with us generally at any time. In a declining stock market, the pace of open‐
end fund redemptions could accelerate. Poor performance relative to other asset management firms can
result in decreased purchases of open‐end fund shares, increased redemptions of open‐end fund shares, and
the loss of institutional or individual separate accounts. The decrease in revenue that could result from any of
these events could have a material adverse effect on our business.
37
55
We could be impacted by counterparty or client defaults. As we have seen in periods of significant market
volatility, the deteriorating financial condition of one financial institution may materially and adversely impact
the performance of others. We, and the funds and accounts we manage, have exposure to many different
counterparties, and routinely execute transactions with counterparties across the financial industry. We, and
the funds and accounts we manage, may be exposed to credit, operational or other risk in the event of a
default by a counterparty or client, or in the event of other unrelated systemic market failures.
Our success depends on key personnel and our financial performance could be negatively affected by the loss
of their services. Our success depends upon our ability to attract, retain and motivate qualified portfolio
managers, analysts, investment counselors, sales and management personnel and other key professionals,
including our executive officers. Our key employees generally do not have employment contracts and may
voluntarily terminate their employment at any time. Certain senior executives and the non‐employee
members of our Board of Directors are subject to our mandatory retirement policy at age 65 and age 74,
respectively. The loss of the services of key personnel or our failure to attract replacement or additional
qualified personnel could negatively affect our financial performance. An increase in compensation to attract
or retain personnel could result in a decrease in net income.
Our expenses are subject to fluctuations that could materially affect our operating results. Our results of
operations are dependent on our level of expenses, which can vary significantly from period to period. Our
expenses may fluctuate as a result of, among other things, variations in the level of compensation, expenses
incurred to support distribution of our investment products, expenses incurred to develop new products and
franchises, expenses incurred to enhance our infrastructure (including technology and compliance) and
impairments of intangible assets or goodwill. Increases in our level of expenses, or our inability to reduce our
level of expenses when necessary, could materially affect our operating results.
Our business is subject to operational risk. In the management and administration of funds and client
accounts, we are subject to the risk that we commit errors that cause the Company to incur financial losses
and damage our reputation. Because they involve large numbers of accounts and operate at generally low fee
rates, our portfolio implementation and exposure management services businesses may be particularly
susceptible to losses from operational or trading errors.
Our reputation could be damaged. We have built a reputation of high integrity, prudent investment
management and superior client service. Our reputation is extremely important to our success. Any damage
to our reputation could result in client withdrawals from funds or separate accounts that are advised by us and
ultimately impede our ability to attract and retain key personnel. The loss of either client relationships or key
personnel due to damage to our reputation could reduce the amount of assets under management and cause
us to suffer a loss in revenue or a reduction in net income.
Success of our NextShares initiative is highly uncertain. In recent years, the Company has devoted substantial
resources to the development of NextShares, a new type of actively managed fund designed to provide better
performance for investors. The Company made progress advancing its NextShares initiative in fiscal 2017, and
expects to continue the staged introduction of NextShares in fiscal 2018. Broad market adoption and
commercial success requires the development of expanded distribution, the launch of NextShares by other
fund sponsors and acceptance by market participants, which cannot be assured.
Support provided to new products may reduce fee income, increase expenses and expose us to potential loss
on invested capital. We may support the development of new investment products by waiving all or a portion
56
38
of the fees we receive for managing such products, by subsidizing expenses or by making seed capital
investments. Seed investments in new products utilize Company capital that would otherwise be available for
general corporate purposes and expose us to capital losses to the extent that realized investment losses are
not offset by hedging gains. The risk of loss may be greater for seed capital investments that are not hedged,
or if an intended hedge does not perform as expected. Failure to have or devote sufficient capital to support
new products could have an adverse impact on our future growth.
We may need to raise additional capital or refinance existing debt in the future, and resources may not be
available to us in sufficient amounts or on acceptable terms. Significant future demands on our capital
include contractual obligations to service our debt, satisfy the terms of non‐cancelable operating leases and
purchase non‐controlling interests in our majority‐owned subsidiaries as described more fully in Contractual
Obligations in Management’s Discussion and Analysis of Financial Condition and Results of Operations in this
Annual Report and in Note 10 in this Annual Report. Although we believe our existing liquid assets, cash flows
from operations and borrowing capacity under our credit facility are sufficient to meet our current and
forecasted operating cash needs, our ability to satisfy our long‐term contractual obligations may be dependent
on our ability to access capital markets. Our ability to access capital markets efficiently depends on a number
of factors, including the state of global credit and equity markets, interest rates, credit spreads and our credit
ratings. If we are unable to access capital markets to issue new debt, refinance existing debt or sell shares of
our Non‐Voting Common Stock as needed, or if we are unable to obtain such financing on acceptable terms,
our business could be adversely impacted.
We could be subject to losses and reputational harm if we, or our agents, fail to properly safeguard sensitive
and confidential information or as a result of cyber attacks. We are dependent on the effectiveness of our
information and cyber security policies, procedures and capabilities to protect our computer and
telecommunications systems and the data that resides in or is transmitted through such systems. As part of
our normal operations, we maintain and transmit confidential information about our clients and employees as
well as proprietary information relating to our business operations. We maintain a system of internal controls
designed to provide reasonable assurance that fraudulent activity, including misappropriation of assets,
fraudulent financial reporting and unauthorized access to sensitive or confidential data, is either prevented or
detected on a timely basis. Nevertheless, all technology systems remain vulnerable to unauthorized access and
may be corrupted by cyber attacks, computer viruses or other malicious software code, the nature of which
threats are constantly evolving and becoming increasingly sophisticated. In addition, authorized persons could
inadvertently or intentionally release confidential or proprietary information. Although we take precautions to
password protect and encrypt our mobile electronic hardware, if such hardware is stolen, misplaced or left
unattended, it may become vulnerable to hacking or other unauthorized use, creating a possible security risk
and resulting in potentially costly actions by us. Breach or other failure of our technology systems, including
those of third parties with which we do business, or failure to timely and effectively identify and respond to
any such breach or failure, could result in the loss of valuable information, liability for stolen assets or
information, remediation costs to repair damage caused by the incident, additional security costs to mitigate
against future incidents and litigation costs resulting from the incident. Moreover, loss of confidential
customer identification information could harm our reputation, result in the termination of contracts by our
existing customers and subject us to liability under laws that protect confidential personal data, resulting in
increased costs or loss of revenues. Recent well‐publicized security breaches at other companies have led to
enhanced government and regulatory scrutiny of the measures taken by companies to protect against cyber
attacks, and may in the future result in heightened cyber security requirements, including additional regulatory
expectations for oversight of vendors and service providers.
Failure to maintain adequate infrastructure could impede our productivity and ability to support business
growth. Our infrastructure, including our technological capacity, data centers and office space, is vital to the
39
57
operations and competitiveness of our business. The failure to maintain an infrastructure commensurate with
the size and scope of our business, including any expansion, could impede our productivity and growth, which
could result in a decline in our earnings.
Failure to maintain adequate business continuity plans could have a material adverse impact on us and our
products. Significant portions of our business operations and those of our critical third‐party service providers
are concentrated in a few geographic areas, including Boston, Massachusetts and Seattle, Washington. Critical
operations that are geographically concentrated in Boston and/or Seattle include trading operations,
information technology, fund administration, and custody and portfolio accounting services for the Company’s
products. Should we, or any of our critical service providers, experience a significant local or regional disaster
or other business continuity problem, our continued success will depend in part on the safety and availability
of our personnel, our office facilities, and the proper functioning of our computer, telecommunication and
other related systems and operations. The failure by us, or any of our critical service providers, to maintain
updated adequate business continuity plans, including backup facilities, could impede our ability to operate in
the event of a disruption, which could cause our earnings to decline. We have developed various backup
systems and contingency plans but we cannot be assured that they will be adequate in all circumstances that
could arise or that material interruptions and disruptions will not occur. In addition, we rely to varying degrees
on outside vendors for disaster contingency support, and we cannot be assured that these vendors will be able
to perform in an adequate and timely manner. If we, or any of our critical service providers, are unable to
respond adequately to such an event in a timely manner, we may be unable to continue our business
operations, which could lead to a damaged reputation and loss of customers that results in a decrease in
assets under management, lower revenues and reduced net income.
We pursue growth in the United States and abroad in part through acquisitions, which exposes us to risks
inherent in assimilating new operations, expanding into new jurisdictions and executing on new
development opportunities. Our growth strategy is based in part on the selective development or acquisition
of asset management or related businesses that we believe will add value to our business and generate
positive net returns. This strategy may not be effective, and failure to successfully develop and implement
such a strategy may decrease earnings and harm the Company’s competitive position in the investment
management industry. We cannot guarantee that we will identify and consummate any such transactions on
acceptable terms or have sufficient resources to accomplish such a strategy. In addition, any strategic
transaction can involve a number of risks, including additional demands on our staff; unanticipated problems
regarding integration of operating facilities, technologies and new employees; and the existence of liabilities or
contingencies not disclosed to or otherwise known by us prior to closing a transaction. As a result, the
Company may not be able to realize all of the benefits that it hoped to achieve from such transactions. In
addition, we may be required to spend additional time or money on integration that would otherwise be spent
on the development and expansion of our business and services.
Expansion into international markets and the introduction of new products and/or services increases our
operational, regulatory and other risks. We continue to increase our product offerings and international
business activities. As a result of such expansion, we face increased operational, regulatory, compliance and
reputational risks. The failure of our compliance and internal control systems to properly mitigate such
additional risks, or of our operating infrastructure to support such expansion, could result in operational
failures and regulatory fines or sanctions. Our operations in the United Kingdom, the European Economic Area,
Australia and Singapore are subject to significant compliance, disclosure and other obligations. We incur
additional costs to satisfy the requirements of the European Union Directive on Undertakings for Collective
Investments in Transferable Securities, the Alternative Investment Fund Managers Directive and the Markets
in Financial Instruments Directive (which is to be replaced, as described below) (together, the Directives). The
Directives may also limit our operating flexibility and impact our ability to expand in European markets.
58
40
Activity in international markets also exposes us to fluctuations in currency exchange rates, which may
adversely affect the U.S. dollar value of revenues, expenses and assets associated with our business activities
outside the United States. Actual and anticipated changes in current exchange rates may also adversely affect
international demand for our investment products and services, most of which represent investments
primarily in U.S. dollar‐based assets. Because certain of our costs to support international business activities
are based in local currencies, the profitability of such activities in U.S. dollar terms may be adversely affected
by a weakening of the U.S. dollar versus other currencies in which we derive significant revenues.
Legal and regulatory developments affecting the investment industry could increase our regulatory costs
and/or reduce our revenues. Our business is subject to complex and extensive regulation by various regulatory
authorities in jurisdictions around the world. This regulatory environment may be altered without notice by
new laws or regulations, revisions to existing regulations or new interpretations or guidance. Global financial
regulatory reform initiatives may result in more stringent regulation, and changes in laws or regulations and
their application to us could have a material adverse impact on our business, our profitability and mode of
operations. In recent years, regulators in both the United States and abroad have increased oversight of the
financial sector of the economy. Some of the newly adopted and proposed regulations are focused directly on
the investment management industry, while others are more broadly focused, but impact our industry. It is
uncertain how regulatory trends will be affected by current and future political developments.
Under a final rule and interpretive guidance issued by FSOC in April 2012, certain non‐bank financial
institutions have been designated for the Federal Reserve’s supervision as SIFIs. Additional non‐bank financial
companies, which may include large asset management companies such as us, may be designated as SIFIs in
the future. If we are designated a SIFI, we would be subject to enhanced prudential measures, which could
include capital and liquidity requirements, leverage limits, enhanced public disclosures and risk management
requirements, annual stress testing by the Federal Reserve, credit exposure and concentration limits,
supervisory and other requirements. These heightened regulatory obligations could, individually or in the
aggregate, adversely impact our business and operations.
Eaton Vance Management, Parametric and BMR are registered with the Commodity Futures Trading
Commission (CFTC) and the National Futures Association (NFA) as Commodity Pool Operators and Commodity
Trading Advisors; other subsidiaries of the Company claim exemptions from registration. In August 2013, the
CFTC adopted rules for operators of registered mutual funds that are subject to registration as Commodity
Pool Operators generally allowing such commodity pools to comply with SEC disclosure, reporting and
recordkeeping rules as the means of complying with CFTC’s similar requirements. These CFTC rules do not,
however, relieve registered Commodity Pool Operators from compliance with applicable anti‐fraud provisions
as well as certain performance reporting and recordkeeping requirements. The Company may incur ongoing
costs associated with monitoring compliance with these requirements, including, but not limited to, CFTC and
NFA registration and exemption obligations and the periodic reporting requirements of Commodity Pool
Operators and Commodity Trading Advisors.
The regulation of derivatives markets has undergone substantial change in recent years and such change may
continue. In particular, the Dodd‐Frank Wall Street Reform and Consumer Protection Act (the Dodd‐Frank Act),
and regulations proposed to be promulgated thereunder require many derivatives to be cleared and traded on
an exchange, expand entity registration requirements, impose business conduct requirements on
counterparties, and impose other regulatory requirements that will continue to change derivative markets as
regulations are implemented. Additional regulation of the derivatives markets may make the use of derivatives
more costly, may limit the availability or reduce the liquidity of derivatives, and may impose limits or
restrictions on the counterparties to derivative transactions.
41
59
Certain of our subsidiaries are required to file quarterly reports on Form PF for private funds they manage,
pursuant to systemic risk reporting requirements adopted by the SEC. These filings require significant
investments in people and systems to ensure timely and accurate reporting. Further investment will be
necessary in the coming years as we implement rules adopted by the SEC in 2016 that amended Form ADV and
established Form N‐PORT to require additional reporting for the separate accounts and Registered Funds we
manage, respectively.
As of December 24, 2016, all securitization transactions became subject to risk retention rules, requiring the
Company to hold interests equal to at least 5 percent of the credit risk of the assets of any new CLO entities
that we manage (unless the CLO entity invests only in certain qualifying loans) and limiting the Company’s
ability to sell or hedge those interests. The new mandatory risk retention requirement for CLO entities may
result in the Company having to invest money to launch new CLO entities that would otherwise be available for
other uses. Such investments would also subject the Company to exposure to the underlying performance of
the assets of the CLO entities and could have an adverse impact on our results of operations or financial
condition.
In 2016, the U.S. Department of Labor (DOL) began introducing changes to definitions and rules relating to
fiduciaries serving holders of qualified retirement accounts. Full implementation has been delayed, and may be
further delayed, during which time additional revisions may be made to the definitions and rules relating to
fiduciaries. If adopted as currently proposed, the DOL’s changes may materially impact how advice can be
provided to retirement account holders in 401(k) plans, individual retirement accounts and other qualified
retirement programs. We may need to modify our interactions or limit distribution to retirement plans, which
could negatively affect our results of operations. Our revenues and expenses may also be adversely affected
by the new rule adopted in 2016 by the SEC to address liquidity risk management by registered open‐end
funds and the new rule proposed in 2015 to address use of derivatives by registered open‐end and closed‐end
funds. These rules could limit investment opportunities for certain funds we manage and increase our
management and administration costs.
In Europe, effective January 3, 2018, the revised Markets in Financial Instruments Directive (MiFID II Directive)
and the Markets in Financial Instruments Regulation (MiFIR) (collectively, MiFID II) will replace the existing
Markets in Financial Instruments Directive and apply throughout the European Union and member states of
the European Economic Area. Implementation of MiFID II will significantly affect both the structure and
operation of the European Union financial markets and, as such, there will be direct and indirect effects on the
Company’s operations in the European Economic Area. Some of the main changes introduced by this new
regime include: (i) enhancing business conduct and governance requirements; (ii) broadening the scope of pre‐
and post‐trade transparency; (iii) enhancing disclosure requirements; (iv) increasing transaction reporting
requirements; (v) revising the relationship between client commissions and investment research services; and
(vi) further regulating trading revenue. Compliance with MiFID II will increase costs and affect the manner in
which our businesses obtain investment research services.
The ultimate impact of the United Kingdom’s exit from the European Union (Brexit) on the Company’s business
operations in the United Kingdom and Europe is still unknown and will vary depending on the terms of the
impending separation agreement. Ongoing changes in the European Union’s regulatory framework applicable
to the Company’s operations, including Brexit as well as any other changes in the composition of the European
Union’s member states, may add complexity to the Company’s global operations and impose additional risks.
All of these new and developing laws and regulations will likely result in greater compliance and administrative
burdens on us, increasing our expenses.
60
42
Our business is subject to risk from regulatory investigation, potential securities laws, liability and
litigation. We are subject to federal securities laws, state laws regarding securities fraud, other federal and
state laws and rules, and regulations of certain regulatory, self‐regulatory and other organizations, including,
among others, the SEC, FINRA, the CFTC, the NFA, the FCA and the New York Stock Exchange. While we have
focused significant attention and resources on the development and implementation of compliance policies,
procedures and practices, non‐compliance with applicable laws, rules or regulations, either in the United
States or abroad, or our inability to adapt to a complex and ever‐changing regulatory environment could result
in sanctions against us, which could adversely affect our reputation, business, revenue and earnings. From
time to time, various claims or potential claims against us arise in the ordinary course of business, including
employment‐related claims. We carry insurance in amounts and under terms that we believe are appropriate.
We cannot guarantee that our insurance will cover most liabilities and losses to which we may be exposed, or
that our insurance policies will continue to be available at acceptable terms and fees. Certain insurance
coverage may not be available or may be prohibitively expensive in future periods. As our insurance policies
come up for renewal, we may need to assume higher deductibles or pay higher premiums, which would
increase our expenses and reduce our net income.
Our Non‐Voting Common Stock lacks voting rights. Our Non‐Voting Common Stock has no voting rights under
any circumstances. All voting power resides with our Voting Common Stock, all shares of which are held by
officers of the Company and our subsidiaries and deposited in a voting trust (the Voting Trust) in exchange for
Voting Trust Receipts. As of October 31, 2017, there were 23 holders of Voting Trust Receipts representing
Voting Common Stock, each holder of which is a Voting Trustee of the Voting Trust. Holders of Non‐Voting
Common Stock should understand that such ownership interests have no ability to vote in the election of the
Company’s Board of Directors or otherwise to influence the Company’s management and strategic direction.
Evaluation of Disclosure Controls and Procedures
We evaluated the effectiveness of our disclosure controls and procedures as of October 31, 2017. Disclosure
controls and procedures are designed to ensure that the information we are required to disclose in the reports
that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time
period specified in the SEC’s rule and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information we are required to disclose in the reports that we file
or submit under the Exchange Act is accumulated and communicated to our management, including our Chief
Executive Officer (CEO) and Chief Financial Officer (CFO), to allow timely decisions regarding required disclosure.
Our CEO and CFO participated in this evaluation and concluded that, as of October 31, 2017, our disclosure
controls and procedures were effective.
There have been no changes in our internal control over financial reporting that occurred during the fourth
quarter of our fiscal year ended October 31, 2017 that materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
43
61
Consolidated Statements of Income
(in thousands, except per share data)
2017
2016
2015
Years Ended October 31,
Revenue:
Management fees
Distribution and underwriter fees
Service fees
Other revenue
Total revenue
Expenses:
Compensation and related costs
Distribution expense
Service fee expense
Amortization of deferred sales commissions
Fund‐related expenses
Other expenses
Total expenses
Operating income
Non‐operating income (expense):
Gains (losses) and other investment income, net
Interest expense
Loss on extinguishment of debt
Other income (expense) of consolidated collateralized
loan obligation (CLO) entities:
Gains and other investment income, net
Interest and other expense
Total non‐operating expense
Income before income taxes and equity in net income of affiliates
Income taxes
Equity in net income of affiliates, net of tax
Net income
Net income attributable to non‐controlling and other beneficial interests
Net income attributable to Eaton Vance Corp. shareholders
Earnings per share:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
Dividends declared per share
See notes to Consolidated Financial Statements.
$
1,318,141
$
1,151,198
$
1,196,866
78,776
119,962
12,131
74,822
107,684
9,156
80,815
116,448
9,434
1,529,010
1,342,860
1,403,563
553,952
132,873
112,519
16,239
48,995
181,674
1,046,252
491,115
117,996
98,494
15,451
35,899
169,637
928,592
483,827
198,155
106,663
14,972
35,886
163,613
1,003,116
482,758
414,268
400,447
19,303
(27,496)
(5,396)
‐
‐
(13,589)
469,169
12,411
(29,410)
‐
24,069
(13,286)
(6,216)
408,052
(31)
(29,357)
‐
5,092
(6,767)
(31,063)
369,384
(173,666)
(153,630)
(143,214)
10,870
306,373
(24,242)
10,335
264,757
(23,450)
12,021
238,191
(7,892)
282,131
$
241,307
$
230,299
2.54
2.42
$
$
2.20
2.12
$
$
2.00
1.92
110,918
116,418
109,914
113,982
113,318
118,155
1.150
$
1.075
$
1.015
$
$
$
$
62
44
Consolidated Statements of Comprehensive Income
(in thousands)
Net income
Other comprehensive income (loss):
Unrealized loss on cash flow hedges, net of tax
Amortization of net gains on cash flow hedges, net of tax
Unrealized gains (losses) on available‐for‐sale investments and
reclassification adjustments, net of tax
Foreign currency translation adjustments, net of tax
Other comprehensive income (loss), net of tax
Years Ended October 31,
2017
2016
2015
$
306,373
$
264,757
$
238,191
(413)
27
1,185
9,310
10,109
‐
13
(790)
(8,220)
(8,997)
‐
13
(1,895)
(28,708)
(30,590)
Total comprehensive income
316,482
255,760
207,601
Comprehensive income attributable to non‐controlling and other
beneficial interests
(24,242)
(23,450)
(7,892)
Total comprehensive income attributable to Eaton Vance Corp. shareholders
$
292,240
$
232,310
$
199,709
See notes to Consolidated Financial Statements.
45
63
Consolidated Balance Sheets
(in thousands, except share data)
Assets
Cash and cash equivalents
Management fees and other receivables
Investments
Assets of consolidated CLO entity:
Bank loan investments
Deferred sales commissions
Deferred income taxes
Equipment and leasehold improvements, net
Intangible assets, net
Goodwill
Loan to affiliate
Other assets
Total assets
Liabilities, Temporary Equity and Permanent Equity
Liabilities:
Accrued compensation
Accounts payable and accrued expenses
Dividend payable
Debt
Liabilities of consolidated CLO entity:
Line of credit
Other liabilities
Total liabilities
Commitments and contingencies (Note 20)
Temporary Equity:
Redeemable non‐controlling interests
Permanent Equity:
Voting Common Stock, par value $0.00390625 per share:
Authorized, 1,280,000 shares
Issued and outstanding, 442,932 and 442,932 shares, respectively
Non‐Voting Common Stock, par value $0.00390625 per share:
Authorized, 190,720,000 shares
Issued and outstanding, 118,077,872 and 113,545,008 shares, respectively
Additional paid‐in capital
Notes receivable from stock option exercises
Accumulated other comprehensive loss
Retained earnings
Total Eaton Vance Corp. shareholders' equity
Non‐redeemable non‐controlling interests
Total permanent equity
Total liabilities, temporary equity and permanent equity
See notes to Consolidated Financial Statements.
October 31,
2017
2016
$
$
$
610,555
200,453
898,192
31,348
36,423
67,100
48,989
89,812
259,681
5,000
83,348
2,330,901
207,330
68,115
44,634
618,843
12,598
116,298
1,067,818
424,174
186,172
589,773
‐
27,076
73,295
44,427
46,809
248,091
5,000
85,565
1,730,382
173,485
59,927
36,525
571,773
‐
75,069
916,779
250,823
109,028
2
2
461
148,284
(11,112)
(47,474)
921,235
1,011,396
864
1,012,260
2,330,901
$
444
‐
(12,074)
(57,583)
773,000
703,789
786
704,575
1,730,382
$
$
$
$
64
46
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67
Consolidated Statements of Cash Flows
(in thousands)
Cash Flows From Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization
Unamortized loss on derivative instrument
Amortization of deferred sales commissions
Stock‐based compensation
Deferred income taxes
Net (gains) losses on investments and derivatives
Impairment loss on investments
Equity in net income of affiliates, net of amortization
Dividends received from affiliates
Loss on extinguishment of debt
Consolidated CLO entities’ operating activities:
Net gains on bank loans, other investments and note
obligations
Amortization
Net increase (decrease) in other assets and liabilities,
including cash and cash equivalents
Changes in operating assets and liabilities:
Management fees and other receivables
Investments in trading securities
Deferred sales commissions
Other assets
Accrued compensation
Accounts payable and accrued expenses
Other liabilities
Net cash provided by operating activities
Cash Flows From Investing Activities:
Additions to equipment and leasehold improvements
Issuance of loan to affiliate
Net cash paid in acquisitions
Cash paid for intangible assets
Proceeds from sale of investments
Purchase of investments
Consolidated CLO entities’ investing activities:
Proceeds from sales and maturities of bank loans and other
investments
Purchase of bank loans and other investments
Net cash (used for) provided by investing activities
See notes to Consolidated Financial Statements.
2017
Years Ended October 31,
2016
2015
$
306,373
$
264,757
$
238,191
19,132
(684)
16,231
79,525
14,345
1,474
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(10,870)
11,447
5,396
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7,330
29,249
64,892
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71,337
22,089
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9,151
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1,334
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3,466
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1,308
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166,460
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(108,278)
147,766
(102,298)
84,266
68
50
Consolidated Statements of Cash Flows (continued)
(in thousands)
Cash Flows From Financing Activities:
Purchase of additional non‐controlling interest
Debt issuance costs
Proceeds from issuance of debt
Repayment of debt
Loss on extinguishment of debt
Proceeds from issuance of Voting Common Stock
Proceeds from issuance of Non‐Voting Common Stock
Repurchase of Voting Common Stock
Repurchase of Non‐Voting Common Stock
Principal repayments on notes receivable from stock option exercises
Excess tax benefit of stock option exercises and vesting of
restricted stock awards
Dividends paid
Net subscriptions received from (redemptions/distributions paid
to) non‐controlling interest holders
Consolidated CLO entities’ financing activities:
Proceeds from line of credit
Repayment of line of credit
Issuance of senior and subordinated notes
Principal repayments of senior and subordinated note obligations
Net cash provided by (used for) financing activities
Effect of currency rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental Cash Flow Information:
Cash paid for interest
Cash paid for interest upon repayment of debt
Cash paid for interest by consolidated CLO entities
Cash paid for income taxes, net of refunds
Supplemental Disclosure of Non‐Cash Information:
Increase in equipment and leasehold improvements due
to non‐cash additions
Exercise of stock options through issuance of notes receivable
Non‐controlling interest call option exercise recorded in other
liabilities
Increase (decrease) in non‐controlling interest due to net
consolidations (deconsolidation) of sponsored investment funds
Initial Consolidation of CLO Entity:
Increase in other assets, net of other liabilities
Increase in investments
Increase in borrowings
Deconsolidation of CLO Entity:
Decrease in other assets, net of other liabilities
Decrease in investments
Decrease in borrowings
See notes to Consolidated Financial Statements.
$
$
$
$
$
51
2017
Years Ended October 31,
2016
2015
(15,673)
‐
‐
‐
‐
232
110,425
(77)
(252,975)
3,257
2,931
(118,621)
(19,964)
‐
‐
‐
‐
77
89,699
(77)
(283,372)
2,427
9,979
(116,016)
302
(7,895)
(9,820)
(2,761)
298,896
(250,000)
(5,396)
‐
210,934
‐
(126,199)
4,500
14,783
(125,785)
188,463
12,598
‐
‐
‐
210,213
2,701
186,381
424,174
610,555
25,535
1,354
‐
143,948
‐
‐
‐
‐
(270,199)
(3,456)
(41,384)
465,558
424,174
28,413
‐
11,024
128,845
$
$
863
3,538
$
12,379
453
4,188
2,510
129,587
(1,567)
$
$
‐
31,348
12,598
‐
‐
‐
‐
‐
‐
(12,118)
(389,856)
(397,544)
$
$
$
$
$
83,612
(202,357)
401,607
(179,166)
(221,446)
(2,344)
80,343
385,215
465,558
28,390
‐
2,388
120,496
389
4,752
10,105
(2,623)
(54,578)
207,371
153,745
(3,566)
(1,559)
(4,097)
69
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Business and organization
Eaton Vance Corp. and its subsidiaries (the Company) manage investment funds and provide investment
management and advisory services to high‐net‐worth individuals and institutions in the United States, Europe,
the Asia Pacific region and certain other international markets. The Company distributes its funds and retail
managed accounts principally through financial intermediaries. The Company also commits significant
resources to serving institutional and high‐net‐worth clients who access investment management services on
a direct basis.
Revenue is largely dependent on the total value and composition of assets under management, which include
sponsored funds and separate accounts. Accordingly, fluctuations in financial markets and changes in the
composition of assets under management impact revenue and the results of operations.
Basis of presentation
The preparation of the Company’s Consolidated Financial Statements in conformity with accounting
principles generally accepted in the United States of America (U.S. GAAP) requires management to make
judgments, estimates and assumptions that affect the amounts reported in the Consolidated Financial
Statements and related notes to the Consolidated Financial Statements. However, due to the inherent
uncertainties in making estimates, actual results could differ from those estimates.
During the first quarter of fiscal 2017, the Company changed the description of a line item in the
Consolidated Statements of Income from investment advisory and administrative fees to management
fees. The change in the description had no impact on the Company’s previously reported net income or
financial position, and does not represent a restatement of previously reported financial results.
Management fees are defined as including both investment advisory fees and administrative fees for all
periods presented.
During the first quarter of fiscal 2015, the Company made a one‐time payment of $73.0 million to
terminate certain closed‐end fund service and additional compensation arrangements with a distribution
partner. The payment was included as a component of distribution expense in the Company’s
Consolidated Statement of Income for the fiscal year ended October 31, 2015.
Adoption of new accounting standards
The Company adopted the following accounting standards as of November 1, 2016:
Consolidation ‐ Accounting Standards Update (ASU) 2015‐02, Amendments to the Consolidation
Analysis
Consolidation ‐ ASU 2016‐17, Interests Held through Related Parties That Are under Common Control
Debt issuance costs ‐ ASU 2015‐03, Simplifying the Presentation of Debt Issuance Costs
The adoption of the amendments to the consolidation guidance did not result in the consolidation of
previously unconsolidated legal entities or the deconsolidation of previously consolidated entities. The
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70
amendment to the consolidation guidance that had the most significant impact on the Company’s
consolidation analyses is the elimination of the deferral of accounting guidance that required separate
evaluation for investment company variable interest entities (VIEs). The elimination of this deferral
effectively reduced the threshold used to evaluate whether the Company has a controlling financial
interest in the Company’s sponsored funds in which the Company holds a seed investment from an
ownership percentage of 50 percent to 10 percent. The amended guidance also impacted the Company’s
evaluation of limited partnerships. Under the amended guidance, if limited partners with equity at risk in a
limited partnership or similarly structured entity do not have either substantive kick‐out rights over the
general partner or substantive participation rights, the limited partnership is deemed to be a VIE. This
update to the guidance resulted in the Company identifying that a private equity partnership managed by
a third party that was previously considered a voting interest entity is now considered a VIE. The Company
holds a variable interest in, but is not deemed to be the primary beneficiary of, this VIE. Refer to disclosure
of this variable interest in Note 6, under the heading Other Entities.
The adoption of the new guidance related to debt issuance costs resulted in the Company changing the
classification of certain debt issuance costs in its Consolidated Balance Sheets. All debt issuance costs were
previously reported as a component of other assets. Debt issuance costs related to the Company’s term
debt are now presented as a component of debt on the Company’s Consolidated Balance Sheets. Amounts
for the comparative prior fiscal year have been restated to conform to the current year presentation. This
reclassification had no impact on previously reported net income or previously reported financial results.
The following table presents the effects of the change in presentation of debt issuance costs on the
Company’s previously reported Consolidated Balance Sheet:
October 31, 2016
(in thousands)
Other assets
Total assets
Debt
Total liabilities
Total permanent equity
As
Previously
Reported
Reclassification
$
87,759 $
1,732,576
573,967
918,973
704,575
(2,194) $
(2,194)
(2,194)
(2,194)
‐
As Restated
85,565
1,730,382
571,773
916,779
704,575
Total liabilities, temporary equity and
permanent equity
1,732,576
(2,194)
1,730,382
In addition to the above updates, the Company adopted ASU 2017‐01, Clarifying the Definition of a
Business, in conjunction with the acquisition of the assets of Calvert Investment Management, Inc. (Calvert
Investments), which closed on December 30, 2016. This new standard provides for an up‐front
quantitative approach, which is referred to as a “screen,” to determine whether an entity is acquiring
assets or a business. In applying the screen, the Company determined that substantially all of the fair value
of the gross assets acquired was concentrated in a group of similar assets and that the assets acquired,
therefore, did not qualify as a business. Required disclosures related to the acquisition are included in
Note 10.
Where applicable, the Company’s significant accounting policies discussed below have been amended to
reflect each of the ASUs adopted as of November 1, 2016.
53
71
Principles of consolidation
With limited exceptions, each of the Company’s sponsored mutual funds is organized as a separately
managed component (or series) of a series trust. All assets of a series irrevocably belong to that series and
are subject to the liabilities of that series; under no circumstances are the liabilities of one series payable
by another series. The Company’s series trusts have no equity investment at risk, rather, all equity is issued
at the series level. However, decisions regarding the trustees of the trust and certain key activities of each
series (i.e., sponsored fund) within the trust, such as appointment of each sponsored fund’s investment
adviser, typically reside at the trust level. As a result, shareholders of a sponsored fund that is organized as
a series of a series trust lack the ability to control the key decision‐making processes that most significantly
affect the economic performance of the sponsored fund. Accordingly, the Company believes that each
trust is a VIE and each sponsored fund within the trust is a silo that will be evaluated for consolidation as a
separate VIE. Having concluded that each silo is a VIE for accounting purposes, the primary beneficiary
evaluation is focused on an analysis of economic interests in each silo. The Company may hold a significant
interest in the shares of a sponsored fund during the seed investment stage when the sponsored fund’s
investment track record is being established. The Company consolidates a sponsored fund when it has a
controlling financial interest in the fund. The Company has generally concluded that its fees earned from
asset management arrangements with sponsored funds represent variable interests that convey both
power and significant economic exposure (i.e., characteristics of a controlling financial interest) to the
Company in instances in which the Company holds a greater than 10 percent ownership interest in the
fund. To the extent that the Company’s interest in a sponsored fund is limited to fees earned from the
fund that are commensurate with the services provided and consistent with market‐based terms and/or
insignificant interests, the Company would not be considered to have a variable interest in the fund and no
further consolidation analysis is performed. Management fee revenue earned on, as well as the Company’s
investments in, consolidated sponsored funds are eliminated in consolidation.
The Company regularly seeds new sponsored funds and may consolidate one or more sponsored funds
during a given reporting period. Due to the similarity of risks related to the Company’s involvement with
each sponsored fund, disclosures required under the VIE model, such as disclosures regarding the carrying
amount and classification of assets of sponsored funds and the gains and losses that the Company
recognizes from sponsored funds, are aggregated.
When the Company is no longer deemed to hold a controlling financial interest in a sponsored fund, the
Company deconsolidates the sponsored fund and removes the related assets, liabilities and non‐
controlling interests from its balance sheet and classifies the Company’s remaining investment as
available‐for‐sale. Because consolidated sponsored funds carry their assets and liabilities at fair value,
there is no incremental gain or loss recognized upon deconsolidation.
The extent of the Company’s exposure to loss with respect to a consolidated sponsored fund is limited to
the amount of the Company’s investment in the sponsored fund. The Company is not obligated to provide
financial support to sponsored funds. Only the assets of a sponsored fund are available to settle its
obligations. Beneficial interest holders of sponsored funds do not have recourse to the general credit of
the Company.
Consolidation of VIEs
Accounting guidance provides a framework for determining whether an entity should be considered a VIE
and, if so, whether a company’s involvement with the entity represents a variable interest in the entity. If
72
54
the Company determines that it has a variable interest in a VIE, it must perform an analysis to determine
whether it is the primary beneficiary of the VIE. If the Company determines it is the primary beneficiary of
the VIE, it is required to consolidate the assets, liabilities, results of operations and cash flows of the VIE.
The Company’s ongoing evaluation of whether it qualifies as the primary beneficiary of a VIE is complex.
The Company is the primary beneficiary of a VIE if it has a controlling financial interest in the VIE. A
company is deemed to have a controlling financial interest in a VIE if it has both (i) the power to direct the
activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) the obligation
to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits
from the VIE that could potentially be significant to the VIE.
For collateralized loan obligation (CLO) entities, the Company must evaluate the relative size of the
Company’s beneficial interest and the overall magnitude and design of the collateral fees within each
structure. There is also judgment involved in assessing whether the Company has the power to direct the
activities that most significantly impact the VIE’s economic performance and the obligation to absorb
losses of or the right to receive benefits from the VIE that could potentially be significant to the entity.
While the Company believes its overall evaluation of VIEs is appropriate, future changes in estimates,
judgments and assumptions or changes in the ownership interests of the Company in a VIE affect the
resulting consolidation, or deconsolidation, of the assets, liabilities, results of operations and cash flows of
a VIE.
Segment information
Management has determined that the Company operates in one segment, namely as an investment
adviser managing funds and separate accounts. The Company’s determination that it operates in one
business segment is based on the fact that the Company’s Chief Executive Officer reviews the Company’s
financial performance at an aggregate level. All of the products and services provided by the Company
relate to investment management and are subject to similar regulatory frameworks. Investment
management teams at the Company are generally not aligned with specific product lines or distribution
channels; in many instances, the investment professionals who manage the Company’s sponsored funds
are the same investment professionals who manage the Company’s separately managed accounts.
Cash and cash equivalents
Cash and cash equivalents consist principally of cash and short‐term, highly liquid investments in money
market funds, commercial paper, certificates of deposit and holdings of Treasury and government agency
securities, which are readily convertible to cash. Cash equivalents have maturities of less than three
months on the date of acquisition and are stated at fair value or cost, which approximates fair value due to
the short‐term maturities of the underlying investments.
Restricted cash
Restricted cash consists principally of cash collateral required for margin accounts established to support
derivative positions, and is included as a component of other assets on the Company’s Consolidated
Balance Sheets. Such derivatives are used to hedge certain investments in consolidated sponsored funds
and separately managed accounts seeded for product development purposes (consolidated seed
investments). Because the accounts are used to support trading activities, changes in restricted cash
55
73
balances are reflected as operating cash flows in other assets in the Company’s Consolidated Statements
of Cash Flows.
Investments
Investment securities, trading
Marketable securities classified as trading securities consist of investments in debt and equity securities
held in the portfolios of consolidated seed investments, bank obligations, certificates of deposit,
commercial paper and corporate debt securities with remaining maturities (upon purchase by the
Company) ranging from three months to 12 months.
Investment securities held in the portfolios of consolidated seed investments and/or held directly by the
Company are carried at fair value based on quoted market prices. Net realized and unrealized gains or
losses are reflected as a component of gains (losses) and other investment income. The specific identified
cost method is used to determine the realized gains or losses on all trading securities sold.
Investment securities, available‐for‐sale
Marketable securities classified as available‐for‐sale consist primarily of investments in shares of
sponsored funds and are carried at fair value based on quoted market prices. Unrealized holding gains or
losses (to the extent such losses are considered temporary) are reported net of deferred tax as a separate
component of accumulated other comprehensive income (loss) until realized. Realized gains or losses are
reflected as a component of gains (losses) and other investment income. The specific identified cost
method is used to determine the realized gains or losses on the sale of shares of sponsored funds.
The Company evaluates the carrying value of marketable securities classified as available‐for‐sale for
impairment on a quarterly basis. In its impairment analysis, the Company takes into consideration
numerous criteria, including the duration and extent of any decline in fair value and the Company’s intent
with respect to a given security. If the decline in value is determined to be other‐than‐temporary, the
carrying value of the security is written down to fair value through earnings.
Investments in non‐consolidated CLO entities
Investments in non‐consolidated CLO entities are carried at amortized cost unless impaired. The excess of
actual and anticipated future cash flows over the initial investment at the date of purchase is recognized in
gains (losses) and other investment income, net, over the life of the investment using the effective yield
method. The Company reviews cash flow estimates throughout the life of each non‐consolidated CLO
entity. If the updated estimate of future cash flows (taking into account both timing and amounts) is less
than the last estimate, an impairment loss is recognized to the extent the carrying amount of the
investment exceeds its fair value.
Investments in equity method investees
Investments in non‐controlled affiliates in which the Company’s ownership ranges from 20 to 50 percent,
or in instances in which the Company is able to exercise significant influence but not control, are
accounted for under the equity method of accounting. Under the equity method of accounting, the
Company’s share of the investee’s underlying net income or loss is recorded as equity in net income of
affiliates, net of tax. Distributions received from investees reduce the Company’s investment balance.
Investments in equity method investees are evaluated for impairment as events or changes in
circumstances indicate that the carrying amount of such assets may not be recoverable. If the carrying
74
56
amounts of the assets exceed their respective fair values, additional impairment tests are performed to
measure the amounts of the impairment losses, if any.
Investments, other
Certain investments are carried at cost. The fair values of cost‐method investments are not estimated if
there are no identified events or changes in circumstances that may have a significant adverse effect on
the fair values of the investments.
Fair value measurements
The accounting standards for fair value measurement provide a framework for measuring fair value and
require expanded disclosures regarding fair value measurements. Fair value is defined as the price that
would be received for an asset or the exit price that would be paid to transfer a liability in the principal or
most advantageous market in an orderly transaction between market participants on the measurement
date. The accounting standards establish a fair value measurement hierarchy, which requires an entity to
maximize the use of observable inputs where available. This fair value measurement hierarchy gives the
highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority
to unobservable inputs.
The Company utilizes third‐party pricing services to value investments in various asset classes, including
interests in senior floating‐rate loans and other debt obligations, derivatives and certain foreign equity
securities, as further discussed below. Valuations provided by the pricing services are subject to exception
reporting that identifies securities with significant movements in valuation, as well as investments with no
movements in valuation. These exceptions are reviewed by the Company on a daily basis. The Company
compares the price of trades executed by the Company to the valuations provided by the third‐party
pricing services to identify and research significant variances. The Company periodically compares the
pricing service valuations to valuations provided by a secondary independent source when available.
Market data provided by the pricing services and other market participants, such as the Loan Syndication
and Trading Association (LSTA) trade study, is reviewed by the Company to assess the reliability of the
provided data. The Company’s Valuation Committee reviews the general assumptions underlying the
methodologies used by the pricing services to value various asset classes at least annually. Throughout the
year, members of the Company’s Valuation Committee or its designees meet with the service providers to
discuss any significant changes to the service providers’ valuation methodologies or operational processes.
Assets and liabilities measured and reported at fair value are classified and disclosed in one of the
following categories based on the nature of the inputs that are significant to the fair value measurements
in their entirety. In certain cases, the inputs used to measure fair value may fall into different levels of the
fair value measurement hierarchy. In such cases, an investment’s classification within the fair value
measurement hierarchy is based on the lowest level of input that is significant to the fair value
measurement.
Level 1 Unadjusted quoted market prices in active markets for identical assets or liabilities at the
reporting date.
Level 2 Observable inputs other than Level 1 unadjusted quoted market prices, such as quoted market
prices for similar assets or liabilities in active markets, quoted prices for identical or similar
assets or liabilities that are not active, and inputs other than quoted prices that are observable
or corroborated by observable market data.
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75
Level 3 Unobservable inputs that are supported by little or no market activity.
The Company recognizes any transfers between levels at the end of each quarter.
Derivative financial instruments
The Company may utilize derivative financial instruments to hedge market, interest rate, commodity and
currency risks associated with its investments in separate accounts and certain consolidated sponsored
funds seeded for new product development purposes, exposures to fluctuations in foreign currency
exchange rates associated with investments denominated in foreign currencies and interest rate risk
inherent in debt offerings. These derivative financial instruments may or may not qualify for designation in
a hedge relationship for accounting purposes. In addition, certain consolidated seed investments may
enter into derivative financial instruments within their portfolios to achieve stated investment objectives.
The Company does not use derivative financial instruments for speculative purposes.
The Company records all derivative financial instruments as either assets or liabilities on its Consolidated
Balance Sheets and measures these instruments at fair value. Derivative transactions are presented on a
gross basis in the Company’s Consolidated Balance Sheets. For a derivative financial instrument that is
designated as a cash flow hedge, the effective portion of the derivative’s gain or loss is initially reported as
a component of other comprehensive income (loss) and subsequently reclassified into earnings over the
life of the hedge. The ineffective portion of the gain or loss is reported in earnings immediately. Changes in
the fair value of the Company’s other derivative financial instruments are recognized in earnings in the
current period.
Deferred sales commissions
Sales commissions paid to broker‐dealers in connection with the sale of certain classes of shares of
sponsored open‐end and private funds are generally deferred and amortized over the period during which
redemptions by the purchasing shareholder are subject to a contingent deferred sales charge, which does
not exceed six years from purchase. Distribution plan payments received from these funds are recorded in
revenue as earned. Contingent deferred sales charges and early withdrawal charges received from
redeeming shareholders of these sponsored funds are generally applied to reduce the Company’s
unamortized deferred sales commission assets. Should the Company lose its ability to recover such sales
commissions through distribution plan payments and contingent deferred sales charges, the value of its
deferred sales commission asset would immediately decline, as would related future cash flows.
The Company evaluates the carrying value of its deferred sales commission asset for impairment on a
quarterly basis. In its impairment analysis, the Company compares the carrying value of the deferred sales
commission asset to the undiscounted cash flows expected to be generated by the asset in the form of
distribution fees over its remaining useful life to determine whether impairment has occurred. If the
carrying value of the asset exceeds the undiscounted cash flows, the asset is written down to fair value
based on discounted cash flows. Impairment adjustments are recognized in operating income as a
component of amortization of deferred sales commissions.
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58
Income taxes
Deferred income taxes reflect the expected future tax consequences of temporary differences between
the carrying amounts and tax bases of the Company’s assets and liabilities measured using rates expected
to be in effect when such differences reverse. To the extent that deferred tax assets are considered more
likely than not to be unrealizable, valuation allowances are provided.
The Company’s effective tax rate reflects the statutory tax rates of the many jurisdictions in which it
operates. Significant judgment is required in evaluating its tax positions. In the ordinary course of business,
many transactions occur for which the ultimate tax outcome is uncertain. Accounting standards governing
the accounting for uncertainty in income taxes for a tax position taken or expected to be taken in a tax
return require that the tax effects of a position be recognized only if it is more likely than not to be
sustained based solely on its technical merits as of the reporting date. The more‐likely‐than‐not threshold
must be met in each reporting period to support continued recognition of the benefit. The difference
between the tax benefit recognized in the financial statements for a tax position and the tax benefit
claimed in the income tax return is referred to as an unrecognized tax benefit. Unrecognized tax benefits,
as well as the related interest and penalties, are adjusted regularly to reflect changing facts and
circumstances. The Company classifies any interest or penalties incurred as a component of income tax
expense.
Equipment and leasehold improvements
Equipment and other fixed assets are recorded at cost and depreciated on a straight‐line basis over their
estimated useful lives, which range from three to five years. Accelerated methods are used for income tax
purposes. Leasehold improvements are amortized on a straight‐line basis over the shorter of their
estimated useful lives or the terms of the leases. Expenditures for repairs and maintenance are charged to
expense when incurred. Equipment and leasehold improvements are tested for impairment whenever
changes in facts or circumstances indicate that the carrying amount of an asset may not be recoverable.
Certain internal and external costs incurred in connection with developing or obtaining software for
internal use are capitalized and amortized on a straight‐line basis over the shorter of the estimated useful
life of the software or three years, beginning when the software project is complete and the application is
put into production. These costs are included in equipment and leasehold improvements on the
Company’s Consolidated Balance Sheets.
Goodwill
Goodwill represents the excess of the cost of the Company’s investment in the net assets of acquired
companies over the fair value of the underlying identifiable net assets at the dates of acquisition. The
Company attributes all goodwill associated with its acquisitions of Atlanta Capital Management Company,
LLC (Atlanta Capital), Parametric Portfolio Associates LLC (Parametric) and The Clifton Group Investment
Management Company (Clifton), which share similar economic characteristics, to one reporting unit. The
Company attributes all goodwill associated with its acquisition of the Tax Advantaged Bond Strategies
(TABS) business of M.D. Sass Investor Services and other acquisitions to a second reporting unit.
Goodwill is not amortized but is tested annually for impairment in the fourth quarter of each fiscal year by
comparing the fair values of identified reporting units to their respective carrying amounts, including
59
77
goodwill. The Company establishes fair value for the purpose of impairment testing for each reporting unit
by using an income approach and a market approach.
The income approach employs a discounted cash flow model that takes into account (1) assumptions that
market participants would use in their estimates of fair value, (2) current period actual results and (3)
budget projections for future periods that have been vetted by senior management. The discounted cash
flow model incorporates the same fundamental pricing concepts used to calculate fair value in the
acquisition due diligence process and a discount rate that takes into consideration the Company’s
estimated cost of capital adjusted for the uncertainty inherent in the forecasted information.
The market approach employs market multiples based on comparable publicly traded companies in the
financial services industry, calculated with data from industry sources. Estimates of fair value are
established using current and forward multiples of both revenue and earnings before interest, taxes,
depreciation and amortization (EBITDA), adjusted for size and performance of the reporting unit relative to
peer companies.
If the carrying amount of the reporting unit exceeds its calculated fair value, the second step of the
goodwill impairment test will be performed to measure the amount of the impairment loss, if any.
Intangible assets
Amortizing identifiable intangible assets generally represent the cost of client relationships, intellectual
property, trademarks and research systems. In valuing these assets, the Company makes assumptions
regarding useful lives and projected growth rates, and significant judgment is required. The Company
periodically reviews its amortizing identifiable intangible assets for impairment as events or changes in
circumstances indicate that the carrying amount of such assets may not be recoverable. If the carrying
amounts of those assets exceed their respective fair values, additional impairment tests are performed to
measure the amounts of the impairment losses, if any.
Non‐amortizing intangible assets generally represent the cost of mutual fund management contracts
acquired. Non‐amortizing intangible assets are tested for impairment in the fourth quarter of each fiscal
year by comparing the fair values of the management contracts acquired to their carrying values. The
Company establishes fair value for purposes of impairment testing using the income approach. If the
carrying value of a management contract acquired exceeds its fair value, an impairment loss is recognized
equal to that excess.
Debt issuance costs
Deferred debt issuance costs are amortized using the effective interest method over the related debt term.
Debt issuance costs related to the Company’s term debt are included in debt in the Company’s
Consolidated Balance Sheets. The amortization of deferred debt issuance costs is included in interest
expense on the Company’s Consolidated Statements of Income.
Appropriated retained earnings (deficit)
The Company records appropriated retained earnings (deficit) equal to the difference between the fair
value of consolidated CLO entity assets and the fair value of consolidated CLO entity liabilities that can be
attributed to external investors. The amount is recorded as appropriated retained earnings (deficit) since
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60
the other holders of the CLO entity’s beneficial interests, not the Company, will receive the benefits or
absorb the losses associated with their proportionate share of the CLO entity’s assets and liabilities. For all
periods presented, the net changes in the fair value of consolidated CLO entity assets and liabilities that
can be attributed to the CLO entity’s other beneficial interest holders have been recorded as net income
attributable to non‐controlling and other beneficial interests and as an adjustment to appropriated
retained earnings (deficit).
Revenue recognition
Management fees
Investment advisory and administrative fees for the funds and investment advisory fees for separate
accounts managed by the Company are recorded in management fee revenue as the services are
performed. Such fees are based primarily on predetermined percentages of the market values of the
assets under management. The Company’s fund investment advisory and administrative fees are
calculated principally as a percentage of average daily net assets. The Company’s separate account
investment advisory fees are calculated as a percentage of either beginning, average or ending monthly or
quarterly net assets. Investment advisory and administrative fees for the funds are earned daily and paid
monthly; investment advisory fees for separate accounts are earned daily and paid either monthly or
quarterly. The Company may waive certain fees for investment advisory and administrative services at its
discretion.
Performance fees are generated on certain fund and separate account management contracts when
specific performance hurdles are met. Such fees are recorded in management fee revenue as of the
performance measurement date, when the outcome can be reasonably assured and measured reliably.
The Company has contractual arrangements with third parties to provide certain fund‐related services,
including sub‐advisory and distribution‐related services. Management’s determination of whether revenue
should be reported gross based on the amount paid by the funds or net of payments to third‐party service
providers is based on management’s assessment of whether the Company is acting as the principal service
provider or is acting as an agent. The primary factors considered in assessing the nature of the Company’s
role include (1) whether the Company is responsible for the fulfillment of the obligation, including the
acceptability of the services provided; (2) whether the Company has reasonable latitude to establish the
price of the service provided; (3) whether the Company has the discretion to select the service provider;
and (4) whether the Company assumes credit risk in the arrangement.
Pursuant to management’s assessment of the criteria described above, management fees are recorded
gross of any sub‐advisory payments, with the corresponding fees paid to any sub‐adviser based on the
terms of those arrangements included in fund‐related expenses in the Company’s Consolidated
Statements of Income.
Distribution, underwriter and service fees
Distribution and service fees for all share classes subject to these fees are calculated as a percentage of
average daily net assets and recorded in revenue as earned, gross of any third‐party distribution and
service fee payments made. Distribution and service fees are earned daily and paid monthly. The expenses
associated with third‐party distribution and service fee arrangements are recorded in distribution and
service fee expense, respectively, as the services are provided by the third party. These expenses are also
paid monthly.
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Underwriter commissions are earned on sales of shares of sponsored mutual funds on which investors pay
a sales charge at the time of purchase. Sales charges and underwriter commissions are waived or reduced
on shareholder purchases that exceed specified minimum amounts and on purchases by certain categories
of investors.
Advertising and promotion
The Company expenses all advertising and promotional costs as incurred. Advertising costs incurred were
not material to the Company’s Consolidated Financial Statements in the fiscal years ended October 31,
2017, 2016 or 2015.
Leases
The Company leases office space under various leasing arrangements. As leases expire, they are normally
renewed or replaced in the ordinary course of business. Most lease agreements contain renewal options,
rent escalation clauses and/or other inducements provided by the landlord. Rent expense is recorded on a
straight‐line basis, including escalations and inducements, over the lease term.
Earnings per share
Earnings per basic and diluted share are calculated under the two‐class method. Pursuant to the two‐class
method, the Company’s unvested restricted stock awards with non‐forfeitable rights to dividends, which
relate exclusively to restricted stock awards granted on or before November 1, 2012, are considered
participating securities and net income attributable to Eaton Vance Corp. shareholders is adjusted for the
allocation of earnings to these participating securities. Earnings per diluted share is then computed on the
basis of the weighted‐average number of common shares outstanding during the period plus the dilutive
effect of any potential common shares outstanding during the period using the more dilutive of the treasury
method or two‐class method.
Stock‐based compensation
The Company accounts for stock‐based compensation expense at fair value. Under the fair value method,
stock‐based compensation expense, which reflects the fair value of stock‐based awards measured at grant
date, is recognized on a straight‐line basis over the relevant service period (generally five years) and is
adjusted each period for anticipated forfeitures.
The fair value of each option award granted is estimated using the Black‐Scholes option valuation model.
The Black‐Scholes option valuation model incorporates assumptions as to dividend yield, expected
volatility, an appropriate risk‐free interest rate and the expected life of the option.
The fair value of profit interests granted under subsidiary long‐term equity plans is estimated on the grant
date by averaging fair value established using an income approach and fair value established using a
market approach for each subsidiary. The income and fair value approaches used in the determination of
grant date fair value of profit interests are consistent with those described in Goodwill above.
Tax benefits realized upon the exercise of stock options that are in excess of the expense previously
recognized for financial reporting purposes are recorded in shareholders’ equity and reflected as a
financing activity in the Company’s Consolidated Statements of Cash Flows. If the tax benefit realized is
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less than the expense previously recorded, the shortfall is recorded in shareholders’ equity. To the extent
the expense exceeds available windfall tax benefits, it is recorded in the Company’s Consolidated
Statements of Income and reflected as an operating activity on the Company’s Consolidated Statements of
Cash Flows.
Foreign currency translation
Substantially all of the Company’s foreign subsidiaries have a functional currency that is something other
than the U.S. dollar. Assets and liabilities of these subsidiaries are translated into U.S. dollars at current
exchange rates as of the end of each accounting period. Related revenue and expenses are translated at
average exchange rates in effect during the accounting period. Net translation exchange gains and losses
are excluded from income and recorded in accumulated other comprehensive income (loss). Foreign
currency transaction gains and losses are reflected in gains (losses) and other investment income, net, as
they occur.
Comprehensive income
The Company reports all changes in comprehensive income in its Consolidated Statements of
Comprehensive Income. Comprehensive income includes net income, the change in unrealized gains on
certain derivatives, the amortization of net gains and losses on certain derivatives, unrealized holding gains
and losses on investment securities classified as available‐for‐sale and foreign currency translation
adjustments, in each case net of tax. When the Company has established an indefinite reinvestment
assertion for a foreign subsidiary, deferred income taxes are not provided on the related foreign currency
translation.
Non‐controlling interests
Non‐redeemable non‐controlling interests consist entirely of unvested interests granted to employees of
the Company’s majority‐owned subsidiaries under subsidiary‐specific long‐term equity plans. These grants
become subject to holder put rights upon vesting and are reclassified to temporary equity as vesting
occurs.
Non‐controlling interests redeemable at fair value consist of interests in the Company’s consolidated
sponsored funds and certain vested interests held by employees of the Company’s majority‐owned
subsidiaries that were granted under the subsidiaries’ long‐term equity plans. The Company’s non‐
controlling interests redeemable at fair value are recorded in temporary equity at estimated redemption
value and changes in the estimated redemption value of these interests are recognized as increases or
decreases to additional paid‐in capital.
Non‐controlling interests redeemable at other than fair value consist of certain other interests in the
Company’s majority‐owned subsidiaries. These interests are subject to holder put rights and Company call
rights at established multiples of earnings before interest and taxes and, as such, are considered
redeemable at other than fair value. The put and call rights are not legally detachable or separately
exercisable and are deemed to be embedded in the related non‐controlling interests. Non‐controlling
interests redeemable at other than fair value are recorded on the Company’s Consolidated Balance Sheets
in temporary equity at estimated redemption value, and changes in estimated redemption value of these
interests are recorded in the Company’s Consolidated Statements of Income as increases or decreases to
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net income attributable to non‐controlling and other beneficial interests. As of October 31, 2017, there are
no such interests held.
Loss contingencies
The Company continuously reviews any investor, employee or vendor complaints and pending or
threatened litigation. The Company evaluates the likelihood that a loss contingency exists under the
criteria of applicable accounting standards through consultation with legal counsel and records a loss
contingency, inclusive of legal costs, if the contingency is probable and reasonably estimable at the date of
the financial statements. There are no losses of this nature that are currently deemed probable and
reasonably estimable, and, thus, none have been recorded in the accompanying Consolidated Financial
Statements.
2. New Accounting Standards Not Yet Adopted
Financial instruments
In January 2016, the Financial Accounting Standards Board (FASB) issued an amendment to its financial
instruments guidance. The amendment requires substantially all equity investments in non‐consolidated
entities to be measured at fair value with changes in fair value recognized in net income, except for those
investments accounted for using the equity method of accounting. There will no longer be an available‐for‐
sale classification for equity securities with readily determinable fair values. The new guidance is effective
for the Company’s fiscal year that begins on November 1, 2018 and requires a modified retrospective
approach to adoption. The Company is currently evaluating the potential impact on its Consolidated
Financial Statements and related disclosures.
In June 2016, the FASB issued new guidance for the accounting for credit losses, which changes the
impairment model for most financial assets. The new guidance requires the use of an “expected loss”
model for instruments measured at amortized cost and an allowance for credit loss model for available‐
for‐sale debt securities. The new guidance is effective for the Company’s fiscal year that begins on
November 1, 2020 and requires a modified retrospective approach to adoption. Early adoption is
permitted for the fiscal year beginning November 1, 2019. The Company is currently evaluating the
potential impact on its Consolidated Financial Statements and related disclosures.
Leases
In February 2016, the FASB issued new guidance for the accounting for leases, which requires a lessee to
recognize on the balance sheet the assets and liabilities for the rights and obligations created by those
leases with a lease term of more than twelve months. Leases will continue to be classified as either
financing or operating, with classification affecting the recognition, measurement and presentation of
expenses and cash flows arising from a lease. The new guidance is effective for the Company’s fiscal year
that begins on November 1, 2019 and requires a modified retrospective approach to adoption. Early
adoption is permitted. The Company is currently evaluating the potential impact on its Consolidated
Financial Statements and related disclosures.
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Simplifying the test for goodwill impairment
In January 2017, the FASB issued amended guidance that simplifies the test for goodwill impairment. The
standard eliminates Step 2 from the goodwill impairment test. Under the amended guidance, an entity
should perform its goodwill impairment test by comparing the fair value of a reporting unit with its
carrying amount. An entity will recognize an impairment charge for the amount by which the carrying
amount exceeds the reporting unit’s fair value, but the loss cannot exceed the total amount of goodwill
allocated to the reporting unit. The new guidance is effective for the Company’s fiscal year that begins on
November 1, 2020 and requires a prospective approach to adoption. Early adoption is permitted for
interim or annual goodwill impairment tests. The Company is currently evaluating the potential impact on
its Consolidated Financial Statements and related disclosures.
Revenue recognition
In May 2014, the FASB issued new guidance for revenue recognition. The new guidance seeks to improve
comparability by removing inconsistencies in revenue recognition practices. The core principle of the
guidance requires companies to recognize revenue upon the transfer of promised goods or services to
customers in an amount that reflects the expected consideration to be received for the goods or services.
This guidance was further updated in March 2016 to clarify how companies should evaluate the principal
versus agent aspects of the previously issued revenue guidance. The new guidance is effective for the
Company’s fiscal year that begins on November 1, 2018 and requires a modified retrospective approach or
full retrospective approach to adoption. The Company is currently evaluating the potential impact on its
Consolidated Financial Statements and related disclosures.
Stock‐based compensation
In March 2016, the FASB issued new guidance for the accounting for stock‐based compensation. The new
guidance requires all income tax effects of stock‐based compensation to be recognized as income tax
expense when the awards vest or settle, provides an election to account for forfeitures as they occur and
clarifies the classification of these transactions in the statement of cash flows. The new guidance is
effective for the Company’s fiscal year that begins on November 1, 2017 and will be adopted as of that
date. Upon adoption of this guidance, the income tax effects of stock‐based compensation that are
currently recognized in additional paid‐in‐capital will be prospectively recognized in income tax expense.
As a result, the Company anticipates that there will be fluctuations in the reported amount of income tax
expense in its Consolidated Statement of Income as well as in its disclosed effective tax rate, particularly in
the first quarter of each year when the Company’s annual stock‐based awards vest or settle. Separately,
the income tax effects of stock‐based compensation (excess tax benefits) that are currently reported as a
financing activity in the Consolidated Statement of Cash Flows will be retrospectively reported as an
operating activity in that statement. Finally, the Company will elect to account for forfeitures as they
occur, which is not expected to have a material impact on the Consolidated Financial Statements.
Statement of cash flows
In August 2016, the FASB issued new guidance that addresses eight specific cash flow issues to reduce
diversity in practice in how certain cash receipts and cash payments are presented on the Statements of
Cash Flows. The new guidance is effective for the Company’s fiscal year that begins November 1, 2018 and
requires a retrospective transition method. The Company is currently evaluating the potential impact on its
Consolidated Financial Statements and related disclosures.
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Statement of cash flows – restricted cash
In November 2016, the FASB issued an amendment to existing guidance on the presentation and
classification of restricted cash in the statement of cash flows. The amendment requires that a statement
of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts
generally described as restricted cash or restricted cash equivalents. The amounts generally described as
restricted cash and restricted cash equivalents should be included with cash and cash equivalents when
reconciling the beginning‐of‐period and end‐of‐period total amounts shown on the statement of cash
flows. The new guidance is effective for the Company’s fiscal year that begins on November 1, 2018 and
requires a retrospective approach to adoption. The Company is currently evaluating the potential impact
on its Consolidated Financial Statements and related disclosures.
3. Consolidated Sponsored Funds
Underlying investments held by consolidated sponsored funds were included in investments on the
Company’s Consolidated Balance Sheets and classified as trading securities at October 31, 2017 and 2016.
Net investment income or (loss) related to consolidated sponsored funds was included in gains (losses) and
other investment income, net, on the Company’s Consolidated Statements of Income for all periods
presented. The impact of consolidated sponsored funds’ net income or (loss) on net income attributable
to Eaton Vance Corp. shareholders was reduced by amounts attributable to non‐controlling interest
holders, which are recorded in net income attributable to non‐controlling and other beneficial interests on
the Company’s Consolidated Statements of Income for all periods presented. The Company’s risk with
respect to each investment in a consolidated sponsored fund is limited to its equity ownership and any
uncollected management and performance fees.
The following table sets forth the balances related to consolidated sponsored funds at October 31, 2017
and 2016, as well as the Company’s net interest in these funds:
(in thousands)
Investments
Other assets
Other liabilities
Redeemable non‐controlling interests
Net interest in consolidated sponsored funds
2017
401,726
13,537
(50,314)
(154,061)
210,888
$
$
2016
$ 248,036
10,984
(23,947)
(24,474)
$ 210,599
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4.
Investments
The following is a summary of investments at October 31, 2017 and 2016:
(in thousands)
Investment securities, trading:
Short‐term debt securities
Consolidated sponsored funds
Separately managed accounts
Total investment securities, trading
Investment securities, available‐for‐sale
Investments in non‐consolidated CLO entities
Investments in equity method investees
Investments, other
Total investments(1)
2017
2016
$
$
213,537
401,726
93,113
708,376
22,465
3,609
144,911
18,831
898,192
$
$
85,822
248,036
79,683
413,541
13,312
3,837
139,929
19,154
589,773
(1) Excludes bank loan investments held by a consolidated warehouse‐stage CLO entity, which is discussed in Note 6.
Investment securities, trading
The following is a summary of the fair value of investments classified as trading at October 31, 2017 and
2016:
(in thousands)
Short‐term debt securities
Other debt securities
Equity securities
Total investment securities, trading
2017
213,537
313,351
181,488
708,376
$
$
$
$
2016
85,822
191,688
136,031
413,541
The Company recognized gains (losses) related to trading securities still held at the reporting date of $15.9
million, $11.3 million and $(14.7) million for the years ended October 31, 2017, 2016 and 2015,
respectively, within gains (losses) and other investment income, net on the Company’s Consolidated
Statements of Income.
Investment securities, available‐for‐sale
The following is a summary of the gross unrealized gains and losses included in accumulated other
comprehensive income (loss) related to securities classified as available‐for‐sale at October 31, 2017 and
2016:
October 31, 2017
(in thousands)
Investment securities, available‐for‐sale
Gross Unrealized
Cost
$ 15,755
Gains
Losses
Fair Value
$
6,718
$
(8)
$
22,465
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October 31, 2016
(in thousands)
Investment securities, available‐for‐sale
Gross Unrealized
Cost
Gains
Losses
Fair Value
$
8,528
$
4,798
$
(14)
$
13,312
Net unrealized holding gains (losses) on investment securities classified as available‐for‐sale included in
other comprehensive income (loss) on the Company’s Consolidated Statements of Comprehensive Income
were $1.9 million, $0.7 million and $(8,000) for the years ended October 31, 2017, 2016 and 2015,
respectively.
The Company did not recognize any impairment losses on investment securities classified as available‐for‐
sale for the years ended October 31, 2017 or 2015. The Company recognized $0.3 million of other‐than‐
temporary impairment losses related to investment securities classified as available‐for‐sale, which
amount is included in gains (losses) and other investment income, net, on the Company’s Consolidated
Statement of Income for the year ended October 31, 2016.
The aggregate fair value of available‐for‐sale investments in an unrealized loss position at October 31,
2017 was $0.4 million; unrealized losses related to these investments totaled $8,000. No investment with a
gross unrealized loss has been in a loss position for greater than one year.
The following is a summary of the Company’s realized gains and losses recognized upon disposition of
investments classified as available‐for‐sale for the years ended October 31, 2017, 2016 and 2015:
(in thousands)
Gains
Losses
Net realized gains
2017
2016
2015
$
$
307 $
(1)
306 $
2,191 $
(37)
2,154 $
7,828
(3,885)
3,943
Investments in non‐consolidated CLO entities
The Company provides investment management services for, and has made direct investments in, a
number of CLO entities that it does not consolidate, as described further in Note 6. The Company’s
investments in non‐consolidated CLO entities are carried at amortized cost unless impaired, at which point
they are written down to fair value. At October 31, 2017 and 2016, the carrying values of such investments
were $3.6 million and $3.8 million, respectively, which represents the Company’s maximum exposure to
loss. At October 31, 2017 and 2016, combined assets under management in the pools of non‐consolidated
CLO entities were $1.5 billion and $2.0 billion, respectively.
The Company recognized $0.4 million and $0.3 million of impairment losses related to the Company’s
investments in non‐consolidated CLO entities for the years ended October 31, 2017 and 2016, respectively.
The Company did not recognize any impairment losses on investments in non‐consolidated CLO entities for
the year ended October 31, 2015.
Investments in equity method investees
The Company has a 49 percent interest in Hexavest Inc. (Hexavest), a Montreal, Canada‐based investment
adviser. The carrying value of this investment was $142.0 million and $137.3 million at October 31, 2017
and 2016, respectively. At October 31, 2017, the Company’s investment in Hexavest consisted of $6.1
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million of equity in the net assets of Hexavest, definite‐lived intangible assets of $23.7 million and goodwill
of $118.6 million, net of a deferred tax liability of $6.4 million. At October 31, 2016, the Company’s
investment in Hexavest consisted of $5.3 million of equity in the net assets of Hexavest, definite‐lived
intangible assets of $24.5 million and goodwill of $114.1 million, net of a deferred tax liability of $6.6
million. The investment is denominated in Canadian dollars and is subject to foreign currency translation
adjustments, which are recorded in accumulated other comprehensive income (loss). The year‐over‐year
change in the carrying value of goodwill is entirely attributable to such foreign currency translation
adjustments.
The Company also has a seven percent equity interest in a private equity partnership managed by a third
party that invests in companies in the financial services industry. The Company’s investment in the
partnership was $2.9 million and $2.6 million at October 31, 2017 and 2016, respectively.
The Company did not recognize any impairment losses related to its investments in equity method
investees during the years ended October 31, 2017, 2016 or 2015.
During the years ended October 31, 2017, 2016 and 2015, the Company received dividends of $11.4
million, $11.5 million and $15.9 million, respectively, from its investments in equity method investees.
Investments, other
Investments, other, which totaled $18.8 million and $19.2 million at October 31, 2017 and 2016,
respectively, primarily consists of certain investments carried at cost.
During the year ended October 31, 2016, the Company participated as lead investor in an equity financing
in SigFig, an independent San Francisco‐based wealth management technology firm. The carrying value of
Company’s investment in SigFig was $17.0 million at both October 31, 2017 and October 31, 2016.
5. Derivative Financial Instruments
Derivative financial instruments designated as cash flow hedges
In April 2017, the Company issued $300.0 million in aggregate principal amount of 3.5 percent ten‐year
senior notes due April 6, 2027 (2027 Senior Notes). In anticipation of the offering, the Company entered
into a Treasury lock transaction with a notional amount of $125.0 million and concurrently designated the
Treasury lock as a cash flow hedge of its exposure to variability in the forecasted semi‐annual interest
payments on $125.0 million of principal outstanding on the 2027 Senior Notes. The benchmark U.S.
Treasury rate declined from the time the Treasury lock was entered into until the time the 2027 Senior
Notes were priced, and the Treasury lock was net settled for cash at a loss of $0.7 million. The Treasury
lock was determined to be a highly effective cash flow hedge and the entire $0.7 million loss, net of the
associated deferred tax benefit of $0.3 million, was recorded in other comprehensive income (loss), net of
tax. The loss recorded in other comprehensive income (loss) will be reclassified to earnings as a
component of interest expense over the term of the debt. During the fiscal year ended October 31, 2017,
approximately $37,000 of this deferred loss was reclassified into interest expense. During the next twelve
months, the Company expects to reclassify approximately $68,000 of the loss into interest expense.
In fiscal 2013, the Company entered into a forward‐starting interest rate swap in connection with the
offering of its 3.625 percent unsecured senior notes due June 15, 2023 (2023 Senior Notes) and recorded
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the unamortized gain on the swap in other comprehensive income (loss), net of tax. The Company
reclassified $0.2 million of the deferred gain into interest expense in each of the fiscal years ended October
31, 2017, 2016 and 2015 and will reclassify the remaining $1.1 million of unamortized gain at October 31,
2017 to earnings as a component of interest expense over the remaining term of the debt. During the next
twelve months, the Company expects to reclassify approximately $0.2 million of the gain into interest
expense.
In fiscal 2007, the Company entered into a Treasury lock transaction in connection with the offering of its
6.5 percent unsecured senior notes due October 2, 2017 (2017 Senior Notes) and recorded the
unamortized loss on the Treasury lock in other comprehensive income (loss), net of tax. The Company
reclassified a total of $0.2 million of the deferred loss into interest expense in each of the fiscal years
ended October 31, 2017, 2016 and 2015.
Other derivative financial instruments not designated for hedge accounting
The Company utilizes stock index futures contracts, total return swap contracts, foreign exchange
contracts, commodity futures contracts, currency futures contracts and interest rate futures contracts to
hedge the market and currency risks associated with its investments in certain consolidated seed
investments.
Excluding derivative financial instruments held by consolidated sponsored funds, the Company was party
to the following derivative financial instruments at October 31, 2017 and 2016:
2017
2016
Number of
Contracts
Notional
value
(in millions)
Number of
Contracts
Notional
value
(in millions)
Stock index futures contracts
Total return swap contracts
Foreign exchange contracts
Commodity futures contracts
Currency futures contracts
Interest rate futures contracts
1,470 $
2 $
31 $
213 $
131 $
134 $
118.1
50.2
28.1
10.2
14.5
25.6
1,721 $
1 $
32 $
‐ $
‐ $
‐ $
125.4
40.0
18.7
‐
‐
‐
The Company has not designated any of these derivative contracts as hedging instruments for accounting
purposes. The derivative contracts outstanding and the notional values they represent at October 31, 2017
and 2016 are representative of derivative balances throughout each respective year. The weighted‐
average remaining contract term for derivative contracts outstanding at both October 31, 2017 and 2016
was 2.2 months.
The Company has not elected to offset fair value amounts related to derivative instruments executed with
the same counterparty under master netting arrangements; as a result, the Company records all derivative
financial instruments as either other assets or other liabilities, gross, on its Consolidated Balance Sheets
and measures them at fair value (see Note 1). The following tables present the fair value of derivative
financial instruments not designated for hedge accounting, and how they are reflected in the Company’s
Consolidated Financial Statements as of October 31, 2017 and 2016:
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(in thousands)
Stock index futures contracts
Total return swap contracts
Foreign exchange contracts
Commodity futures contracts
Currency futures contracts
Interest rate futures contracts
Total
$
$
2017
2016
Other
Assets
330 $
‐
650
63
327
48
1,418 $
Other
Liabilities
3,021
570
60
120
178
226
4,175
$
$
Other
Assets
1,722 $
‐
350
‐
‐
‐
2,072 $
Other
Liabilities
130
418
267
‐
‐
‐
815
Changes in the fair value of derivative contracts are recognized in gains (losses) and other investment
income, net (see Note 15). The Company recognized the following net gains (losses) on derivative financial
instruments for the years ended October 31, 2017, 2016 and 2015:
(in thousands)
Stock index futures contracts
Total return swap contracts
Foreign exchange contracts
Commodity futures contracts
Interest rate futures contracts
Interest rate swap contracts
Net realized gains (losses)
2017
2016
2015
$ (23,905) $
(3,569)
(595)
(574)
(421)
91
(2,931) $
(2,935)
(590)
‐
‐
‐
$ (28,973) $
(6,456) $
640
157
1,948
3,396
(181)
(21)
5,939
In addition to the derivative contracts described above, certain consolidated seed investments may utilize
derivative financial instruments within their portfolios in pursuit of their stated investment objectives. See
Note 3 for discussion of consolidated sponsored funds.
6. Variable Interest Entities
In the normal course of business, the Company maintains investments in sponsored products that are
considered VIEs. These variable interests generally represent seed investments made by the Company, as
collateral manager or investment adviser, to launch or market these products. The Company receives at‐
market management fees that are commensurate with the level of effort required to provide collateral
management or investment advisory services to these entities that may be considered variable interests,
depending on the significance of the Company’s investment in those entities.
Investments in VIEs that are consolidated
Consolidated sponsored funds
The Company invests in investment companies that meet the definition of a VIE. Disclosure regarding such
consolidated sponsored funds is included in Note 3.
Consolidated CLO entities
As of October 31, 2017, the Company deems itself to be the primary beneficiary of one non‐recourse CLO
entity, namely, Eaton Vance CLO 2017‐1 (CLO 2017‐1), a warehousing phase CLO entity. The Company was
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not the primary beneficiary of any CLO entities as of October 31, 2016 and the Company consolidated one
CLO entity as of October 31, 2015, namely, Eaton Vance CLO 2015‐1 (CLO 2015‐1).
Interest income and expense of the consolidated CLO entities are recorded on an accrual basis and
reported as gains and other investment income, net, and as interest expense, respectively, in the
Company’s Consolidated Statements of Income for the fiscal years ended October 31, 2017, 2016 and
2015. Substantially all ongoing gains (losses) related to the consolidated CLO entities’ bank loan and other
investments and note obligations recorded in earnings for the periods presented are attributable to
changes in instrument‐specific credit considerations.
Eaton Vance CLO 2017‐1
The Company established CLO 2017‐1 on August 24, 2017. CLO 2017‐1 is in the warehousing phase as of
October 31, 2017. The Company contributed $18.8 million into CLO 2017‐1 at the inception of the entity
and concurrently entered into a credit facility agreement with a third‐party lender that provides CLO 2017‐
1 with a $160.0 million non‐recourse revolving line of credit. At October 31, 2017, $12.6 million was
outstanding under the revolving line of credit. As collateral manager, the Company has the unilateral
ability to liquidate CLO 2017‐1 without cause (a substantive kick‐out right), which provides it with the
power to direct the activities that most significantly impact the economic performance of the entity. The
Company’s $18.8 million capital contribution to CLO 2017‐1 serves as first‐loss protection to the third‐
party lender and provides the Company with an obligation to absorb losses of, or the right to receive
benefits from, the VIE that could potentially be significant to the entity. Accordingly, the Company deems
itself to be the primary beneficiary of CLO 2017‐1 from establishment on August 24, 2017.
During the warehouse phase, the Company, acting as collateral manager and subject to the approval of
the third‐party lender, intends to use its capital contributions along with the proceeds from the revolving
line of credit to accumulate a portfolio of commercial bank loan investments from the open market
sufficient for eventual securitization. The Company has no right to the benefits from, nor does the
Company bear the risks associated with, the commercial bank loan investments held by CLO 2017‐1
beyond its capital contribution. In the event of default, the recourse to the Company is limited to its
investment in the warehouse. The Company does not earn any collateral management fees from CLO
2017‐1 during the warehousing phase. The Company will be the collateral manager of the CLO entity
during the securitization phase.
The size of the non‐recourse revolving line of credit can be increased subject to the occurrence of certain
events and the mutual consent of the parties. The line of credit is secured by all the commercial bank loan
investments in CLO 2017‐1 and initially bears interest at a rate of daily LIBOR plus 1.25 percent per annum
(with such interest rate, upon completion of the initial twelve‐month warehousing period, increasing to
daily LIBOR plus 2.0 percent per annum). The third‐party lender does not have any recourse to the
Company’s general credit.
The Company’s $18.8 million capital contribution to CLO 2017‐1 was eliminated in consolidation and no
gain or loss was recognized upon the initial consolidation of CLO 2017‐1 on August 24, 2017. Upon
consolidation, the Company irrevocably elected to subsequently measure the commercial bank loan
investments at fair value using the fair value option. Accordingly, any unrealized gains and losses on
commercial bank loan investments were reported in gains and other investment income, net, of
consolidated CLO entities on the Company’s Consolidated Statement of Income. As of October 31, 2017,
the unpaid principal balance of the commercial bank loan investments approximate fair value, and there
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are no unpaid principal balances of such loans that are 90 days or more past due or in non‐accrual status.
Disclosure of the fair value of bank loan investments is included in Note 7.
The Company did not elect the fair value option for amounts outstanding under the revolving line of credit
upon the initial consolidation of CLO 2017‐1 as these liabilities are temporary in nature. Disclosure of the
fair value of amounts outstanding under the revolving line of credit is included in Note 8. If the Company
determines it is the primary beneficiary of CLO 2017‐1 during the securitization phase, the Company
intends to irrevocably elect the fair value option for the note obligations of Eaton Vance CLO 2017‐1 upon
their issuance, mitigating any potential accounting mismatches between the carrying value of the note
obligations to be issued during the securitization phase and the carrying value of the commercial bank loan
investments held to provide the cash flows for those note obligations.
Gains and other investment income and interest expense attributable to CLO 2017‐1 were negligible for
the period ended October 31, 2017.
Eaton Vance CLO 2015‐1
On September 21, 2016, the Company sold its 16.1 percent subordinated interest in CLO 2015‐1 to an
unrelated third party, recognizing a gain on disposal of $0.1 million. Although the Company continues to
serve as collateral manager of the entity, and therefore has the power to direct the activities that most
significantly impact the economic performance of the entity, the Company concluded that it no longer had
an obligation to absorb losses of, or the right to receive benefits that could potentially be significant to CLO
2015‐1. As a result, the Company concluded that it was no longer the primary beneficiary and therefore
deconsolidated CLO 2015‐1 effective September 21, 2016.
During the fiscal year ended October 31, 2015, the Company recorded approximately $2.4 million of
organizational and structuring costs and other expenses associated with the securitization phase of CLO
2015‐1 in interest expense of consolidated CLO entities in the Company’s Consolidated Statement of
Income.
Prior to the deconsolidation of CLO 2015‐1, changes in the fair values of commercial bank loans and other
investments held by the entity resulted in net gains (losses) of $2.4 million and $(28,550) for the fiscal
years ended October 31, 2016 and 2015, respectively, while changes in the fair values of CLO 2015‐1’s note
obligations resulted in net gains of $3.7 million for the fiscal year ended October 31, 2016. The combined
net gains (losses) of $6.1 million and $(28,550) for the fiscal years ended October 31, 2016 and 2015,
respectively, were recorded in gains and other investment income, net, of consolidated CLO entities in the
Company’s Consolidated Statements of Income for these periods.
For the fiscal years ended October 31, 2016 and 2015, the Company recorded net gains (losses) of $10.6
million and $(4.2) million, respectively, related to CLO 2015‐1. The Company recorded net gains (losses)
attributable to other beneficial interests of $9.8 million and $(4.4) million for the fiscal years ended
October 31, 2016 and 2015, respectively. Net income attributable to Eaton Vance Corp. shareholders was
$0.8 million and $0.2 million for the fiscal years ended October 31, 2016 and 2015, respectively.
Eaton Vance CLO IX
On November 13, 2014, the Company sold its 8 percent residual interest in Eaton Vance CLO IX (CLO IX) to
an unrelated third party. During the third quarter of fiscal 2015, a majority of the holders of the
subordinated notes elected to liquidate CLO IX, with redemption occurring nearly in full on the scheduled
July 20, 2015 payment date. The Company remained the collateral manager of CLO IX through resolution
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of the disposal of all remaining collateral assets. The Company made the decision to deconsolidate CLO IX
in the fourth quarter of fiscal 2015, as the remaining net assets of CLO IX of $4.9 million were not material
to the Company’s financial position.
Prior to the deconsolidation of CLO IX, changes in the fair values of commercial bank loans and other
investments held by the entity resulted in net losses of $3.2 million for the fiscal year ended October 31,
2015, while changes in the fair values of CLO IX’s note obligations resulted in net gains of $5.1 million over
the same period. The combined net gains of $1.9 million for the fiscal year ended October 31, 2015 were
recorded in gains and other investment income, net, of consolidated CLO entities on the Company’s
Consolidated Statement of Income.
For the fiscal year ended October 31, 2015, the Company recorded net gains of $2.0 million (including the
loss on disposal of its subordinated interest of $0.3 million) related to CLO IX. The Company recorded net
losses attributable to other beneficial interests of $1.4 million for the fiscal year ended October 31, 2015.
Net income attributable to Eaton Vance Corp. shareholders was $3.4 million for the fiscal year ended
October 31, 2015.
Investments in VIEs that are not consolidated
Sponsored funds
The Company classifies its investments in certain sponsored funds that are considered VIEs as available‐
for‐sale investments when it is not considered the primary beneficiary of these VIEs (generally when the
Company owns less than 10 percent of the fund). The Company provides aggregated disclosures with
respect to these non‐consolidated sponsored fund VIEs in Note 4.
Non‐consolidated CLO entities
The Company is not deemed the primary beneficiary of several CLO entities in which it holds variable
interests that consist of direct investments and management fees (including subordinated management
fees) earned from managing the collateral of these CLO entities. In its role as collateral manager, the
Company often has the power to direct the activities of the CLO entities that most significantly impact the
economic performance of these entities. In developing its conclusion that it is not the primary beneficiary
of these entities, the Company determined that, for certain of these entities, although it has variable
interests in each by virtue of its beneficial interests therein and the collateral management fees it receives,
its variable interests neither individually nor in the aggregate represent an obligation to absorb losses of,
or a right to receive benefits from, any such entity that could potentially be significant to that entity.
Quantitative factors supporting the Company’s qualitative conclusion in each case included the relative
size of the Company’s beneficial interest and the overall magnitude and design of the collateral
management fees within each structure.
The Company’s maximum exposure to loss with respect to these managed CLO entities is limited to the
carrying value of its investments in, and collateral management fees receivable from, these entities as of
October 31, 2017. Additional information regarding the Company’s investment in non‐consolidated CLO
entities, as well as the combined assets under management in the pools of non‐consolidated CLO entities,
is included in Note 4. Collateral management fees receivable for these entities totaled $0.4 million and
$1.4 million on October 31, 2017 and 2016, respectively. Investors in these CLO entities have no recourse
against the Company for any losses sustained in the CLO structures. During fiscal 2017, the Company did
not provide any financial or other support to these entities that it was not previously contractually
required to provide in any of the fiscal years presented. Income from these entities is recorded as a
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component of gains (losses) and other investment income, net, in the Company’s Consolidated Statements
of Income, based upon projected investment yields.
Other entities
The Company holds variable interests in, but is not deemed to be the primary beneficiary of, certain
sponsored privately offered equity funds with total assets of $18.1 billion and $13.5 billion as of October
31, 2017 and 2016, respectively. The Company’s variable interests in these entities consist of the
Company’s direct ownership therein, which in each case is insignificant relative to the total ownership of
the fund, and any investment advisory fees earned but uncollected. The Company held investments in
these entities totaling $2.7 million and $2.2 million on October 31, 2017 and 2016, respectively, and
investment advisory fees receivable totaling $1.1 million and $0.8 million on October 31, 2017 and 2016,
respectively. During fiscal 2017, the Company did not provide any financial or other support to these
entities that it was not contractually required to provide in any of the fiscal years presented. The
Company’s risk of loss with respect to these managed entities is limited to the carrying value of its
investments in, and investment advisory fees receivable from, the entities as of October 31, 2017. The
Company does not consolidate these VIEs because it does not have the obligation to absorb losses of the
VIEs that could potentially be significant to the VIEs or the right to receive benefits from the VIEs that
could potentially be significant to the VIEs.
The Company’s investments in privately offered equity funds are carried at fair value and included in
investment securities, available‐for‐sale, which are disclosed as a component of investments in Note 4. The
Company records any change in fair value, net of income tax, in other comprehensive income (loss).
The Company also holds a variable interest in, but is not deemed to be the primary beneficiary of, a private
equity partnership managed by a third party that invests in companies in the financial services industry.
The Company’s variable interest in this entity consists of the Company’s direct ownership in the private
equity partnership, equal to $2.9 million and $2.6 million at October 31, 2017 and 2016, respectively. The
Company did not provide any financial or other support to this entity. The Company’s risk of loss with
respect to the private equity partnership is limited to the carrying value of its investment in the entity as of
October 31, 2017. The Company does not consolidate this VIE because the Company does not hold the
power to direct the activities that most significantly impact the VIE.
The Company’s investment in the private equity partnership is accounted for as an equity method
investment and disclosures related to this entity are included in Note 4 under the heading Investments in
equity method investees.
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7. Fair Value of Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables summarize financial assets and liabilities measured at fair value on a recurring basis
and their assigned levels within the valuation hierarchy at October 31, 2017 and 2016:
October 31, 2017
(in thousands)
Level 1
Level 2
Level 3
Other
Assets Not
Held at
Fair Value
Total
Financial assets:
Cash equivalents
Investments:
Investment securities, trading:
Short‐term debt securities
Other debt securities
Equity securities
Investment securities, available‐for‐sale
Investments in non‐consolidated CLO
entities(1)
Investments in equity method investees(2)
Investments, other(3)
Derivative instruments
Assets of consolidated CLO entity:
Bank loan investments
Total financial assets
Financial liabilities:
Derivative instruments
Total financial liabilities
$
24,811 $
97,571 $
‐ $
‐ $
122,382
‐
17,255
125,689
8,938
‐
‐
‐
‐
‐
$
176,693 $
213,537
296,096
55,799
13,527
‐
‐
146
1,418
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
3,609
144,911
18,685
‐
213,537
313,351
181,488
22,465
3,609
144,911
18,831
1,418
31,348
709,442 $
‐
‐ $
‐
31,348
167,205 $ 1,053,340
$
$
‐ $
‐ $
4,175 $
4,175 $
‐ $
‐ $
‐ $
‐ $
4,175
4,175
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76
October 31, 2016
(in thousands)
Level 1
Level 2
Level 3
Other
Assets Not
Held at
Fair Value
Total
Financial assets:
Cash equivalents
Investments:
Investment securities, trading:
Short‐term debt securities
Other debt securities
Equity securities
Investment securities, available‐for‐sale
Investments in non‐consolidated CLO
entities(1)
Investments in equity method investees(2)
Investments, other(3)
Derivative instruments
Total financial assets
Financial liabilities:
Derivative instruments
Total financial liabilities
$
21,875 $
35,913 $
‐ $
‐ $
57,788
‐
18,757
93,491
11,051
‐
‐
‐
‐
85,822
172,931
42,540
2,261
‐
‐
120
2,072
$
145,174 $ 341,659 $
$
$
‐ $
‐ $
815 $
815 $
‐
‐
‐
‐
‐
‐
‐
‐
‐ $
‐ $
‐ $
‐
‐
‐
‐
3,837
139,929
19,034
‐
162,800 $
85,822
191,688
136,031
13,312
3,837
139,929
19,154
2,072
649,633
‐ $
‐ $
815
815
(1)
(2)
(3)
The investments are carried at amortized cost unless facts and circumstances indicate that the investments have been impaired, at which
time the investments are written down to fair value as measured using level 3 inputs. During fiscal 2017 and 2016, the Company
recognized $0.4 million and $0.3 million, respectively, of other‐than‐temporary impairment losses related to its investments in non‐
consolidated CLO entities.
Investments in equity method investees are not measured at fair value in accordance with U.S. GAAP.
Investments, other, include investments carried at cost that are not measured at fair value in accordance with U.S. GAAP.
Valuation methodologies
Cash equivalents
Cash equivalents include investments in money market funds, government agency securities, certificates of
deposit and commercial paper with original maturities of less than three months. Cash investments in
actively traded money market funds are valued using published net asset values and are classified as Level
1 within the fair value measurement hierarchy. Government agency securities are valued based upon
quoted market prices for similar assets in active markets, quoted prices for identical or similar assets that
are not active and inputs other than quoted prices that are observable or corroborated by observable
market data. The carrying amounts of certificates of deposit and commercial paper are measured at
amortized cost, which approximates fair value due to the short time between the purchase and expected
maturity of the investments. Depending on the nature of the inputs, these assets are generally classified as
Level 1 or 2 within the fair value measurement hierarchy.
Investment securities, trading – short‐term debt
Short‐term debt securities include certificates of deposit, commercial paper and corporate debt
obligations with remaining maturities from three months to 12 months. Short‐term debt securities held
are generally valued on the basis of valuations provided by third‐party pricing services, as derived from
such services’ pricing models. Inputs to the models may include, but are not limited to, reported trades,
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executable bid and ask prices, broker‐dealer quotations, prices or yields of securities with similar
characteristics, benchmark curves or information pertaining to the issuer, as well as industry and economic
events. The pricing services may use a matrix approach, which considers information regarding securities
with similar characteristics to determine the valuation for a security. Depending on the nature of the
inputs, these assets are generally classified as Level 1 or 2 within the fair value measurement hierarchy.
Investment securities, trading – other debt
Other debt securities classified as trading include debt obligations held in the portfolios of consolidated
sponsored funds and separately managed accounts. Other debt securities held are generally valued on the
basis of valuations provided by third‐party pricing services as described above for investment securities,
trading – short‐term debt. Other debt securities purchased with a remaining maturity of 60 days or less
(excluding those that are non‐U.S. denominated, which typically are valued by a third‐party pricing service
or dealer quotes) are generally valued at amortized cost, which approximates fair value. Depending upon
the nature of the inputs, these assets are generally classified as Level 1 or 2 within the fair value
measurement hierarchy.
Investment securities, trading – equity
Equity securities classified as trading include foreign and domestic equity securities held in the portfolios of
consolidated sponsored funds and separately managed accounts. Equity securities are valued at the last
sale, official close or, if there are no reported sales on the valuation date, at the mean between the latest
available bid and ask prices on the primary exchange on which they are traded. When valuing foreign
equity securities that meet certain criteria, the portfolios use a fair value service that values such securities
to reflect market trading that occurs after the close of the applicable foreign markets of comparable
securities or other instruments that have a strong correlation to the fair‐valued securities. In addition, the
Company performs its own independent back test review of fair values versus the subsequent local market
opening prices when available. Depending upon the nature of the inputs, these assets generally are
classified as Level 1 or 2 within the fair value measurement hierarchy.
Investment securities, available‐for‐sale
Investment securities classified as available‐for‐sale include investments in sponsored mutual funds and
privately offered equity funds. Sponsored mutual funds are valued using published net asset values and
are classified as Level 1 within the fair value measurement hierarchy. Investments in sponsored privately
offered equity funds that are not listed on an active exchange but have net asset values that are
comparable to mutual funds and have no redemption restrictions are classified as Level 2 within the fair
value measurement hierarchy.
Derivative instruments
Derivative instruments, which include stock index futures contracts, total return swap contracts, foreign
exchange contracts, commodity futures contracts, currency futures contracts and interest rate futures
contracts, are recorded as either other assets or other liabilities on the Company’s Consolidated Balance
Sheets. Stock index futures contracts, total return swap contracts, commodity futures contracts, currency
futures contracts and interest rate futures contracts are valued using a third‐party pricing service that
determines fair value based on bid and ask prices. Foreign exchange contracts are valued by interpolating
a value using the spot foreign exchange rate and forward points, which are based on spot rate and
currency interest rate differentials. Derivative instruments generally are classified as Level 2 within the fair
value measurement hierarchy.
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Assets of consolidated CLO entity
Consolidated CLO entity assets include investments in bank loans. Fair value is determined utilizing
unadjusted quoted market prices when available. Interests in senior floating‐rate loans for which reliable
market quotations are readily available are valued generally at the average mid‐point of bid and ask
quotations obtained from a third‐party pricing service. Fair value may also be based upon valuations
obtained from independent third‐party brokers or dealers utilizing matrix pricing models that consider
information regarding securities with similar characteristics. In certain instances, fair value has been
determined utilizing discounted cash flow analyses or single broker non‐binding quotes. Depending on the
nature of the inputs, these assets are classified as Level 2 or 3 within the fair value measurement
hierarchy.
Transfers in and out of Levels
The following table summarizes fair value transfers between Level 1 and Level 2 of the fair value
measurement hierarchy for the years ended October 31, 2017 and 2016:
(in thousands)
Transfers from Level 1 into Level 2(1)
Transfers from Level 2 into Level 1(2)
2017
2016
$
416 $
44
87
15
(1)
(2)
Transfers from Level 1 into Level 2 represent securities for which unadjusted quoted market prices in active markets
became unavailable.
Transfers from Level 2 into Level 1 represent securities for which unadjusted quoted market prices in active markets
became available.
Level 3 assets and liabilities
The Company did not hold any assets or liabilities valued on a recurring basis and classified as Level 3
within the fair value measurement hierarchy during the fiscal year ended October 31, 2017. The following
table shows a reconciliation of the beginning and ending fair value measurements of assets and liabilities
valued on a recurring basis and classified as Level 3 within the fair value measurement hierarchy for the
fiscal year ended October 31, 2016:
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(in thousands)
Beginning balance
Net gains (losses) on investments and note
obligations included in net income(1)
Purchases
Sales
Amortization of original issue discount
Transfers into Level 3(2)
Deconsolidation of CLO entity
Ending balance
Change in unrealized gains (losses)
included in net income relating to
assets and liabilities held
2016
Bank Loans and Other
Investments of Eaton
Vance CLO 2015‐1
‐
$
56
72
(756)
‐
700
(72)
‐
$
‐
$
$
$
$
Senior and
Subordinated Note
Obligations of Eaton
Vance CLO 2015‐1
‐
2,846
‐
‐
457
390,654
(393,957)
‐
‐
(1)
Substantially all net gains (losses) on investments and note obligations attributable to the assets and borrowings of
the Company's consolidated CLO entities are allocated to non‐controlling and other beneficial interests on the
Company's Consolidated Statements of Income.
(2) Transfers into Level 3 were the result of a reduction in the availability of significant observable inputs used in
determining the fair value of certain instruments.
As discussed more fully in Note 6, the Company deconsolidated Eaton Vance CLO 2015‐1 on September 21,
2016.
8. Fair Value Measurements of Other Financial Instruments
Certain financial instruments are not carried at fair value, but their fair value is required to be disclosed.
The following is a summary of the carrying amounts and estimated fair values of these financial
instruments at October 31, 2017 and 2016:
2017
2016
(in thousands)
Loan to affiliate
Investments, other
Other assets
Debt
Consolidated CLO entity
line of credit
$
$
$
$
$
Carrying
Value
5,000 $
Fair
Value
5,000
Fair Value
Level
3
18,685 $
18,685
6,440 $
6,440
618,843 $ 644,454
12,598 $
12,598
3
3
2
2
$
$
$
$
$
Carrying
Value
5,000 $
Fair
Value
5,000
Fair Value
Level
3
19,034 $
19,034
6,194 $
4,328
571,773 $
603,625
‐ $
‐
3
3
2
‐
As discussed in Note 21, on December 23, 2015, Eaton Vance Management Canada Ltd. (EVMC), a wholly‐
owned subsidiary of the Company, loaned $5.0 million to Hexavest under a term loan agreement to seed a
new investment strategy. The carrying value of the loan approximates fair value. The fair value is
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determined annually using a cash flow model that projects future cash flows based upon contractual
obligations, to which the Company then applies an appropriate discount rate.
Included in investments, other, is a non‐controlling capital interest in SigFig carried at $17.0 million at both
October 31, 2017 and 2016 (see Note 4). The carrying value of this investment approximates fair value, as
the Company purchased this investment in fiscal 2016 and there have been no events or changes in
circumstances that would have had a significant effect on the fair value of this investment at October 31,
2017.
Included in other assets at October 31, 2017 and 2016 is an option to acquire an additional 26 percent
interest in Hexavest carried at $6.4 million and $6.2 million, respectively. The exercise period of the option
expires on December 11, 2017. The Company valued the option as of October 31, 2017 using a market
approach and determined that the carrying value of the option is representative of fair value. As of
October 31, 2016, the fair market value of the option was determined using a Monte Carlo model. The
Monte Carlo model simulates potential future market multiples of earnings. The change in valuation
approach is due to the fact the option is in the exercise period as of October 31, 2017, making it no longer
appropriate to use future earnings to value the option.
The fair value of the Company’s debt has been determined based on quoted prices in inactive markets.
CLO 2017‐1 is in the warehousing phase as of October 31, 2017. The Company established CLO 2017‐1 on
August 24, 2017 and deems itself to be the primary beneficiary of CLO 2017‐1 from that date. The
Company did not elect the fair value option for amounts outstanding under the revolving line of credit
upon the initial consolidation of CLO 2017‐1. Additional information regarding CLO 2017‐1, including the
terms of the revolving line of credit, is included in Note 6. As discussed in Note 6, the line of credit bears
interest based on a rate of daily LIBOR and is temporary in nature given that CLO 2017‐1 is in the
warehousing phase. The carrying amount of the revolving line of credit of $12.6 million as of October 31,
2017 approximates fair value as the line of credit was recently originated.
Subsequent event – Determination Not to Exercise Hexavest Option
On December 11, 2017, the Company determined not to exercise the option to acquire an additional 26
percent ownership interest in Hexavest under the terms of the option agreement entered into when the
Company acquired its Hexavest position in 2012. As a result of this determination, the Company will
recognize a loss equal to the option’s carrying amount of $6.5 million as of December 11, 2017 within gains
(losses) and other investment income, net in the Company’s Consolidated Statement of Income.
9. Equipment and Leasehold Improvements
The following is a summary of equipment and leasehold improvements at October 31, 2017 and 2016:
(in thousands)
Equipment
Leasehold improvements
Subtotal
Less: Accumulated depreciation and amortization
Equipment and leasehold improvements, net
81
2017
87,288 $
57,832
145,120
(96,131)
48,989 $
2016
78,460
54,884
133,344
(88,917)
44,427
$
$
99
Depreciation and amortization expense was $9.1 million, $10.9 million and $11.4 million for the years ended
October 31, 2017, 2016 and 2015, respectively.
10. Acquisitions, Goodwill and Intangible Assets
Atlanta Capital Management Company, LLC (Atlanta Capital)
In fiscal 2017, the Company exercised a series of call options through which it purchased the remaining 0.5
percent profit interest held by non‐controlling interest holders of Atlanta Capital as of October 31, 2016
pursuant to the terms of the original Atlanta Capital acquisition agreement, as amended. The total
purchase price under the call options exercised in fiscal 2017 was $3.2 million. The purchase price was
based on a multiple of Atlanta Capital’s earnings before taxes for the fiscal periods ended October 31,
2017 and 2016. In fiscal 2016, the Company purchased a 0.02 percent profit interest in Atlanta Capital for
$0.1 million pursuant to the terms of the original acquisition agreement, as amended. The purchase price
of this transaction was based on a multiple of Atlanta Capital’s earnings before taxes for the fiscal period
ended October 31, 2015.
In fiscal 2017 and 2016, the Company purchased 1.1 percent and 0.9 percent profit interests in Atlanta
Capital for $4.2 million and $1.9 million, respectively, pursuant to the put and call provisions of the Atlanta
Capital Management Company, LLC Long‐term Equity Incentive Plan (the Atlanta Capital Plan). These
transactions settled in November 2017 and 2016, respectively. In addition, the Company granted a 1.1
percent profit interest to employees of Atlanta Capital pursuant to the terms of the Atlanta Capital Plan in
fiscal 2017. Please see Note 12 for additional information related to the Atlanta Capital Plan.
Total profit interests in Atlanta Capital held by non‐controlling interest holders, including direct profit
interests related to the original acquisition as well as indirect profit interests issued pursuant to the Atlanta
Capital Plan, decreased to 11.6 percent on October 31, 2017 from 13.0 percent on October 31, 2016,
reflecting the exercise of puts and calls as described above. As a result of these transactions, profit
interests in Atlanta Capital held by non‐controlling interest holders as of October 31, 2017 relate solely to
indirect profit interests issued pursuant to the Atlanta Capital Plan. Non‐controlling interest holders did
not hold any capital interests in Atlanta Capital as of October 31, 2017 or 2016.
Calvert Research and Management (Calvert)
On December 30, 2016, the Company, through its newly formed subsidiary Calvert, acquired substantially
all of the assets of Calvert Investments for cash. The transaction was accounted for as an asset acquisition
because substantially all of the fair value of the gross assets acquired was concentrated in a single
identifiable intangible asset related to acquired contracts to manage and distribute sponsored mutual
funds (the Calvert Funds). The Calvert Funds are a diversified family of mutual funds, encompassing
actively and passively managed equity, fixed income and asset allocation strategies managed in
accordance with the Calvert Principles for Responsible Investment or other responsible investment criteria.
The Company is not required to make any additional payments with respect to this transaction. Please see
the acquired intangible assets section below for a summary of the acquired intangible assets.
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Parametric Portfolio Associates LLC (Parametric)
In November 2013, the non‐controlling interest holders of Parametric Risk Advisors entered into a Unit
Acquisition Agreement with Parametric to exchange their remaining ownership interests in Parametric Risk
Advisors (representing a 20 percent ownership interest in the entity) for additional ownership interests in
Parametric Portfolio LP (Parametric LP), whose sole asset is ownership interests in Parametric. The
Parametric LP ownership interests issued in the exchange, representing a 0.8 percent profit interest and a
0.8 percent capital interest, contain put and call features that become exercisable over a four‐year period
starting in fiscal 2018. As a result of this exchange, Parametric Risk Advisors became a wholly‐owned
subsidiary of Parametric.
In December 2012, Parametric acquired Clifton. As part of the transaction, the Company issued indirect
ownership interests in Parametric LP to certain employees. These indirect interests, representing a 1.9
percent profit interest and a 1.9 percent capital interest, are subject to certain put and call features that
are exercisable over a four‐year period that began at closing. In fiscal 2017, the Company exercised a call
option related to non‐controlling interests in Parametric LP issued in conjunction with the Clifton
acquisition, resulting in the Company’s acquisition of an indirect 0.5 percent profit interest and a 0.5
percent capital interest in Parametric for a total of $6.9 million. In fiscal 2016, the associated holders
exercised a put option and the Company exercised a call option related to non‐controlling interests in
Parametric LP issued in conjunction with the Clifton acquisition, resulting in the Company’s acquisition of
an indirect 0.5 percent profit interest and a 0.5 percent capital interest in Parametric for $6.2 million.
In fiscal 2017 and 2016, the Company purchased 0.5 percent and 0.1 percent profit interests in Parametric
for $5.7 million and $0.6 million, respectively, pursuant to the put and call provisions of the Parametric
Portfolio Associates LLC Long‐term Equity Incentive Plan (the Parametric Plan). The fiscal 2017 purchase
settled in November 2017 and the fiscal 2016 purchase settled in November 2016. Please see Note 12 for
additional information related to the Parametric Plan.
Total profit interests in Parametric held by non‐controlling interest holders, including indirect profit
interests issued pursuant to the Parametric Plan, decreased to 6.0 percent as of October 31, 2017 from 7.0
percent as of October 31, 2016, reflecting the exercise of puts and calls as described above. Total capital
interests in Parametric held by non‐controlling interest holders decreased to 1.3 percent as of October 31,
2017 from 1.8 percent as of October 31, 2016.
Tax Advantaged Bond Strategies (TABS)
In fiscal 2009, the Company acquired the TABS business of M.D. Sass Investors Services, a privately held
investment manager based in New York, New York for cash and future consideration. Subsequent to
closing, the TABS business was reorganized as the Tax‐Advantaged Bond Strategies division of Eaton Vance
Management. The acquisition was completed prior to the change in accounting for contingent purchase
price consideration. Accordingly, all contingent purchase price payments related to this acquisition are
treated as adjustments to the purchase price allocation.
During fiscal 2017, the Company made a final contingent payment of $11.6 million to the selling group
based upon prescribed multiples of revenue of the TABS business for the twelve months ended December
31, 2016, increasing goodwill by the payment amount.
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101
Goodwill
The changes in the carrying amount of goodwill for the years ended October 31, 2017 and 2016 are as follows:
(in thousands)
Balance, beginning of period
Goodwill acquired
Balance, end of period
All acquired goodwill is deductible for tax purposes.
October 31,
2017
248,091 $
11,590
259,681 $
2016
237,961
10,130
248,091
$
$
The Company completed its most recent goodwill impairment testing in the fourth quarter of fiscal 2017
and determined that there was no impairment in the carrying value of this asset as of September 30, 2017.
To evaluate the sensitivity of the goodwill impairment testing to the calculation of fair value, the Company
applied a hypothetical 10 percent and 20 percent decrease to the fair value of each reporting unit. Based
on such hypothetical scenarios, the results of the Company’s impairment testing would not change, as the
reporting units still had an excess of fair value over the carrying value under both hypothetical scenarios.
No impairment in the value of goodwill was recognized during the years ended October 31, 2017, 2016 or
2015.
Intangible assets
The following is a summary of intangible assets at October 31, 2017 and 2016:
October 31, 2017
Weighted‐
Average
Remaining
Amortization
Period
(in years)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
$
8.7
8.6
12.3
2.2
134,247 $
1,025
4,257
639
(103,314) $
(452)
(821)
(177)
30,933
573
3,436
462
54,408
194,576 $
$
‐
(104,764) $
54,408
89,812
(dollars in thousands)
Amortizing intangible assets:
Client relationships acquired
Intellectual property acquired
Trademark acquired
Research system acquired
Non‐amortizing intangible assets:
Mutual fund management contracts
acquired
Total
102
84
October 31, 2016
(dollars in thousands)
Amortizing intangible assets:
Client relationships acquired
Intellectual property acquired
Trademark acquired
Non‐amortizing intangible assets:
Mutual fund management contracts
acquired
Total
Weighted‐
Average
Remaining
Amortization
Period
(in years)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
$
8.5
9.6
3.2
133,927 $
1,025
900
(94,873) $
(385)
(493)
39,054
640
407
6,708
142,560 $
$
‐
(95,751) $
6,708
46,809
No impairment in the value of amortizing or non‐amortizing intangible assets was recognized during the years
ended October 31, 2017, 2016 or 2015.
Amortization expense was $9.0 million, $8.6 million and $9.7 million for the years ended October 31, 2017,
2016 and 2015, respectively. Estimated amortization expense to be recognized by the Company over the next
five years is as follows:
Year Ending October 31,
(in thousands)
2018
2019
2020
2021
2022
Acquired intangible assets
$
Estimated
Amortization
Expense
8,927
4,978
3,807
2,282
2,154
The following is a summary of the intangible assets acquired in the first quarter of fiscal 2017 and the net
carrying amount of these assets as of October 31, 2017:
85
103
Weighted‐
Average
Remaining
Amortization
Period
(in years)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
14.2
13.2
2.2
$
320 $
(18) $
3,357
639
(200)
(177)
302
3,157
462
11.9
$
47,700
52,016 $
‐
(395) $
47,700
51,621
(dollars in thousands)
Amortizing intangible assets:
Client relationships acquired
Trademark acquired
Research system acquired
Non‐amortizing intangible assets:
Mutual fund management contracts
acquired
Total
Amortization expense related to intangible assets acquired in the first quarter of fiscal 2017 was $0.4
million at October 31, 2017. Estimated remaining amortization expense for these assets for the next five
fiscal years, on a straight‐line basis, is as follows:
Year Ending October 31,
(in thousands)
2018
2019
2020
2021
2022
11. Debt
2027 Senior Notes
$
Estimated
Amortization
Expense
474
474
297
261
261
On April 6, 2017, the Company issued $300.0 million in aggregate principal amount of 3.5 percent ten‐year
senior notes due April 6, 2027, resulting in net proceeds of approximately $296.1 million after deducting the
underwriting discount and offering expenses. Interest is payable semi‐annually in arrears on April 6th and
October 6th of each year, and commenced on October 6, 2017. At October 31, 2017, the carrying value of the
2027 Senior Notes was $296.4 million. The 2027 Senior Notes are unsecured and unsubordinated obligations
of the Company. There are no covenants associated with the 2027 Senior Notes.
Redemption of 2017 Senior Notes
On May 6, 2017, the Company used net proceeds from the 2027 Senior Notes to redeem the remaining
$250.0 million aggregate principal amount of its 2017 Senior Notes. The Company paid total consideration
of $256.8 million at redemption to the holders of the 2017 Senior Notes, which was determined pursuant
to the terms of the Indenture that governs the notes at an amount equal to the sum of the aggregate
principal amount outstanding, the present value of the remaining scheduled payments of interest through
86
104
the original maturity date and the interest accrued to the date of redemption. The Company recognized a
$5.4 million non‐operating loss on the extinguishment of the 2017 Senior Notes, representing the
difference between the total consideration paid and the net carrying amount of the extinguished debt plus
interest accrued to the date of redemption.
2023 Senior notes
During fiscal 2013, the Company issued $325.0 million in aggregate principal amount of 3.625 percent ten‐
year senior notes due June 15, 2023. Interest is payable semi‐annually in arrears on June 15th and
December 15th of each year. At October 31, 2017 and 2016, the carrying value of the 2023 Senior Notes
was $322.4 million and $324.0 million, respectively. The 2023 Senior Notes are unsecured and
unsubordinated obligations of the Company. There are no covenants associated with the 2023 Senior
Notes.
Corporate credit facility
The Company entered into a $300.0 million senior unsecured revolving credit facility on October 21, 2014. The
credit facility has a five‐year term, expiring on October 21, 2019. Under the facility, the Company may borrow
up to $300.0 million at LIBOR‐based rates of interest that vary depending on the level of usage of the facility
and credit ratings of the Company. The credit facility is unsecured, contains financial covenants with respect to
leverage and interest coverage, and requires the Company to pay an annual commitment fee on any unused
portion. As of October 31, 2017, the Company had no borrowings under its unsecured revolving credit facility.
12. Stock‐Based Compensation Plans
The Company recognized compensation cost related to its stock‐based compensation plans for the years
ended October 31, 2017, 2016 and 2015 as follows:
(in thousands)
Omnibus Incentive Plans:
Stock options
Restricted shares
Phantom stock units
Employee Stock Purchase Plans
Employee Stock Purchase Incentive Plan
Atlanta Capital Plan
Parametric Plan
Parametric Phantom Incentive Plan
Total stock‐based compensation expense
2017
2016
2015
$
20,693 $ 18,870 $
48,955
524
716
753
3,420
3,816
1,172
43,199
263
389
601
2,905
5,373
‐
$
80,049 $ 71,600 $
17,606
41,789
241
624
512
2,534
6,214
‐
69,520
The total income tax benefit recognized for stock‐based compensation arrangements was $29.0 million,
$24.8 million and $23.3 million for the years ended October 31, 2017, 2016 and 2015, respectively.
Omnibus Incentive Plans
The 2013 Omnibus Incentive Plan (the 2013 Plan), which is administered by the Compensation Committee
of the Board, allows for awards of stock options, restricted shares and phantom stock units to eligible
87
105
employees and non‐employee Directors and the issuance of shares to settle phantom incentive units
awarded to employees of the Company’s majority‐owned subsidiaries. Options to purchase Non‐Voting
Common Stock granted under the 2013 Plan expire ten years from the date of grant, vest over five years
and may not be granted with an exercise price that is less than the fair market value of the stock as of the
close of business on the date of grant. Restricted shares of Non‐Voting Common Stock granted under the
2013 Plan vest over five years and may be subject to performance goals. These performance goals
generally relate to the achievement of specified levels of adjusted operating income. Phantom stock units
granted to non‐employee Directors under the 2013 Plan vest over two years. During fiscal 2017, the 2013
Plan was amended such that phantom stock units granted to non‐employee Directors subsequent to
November 2017 shall vest and settle on either the date of the non‐employee Director’s termination from
the Board (other than for cause) or on the second anniversary of the award’s grant date, depending on an
election made by the non‐employee Director. The 2013 Plan contains change in control provisions that
may accelerate the vesting of awards. A total of 25.5 million shares of Non‐Voting Common Stock have
been reserved for issuance under the 2013 Plan. Through October 31, 2017, 5.7 million restricted shares,
options to purchase 10.8 million shares and 1,360 shares to settle phantom incentive units have been
issued pursuant to the 2013 Plan.
Stock options
The fair value of each stock option award is estimated on the date of grant using the Black‐Scholes option
valuation model. The Black‐Scholes option valuation model incorporates assumptions as to dividend yield,
volatility, an appropriate risk‐free interest rate and the expected life of the option. Many of these
assumptions require management’s judgment. The dividend yield assumption represents the Company’s
expected dividend yield based on its historical dividend payouts and the stock price at the date of grant.
The Company’s stock volatility assumption is based upon its historical stock price fluctuations. The
Company uses historical data to estimate option forfeiture rates and the expected life of options granted.
The risk‐free rate for periods within the contractual life of the option is based on the U.S. Treasury yield
curve at the time of grant.
The weighted‐average fair values per share of stock options granted during the years ended October 31,
2017, 2016 and 2015 using the Black‐Scholes option valuation model were as follows:
Weighted‐average grant date fair value
of options granted
$ 6.29
$ 7.39
$ 10.13
2017
2016
2015
Assumptions:
Dividend yield
Expected volatility
Risk‐free interest rate
Expected life of options
2.6% to 3.2%
25%
1.7% to 2.3%
7.0 years
2.9% to 3.8%
25% to 27%
1.3% to 2.0%
6.9 years
2.3% to 2.7%
27% to 34%
1.7% to 2.1%
6.7 years
Stock option transactions under the 2013 Plan and predecessor plans for the year ended October 31, 2017
are summarized as follows:
106
88
(share and intrinsic value figures in thousands)
Options outstanding, beginning of period
Granted
Exercised
Forfeited/expired
Options outstanding, end of period
Shares
20,311 $
2,886
(5,599)
(11)
17,587 $
Options exercisable, end of period
8,266 $
Vested or expected to vest at October 31, 2017
17,549 $
Weighted‐
Average
Exercise
Price
33.52
34.97
37.05
38.91
32.63
28.84
32.62
Weighted‐
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value
5.9 $ 313,777
3.9 $ 178,826
5.9 $ 313,217
The Company received $204.0 million, $103.7 million and $82.9 million related to the exercise of options
for the fiscal years ended October 31, 2017, 2016 and 2015, respectively. Shares issued upon exercise of
options represent newly issued shares. The total intrinsic value of options exercised during the years
ended October 31, 2017, 2016 and 2015 was $58.9 million, $32.2 million and $46.2 million, respectively.
The total fair value of options that vested during the year ended October 31, 2017 was $20.8 million.
As of October 31, 2017, there was $45.3 million of compensation cost related to unvested stock options
granted under the 2013 Plan and predecessor plans not yet recognized. That cost is expected to be
recognized over a weighted‐average period of 2.6 years.
In November 2017, the Company granted options to purchase 1.7 million shares of the Company’s Non‐
Voting Common Stock under the 2013 Plan to employees at a price of $50.67 per share, the then‐current
trading price of the underlying securities.
Restricted shares
The Company’s restricted share awards are generally subject to graduated vesting schedules.
Compensation expense is adjusted for estimated forfeitures and is recognized on a straight‐line basis over
the service periods underlying the awards. As of October 31, 2017, there was $103.1 million of
compensation cost related to unvested awards granted under the 2013 Plan and predecessor plans not yet
recognized. That cost is expected to be recognized over a weighted‐average period of 2.7 years.
A summary of the Company’s restricted share activity for the year ended October 31, 2017 under the 2013
Plan and predecessor plans is presented below:
89
107
(share figures in thousands)
Unvested, beginning of period
Granted
Vested
Forfeited
Unvested, end of period
Weighted‐
Average
Grant Date
Fair Value
$
$
35.43
35.98
33.20
36.22
36.22
Shares
4,157
1,691
(1,217)
(66)
4,565
The total fair value of restricted stock vested for the years ended October 31, 2017, 2016 and 2015 was
$40.5 million, $38.1 million and $33.3 million, respectively. In November 2017, the Company awarded a
total of 1.2 million shares of restricted shares under the 2013 Plan at a grant date fair value of $50.67 per
share.
Phantom stock units
During fiscal 2017, 10,510 phantom stock units were issued to non‐employee Directors pursuant to the
2013 Plan. Because these units are contingently forfeitable, compensation expense is recorded over the
forfeiture period. The total liability paid out associated with phantom stock during the fiscal years ended
October 31, 2017, 2016 and 2015 was $0.4 million, $0.3 million and $0.3 million, respectively. As of
October 31, 2017, there was $0.3 million of compensation cost related to unvested phantom stock units
granted under the 2013 Plan not yet recognized. That cost is expected to be recognized over a weighted‐
average period of one year.
Employee Stock Purchase Plans
The 2013 Employee Stock Purchase Plan (the Qualified ESPP) and the 2013 Nonqualified Employee Stock
Purchase Plan (the Nonqualified ESPP) (together, the Employee Stock Purchase Plans), which are
administered by the Compensation Committee of the Board, permit eligible employees to direct up to a
maximum of $12,500 per six‐month offering period toward the purchase of Non‐Voting Common Stock at
the lower of 90 percent of the market price of the Non‐Voting Common Stock at the beginning or at the
end of each offering period. The Qualified ESPP qualifies under Section 423 of the U.S. Internal Revenue
Code of 1986, as amended (Internal Revenue Code). A total of 0.5 million and 0.1 million shares of the
Company’s Non‐Voting Common Stock have been reserved for issuance under the Qualified ESPP and
Nonqualified ESPP, respectively. Through October 31, 2017, 0.4 million shares have been issued pursuant
to the Employee Stock Purchase Plans.
The Company received $3.0 million, $3.1 million and $3.3 million related to shares issued under the
Employee Stock Purchase Plans for the years ended October 31, 2017, 2016 and 2015, respectively.
Employee Stock Purchase Incentive Plan
The 2013 Incentive Compensation Nonqualified Employee Stock Purchase Plan (the Employee Stock
Purchase Incentive Plan), which is administered by the Compensation Committee of the Board, permits
employees to direct up to half of their incentive bonuses and commissions toward the purchase of the
Company’s Non‐Voting Common Stock at the lower of 90 percent of the market price of the Non‐Voting
Common Stock at the beginning or at the end of each quarterly offering period. A total of 0.6 million
108
90
shares of the Company’s Non‐Voting Common Stock have been reserved for issuance under the Employee
Stock Purchase Incentive Plan. Through October 31, 2017, 0.4 million shares have been issued pursuant to
the plan.
The Company received $4.0 million, $3.6 million and $3.5 million related to shares issued under the
Employee Stock Purchase Incentive Plan for the years ended October 31, 2017, 2016 and 2015,
respectively.
Atlanta Capital and Parametric Long‐term Equity Incentive Plans
The Atlanta Capital Plan and the Parametric Plan allow for awards of profit units of Atlanta Capital and
Parametric, respectively, to key employees. Profit units granted under the Atlanta Capital and Parametric
Plans vest over five years and entitle the holders to quarterly distributions of available cash flow. Fair value
of the awards is determined on the grant date utilizing an annual appraisal of each entity. The annual
appraisal is developed using two models, an income approach and a market approach, as described in
Note 1. These models utilize appropriate discount rates as well as relevant investment management
industry market multiples. Vested profit units are redeemable upon the exercise of limited in‐service put
rights held by the employee or call rights held by the Company. The call rights held by the Company entitle
the Company to repurchase the profit units at the end of a ten‐year call period and each year thereafter,
and upon termination of employment. Execution of the puts and calls takes place upon availability of the
annual appraisal to ensure the transactions take place at fair value. Profit units are not reserved for
issuance; the number of profit units authorized for awards is determined annually by the Company on the
first calendar day of the fiscal year. The awards under the Atlanta Capital and Parametric Plans are
accounted for as equity awards.
During the fiscal year ended October 31, 2017, 25,661 profit units of Atlanta Capital were issued to certain
employees of that entity pursuant to the Atlanta Capital Plan at a weighted‐average per unit price of
$153.85. Because the units are contingently forfeitable, compensation expense is recorded on a straight‐
line basis over the forfeiture period of five years. As of October 31, 2017, there was $7.6 million of
compensation cost related to unvested awards granted under the Atlanta Capital Plan not yet recognized.
That cost is expected to be recognized over a weighted‐average period of 3.1 years. Through October 31,
2017, 323,016 profit units have been issued pursuant to the Atlanta Capital Plan.
During the fiscal year ended October 31, 2017, the Company did not issue profit units of Parametric under
the Parametric Plan. Because the units historically issued under the Parametric Plan are contingently
forfeitable, compensation expense is recorded on a straight‐line basis over the forfeiture period of five
years. As of October 31, 2017, there was $6.9 million of compensation cost related to unvested awards
granted under the Parametric Plan not yet recognized. That cost is expected to be recognized over a
weighted‐average period of 2.5 years. Through October 31, 2017, 39,423 profit units have been issued
pursuant to the Parametric Plan.
The Company did not grant any profit units under the Atlanta Capital or Parametric Plans during November
2017.
Atlanta Capital and Parametric Phantom Incentive Plans
The 2017 Atlanta Capital Phantom Incentive Plan (the Atlanta Capital Phantom Incentive Plan), which was
recommended by the Compensation Committee and approved by the Board on October 25, 2017, and the
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109
2016 Parametric Phantom Incentive Plan (the Parametric Phantom Incentive Plan) are long‐term equity
incentive plans that provide for the award of phantom incentive units to eligible employees of Atlanta
Capital and Parametric, respectively. The phantom incentive units vest over five years. The grant date
value of phantom incentive units is tied to the enterprise value of Atlanta Capital or Parametric adjusted to
take into consideration that the phantom incentive units do not have rights to receive quarterly cash flow
distributions from Atlanta Capital or Parametric, as applicable, or to quarterly dividends from the
Company. At each vesting date, the vested portion of the award is adjusted to reflect the then‐current
enterprise value of Atlanta Capital or Parametric, as applicable, and the adjusted value of the vested award
is settled in Eaton Vance Non‐Voting Common Stock under the 2013 Plan. Because the units are
contingently forfeitable, compensation expense is recorded on a straight‐line basis over the five‐year
forfeiture period using the grant date phantom incentive unit value. The phantom incentive unit value of
an award is determined utilizing annual appraisals of Atlanta Capital and Parametric. The annual appraisals
are developed using two models, an income approach and a market approach, as described in 1. These
models utilize appropriate discount rates as well as relevant investment management industry market
multiples. Phantom incentive units are not reserved for issuance; the number of phantom incentive units
authorized for awards is determined annually by the Company on the first calendar day of the fiscal year.
However, since the awards are settled under the 2013 Plan, the awards are subject to the Non‐Voting
Common Stock reserves defined under the 2013 Plan. As described above, a total of 25.5 million shares of
Non‐Voting Common Stock have been reserved for issuance under the 2013 Plan. The awards under the
Atlanta Capital Phantom Incentive Plan and the Parametric Phantom Incentive Plan are accounted for as
equity awards.
Parametric Phantom Incentive Plan
During the fiscal year ended October 31, 2017, the Company granted a total of 3,212 phantom incentive
units with a weighted‐average grant date phantom incentive unit value of $1,770.94 per unit. Also during
the fiscal year ended October 31, 2017, 24 phantom incentive units vested and were settled with 1,360
shares of Non‐Voting Common Stock based on the October 31, 2017 Parametric enterprise value of
$2,860.16 per unit and the October 31, 2017 price of the Company’s Non‐Voting Common Stock of $50.47.
As of October 31, 2017, there was $4.5 million of compensation cost related to unvested awards granted
under the Parametric Phantom Incentive Plan not yet recognized. That cost is expected to be recognized
over a weighted‐average period of 4 years. Through October 31, 2017, 3,212 phantom incentive units have
been issued pursuant to the Parametric Phantom Incentive Plan.
In November 2017, the Company granted a total of 3,402 phantom incentive units at a grant date phantom
incentive unit value of $2,208.66 per unit.
Atlanta Capital Phantom Incentive Plan
The Company did not grant any phantom incentive units under the Atlanta Capital Phantom Incentive Plan
during fiscal 2017. In November 2017, the Company granted a total of 19,931 phantom incentive units at a
grant date phantom incentive unit value of $142.31 per unit.
Stock Option Income Deferral Plan
The Company has established an unfunded, non‐qualified Stock Option Income Deferral Plan to permit key
employees to defer recognition of income upon exercise of non‐qualified stock options previously granted
by the Company. As of October 31, 2017, options to purchase 0.2 million shares have been exercised and
placed in trust with the Company.
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92
13. Employee Benefit Plans
Profit Sharing and Savings Plan
The Company has a Profit Sharing and Savings Plan for the benefit of employees. The Profit Sharing and
Savings Plan is a defined contribution profit sharing plan with a 401(k) deferral component. All full‐time
employees who have met certain age and length of service requirements are eligible to participate in the
plan. The plan allows participating employees to make elective deferrals of compensation up to the plan’s
annual limits. The Company then matches each participant’s contribution on a dollar‐for‐dollar basis to a
maximum of $1,040 per annum. In addition, the Company may, at its discretion, contribute up to 15
percent of eligible employee compensation to the plan, up to a maximum of $39,750, $39,750 and $39,000
per employee for the years ended October 31, 2017, 2016 and 2015, respectively. The Company’s expense
under the plan was $25.3 million, $23.9 million and $22.7 million for the years ended October 31, 2017,
2016 and 2015, respectively.
Supplemental Profit Sharing Retirement Plan
The Company has an unfunded, non‐qualified Supplemental Profit Sharing Retirement Plan whereby
certain key employees of the Company may receive profit sharing contributions in excess of the amounts
allowed under the Profit Sharing and Savings Plan. Participation in the Supplemental Profit Sharing
Retirement Plan has been frozen and is restricted to employees who qualified as participants on November
1, 2002. The Company did not make any contributions to the plan in fiscal 2017. Participants in the
Supplemental Profit Sharing Retirement Plan continue to earn investment returns on their balances
commensurate with those earned in the employer‐directed portion of the Profit Sharing and Savings Plan.
The Company’s expense under the Supplemental Profit Sharing Retirement Plan for the years ended
October 31, 2017, 2016 and 2015 was $34,599, $12,320 and $1,486, respectively.
14. Common Stock
All outstanding shares of the Company’s Voting Common Stock are deposited in a voting trust, the trustees of
which have unrestricted voting rights with respect to the Voting Common Stock. The trustees of the voting
trust are all officers of the Company. Non‐Voting Common shares do not have voting rights under any
circumstances. During fiscal 2017, the Company did not issue or repurchase any Voting Common Stock.
The Company’s current Non‐Voting Common Stock share repurchase program was announced on January
11, 2017. The Board authorized management to repurchase and retire up to 8.0 million shares of its Non‐
Voting Common Stock on the open market and in private transactions in accordance with applicable
securities laws. The timing and amount of share purchases are subject to management’s discretion. The
Company’s share repurchase program is not subject to an expiration date.
In fiscal 2017, the Company purchased and retired approximately 2.0 million shares of its Non‐Voting
Common Stock under the current repurchase authorization and approximately 0.9 million shares under a
previous repurchase authorization. Approximately 6.1 million additional shares may be repurchased under
the current authorization as of October 31, 2017.
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111
15. Non‐operating Income (Expense)
The components of non‐operating income (expense) for the years ended October 31, 2017, 2016 and 2015
were as follows:
(in thousands)
Interest and other income
Net losses on investments and derivatives
Net foreign currency gains (losses)
Gains (losses) and other investment income, net
Interest expense
Loss on extinguishment of debt
Other income (expense) of consolidated
CLO entities: (1)
Interest income
Net gains on bank loans, other investments and
note obligations
Gains and other investment income, net
Structuring and closing fees
Interest expense
Interest and other expense
$
2017
22,501 $
(1,901)
(1,297)
19,303
(27,496)
(5,396)
2016
11,515 $
(116)
1,012
12,411
(29,410)
‐
2015
9,346
(9,151)
(226)
(31)
(29,357)
‐
‐
‐
‐
‐
‐
‐
17,975
3,467
6,094
24,069
‐
(13,286)
(13,286)
1,625
5,092
(2,359)
(4,408)
(6,767)
(31,063)
Total non‐operating expense
$ (13,589) $
(6,216) $
(1)
(1)
Net income earned by the consolidated CLO entity in 2017 was negligible as the CLO entity was consolidated in
the fourth quarter of the fiscal year and is in a warehouse phase.
16. Income Taxes
The provision for income taxes for the years ended October 31, 2017, 2016 and 2015 consists of the
following:
(in thousands)
Current:
Federal
State
Deferred:
Federal
State
Total
2017
2016
2015
$ 136,959 $
22,753
114,350 $ 117,682
20,837
17,305
11,952
2,002
$ 173,666 $
18,391
3,584
4,614
81
153,630 $ 143,214
Deferred income taxes reflect the expected future tax consequences of temporary differences between
the carrying amounts and tax bases of the Company’s assets and liabilities. The significant components of
deferred income taxes are as follows:
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94
(in thousands)
2017
2016
Deferred tax assets:
Stock‐based compensation
Investment basis in partnerships
Deferred rent
Differences between book and tax bases of investments
Compensation and benefit expense
Federal benefit of unrecognized state tax benefits
Other
Total deferred tax asset
Deferred tax liabilities:
Deferred sales commissions
Differences between book and tax bases of property
Differences between book and tax bases of goodwill
and intangibles
Unrealized net holding gains on investments
Unrealized gains on derivative instruments
Total deferred tax liability
Net deferred tax asset
$
$
$
$
$
58,883 $
12,375
12,354
6,961
4,679
410
373
96,035 $
66,221
12,575
7,478
4,193
3,233
716
409
94,825
(14,022) $
(7,930)
(10,407)
(7,537)
(4,240)
(2,558)
(185)
(28,935) $
67,100 $
(1,322)
(1,821)
(443)
(21,530)
73,295
The Company records a valuation allowance when necessary to reduce deferred tax assets to an amount
that is more likely than not to be realized. No valuation allowance has been recorded for deferred tax
assets, reflecting management’s belief that all deferred tax assets will be utilized.
The following table reconciles the Company’s effective tax rate from the U.S. federal statutory tax rate to
such amount for each of the years ended October 31, 2017, 2016 and 2015:
Federal statutory rate
State and local income tax, net of
federal income tax benefit
Non‐controlling interest
Stock‐based compensation
Other
Effective income tax rate
2017
2016
2015
35.0 % 35.0 %
35.0 %
3.5
(1.8)
0.3
‐
3.5
(2.0)
0.6
0.6
37.0 % 37.7 %
3.8
(0.8)
0.8
‐
38.8 %
The exercise of stock options and lapse of restricted stock awards resulted in a reduction of taxes payable
of approximately $3.2 million, $2.2 million and $10.0 million for the years ended October 31, 2017, 2016
and 2015, respectively. Such benefit has been reflected as a component of shareholders’ equity.
The changes in gross unrecognized tax benefits, excluding interest and penalties, for the years ended
October 31, 2017, 2016 and 2015 are as follows:
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(in thousands)
Beginning Balance
Additions for tax positions of prior years
Additions based on tax positions related to current year
Reductions for tax positions of prior years
Reductions for settlements with taxing authorities
Lapse of statute of limitations
Ending Balance
2017
1,859 $
12
75
(898)
(19)
‐
1,029 $
$
$
2016
2015
2,100 $
6
57
‐
‐
(304)
1,859 $
1,798
437
62
(130)
‐
(67)
2,100
The total amount of unrecognized tax benefits as of October 31, 2017, 2016 and 2015 that, if recognized,
would impact the effective tax rate is $1.0 million, $1.9 million and $2.1 million, respectively.
The Company did not recognize any interest or penalties in its tax provision during the year ended October
31, 2017. In the years ended October 31, 2016 and 2015, the Company recognized $(0.2) million and $0.1
million, respectively, in interest and penalties in its income tax provision. Accrued interest and penalties,
which are included as a component of unrecognized tax benefits, totaled $0.6 million at both October 31,
2017 and 2016 and $0.8 million at October 31, 2015.
The Company believes that it is reasonably possible that approximately $0.6 million of its currently
remaining unrecognized tax benefits, each of which are individually insignificant, may be recognized within
the next 12 months as a result of a lapse of the statute of limitations and settlements with state taxing
authorities.
The Company considers the undistributed earnings of certain of its foreign corporations to be indefinitely
reinvested in foreign operations as of October 31, 2017. Accordingly, no U.S. income taxes have been
provided thereon. As of October 31, 2017, the Company had approximately $61.7 million of undistributed
earnings in certain Canadian, United Kingdom, and Australian foreign corporations that are not available to
fund domestic operations or to distribute to shareholders unless repatriated. Repatriation would require
the Company to accrue and pay U.S. corporate income taxes. The unrecognized deferred income tax
liability on these un‐repatriated funds, or temporary difference, is estimated to be $7.7 million at October
31, 2017. The Company does not intend to repatriate these funds, has not previously repatriated funds
from these entities and has the financial liquidity to permanently leave these funds offshore.
The Company is generally no longer subject to income tax examinations by U.S. federal, state, local or non‐
U.S. taxing authorities for fiscal years prior to fiscal 2013.
In fiscal 2016, the Company identified an immaterial error related to basis adjustments of certain
partnership interests arising from Company repurchases of non‐controlling interests in majority‐owned
subsidiaries that was not recorded in previous fiscal periods. The cumulative impact of this error resulted
in an increase to deferred income tax asset and additional paid‐in‐capital in the amount of $50.5 million
recorded as of October 31, 2016. The error was not considered material to the Company’s Consolidated
Statement of Equity as of October 31, 2015, and had no effect on the Consolidated Statements of Income,
Comprehensive Income, or Cash Flows as of and for the years ended October 31, 2016 and 2015. The fiscal
2016 basis adjustment of $2.2 million was reflected within the Company’s deferred income tax asset and
additional paid‐in‐capital in the accompanying Consolidated Balance Sheet as of October 31, 2016.
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17. Non‐controlling and Other Beneficial Interests
Non‐controlling and other beneficial interests are as follows:
Non‐redeemable non‐controlling interests
Non‐redeemable non‐controlling interests consist entirely of unvested profit interests granted to
employees of the Company’s majority‐owned subsidiaries under subsidiary‐specific long‐term equity plans.
These grants become subject to put rights upon vesting and will be reclassified to temporary equity as
vesting occurs.
Redeemable non‐controlling interests at other than fair value
During the year ended October 31, 2017, the Company acquired the remaining profit interests held by the
non‐controlling interest holders of Atlanta Capital, as discussed further in Note 10. As a result, the
Company had no non‐controlling interests that are redeemable at other than fair value as of October 31,
2017.
Net income attributable to non‐controlling and other beneficial interests in fiscal 2017, 2016 and 2015
reflects an increase of $0.5 million, an increase $0.2 million and a decrease of $0.2 million, respectively, in
the estimated redemption value of redeemable non‐controlling interests in Atlanta Capital.
Redeemable non‐controlling interests at fair value
Interests in the Company’s consolidated funds and vested interests granted to employees of the
Company’s majority‐owned subsidiaries under subsidiary‐specific long‐term equity plans are considered
redeemable at fair value. Future changes in the redemption value of these interests will be recognized as
increases or decreases to additional paid‐in capital. Any future payments made to these non‐controlling
interest holders will reduce temporary equity.
The components of net income attributable to non‐controlling and other beneficial interests for the years
ended October 31, 2017, 2016 and 2015 were as follows:
(in thousands)
Consolidated sponsored funds
Majority‐owned subsidiaries
Non‐controlling interest value adjustments(1)
Consolidated CLO entities(2)
Net income attributable to non‐controlling and
other beneficial interests
$
2017
(6,816) $
(16,895)
(531)
‐
2016
2015
43 $
(13,525)
(200)
(9,768)
1,752
(15,673)
204
5,825
$ (24,242) $ (23,450) $
(7,892)
(1) Relates to non‐controlling interests redeemable at other than fair value.
(2) Net income earned by the consolidated CLO entity in 2017 was negligible as the CLO entity was consolidated in the
(1) fourth quarter of the fiscal year and is in a warehouse phase.
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18. Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss), net of tax, for the years ended
October 31, 2017, 2016 and 2015 are as follows:
(in thousands)
Balance at October 31, 2014
Other comprehensive loss, before
reclassifications and tax
Tax impact
Reclassification adjustments, before tax
Tax impact
Net current period other comprehensive
income (loss)
$
Balance at October 31, 2015
Other comprehensive income (loss),
before reclassifications and tax
Tax impact
Reclassification adjustments, before tax
Tax impact
Net current period other comprehensive
income (loss)
$
Balance at October 31, 2016
Other comprehensive income (loss),
before reclassifications and tax
Tax impact
Reclassification adjustments, before tax
Tax impact
Net current period other comprehensive
income (loss)
Balance at October 31, 2017
$
Unamortized
Net Gains
(Losses) on
Cash Flow
Hedges(1)
$
661
$
Net Unrealized
Gains (Losses)
on Available‐
for‐Sale
Investments(2)
5,628
Foreign
Currency
Translation
Adjustments(3)
(24,285)
$
Total
(17,996)
$
‐
‐
22
(9)
(8)
3
(2,992)
1,102
(28,877)
(115)
463
(179)
(28,885)
(112)
(2,507)
914
13
674
$
(1,895)
3,733
$
(28,708)
(52,993)
$
(30,590)
(48,586)
‐
‐
22
(9)
732
(303)
(2,082)
863
(8,220)
‐
‐
‐
(7,488)
(303)
(2,060)
854
13
687
$
(790)
2,943
$
(8,220)
(61,213)
$
(8,997)
(57,583)
(684)
271
40
(13)
1,930
(743)
(4)
2
9,310
‐
‐
‐
10,556
(472)
36
(11)
(386)
301 $
1,185
4,128 $
9,310
(51,903) $
10,109
(47,474)
(1)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax, represent the amortization of net gains (losses) on
qualifying derivative financial instruments designated as cash flow hedges over the life of the Company's senior notes into interest expense
on the Consolidated Statements of Income.
(2)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax, represent gains (losses) on disposal of available‐
for‐sale securities that were recorded in gains (losses) and other investment income, net, on the Consolidated Statements of Income.
(3)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax, represent the realization of foreign currency
translation losses on a consolidated sponsored fund denominated in Euros that was deconsolidated during fiscal 2015. These amounts
were recorded in gains (losses) and other investment income, net, on the Consolidated Statements of Income.
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98
19. Earnings per Share
The following table sets forth the calculation of earnings per basic and diluted share for the years ended
October 31, 2017, 2016 and 2015:
(in thousands, except per share data)
Net income attributable to Eaton Vance Corp.
shareholders
Less: Allocation of earnings to participating
restricted shares
Net income available to common shareholders
2017
2016
2015
$ 282,131 $ 241,307 $
230,299
‐
‐
$ 282,131 $ 241,307 $
Weighted‐average shares outstanding – basic
Incremental common shares
Weighted‐average shares outstanding – diluted
110,918
5,500
116,418
109,914
4,068
113,982
3,885
226,414
113,318
4,837
118,155
Earnings per share:
Basic
Diluted
$
$
2.54 $
2.42 $
2.20 $
2.12 $
2.00
1.92
Antidilutive common shares related to stock options and unvested restricted stock excluded from the
computation of earnings per diluted share were approximately 3.7 million, 11.9 million and 7.8 million for
the years ended October 31, 2017, 2016 and 2015, respectively.
20. Commitments and Contingencies
In the normal course of business, the Company enters into agreements that include indemnities in favor of
third parties, such as engagement letters with advisors and consultants, information technology
agreements, distribution agreements and service agreements. In certain circumstances, these indemnities
in favor of third parties relate to service agreements entered into by investment funds advised by Eaton
Vance Management, Boston Management and Research, or Calvert, all of which are direct or indirect
wholly‐owned subsidiaries of the Company. The Company has also agreed to indemnify its directors,
officers and employees in accordance with the Company’s Articles of Incorporation, as amended. Certain
agreements do not contain any limits on the Company’s liability and, therefore, it is not possible to
estimate the Company’s potential liability under these indemnities. In certain cases, the Company has
recourse against third parties with respect to these indemnities. Further, the Company maintains
insurance policies that may provide coverage against certain claims under these indemnities.
The Company and its subsidiaries are subject to various legal proceedings. In the opinion of management,
after discussions with legal counsel, the ultimate resolution of these matters will not have a material effect
on the consolidated financial condition, results of operations or cash flows of the Company.
In November 2010, the Company acquired patents and other intellectual property from Managed ETFs LLC,
a developer of intellectual property in the field of exchange‐traded funds. The intellectual property is the
foundation of the Company’s NextShares™ exchange‐traded managed funds initiative. The terms of the
acquisition of the patents and other intellectual property of Managed ETFs LLC include approximately $9.0
million in aggregate contingent milestone payments that are based on specific events representing key
developments in the commercialization of NextShares. There is no defined timing on these payments,
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117
resulting in significant uncertainty as to when the amount of any payment is due in the future. If and when
the milestones have been accomplished, Managed ETFs LLC is also entitled to revenue‐sharing payments
that are calculated based on a percentage of licensing revenue that the Company receives for use of the
acquired intellectual property.
The Company leases certain office space and equipment under non‐cancelable operating leases. The office
space leases expire over various terms that extend through 2034. Certain of the leases contain renewal
options. The lease payments are recognized on a straight‐line basis over the non‐cancelable term of each
lease plus any anticipated extensions. Rent expense under these leases in fiscal 2017, 2016 and 2015
totaled $21.9 million, $21.2 million and $21.5 million, respectively. Future minimum lease commitments
are as follows:
Year Ending October 31,
(in thousands)
2018
2019
2020
2021
2022
2023 – thereafter
Total
(1) Future minimum lease payments have not been reduced by minimum sublease rentals of $0.1 million due
in the future.
23,252
23,621
23,204
20,644
19,412
217,713
327,846
Amount(1)
$
$
The Company subleases to unaffiliated third parties office space under operating leases that expire over
various terms. The sublease payments are recognized on a straight‐line basis over the non‐cancelable
terms of the subleases. Rental income under these subleases totaled $0.1 million, $0.3 million and $1.3
million for the fiscal years ended October 31, 2017, 2016 and 2015, respectively. Future minimum rental
payments are $61,000 and $35,000 during the fiscal years ended October 31, 2018 and 2019, respectively.
There are no future minimum rental payments due to the Company in periods after fiscal 2019.
Other commitments and contingencies include puts and calls related to indirect profit interests issued
pursuant to the Atlanta Capital Plan and the Parametric Plan as well as the original Atlanta Capital
acquisition agreement, as more fully described in Note 10.
21. Related Party Transactions
Sponsored funds
The Company is an investment adviser to, and has administrative agreements with, certain sponsored
mutual funds, privately offered equity funds and closed‐end funds for which employees of the Company
are officers and/or directors. Substantially all of the services to these entities for which the Company earns
a fee, including investment advisory, distribution, shareholder and administrative services, are provided
under contracts that set forth the services to be provided and the fees to be charged. Certain of these
contracts are subject to annual review and approval by the funds’ boards of directors or trustees.
Revenues for services provided or related to these funds for the years ended October 31, 2017, 2016 and
2015 are as follows:
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118
(in thousands)
Management fees
Distribution fees
Service fees
Shareholder service fees
Other revenue
Total
$
2017
927,453 $
75,531
119,962
4,482
731
$ 1,128,159 $
2015
2016
809,102 $
71,784
107,684
2,433
2,133
865,792
73,468
116,448
2,641
2,384
993,136 $ 1,060,733
For the years ended October 31, 2017, 2016 and 2015, the Company had investment advisory agreements
with certain sponsored funds pursuant to which the Company contractually waived $16.7 million, $15.1
million and $13.0 million, respectively, of management fees it was otherwise entitled to receive.
Sales proceeds and net realized gains for the years ended October 31, 2017, 2016 and 2015 from
investments in sponsored funds classified as available‐for‐sale, including sponsored funds accounted for
under the equity method, are as follows:
(in thousands)
Proceeds from sales
Net realized gains
$
2017
14,136 $
306
2016
10,895 $
2,154
2015
44,736
3,943
The Company bears the non‐advisory expenses of certain sponsored funds for which it earns an all‐in
management fee and provides subsidies to startup and other smaller sponsored funds to enhance their
competitiveness. For the years ended October 31, 2017, 2016 and 2015, expenses of $35.0 million, $24.4
million and $22.5 million, respectively, were incurred by the Company pursuant to these arrangements.
Included in management fees and other receivables at October 31, 2017 and 2016 are receivables due
from sponsored funds of $100.0 million and $88.7 million, respectively. Included in accounts payable and
accrued expenses at October 31, 2017 and 2016 are payables due to sponsored funds of $1.7 million and
$1.6 million, respectively.
Loan to affiliate
On December 23, 2015, EVMC loaned $5.0 million to Hexavest under a term loan agreement to seed a new
investment strategy. The loan renews automatically for an additional one‐year period on each anniversary
date unless written termination notice is provided by EVMC. The loan earns interest equal to the one‐year
Canadian Dollar Offered Rate plus 200 basis points, which is payable quarterly in arrears. Hexavest may
prepay the loan in whole or in part at any time without penalty. The Company recorded $0.2 million and
$0.1 million of interest income related to the loan in gains (losses) and other investment income, net, on
the Company’s Consolidated Statement of Income in fiscal 2017 and 2016, respectively. Interest due from
Hexavest under this arrangement included in other assets on the Company’s Consolidated Balance Sheets
was $13,000 at both October 31, 2017 and 2016.
Hexavest agreements
The Company has an agreement with Hexavest whereby the Company compensates Hexavest for sub‐
advisory services and Hexavest reimburses the Company for a portion of fund subsidies related to certain
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119
investment companies for which the Company is the investment adviser. The Company paid Hexavest $0.4
million, $0.3 million and $0.3 million in sub‐advisory fees in fiscal 2017, 2016 and 2015, respectively, and
the Company received $0.1 million, $0.2 million and $1.2 million in fiscal 2017, 2016 and 2015,
respectively, from Hexavest for reimbursement of fund subsidies. The amount due to Hexavest under this
arrangement, which is included in other liabilities on the Company’s Consolidated Balance Sheets, was
$51,000 at October 31, 2016. As of October 31, 2017, the Company did not have any amounts due to
Hexavest under this arrangement.
In addition, the Company has an agreement with Hexavest whereby the Company is reimbursed for
placement costs of certain institutional separately managed accounts. The Company earned $2.4 million
under this arrangement during each of fiscal 2017, 2016 and 2015. The amount due from Hexavest under
this arrangement, which is included in other assets on the Company’s Consolidated Balance Sheets, was
$0.3 million at both October 31, 2017 and 2016.
Employee loan program
The Company has established an Employee Loan Program under which a program maximum of $20.0
million is available for loans to officers (other than executive officers) and other key employees of the
Company for purposes of financing the exercise of employee stock options. Loans are written for a seven‐
year period, at varying fixed interest rates (currently ranging from 0.9 percent to 2.9 percent), are payable
in annual installments commencing with the third year in which the loan is outstanding, and are
collateralized by the stock issued upon exercise of the option. All loans under the program must be made
on or before October 31, 2018. Loans outstanding under this program, which are full recourse in nature,
are reflected as notes receivable from stock option exercises in shareholders’ equity, and were $11.1
million and $12.1 million at October 31, 2017 and 2016, respectively.
22. Regulatory Requirements
The Company is required to maintain net capital in certain regulated subsidiaries within a number of
jurisdictions. Such requirements may limit the Company’s ability to make withdrawals of capital from these
subsidiaries.
Eaton Vance Distributors, Inc. (EVD), a wholly‐owned subsidiary of the Company and principal underwriter
of the Eaton Vance and Parametric funds, is subject to the U.S. Securities and Exchange Commission’s
uniform net capital rule, which requires the maintenance of minimum net capital. For purposes of this rule,
EVD had net capital of $82.7 million, which exceeds its minimum net capital requirement of $3.6 million at
October 31, 2017. The ratio of aggregate indebtedness to net capital at October 31, 2017 was 0.66‐to‐1.
At October 31, 2017, the Company was required to maintain net capital in certain other regulated
subsidiaries. The Company was in compliance with all applicable regulatory minimum net capital
requirements.
23. Concentrations of Credit Risk and Significant Relationships
Financial instruments that potentially subject the Company to concentrations of credit risk consist
primarily of cash and cash equivalents held. The Company maintains cash and cash equivalents with
various financial institutions. Cash deposits maintained at a financial institution may exceed the federally
insured limit.
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102
During the fiscal years ended October 31, 2017, 2016 and 2015, there were no managed portfolios, related
funds or other clients that provided over 10 percent of the total revenue for the Company.
24. Geographic Information
Revenues by principal geographic area for the years ended October 31, 2017, 2016 and 2015 are as
follows:
(in thousands)
Revenue:
U.S.
International
Total
2017
2016
2015
$
$
1,466,495 $
62,515
1,289,830 $
53,030
1,340,760
62,803
1,529,010 $
1,342,860 $
1,403,563
Long‐lived assets by principal geographic area as of October 31, 2017 and 2016 are as follows:
(in thousands)
Long‐lived Assets:
U.S.
International
Total
2017
2016
$
$
46,804 $
2,185
48,989 $
42,153
2,274
44,427
International revenues and long‐lived assets are attributed to countries based on the location in which
revenues are earned.
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121
25. Comparative Quarterly Financial Information (Unaudited)
(in thousands, except per share data)
First
Quarter
Second
Quarter
2017
Third
Quarter
Fourth
Quarter
Full Year
Total revenue
Operating income
Net income
Net income attributable
to Eaton Vance Corp.
shareholders
Earnings per Share:
Basic
Diluted
$ 354,959 $ 374,632 $ 393,746 $
$ 105,436 $ 117,920 $ 121,031 $
74,853 $
$
77,633 $
64,341 $
405,673 $
138,371 $
89,546 $
1,529,010
482,758
306,373
$
$
$
60,711 $
71,975 $
67,361 $
82,084 $
282,131
0.55 $
0.53 $
0.65 $
0.62 $
0.61 $
0.58 $
0.73 $
0.69 $
2.54
2.42
(in thousands, except per share data)
First
Quarter
Second
Quarter
2016
Third
Quarter
Fourth
Quarter
Full Year
Total revenue
Operating income
Net income
$ 331,556 $ 323,290 $ 341,168 $
95,768 $ 106,725 $
$ 100,625 $
65,774 $
69,455 $
63,232 $
$
346,846 $
111,150 $
66,296 $
1,342,860
414,268
264,757
Net income attributable
to Eaton Vance Corp.
shareholders
Earnings per Share:
Basic
Diluted
$
$
$
58,386 $
54,967 $
62,899 $
65,055 $
241,307
0.52 $
0.50 $
0.50 $
0.48 $
0.57 $
0.55 $
0.59 $
0.57 $
2.20
2.12
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Eaton Vance Corp.:
as of October 31, 2017 and 2016, and the related consolidated statements of
We have audited the accompanying consolidated balance sheets of Eaton Vance Corp. and subsidiaries (the
"Company")
income, shareholders’ equity, and cash flows for each of the three years in the period ended October 31, 2017.
These financial statements are the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
income, comprehensive
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position
of Eaton Vance Corp. and subsidiaries as of October 31, 2017 and 2016, and the results of their operations and
their cash flows for each of the three years in the period ended October 31, 2017, in conformity with accounting
principles generally accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 20, 2017
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123
Investor Information
Eaton Vance Corp. has filed an Annual Report on Form 10-K with the Securities and Exchange Commission for the
2017 fiscal year. For a copy of the Company’s Form 10-K, which is available free of charge to shareholders upon
request, or other information regarding the Company, please contact:
Laurie G. Hylton
Vice President and Chief Financial Officer
Eaton Vance Corp.
Two International Place
Boston, MA 02110
(617) 482-8260
The Company’s Form 10-K and other information about Eaton Vance Corp. are also available on the Company’s
website: eatonvance.com. The Company has submitted to the New York Stock Exchange a certificate of the chief
executive officer representing that he is not aware of any violation by the Company of New York Stock Exchange
corporate governance listing standards.
Transfer Agent and Registrar
Computershare
P.O. Box 505000
Louisville, KY 40233
(877) 282-1168
computershare.com/investor
The Transfer Agent maintains shareholder account records and should be contacted regarding changes in address,
name or ownership, lost certificates and consolidation of accounts. When corresponding with the Transfer Agent,
shareholders should state the exact name(s) in which their stock is registered and the certificate number, as well
as other pertinent account information.
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
(617) 437-2000
deloitte.com
124
|2017 Annual Report Directors and Officers
Directors
Ann E. Berman (1,2,3)
Thomas E. Faust Jr.
Leo I. Higdon Jr.*(2)
Brian D. Langstraat
Dorothy E. Puhy (1,3)
Winthrop H. Smith Jr. (1,2,3)
Richard A. Spillane Jr. (2,3)
*Lead Independent Director. Board Committees: 1. Audit, 2. Compensation, 3. Nominating and Governance
Officers
Thomas E. Faust Jr.
Chairman, Chief Executive Officer and President
Laurie G. Hylton
Vice President and Chief Financial Officer
Jeffrey P. Beale
Vice President and Chief Administrative Officer
Frederick S. Marius
Vice President, Secretary and Chief Legal Officer
Daniel C. Cataldo
Vice President and Treasurer
Julie E. Rozen
Vice President and Chief Accounting Officer
2017 Annual Report
2017 Annual Report |
|
125
2017 Annual Report| Our mission and core values
Eaton Vance strives to be the premier investment management organization.
§ We seek to provide clients with superior performance, top-quality service and value-added products
across a range of investment disciplines and distribution channels.
§ We seek to provide an attractive work environment and fulfilling careers for our dedicated employees.
§ Through the success of clients and associates, we thereby seek to build long-term shareholder value.
Integrity
Is honest in word and deed.
Adheres to the company’s code of
ethics, industry standards of business
conduct and applicable law.
Deals fairly and forthrightly with clients,
colleagues and business partners.
Teamwork
Works collaboratively with others to
achieve shared goals.
Communicates openly and follows
through on commitments.
Enhances the work experience of
colleagues.
Professionalism
Demonstrates maturity, dedication and
a strong work ethic.
Behaves appropriately; is respectful
of clients, colleagues and business
partners.
Uses the company’s resources wisely.
Client Focus
Meets or exceeds client performance
expectations.
Places the interests of clients first.
Creativity/Adaptability
Excellence
Develops business opportunities and
process improvements.
Is open and adaptable to change.
Works to achieve personal development.
Achieves outstanding results for
clients and shareholders.
Advances the record and reputation of
Eaton Vance as an industry leader.
126
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|2017 Annual Report
continued from back cover
Emi Yajima Katherine Campbell Erin Nygard Lynn Parker Maya Calabrese Alfred Bonfantini Lindsay Dahlstrom Carlos Del Valle-Ortiz Jeffrey Feccia David Grean Jonathan Lahey
Desmond Gallacher Kimberly Matisoff Roy Belen Karen Long Onix Marrero Nicolette Mills Clinton Talmo Cory Gately Yuepeng Li William Murray Vincent Primavera Kevin DeVito
Andrew Scanlon Azyzah Sasry David Turk Jackson Bennett Christopher Ferrier Domini Gardner Joseph Zeck Malia Bandli Amir Aliabadi Brock Griffin Dorothy Maloney
Richard Bissell Collin Schrier Steven Abbiuso John Garvey Matthew Butorac Kattie Elder Matthew Calos Isaac Beckel Max Chisaka Kristine Delano Holly DiCostanzo Robert Pieroni
Alec Szczerbinski Nataliya Zubrylova Cory Gorski Alexander Lee Abraham Hyun William Busch Monica Durango Kathryn Griffin Tyler Pascucci Corinne Pekoske Samuel Reinhart
Prachi Samudra Briton Wheeler Rob Anketell Peter Iodice Jun Li Paul Metheny David Morley Whitlam Zhang Lucas Anderson Matthew Johnson Jennifer Kilroy Theodore Zwieg
Riley Allen Hasmid Haro Brian King Craig Letendre Scott Linari Jennifer Magazu David Mattson Jeffrey Mueller Glenn Bowens Andrew Cantrall Veronika Karova Kyle Shannon
Patrice Spencer Bradley Gagnon-Palick Mary Primiterra Russell Smith Kathleen Colangelo Kyle Shanafelt David Miles Elizabeth Royer August Kristoferson Kiva Boddy
Kathrine Vinciguerra Nicholas Hunter Ryan Olsen Alexander Payne Helena Racette Bradley Vopni Anne Darlington Adam Homicz Tasha Thomas Heather Wolf Steven Fahey
Juan Garcia Corey O’Connor Georgia Emms Joseph Hudepohl John Kowalczik Jan Mowbray Colt Wolfram Nicholas Burdeau Paul Chang Mark Collins Christopher Dyer Aidan Farrell
Marielle Gallant Andrew Lebowitz Jake McDougall Jeffrey Parsons Christopher Rios Katharine Maretz Alison Wagner Emily Cetlin Peter Correggio Sean Gildea Kathryn Mohrfeld
Matthew Morin Maria van Heeckeren Justin Ziegler Deanna Young Neal Cabanos Jeremy Catt Joshua Schramm Jonathan Alexander Cailly Carroll Kristin Chan Suresh Sundaram
Dane Fickel Carmen Boscia Gregory Gelinas Peter Smith Sandy Tam Marissa Simmons Tatyana Ryabchenko Beau Bowman Stelios Kousettis James McCourt Patricia Odnakk
Joshua Ford Jo-Ellen Kenney Quinn Christofferson Gregory Lawson Sterling Tran Gavin Kennedy Audrey Ford Andrew McKee Raymond Singh Brian Austin Julija Coloma
Alexander Dyson Julianne Williams Nicholas Kirsch Hillary Kloeckner Gregory Bauer Sean Melville Steven Perlmutter Brian Reilly Robert Ankenbauer Katherine Baker Elizabeth Pringle
Katelyn Daignault Donandrea Myette Edward Smith Jacqueline Mills Tianchuan Li Anna Calcagno Henry Meuret Stephanie Uvwo Claus Roller Brian Johnson Alex Provencal
Emily Santa Fe Abigail Cammack William Bergen Kristin Carcio Stephen Munoz Amelia Wren Tiffany Lee Allen Mayer Samantha Pandolfi Alexa Whiteman Ian Kirwan Maria Calabrese
Joshua Chao Stephanie Hammond Kevin Karales Iain McNaught Nakaba Minai Devendra Singh Manoj Sukumaran Laura Bourgeois Kyle Buswell Thomas Coan Kristopher Brassard
Timothy George Krista Lacolla Matthew Robson Michael Zaslavsky Ryan Dalzell Sandy Fortin John Holberg Shawn Klopp Dina Putrya-Momotok Morgan Woods Jennifer Bullock
Mark Lobbestael Leah Smith Angie Wu Nehemie Alcindor Bryan Holdt Robert Buckley Paul Kimani Brent Sullivan Amanda Woodgate Seth Goldzweig Clinton Barber James Croom
Daniel Lungu David White Joseph Whiting Kristen Grant Ryan Hartung Alexander Hovsepian Reed Lerner Scott Price Jacob Rife Colin Sammataro Samuel Shankel Tyrone Gamby
Charlotte Keith Joseph Bustros Jamie Manzo Sandra Oles Kerry Wasgatt Davina Armstrong-Cruz Colton Blackman Nancy Curtin Ryan Potter Michelle Capriotti Mohamed Masoud
Lillian Pena William Poillucci Surya Rai Martha Strebinger Kirby Arens Doug Keagle Luke Murdock Andrew Carlson Randall Hegarty Christine Japhet Scott Tice Jennifer Everett
Krishna Das Peter Graham Gina Hutter Scott Kudlacik Kyle Lunde Esther Tam Vivek Vinayak Meaghan Buckley Michael Esposito Michael Broughton Erin Mellen Lawrence Gingrow
Scott Lindsay Chris Morahan Joseph Brody Natividad Lozada Cheryl Swanberg David Dodson Robel Ghebremichael Leah Lam Alex Meyer Lisa Weiler Marc Fiore Scott Habeeb
Katherine Walsh Andrew Grennon Michael Hill Ryan Martin Kittisak Toyparn Alec Macmillan Kimberly Roessiger Agneta Sheire Terry Stebner Matthew Groth Samuel Juliano
Tin Mai Wei Mei Ashley Beckham Jesse Cauble Benjamin Cheung Gray Gibson Lindsay Hydorn Joshua Latimer Michael LaVita Michael Maddahi Jason Michonski Patrick Mullin
Kellen Smith Daniel Sullivan Sarah Wood Digajara Degaga Aaron Benedict Carolina Concannon Michael Dietrich Erik Dunn Adam Gardner Christopher Stadtler Daniel Streppa
Justin Ward Alexandros Apostolidis Jie Yuan Taylor Jenkins Brian Smith Andrew Furney Walter Lindsay Jay Schwartz Francis Coughlin Matthew Morse Erik Saarinen John Spence
Hari Thirumalai Zachary Gears Andrew Goodale Anthony Mitrano Abigail Torrisi Moran Zhang John Gordon Nicholas Scalia Ashfikul Islam Thomas Deang Richard Perrins
Alex Woolbert Julie Brezen Stephen Antanavige David Bloom Robert Blood Emily Casey Jennette Erickson John Hemingway Razzie Smith Jeffrey Leighton Connor O’Leary
Tjalling Halbertsma Timothy Mamis Fan Bu Laurie Halulakos William Heffernan Billy Savanh Nicole Vicino Galina Warner Ryan Cox Brian Hertzog Christopher Reed Tyler Anderl
Arthur Driscoll Cristy O’Neil Paula Shea Kriti Khanna Luke Brodzinski Kaitlin Callison Patrick Dunlap Francesco Garofalo Patricia Willis Morgan Baker Clifton Hunt Julie Schoening
Matthew Bradley Mary Duffy Dorothy Levine Brandon Lindley David Curran Reid Krugman John Paul Botcheller Darrow DiBattista Philip Hong Kelsey James Phayvanh Vongmixay
Gregg Fowler Maximilian Lutz Brian Goncalves Stephanie Aument Jack Bauer Hope Brown Imani Camp Stuart Dalheim Alexander Deleon Trudy Doyle Anthony Eames Brian Ellis
Kristina Friedman Jade Huang Vishal Khanduja Wilson Kistler Erica Lasdon Michael Lombardo Christopher Madden Catherine Martin Steven Matosziuk Reed Montague Andrew Olig
Darrile Papier Shirley Peoples Christopher Santos Jason Schumacher Patrick Simpson Alexander Smith John Streur Johnny Hom Tetsuo Kushiya Yat Lun Benjamin Mahlik Julie Rozen
Marina Brighouse-Thorpe Arthur Harris Mattison King Brian Helmholz Yutong Jiang Molly MacKinnon John Menefee Samra Nozinovic Haley Strandberg Bindu Sutaria Tian Xie
Kaylin Zimmer Andres Alemann Robert Burr Wilfredo Castillo Matthew Dowd Christopher Flavin Taylor Morley Connor Scott Alec Strain Charles Tilden Adrian Woolard
Giuseppina Cucinotta Nicole Gallagher Jessica Malinski Emma Moriarty Aaron Patel Jennifer Chambers Bryan Dixon John Kraft Michael Mulkern Braden Senst Claire von Loesecke
Kristin Borowski Karl Fredrickson Mary Nickerson Wendy White Kyle Nestor Gene Manning David Tirrell Olivia Burger Jaime Gill Songyi He Rafael Piniasz Clinton Rowihab
Lenore Reiner Craig Fisher Thomas Pelletier Michael Thompson Daniel Austin Tyler Brent Michael Giacco Stuart Weeks Timothy Lui Michael Berman Akbar Causer
Grace Donesasorith Jaclyn Sostilio Alexa DeBuccia David DeFronzo Naga Pavuluri Erma Pinto Chad Priest Jessica Derman Lyndsey McGill Stephen Della Pelle Nicholas Muscatiello
Christopher Ryan Jill Damon Brandon Fritz Zachary Olsen Rawan Sarhan Jeremy Smith Thomas Vercillo Alek Auxier Vincent Bertram Eric Bland Kristen Clark Shane Claugherty
Ryan Lewis Tyler Sokol Daren Delaney James Ostrem Kelly Rechen Tyler Bergantino James Henderson Kelly Johnson Louis Rosa Bianca Minns Maria Wasnick Natalie Kintop
Courtney Gramstorff Ross Meyer Jacqueline Ngo Brittany Panzino Patrick Persons Alec Schaefer Christian Costanza Bryan Adams Anthony Antonetti Cameron Cipolla Kristopher Frank
Autrey Gates Kimberly Ginsberg Briana Howard Allison Mahoney Anthony Maiuri Connor McGuirk Emma Morrissey Matthew Muckjian Samantha Schena Andrew Schlumper
Molly Welch Mi Zhou Laura Griffiths William Cabell Angela Chai David Lee Virginia McCord Juan Mejia Jason Newnham Amelia Ricketts Johanna Saint-Hilaire Steven Silver
Andrew Stutzman Alba Alvarez Christopher Baez Brendan Greene Jason Welch Eva Wu Stephan McElreath Theresa Carignan Siobhan Kranz Robert Black Hyunjin Yun John Nettles
Bryan Cassill Jeremy Corbett Jonathan Ferrazzani Ryan Helgeson Parker Hoffman Hoi Yau Hung Anthony Hutson Kyler Kameoka Lane McLaughlin Jarren Petit Paul Shifflet
Donald Wells Logan Wohlers Jacob Wolfe Priscilla Wong Catherine Hua Fiona Morrison Huy Le Alejandra Buenrostro Ramirez Dain Charbonneau James Gilloran Michael Schmidt
Angela Tang Douglas Taylor Jackie Bai Michael Duplisea Padraic Fitzgerald Jeffrey Nizzardo Luke Webber Allison Winn Victoria Wiley Ann Marie Collins Zachary Costello Kayla Sealy
John Brophy Hillary Dobbs Avery Riggs Karen Cai Nicholas Gaskell Julius Huttunen Lily Rinderknecht Elif Senvardarli Samantha Varney Kelsey Czeck Joseph Horak Robert Kuberski
Jacob Welton Laura McFerrin Daniel Wiebusch Jason Ma Thomas Body Andrew Brandao-Carvalho Jerome Reed Nicole Burshan Brendon Canavan Alyssa Creager Benjamin Defronzo
Zeinab Kamhaz Devin Kaufman Adwoa Poku Davithy Ros Robert Wetzel John Winkle Eric Colvin Jordan Marciello William Roeder Jason Welch Emma Doner Richard Froio
Preeti Saxena Nicole Sonett Thomas Finneran David Reid Bryan Sandvig
Dallas Lundy Linda Hanson Nora Bernazzani Wayne Saulnier Deborah Bishop William Austin Daniel Cataldo Jenilde Mastrangelo Linda Doherty Thomas Faust Cynthia Clemson
Lauren Mannone Donna D’Addario Marlo-Jean Tulis Anne Marie Gallagher Stephanie Brady Mary Maestranzi James Foley Veth Huorn William Gillen Mary Little Kelley Creedon
Douglas McMahon Diane Brissette Rosemary Leavitt Scott Page Lynn Ostberg Brian Langstraat James Thebado Lynne Hetu Mary Byrom Payson Swaffield Michael Weilheimer
Amy Ursillo John Gibson Gregory Parker Hadi Mezher Julie Andrade Jeffrey Beale John Murphy Deanna Berry Jane Rudnick Geoffrey Marshall Robert Bortnick Cecilia O’Keefe
Louann Penzo Maureen Gemma David Michaud John Trotsky David Olivieri Laurie Hylton Jie Lu Margaret Taylor James Womack Kathleen Fryer Jonathan Isaac Kathleen Krivelow
Thomas Luster John Pumphrey James Godfrey Katherine Kreider Marie Preston Lewis Piantedosi Christopher Gaylord Kelly Williams Elizabeth Prall John Macejka Marie Charles
Brian Dunkley Leanne Parziale Mark Burkhard Peter Crowley Craig Russ Michelle Green Roseann Sulano Yana Barton Michael Botthof Deborah Trachtenberg John Redding
Paul O’Neil Kristin Anagnost Duke Laflamme Tiffany Cayarga Sotiria Kourtelidis Joanne Mey Jeffrey DuVall William Delahunty Gillian Moore Linda Carter John Crowley
Michael McGurn Michael Kinahan Daniel Ethier John Ullman Richard Wilson Maria Cappellano Suzanne Marger Steven O’Brien Noah Coons Daniel Puopolo Adam Weigold
Shannon Price Lee Thacker Craig Brandon Kirsten Ulich Charles Reed Thomas Seto Far Salimian Scott Firth Catherine Gagnon David Zimmerman Eric Caplinger Andrew Sveen
Simone Santiago Robert Breshock Joseph Roman Carolee MacLellan Mary Arutyunyan Shalamar Kanemoto Jeanene Montgomery Amanda Madison Gregory Walsh Jeremiah Casey
Amanda Kokan Robert Walton William Bell Erica Burke Lilly Scher Jeffrey Hesselbein Tina Holmes Ira Baron Timothy McEwen Robert Curtis Lisa Flynn Jared Gray Jeffrey Brown
Philip Pace Linda Nishi Xiaozhen Li Michael Allison John Gill Elizabeth McNamara Deborah Chlebek Samuel Scholz Stephen Concannon Craig Castriano Bruce McIntosh
Christine Bogossian Michael Nappi Catherine McDermott Stephen Soltys Randall Skarda Steven Leveille Kimberly Pacheco Kevin Sullivan Patrick Cosgrove Douglas Rogers
James McCuddy Michael Devlin Lidia Pavlotsky Michael Costello Katharine Walker Randall Clark Steven Widder Michelle Baran Troy Evans Michael McLean Paul Rose James Durocher
James Putman Coleen Lynch Elizabeth Johnson Kristen Abruzzese John Santoro Jay McKenney Christopher Berry Linda Bailey James Skesavage Timothy Breer Robert Ellerbeck
Deborah Henry David Lochiatto Brian Herbert Joseph Furey Bradford Godfrey Amy Schwartz Lawrence Fahey Matthew Hereford Katherine Cameron Dorothy Kopp Deidre Walsh
Gregor Yuska John Simchuk Michael Cirami Christian Howe Vassilii Nemtchinov Heath Christensen Ralph Hinckley Eugene Lee Peter Campo Christopher Hayes Lori Miller
Paul Nicely Darin Clauson Charles Gaffney Ian McGinn West Saltonstall James Reber Meghann Clark Maureen Emmerso Earl Brown Frederick Marius John Brodbine Ronald Randall
Sheila Irizarry Mark Milan Laurie Allard Michael Keffer Joshua Lipchin Benjamin Pomeroy William Pannella Kristin Chisholm John Croft Megan Keaty Noriko Ogawa-Ishii
Eileen Tam Leonard Dolan Samuel Perry Jonathan Treat Kevin Darrow George Nelson Marc Moran Jodi Wong David Richman Melinda Olson Erin Kace John Murphy Jamie Babineau
Nicole Hoitt Sharon Gordon Daniel McElaney Brian Kiernan Christopher Teixeira Joseph Hernandez Charles Manning William Holt Gordon Wotherspoon Gary LeFave Barbara Andre-
Jean Jeffrey Sine Richard Michaels Geoff Longmeier Erick Lopez Matthew McNamara Scott Craig Richard Milano Brendan MacKenzie Jamie Mullen Stewart Taylor Sean Broussard
Thomas Tajmajer David Lefcourt Dennis Carson Anatoliy Eybelman Kathryn McElroy Kevin Connerty Michael O’Brien Bridget Fangueiro Kelley Baccei Jordana Mirel Raymond Sleight
Adam Pacelli Michael Parker Jeffrey Rawlins Dan Strelow Kimberly Williams Peter Popovics John Baur Richard Kelly Scott Timmerman Timothy Fetter Michael Reidy Sebastian Vargas
Jay Schlott Stephanie Douglas Eric Stein Kate Chanoux Marsh Enquist Thomas Guiendon Juliene Ehmig Matthew Buckley Eric Robertson Ryan Landers Ross Chapin Carla Lopez-Codio
Laura Donovan Ivan Huerta Jennifer Mihara Rainer Germann Dan Maalouly Louis Membrino Adan Gutierrez Stephen Byrnes Tracey Carter Bernadette Mahoney David McCabe
Michael Striglio Michael Keogh Daniel Clayton Hemambara Vadlamudi Michaella Callaghan Patricia Greene Patricia Bishop Susan Brengle Francine Craig Gayle Hodus Kevin Taylor
Henry Hong Daniel Grover Egan Ludwig Robert Allen Michelle Berardinelli Paul Bouchey Bernard Scozzafava Andrew Frenette Brian Taranto Michelle Wu Brian Pomerleau
Michael Shea Alan Simeon Adam Bodnarchuk Rhonda Forde Katy Burke Christopher Doyle Melissa Fell Eleanor McDonough Meghan Moses John Casamassima John Shea Brian Shuell
Derek DiGregorio Brian Hassler Michael Turgel Phuong Cam Travis Bohon Aubin Quesnell Michael Roppolo Annemarie Ng Sean Caplice Melissa Marks Brian Mazzocchi Eric Dorman
Brian Coole Steven Kleyn Justin Bourgette Tullan Cunningham Kim Day Steven Pietricola David Andrews Pamela Parker Irene Deane Scott Forst Stacey McAllister Michael Mazzei
Daniel McCarthy Stuart Muter Tristan Benoit Christopher Sansone Jeanmarie Lee David Gordon David Perry Christian Johnson Nelson Cohn Ryan DeBoe George Hopkins
Christopher Hackman Janice Korpusik Collette Keenan Raphael Leeman Danat Abdrakhmanov Randolph Verzillo Katie McBride Andrew Szczurowski Virginia Gockelman
Jessica Savageau Marconi Bomfim Lawrence Berman Kenneth Everding Helen Hedberg Jonathan Orseck John Ring Patrick Escarcega Kevin Longacre John Jannino Matthew Witkos
Elaine Peretti Stephanie Rosander Kathleen Walsh Eileen Storz-Salino Brooke Beresh Trevor Harlow James Kirchner Tatiana Koltsova Rose-Lucie Croisiere Lance Garrison James Stafford
Kyle Johns Ross Anderson Mary Gillespie Robert Bastien Jake Lemle Robert Greene Donna Drewes Christopher Mitchell Roger Weber Steven Dansreau Tara O’Brien Jaime Smoller
Michael Ferreira Gonzalo Cabello Judith Cranna Michelle Rousseau Mary Proler Stephanie McEvoy Andrew Valk Yingying Liu Laura Maguire Heather Dennehy Christopher Eustance
Marc Bertrand Kyle Lee Andrew Waples Sharon Pinkston Sean Kelly Louis Cobuccio Thomas Hardy Scott Weisel David Hanley Dan Stanger Praveenkumar Rapol Lisa Wolff
Michael Deich Rey Santodomingo Zamir Klinger John Loy Mary Panza John Cullen Raya McAnern Albert Festa Benjamin Finley James Maynard Nathan Flint Rachael Carey
Michael Kelly Margaret Egan Christopher Nebons James Roccas Alice Li Charles McCrosson Michael Shattuck Michael Alexander Bernard Cassamajor Edward Greenaway Samuel Swartz
Richard Hein James McInerney Matthew Navins David Guarino Cheryl Innerarity Avia Johnston Kevin Hickey Michele Sheperd Christopher Remington Andrew Beaton
Darwin Macapagal Christopher Nabhan Eric Trottier Lauren Kashmanian Wiwik Soetanto Nicholas Vose Lorraine Lake John Murray Marcos Rojas-Sosa Marie Elliott
Luke England-Markun Jennifer Madden Emily Gray James Maki Kristen O’Riordan Ashley Walsh John Harrington Michael McGrail Robert Osborne Patrick Campbell Brian Eriksen
Alexander Martin Michael Ortiz Andrew Collins Alicia Ramsdell Sarah Orvin Davendra Rao Timothy Williamson Hydn Vales Brian Blair Dustin Cole Andrew Hinkelman
Alain Auguste Robyn Tice Susan Perry Elizabeth Stohlman Dana Wood Diane Tracey Brian Barney Devin Cooch Joseph Davolio James Evans John Hanna Nisha Patel Jonathan Rocafort
Evan Rourke Robert Runge Robert Salmon Colin Shaw Elizabeth Driscoll Liselle Aresty Hirotake Yamamoto Mitchell Matthews Patrick Cerrato Christopher Harshman Patrick McCarthy
Ryan Walsh Diana Atanasova Antoinette Russell Anthony Gigante Jonathan Futterman Justine Abbadessa Joseph Kosciuszek Kevin Rookey Michelle Graham Kerianne Austin
Jason DesLauriers Eric Filkins Matthew Manning Vibhawari Naik Jeffrey Selby Kevin Andrade William Kennedy Brian Shaw Lisa Falotico William Buie Nicholas Bender Kelsey Hill
Howard Lee Tro Hallajian Deanna Foley Marcus Jurado Kha Ta Theodore Hovivian Issac Kuo Stuart Shaw William Jervey Paul Leonardo Timothy Atwill Jessica Hemenway
Maeve Flanagan Jeanette Liu Robert Quinn Johnathan Komich Daniel Grzywacz Sandra Snow Sean Bakhtiari Robert Nichols Aaron Burke Sarah Kenyon Aida Jovani Jeffrey Timbas
Brian Ventura Trevor Smith Harsh Vahalia Cyril Legrand Steven DeAlmo Dori Hetrick Alfonso Hernandez Marc Savaria Jessica Roeder Timothy Russo Sabina Duborg Federico Sequeda
Rodolfo Galgana Geoffrey Underwood Christopher Fortier Robert White James Birkins Jenny Winters Kristen Gaspar Diane Hallett Madhuleena Saha David Barr William O’Brien
Stephen Tilson Timothy Walsh Kelly Maneman Courtney Graham Amarnath Jayam Charles Cordeiro Amy Laliberte Deirdre O’Connell Richard Raymond Robert Howell
Michael Guertin James Barrett Ryan Gagliastre David Smith Rafika Shibly Duncan Hodnett Robert Yocum Anna Semakhin Jarir Mallah Charles Turgeon Stephen Kistner
Andrew Subkoviak Andrew Haycock Jennifer Klempa Thomas Shively Brian Dailey David Callard Anne Chaisiriwatanasai John Paolella Anthony Pell Rodrigo Soto Erik Lanhaus
Miranda Hill Anthony Zanetti Daryl Johnson Kai Xie Michael Yip Eric Britt Timothy Giles Darcy Fernandes Justin Brown Leidy Hoffman Ross Taylor Christopher McKenzie
Jacob Greene Victor Joita Colleen Lavery Ryan Gallagher Toebe Hinckle Julia LeGacy Monica McGillicuddy Emily Coville Mark Haskell Jason Rendon Carl Thompson Jason Jung
Reuben Butler Syed Rahman Jeffrey Brody Timothy Kierstead Isabel Clark Matthew Murphy Schuyler Hooper Michael Wagner Courtney Collura Derek Brown Pamela Begin
Kenneth DeJesus Robert Faulkner David Oliveri Christopher Rohan Rebecca Moles Benjamin Garforth Suzanne Hingel Michael Swirski Mark Hogan Daniel Sugameli
Emma Hutchinson Stephen Clarke Nathan Goldman John Northrop Jeremy McLeod Peter Lonergan Megan Dooley Rachael Boggia Jeffrey Schenkman Rocco Scanniello Tyler Cortelezzi
Adrian Jackson Hottis McGovern Kenneth Zinner Robert D’Amato Matthew Williams Brian Arcara Kathryn Johnson Michael Kincheloe Daniel Sullivan Vinh-Quang Van Ha
Jeremy Milleson Cory McGrath William King Colin Looby Gregory Johnsen David Chafin Gregory Chalas Yu Fu David Zigas Kara Boon Matthew Clenney Yanling Zhang
Sheila Doherty Robert Holmes Katherine Johnson Thomas Leonard Jason Vanas Laura Foster Alexander Paulsen David Pychewicz Frederick Wright Peter Avallone Sachiko McHugh
Lori Abboud Enrico Coscia Aaron Dunn Jacqueline Poke John Wilton Philip Casalini Candice Flemming Lindsay Mallett John Noble Steven Reece Jason Kritzer David Doggett
Luke Bruno Matthew Gibbons Kirk Heelen Anthony Scalese Lei Chen Matthew Furan Marquisa Gaines Bradford Richards Daniel Lee William Lesler Hang Nguyen Paulina Koutroubis
John Jezowski Leonard Senkovsky Andrius Balta Andrew Dillon Christopher Hearne Dorothy Jones Eric Zeigler Sarah Sheehan Stephannie Workman Qihua Liu Daniel Sunderland
Michael Pogson Elaine Sullivan Jennifer Flynn Laura Nykreim Christopher Loger Alexander Randall Jennifer Ranahan Jeremy Davis Jill Holland Karl Saur Huong Strong
Kathleen Gaffney Brendan Lanahan Danforth Sullivan Megan Fiorito Teresa Watkins Cynthia Danger Michael Spear Dean Graves John Moninger Jennifer Casey Harrison Kent
Dan Codreanu David Irizarry Mary Anderson Matthew Bailey Gregory Baranivsky Steven Bedell Alexander Braun Allison Brunette Orison Chaffee Michael Cole Richard Fong
Alexander Gomelsky Vladimir Gomelsky Jack Hansen Christopher Haskamp Justin Henne Jane Henning Hong Huo Thomas Lee Gregory Liebl RaeAnn McDonnell Antony Motl
Alicia Neese Timothy Post Eric Prawalsky Ashley Schulzetenberg Kelly Shelquist Jay Strohmaier Denise Timmons Christopher Uhas Mark Wacker Daniel Wamre Alyssa Wiechmann
Alex Zweber Mark Saindon Robert Ciro Scott Brindle Hussein Khattab Henry Rehberg Jennifer Sireklove AnnMarie DuBose Alexander Macrokanis Emily Finn Deborah Flood
Jeffrey Boutin Timothy Robey Robert Swidey Mary Barsoom Benjamin King John Simeone Sarah Castanheira Simon Mui Louise Bradshaw Patrick Duffy Andrew Leimenstoll
Benjamin Spitz Joshua Lipinski Kelly Finneran Milind Kanitkar Rachel Schaefbauer Melanie Kramer Sean Sorensen Robert Cunha Katherine Todd Diane Gordon Thomas McMahon
Michi McDonough Christopher Wisdom Michael Finney Benjamin Hammes Christopher Burnet Jerome D’Alessandro Raffi Samkiranian Kristen Novello Jeffrey Norton Adriana Tacu
Serena Lee Craig Melillo Todd Johnson Mahesh Pritamani Juliet Todd Patrick Huerta Chris Smith Mei Chang Matthew Mueller Timothy Nelson Jared Pawelk Christopher Belnap
Troy Neville Jeffrey Sayman Caitlin Schlesinger Spencer Swan Charlotte Watkins Christopher Webb Alexander Amado Christopher Briant Heather Chapman Bradley Galko Daniel Saltus
James Thorson Marshall Stocker Jared Allen Amanda Lyons Tyler Smith Ryan Cavanaugh Sophie Murray Patrick Gennaco Christopher Cook Matthew Gile Henry Peabody David Brinker
Benjamin LeFevre Robert Rowe William Turner Charles Norvish Biana Perez Rachel LeBlanc Nokio Twumasi Steven Vanne Lisa Brown Amir Vaziri Alan Arrington Kevin Pih
Michael Szyska Mamatha Chilumuthuru Isaiah Petersen Victor La William Spring Daniel Ryan Casey Foskett Caroline Spellman Wenlei Sun Benjamin Adams Allen Wagner
David Butters Erin Canon Holly Bragdon Christopher Brown Robert Zaccardi David Glen William Reardon Ashley Peterson Michael Askew Diogenes Balsam Nagabhushan Beeram
Tracy Potorski Jesse Tobiason Macki Anderson Amy Arslain Ryan Balko Michael Hebert Qiwen Liu Laura Sanders Punit Shetty Robert Cruice Craig McHaffie Robert Pellow John Jaje
Scott Sovine Benjamin Lazarus Lee Bertram Jennifer Rodas Jenna Baratto Joshua Rock Carolyn Cawley Steven Heck Andrea Vaitkus Ashley Boecker Shiva Iyer Jacob Homchick
Glenn Pardo Raewyn Williams Timothy Gaudette Erin Kandamar Elizabeth McDonough Alba Shkurti Michael Sullivan Alexis Walsh John Flanagan Patrick Keogh Julie Smith
Scott VanSickle Jason Chalmers Paul Cocanour Heather Anderson Kathryn Salzl Daniel Cozzi Edward Perkin Ashok Nayak Sheila Pechacek Bradford Thomas Andrew Spero
Darrell Thompson Joseph Cinar Glenn Fitzsimmons Alexandra Monaco Christopher Arthur James Allen Madeline Anderson Dial Boehmer Michael Bortnick Allison Goldie
Blair McGreenery Nicholas Stahelski Jason Nelson Mark Bumann Miles Ferguson Elaina Kenney Donald Schofield Patrick Curran
Wei Ge Michael Gose Audrey Grant Justin Horner Kurt Kostyu Joonmo Ku Tyler Nowicki Caitlyn Olson Adam Swinney Scott Mackey
Alli Bayko Lauren McAllister Abbas Jaffri Baharan MacLean Jeffrey Miller Laura Zilewicz Alfred Walterscheit Keith Schweitzer