Eaton Vance Corp. Report for the Three Month Period Ended January 31, 2021

Rhea-AI Summary

Eaton Vance Corp. (NYSE: EV) reported earnings of $0.74 per diluted share for Q1 FY2021, down from $0.91 in Q1 FY2020. However, adjusted earnings rose to a record $0.94 per diluted share, an 11% increase year-over-year. The company achieved record consolidated net inflows of $20 billion, marking a 16% annualized growth in managed assets. Total consolidated assets under management reached $584.2 billion. Despite increases in operating expenses—largely due to stock-based compensation linked to a pending acquisition by Morgan Stanley—operating income improved significantly, reflecting strong management fee revenue growth.

Positive

• Adjusted earnings reached a record $0.94 per diluted share, up 11% year-over-year.
• Consolidated net inflows totaled $20 billion, a 16% increase in managed assets.
• Consolidated assets under management grew to a record $584.2 billion, up 13% year-over-year.
• Operating income on an adjusted basis rose to $163.5 million, a 19% increase from Q1 FY2020.

Negative

• Earnings per diluted share decreased from $0.91 in Q1 FY2020 to $0.74.
• Operating expenses increased by 29% compared to Q1 FY2020, primarily due to stock-based compensation.
• Operating margin fell to 16.3% from 29.8% year-over-year.

BOSTON, Feb. 24, 2021 /PRNewswire/ -- Eaton Vance Corp. (NYSE: EV) today reported earnings of $0.74 per diluted share for the first quarter of fiscal 2021, which compares to earnings of $0.91 per diluted share in the first quarter of fiscal 2020 and $(0.31) per diluted share in the fourth quarter of fiscal 2020.

The Company reported record quarterly adjusted earnings^([1]) of $0.94 per diluted share for the first quarter of fiscal 2021, an increase of 11 percent from $0.85 of adjusted earnings per diluted share in the first quarter of fiscal 2020 and an increase of 7 percent from $0.88 of adjusted earnings per diluted share in the fourth quarter of fiscal 2020.

In the first quarter of fiscal 2021, adjusted earnings exceeded earnings under U.S. generally accepted accounting principles (U.S. GAAP) by $0.20 per diluted share, reflecting the reversal of $70.6 million of compensation expenses and other costs recognized in connection with the proposed acquisition of Eaton Vance by Morgan Stanley announced on October 8, 2020, the reversal of $27.3 million of net excess tax benefits related to stock–based compensation awards, the reversal of $20.1 million of net gains of consolidated sponsored funds and consolidated collateralized loan obligation (CLO) entities (collectively, consolidated investment entities) and the Company's other seed capital investments, and the add-back of $2.2 million of management fees and expenses of consolidated investment entities. Earnings under U.S. GAAP exceeded adjusted earnings by $0.06 per diluted share in the first quarter of fiscal 2020, reflecting the reversal of $4.9 million of net excess tax benefits related to stock-based compensation awards, the reversal of $3.6 million of net gains of consolidated investment entities and other seed capital investments, and the add-back of $2.4 million of management fees and expenses of consolidated investment entities. In the fourth quarter of fiscal 2020, adjusted earnings exceeded earnings under U.S. GAAP by $1.19 per diluted share, reflecting the reversal of $114.9 million of compensation expenses and other costs recognized in connection with the proposed acquisition of Eaton Vance by Morgan Stanley, the reversal of a $21.8 million impairment loss recognized on the Company's investment in Hexavest Inc. (Hexavest), the reversal of $2.9 million of net excess tax benefits related to stock–based compensation awards, the reversal of $1.8 million of net losses of consolidated investment entities and other seed capital investments, and the add-back of $1.7 million of management fees and expenses of consolidated investment entities.

In the first quarter of fiscal 2021, the Company had record quarterly consolidated net inflows of $20.0 billion, representing 16 percent annualized internal growth in managed assets (consolidated net flows divided by beginning of period consolidated assets under management). This compares to net inflows of $6.1 billion and 5 percent annualized internal growth in managed assets in the first quarter of fiscal 2020 and net inflows of $5.2 billion and 4 percent annualized internal growth in managed assets in the fourth quarter of fiscal 2020. Excluding Parametric overlay services, the Company had net inflows of $6.9 billion and 7 percent annualized internal growth in managed assets in the first quarter of fiscal 2021, net inflows of $5.0 billion and 5 percent annualized internal growth in managed assets in the first quarter of fiscal 2020, and net inflows of $4.8 billion and 5 percent annualized internal growth in managed assets in the fourth quarter of fiscal 2020.

The Company's internal management fee revenue growth (management fees attributable to consolidated inflows less management fees attributable to consolidated outflows, divided by beginning of period consolidated management fee revenue) was 8 percent in the first quarter of fiscal 2021 and 5 percent in both the first quarter and the fourth quarter of fiscal 2020.

Consolidated assets under management were a record $584.2 billion on January 31, 2021, up 13 percent from $518.2 billion of consolidated managed assets on January 31, 2020 and $515.7 billion of consolidated managed assets on October 31, 2020. The year-over-year increase in consolidated assets under management reflects $18.6 billion of net inflows, $45.1 billion of price appreciation in managed assets and $2.3 billion of new managed assets gained in the acquisition of the business assets of WaterOak Advisors, LLC (WaterOak) on October 16, 2020. The sequential increase in consolidated assets under management in the first quarter of fiscal 2021 reflects $20.0 billion of quarterly net inflows and $48.5 billion of price appreciation in managed assets.

"In what we expect will be Eaton Vance's last quarterly reporting period as an independent public company, the Company set new records for consolidated net inflows, consolidated ending assets under management, adjusted operating income and adjusted earnings per diluted share," said Thomas E. Faust Jr., Chairman and Chief Executive Officer. "We approach the Company's acquisition by Morgan Stanley with strong momentum across our businesses, and look forward to building on that strength as part of Morgan Stanley Investment Management."

Average consolidated assets under management were $562.2 billion in the first quarter of fiscal 2021, up 10 percent from $509.9 billion in the first quarter of fiscal 2020 and up 9 percent from $516.7 billion in the fourth quarter of fiscal 2020.

Attachments 5 and 6 summarize the Company's consolidated assets under management and net flows by investment mandate and investment vehicle reporting categories. Among investment mandate reporting categories, consolidated net inflows in the first quarter of fiscal 2021 were $13.1 billion for Parametric overlay services, $3.5 billion for fixed income, $2.4 billion for Parametric custom portfolios, $608 million for floating-rate income, $214 million for equity and $191 million for alternative mandates. Annualized internal growth in managed assets for the first quarter of fiscal 2021 was 55 percent for Parametric overlay services, 19 percent for fixed income, 10 percent for alternative, 8 percent for floating-rate income, 6 percent for Parametric custom portfolios and 1 percent for equity mandates. Annualized internal growth in management fee revenue for the first quarter of fiscal 2021 was 51 percent for Parametric overlay services, 21 percent for fixed income, 11 percent for Parametric custom portfolios, 10 percent for alternative, 6 percent for floating-rate income and -1 percent for equity mandates.

By investment affiliate, consolidated net inflows in the first quarter of fiscal 2021 were $14.9 billion for Parametric, $4.0 billion for Eaton Vance Management (EVM), $1.6 billion for Calvert and $(517) million for Atlanta Capital. Annualized internal growth in managed assets for the first quarter of 2021 was 24 percent for Calvert, 19 percent for Parametric, 10 percent for EVM and -8 percent for Atlanta Capital. Annualized internal growth in management fee revenue for the first quarter of fiscal 2021 was 26 percent for Calvert, 9 percent for EVM, 7 percent for Parametric and -13 percent for Atlanta Capital.

Attachments 7, 8 and 9 summarize the Company's ending consolidated assets under management by investment mandate, investment vehicle and investment affiliate. Attachment 10 shows the Company's average annualized management fee rates by investment mandate.

As of January 31, 2021, managed assets of the Company's 49 percent-owned affiliate Hexavest were $4.3 billion, down 67 percent from $13.0 billion of managed assets on January 31, 2020 and down 26 percent from $5.8 billion of managed assets on October 31, 2020. Hexavest had net outflows of $2.2 billion in the first quarter of fiscal 2021, $0.5 billion in the first quarter of fiscal 2020 and $0.9 billion in the fourth quarter of fiscal 2020. Attachment 11 summarizes the assets under management and net flows of Hexavest. Other than Eaton Vance-sponsored funds for which Hexavest is the adviser or sub-adviser, the managed assets and flows of Hexavest are not included in our consolidated totals.

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

 

Financial Highlights
(in thousands, except per share figures)
		Three Months Ended
		January 31,		October 31,		January 31,
		2021		2020		2020
U.S. GAAP Financial Measures:
Revenue		$	488,946	$	451,081	$	452,554
Expenses		$	409,424	$	464,737	$	317,835
Operating income (loss)		$	79,522	$	(13,656)	$	134,719
Operating margin			16.3%		(3.0)%		29.8%
Net income (loss) attributable to
Eaton Vance Corp. shareholders		$	89,914	$	(35,934)	$	103,985
Earnings (loss) per diluted share		$	0.74	$	(0.31)	$	0.91
Adjusted Non-U.S. GAAP Financial Measures:(1)
Revenue		$	490,917	$	452,485	$	454,479
Expenses		$	327,459	$	309,344	$	316,548
Operating income		$	163,458	$	143,141	$	137,931
Operating margin			33.3%		31.6%		30.3%
Net income attributable to
Eaton Vance Corp. shareholders		$	115,269	$	101,503	$	97,947
Earnings per diluted share		$	0.94	$	0.88	$	0.85
Weighted Average Shares Outstanding:
Basic			116,220		110,701		109,380
Diluted			122,279		115,878		114,688
(1) See Attachment 2 for reconciliations between the U.S. GAAP and adjusted non-U.S. GAAP financial measures identified here as well as other important disclosures.

 

First Quarter Fiscal 2021 vs. First Quarter Fiscal 2020 

In the first quarter of fiscal 2021, revenue increased 8 percent to $488.9 million from $452.6 million in the first quarter of fiscal 2020. Management fees were up 9 percent, as a 10 percent increase in average consolidated assets under management more than offset a 1 percent decrease in the Company's consolidated average annualized management fee rate. Performance fees were $0.2 million in both the first quarter of fiscal 2021 and the first quarter of fiscal 2020. Distribution and service fee revenues in the first quarter of fiscal 2021 were collectively up 2 percent from the first quarter of fiscal 2020, reflecting higher average managed assets in fund share classes that are subject to these fees.

Operating expenses increased 29 percent to $409.4 million in the first quarter of fiscal 2021 from $317.8 million in the first quarter of fiscal 2020, reflecting increases in compensation expense, service fee expense, amortization of deferred sales commissions, fund-related expenses and other operating expenses, partially offset by a decrease in distribution expense. The increase in compensation expense primarily reflects $39.6 million of stock-based and other compensation costs and associated payroll taxes recognized in the first quarter of fiscal 2021 in connection with the proposed acquisition of Eaton Vance by Morgan Stanley. The increase in compensation expense further reflects higher salary and benefit expense associated with increases in headcount, higher operating income-based and investment performance-based bonus accruals, and higher sales-based incentive compensation, partially offset by lower severance expenses. The increase in service fee expense reflects higher private fund and Class A service fee payments, partially offset by lower Class C service fee payments. The increase in amortization of deferred sales commissions reflects higher private fund commission amortization. The increase in fund-related expenses reflects higher sub-advisory fees paid, partially offset by a reduction in fund expenses borne by the Company. Other operating expenses increased 69 percent, primarily reflecting higher professional service expenses driven by proxy solicitation fees and other legal and consulting costs associated with the proposed acquisition of Eaton Vance by Morgan Stanley, and an increase in information technology spending, partially offset by lower travel expenses. The decline in distribution expense reflects lower Class C distribution fee payments, up-front sales commission expense, promotional costs and finder's fees, partially offset by higher intermediary marketing support payments. Excluding expenses in connection with the proposed acquisition of Eaton Vance by Morgan Stanley and other adjustments as shown in Attachment 2, operating expenses in the first quarter of fiscal 2021 were $327.5 million, an increase of 3 percent from operating expenses of $316.5 million in the first quarter of fiscal 2020.

Operating income decreased to $79.5 million in the first quarter of fiscal 2021 from $134.7 million in the first quarter of fiscal 2020, primarily reflecting $81.0 million of compensation expense and other costs recognized in the first quarter of fiscal 2021 in connection with the proposed acquisition of Eaton Vance by Morgan Stanley. The Company's operating margin decreased to 16.3 percent in the first quarter of fiscal 2021 from 29.8 percent in the first quarter of fiscal 2020.

As shown in Attachment 2, the Company's operating income on an adjusted basis was a quarterly record of $163.5 million in the first quarter of fiscal 2021, an increase of 19 percent from $137.9 million of adjusted operating income in the first quarter of fiscal 2020. The Company's adjusted operating margin increased to 33.3 percent in the first quarter of fiscal 2021 from 30.3 percent in the first quarter of fiscal 2020.

Non-operating income totaled $41.2 million in the first quarter of fiscal 2021 and $8.4 million in the first quarter of fiscal 2020. The year-over-year increase reflects a $25.1 million improvement in net income (expense) of consolidated CLO entities, primarily driven by gains realized upon the sale of the Company's interests in four CLO entities that the Company no longer consolidates, but continues to manage, and a $7.7 million increase in net gains and other investment income of consolidated sponsored funds and the Company's investments in other sponsored strategies.

The Company's effective tax rate, calculated as a percentage of income before income taxes and equity in net income of affiliates, was 7.5 percent in the first quarter of fiscal 2021 and 22.8 percent in the first quarter of fiscal 2020. The Company's effective tax rate is discussed in greater detail under "Taxation" below.

Equity in net income of affiliates was $0.6 million and $2.3 million in the first quarters of fiscal 2021 and 2020, respectively, substantially all relating to the Company's investment in Hexavest.

As detailed in Attachment 3, net income attributable to non-controlling and other beneficial interests was $22.4 million in the first quarter of fiscal 2021 and $8.9 million in the first quarter of fiscal 2020. The year-over-year change primarily reflects an increase in income earned by consolidated sponsored funds.

The Company's weighted average basic shares outstanding were 116.2 million in the first quarter of fiscal 2021 and 109.4 million in the first quarter of fiscal 2020, an increase of 6 percent. The year-over-year increase reflects new shares issued upon the vesting of restricted stock awards and the exercise of employee stock options. On a diluted basis, the Company's weighted average shares outstanding were 122.3 million in the first quarter of fiscal 2021 and 114.7 million in the first quarter of fiscal 2020, an increase of 7 percent. The change in weighted average diluted shares outstanding further reflects an increase in the dilutive effect of in-the-money options due to higher market prices of the Company's non-voting common stock, partially offset by a decrease in the dilutive effect of restricted stock awards due to the accelerated vesting of restricted stock awards in the fourth quarter of fiscal 2020 in connection with the proposed acquisition of Eaton Vance by Morgan Stanley.

First Quarter Fiscal 2021 vs. Fourth Quarter Fiscal 2020

In the first quarter of fiscal 2021, revenue increased 8 percent to $488.9 million from $451.1 million in the fourth quarter of fiscal 2020. Management fees were up 9 percent, primarily reflecting a 9 percent increase in average consolidated assets under management. Performance fees were $0.2 million in the first quarter of fiscal 2021, versus $1.5 million in the fourth quarter of fiscal 2020. Distribution and service fee revenues in the first quarter of fiscal 2021 were collectively up 7 percent from the fourth quarter of fiscal 2020, reflecting higher average managed assets in fund share classes that are subject to these fees.

Operating expenses decreased 12 percent to $409.4 million in the first quarter of fiscal 2021 from $464.7 million in the fourth quarter of fiscal 2020, reflecting lower compensation expense, partially offset by increases in distribution expense, service fee expense, amortization of deferred sales commissions, fund-related expenses and other operating expenses. The decrease in compensation expense primary reflects a reduction in stock-based compensation expense due to the acceleration of $146.0 million of expense recognized in the fourth quarter of fiscal 2020 in connection with the proposed acquisition of Eaton Vance by Morgan Stanley, partially offset by $39.6 million of stock-based and other compensation costs and associated payroll taxes recognized in the first quarter of fiscal 2021 in connection with the proposed acquisition. The decrease in compensation expense further reflects lower operating income-based bonus accruals, partially offset by higher sales-based incentive compensation, higher performance-based bonus accruals and higher salary and benefit expense associated with year-end compensation increases for continuing employees and slightly higher headcount, and seasonal increases in benefit costs and payroll taxes. The increase in distribution expense reflects higher intermediary marketing support payments, partially offset by a decrease in promotion costs and lower Class C distribution fee payments. The increase in service fee expense reflects higher private fund and Class A service fee payments. The increase in fund-related expenses reflects higher sub-advisory fees paid. Other operating expenses increased 52 percent, primarily reflecting higher professional service expenses driven by increases in proxy solicitation fees and other legal costs associated with the proposed acquisition of Eaton Vance by Morgan Stanley. Excluding expenses in connection with the proposed acquisition of Eaton Vance by Morgan Stanley and other adjustments as shown in Attachment 2, operating expenses in the first quarter of fiscal 2021 were $327.5 million, an increase of 6 percent from operating expenses of $309.3 million in the fourth quarter of fiscal 2020.

Operating income (loss) increased to $79.5 million in the first quarter of fiscal 2021 from $(13.7) million in the fourth quarter of fiscal 2020. The sequential change primarily reflects a $73.4 million decrease in compensation expense and other costs recognized in connection with the proposed acquisition of Eaton Vance by Morgan Stanley. The Company's operating margin increased to 16.3 percent in the first quarter of fiscal 2021 from (3.0) percent in the fourth quarter of fiscal 2020.

As shown in Attachment 2, the Company's $163.5 million of adjusted operating income in the first quarter of fiscal 2021 compared to $143.1 million of adjusted operating income in the fourth quarter of fiscal 2020, an increase of 14 percent. The Company's adjusted operating margin increased to 33.3 percent in the first quarter of fiscal 2021 from 31.6 percent in the fourth quarter of fiscal 2020.

Non-operating income totaled $41.2 million in the first quarter of fiscal 2021 versus $7.1 million of non-operating expense in the fourth quarter of fiscal 2020. The sequential change reflects a $28.6 million improvement in net income (expense) of consolidated CLO entities, primarily driven by gains realized upon the sale of the Company's interests in four CLO entities that the Company no longer consolidates, but continues to manage, and a $19.8 million increase in net gains and other investment income of consolidated sponsored funds and the Company's investments in other sponsored strategies.

The Company's effective tax rate, calculated as a percentage of income (loss) before income taxes and equity in net income of affiliates, was 7.5 percent in the first quarter of fiscal 2021 and 36.6 percent in the fourth quarter of fiscal 2020. The Company's effective tax rate is discussed in greater detail under "Taxation" below.

Equity in net income (loss) of affiliates was $0.6 million in the first quarter of fiscal 2021 and $(20.8) million in the fourth quarter of fiscal 2020, respectively. In both the first quarter of fiscal 2021 and the fourth quarter of fiscal 2020, substantially all of the Company's equity in net income of affiliates related to the Company's investment in Hexavest. Equity in net income (loss) of affiliates in the fourth quarter of fiscal 2020 included a $21.8 million impairment loss recognized on the Company's investment in Hexavest.

As detailed in Attachment 3, net income attributable to non-controlling and other beneficial interests was $22.4 million in the first quarter of fiscal 2021 and $2.0 million in the fourth quarter of fiscal 2020. The sequential change primarily reflects an increase in income earned by consolidated sponsored funds.

The Company's weighted average basic shares outstanding were 116.2 million in the first quarter of fiscal 2021 and 110.7 million in the fourth quarter of fiscal 2020, an increase of 5 percent. The increase reflects new shares issued upon the vesting of restricted stock awards and the exercise of employee stock options. On a diluted basis, the Company's weighted average shares outstanding were 122.3 million in the first quarter of fiscal 2021 and 115.9 million in the fourth quarter of fiscal 2020, an increase of 6 percent. The change in weighted average diluted shares outstanding further reflects an increase in the dilutive effect of in-the-money options due to higher market prices of the Company's non-voting common stock, partially offset by a decrease in the dilutive effect of restricted stock awards due to the accelerated vesting of restricted stock awards in the fourth quarter of fiscal 2020 in connection with the proposed acquisition of Eaton Vance by Morgan Stanley.

Taxation

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

		Three Months Ended
		January 31,		October 31,		January 31,
		2021		2020		2020
Statutory U.S. federal income tax rate		21.0	%	21.0	%	21.0	%
State income tax, net of federal income tax benefits		4.0		5.8		4.9
Net income (loss) attributable to non-controlling
and other beneficial interests		(3.6)		2.0		(0.5)
Non-deductible costs related to the proposed
acquisition of Eaton Vance by Morgan Stanley		8.4		-		-
Other items		0.3		(6.0)		0.8
Net excess tax benefits from stock-based
compensation plans(1)		(22.6)		13.8		(3.4)
Effective income tax rate		7.5	%	36.6	%	22.8	%
(1) Represents net excess tax benefits from stock-based compensation plans. Amounts have been reduced for executive compensation limitations under Section 162(m) of the Internal Revenue Code.

The net loss experienced by the Company in the fourth quarter of fiscal 2020 resulted in a tax benefit being recognized during the quarter.

The Company's income tax provision was reduced by net excess tax benefits related to stock-based compensation awards totaling $27.3 million in the first quarter of fiscal 2021, $4.9 million in the first quarter of fiscal 2020 and $2.9 million in the fourth quarter of fiscal 2020. The Company's income tax provision is also impacted by other items, which include non-deductible executive compensation, prior period adjustments primarily related to the filing of tax returns and other differences in the treatment of certain items for book and tax purposes.

As shown in Attachment 2, the Company's calculations of adjusted net income and adjusted earnings per diluted share remove compensation expenses and other costs related to the proposed acquisition of Eaton Vance by Morgan Stanley, remove the impairment losses recognized in the fourth quarter of fiscal 2020 on the Company's investment in 49 percent-owned affiliate Hexavest, exclude gains (losses) and other investment income (expense) of consolidated investment entities and other seed capital investments, add back the management fees and expenses of consolidated investment entities and exclude the tax impact of stock-based compensation shortfalls or windfalls. On this basis, the Company's adjusted effective tax rate was 25.8 percent in the first quarter of fiscal 2021, 27.6 percent in the first quarter of fiscal 2020 and 26.2 percent in the fourth quarter of fiscal 2020.

Balance Sheet Information

As of January 31, 2021, the Company held cash and cash equivalents of $606.1 million and its investments included $20.4 million of short-term debt securities with maturities between 90 days and one year. There were no outstanding borrowings under the Company's $300 million credit facility at such date.

Proposed Acquisition of Eaton Vance by Morgan Stanley

As described above, Eaton Vance and Morgan Stanley announced on October 8, 2020 that they have entered into a definitive agreement for Morgan Stanley to acquire Eaton Vance. Under the terms of the merger agreement, Eaton Vance shareholders will receive $28.25 per share in cash and 0.5833 shares of Morgan Stanley common stock per share of Eaton Vance common stock held. The merger agreement contains an election procedure whereby each Eaton Vance shareholder may elect to receive the merger consideration all in cash or all in stock, subject to proration and adjustment.

The merger agreement also provides for Eaton Vance shareholders to receive a special cash dividend of $4.25 per share of Eaton Vance common stock held. On November 23, 2020, the Eaton Vance Board of Directors declared the $4.25 per share special dividend, which was paid on December 18, 2020 to shareholders of record on December 4, 2020.

Eaton Vance and Morgan Stanley currently expect to complete the proposed transaction no later than early in the second quarter of 2021. Subject to the satisfaction of customary closing conditions, including receipt of necessary regulatory approvals and client consents, the transaction could close as soon as March 1, 2021.

About Eaton Vance Corp.

Eaton Vance Corp. (NYSE: EV) provides advanced investment strategies and wealth management solutions to forward-thinking investors around the world. Through principal investment affiliates Eaton Vance Management, Parametric, Atlanta Capital, Calvert and Hexavest, the Company offers a diversity of investment approaches, encompassing bottom-up and top-down fundamental active management, responsible investing, systematic investing and customized implementation of client-specified portfolio exposures. As of January 31, 2021, Eaton Vance had consolidated assets under management of $584.2 billion. Exemplary service, timely innovation and attractive returns across market cycles have been hallmarks of Eaton Vance since 1924. For more information, visit eatonvance.com.

Forward-Looking Statements

This news release may contain statements that are not historical facts, referred to as "forward-looking statements." The Company's actual future results may differ significantly from those stated in any forward-looking statements, depending on factors such as changes in securities or financial markets or general economic conditions, the scope and duration of the COVID-19 pandemic and its impact on the global economy or capital markets, the completion of the proposed transaction with Morgan Stanley and the anticipated terms and timing, including obtaining required regulatory approvals, anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion and growth of the combined company's operations and other conditions to the completion of the acquisition, client sales and redemption activity, the continuation of investment advisory, administration, distribution and service contracts, and other risks discussed in the Company's filings with the Securities and Exchange Commission.

									Attachment 1
Consolidated Statements of Income
(in thousands, except per share figures)
		Three Months Ended
								%		%
								Change		Change
								Q1 2021		Q1 2021
		January 31,		October 31,		January 31,		vs.		vs.
		2021		2020		2020		Q4 2020		Q1 2020
Revenue:
Management fees		$	430,315	$	396,268	$	394,801	9	%	9	%
Distribution and underwriter fees			18,211		18,215		21,578	-		(16)
Service fees			38,598		34,906		33,939	11		14
Other revenue			1,822		1,692		2,236	8		(19)
	Total revenue		488,946		451,081		452,554	8		8
Expenses:
Compensation and related costs			221,402		315,847		171,982	(30)		29
Distribution expense			35,630		35,436		40,003	1		(11)
Service fee expense			34,218		30,542		29,755	12		15
Amortization of deferred sales commissions			6,501		6,400		5,968	2		9
Fund-related expenses			12,125		10,932		11,067	11		10
Other expenses			99,548		65,580		59,060	52		69
	Total expenses		409,424		464,737		317,835	(12)		29
Operating income (loss)			79,522		(13,656)		134,719	NM		(41)
Non-operating income (expense):
Gains and other investment income, net			23,816		3,994		16,090	496		48
Interest expense			(5,921)		(5,800)		(5,888)	2		1
Other income (expense) of consolidated
	collateralized loan obligation (CLO) entities:
	Gains and other investment income, net		41,768		10,961		15,563	281		168
	Interest and other expense		(18,467)		(16,246)		(17,396)	14		6
	Total non-operating income (expense)		41,196		(7,091)		8,369	NM		392
Income (loss) before income taxes and equity
in net income (loss) of affiliates			120,718		(20,747)		143,088	NM		(16)
Income tax benefit (expense)			(9,009)		7,594		(32,578)	NM		(72)
Equity in net income (loss) of affiliates, net of tax			628		(20,793)		2,325	NM		(73)
Net income (loss)			112,337		(33,946)		112,835	NM		-
Net income attributable to non-controlling
and other beneficial interests			(22,423)		(1,988)		(8,850)	NM		153
Net income (loss) attributable to
Eaton Vance Corp. shareholders		$	89,914	$	(35,934)	$	103,985	NM		(14)
Earnings (loss) per share:
Basic		$	0.77	$	(0.32)	$	0.95	NM		(19)
Diluted		$	0.74	$	(0.31)	$	0.91	NM		(19)
Weighted average shares outstanding:
Basic			116,220		110,701		109,380	5		6
Diluted			122,279		115,878		114,688	6		7
Dividends declared per share		$	4.625	$	0.375	$	0.375	NM		NM

 

Attachment 2

Non-U.S. GAAP Information and Reconciliations

Management believes that certain non-U.S. GAAP financial measures, specifically, adjusted operating income, adjusted net income attributable to Eaton Vance Corp. shareholders and adjusted earnings per diluted share, while not a substitute for U.S. GAAP financial measures, may be effective indicators of the Company's performance over time. Non-U.S. GAAP financial measures should not be construed to be superior to U.S. GAAP measures. In calculating these non-U.S. GAAP financial measures, operating income, net income attributable to Eaton Vance Corp. shareholders and earnings per diluted share are adjusted to exclude items management deems non-operating or non-recurring in nature, or otherwise outside the ordinary course of business. These adjustments may include, when applicable, the add back of closed-end fund structuring fees, costs associated with debt repayments and tax settlements, the tax impact of stock-based compensation shortfalls or windfalls, impairment charges, costs in connection with the proposed acquisition of Eaton Vance by Morgan Stanley and other acquisition-related items, and non-recurring charges for the effect of tax law changes. Adjustments to operating income also include the add-back of management fee revenue received from consolidated sponsored funds and consolidated collateralized loan obligation (CLO) entities (collectively, consolidated investment entities) that are eliminated in consolidation and the non-management expenses of consolidated sponsored funds recognized in consolidation. Adjustments to net income attributable to Eaton Vance Corp. shareholders include the after-tax impact of these adjustments to operating income and the elimination of gains (losses) and other investment income (expense) of consolidated investment entities and other seed capital investments included in non-operating income (expense), as determined net of tax and non-controlling and other beneficial interests. Management and our Board of Directors, as well as certain of our outside investors, consider the adjusted numbers a measure of the Company's underlying operating performance. Management believes adjusted operating income, adjusted net income attributable to Eaton Vance Corp. shareholders and adjusted earnings per diluted share are important indicators of our operations because they exclude items that may not be indicative of, or are unrelated to, our core operating results, and may provide a useful baseline for analyzing trends in our underlying business.

Effective in the second quarter of fiscal 2020, the Company's calculation of non-U.S. GAAP financial measures was revised to reflect the treatment of consolidated investment entities and other seed capital investments described in the previous paragraph. All prior period non-U.S. GAAP financial measures have been updated to reflect this change.

 

Reconciliation of operating income (loss) to adjusted operating income:
(in thousands, except as noted)
		Three Months Ended
									%		%
									Change		Change
									Q1 2021		Q1 2021
		January 31,		October 31,		January 31,			vs.		vs.
		2021		2020		2020			Q4 2020		Q1 2020
Total revenue		$	488,946	$	451,081	$	452,554		8	%	8	%
Management fees of consolidated sponsored
	funds and consolidated CLO entities(1)		1,971		1,404		1,925		40		2
Adjusted total revenue		$	490,917	$	452,485	$	454,479		8		8
Total expenses		$	409,424	$	464,737	$	317,835		(12)	%	29	%
Non-management expenses of consolidated
	sponsored funds(2)		(922)		(942)		(1,287)		(2)		(28)
Accelerated stock-based compensation expense
	related to the proposed acquisition of Eaton Vance
	by Morgan Stanley(3)		(5,702)		(145,993)		-		(96)		NM
Other compensation expenses related to the proposed
	acquisition of Eaton Vance by Morgan Stanley(4)		(33,943)		-		-		NM		NM
Other costs related to the proposed acquisition of
	Eaton Vance by Morgan Stanley(5)		(41,398)		(8,458)		-		389		NM
Adjusted total expenses		$	327,459	$	309,344	$	316,548		6		3
Operating income (loss)		$	79,522	$	(13,656)	$	134,719		NM	%	(41)	%
Management fees of consolidated sponsored
	funds and consolidated CLO entities(1)		1,971		1,404		1,925		40		2
Non-management expenses of consolidated
	sponsored funds(2)		922		942		1,287		(2)		(28)
Accelerated stock-based compensation expense
	related to the proposed acquisition of Eaton Vance
	by Morgan Stanley(3)		5,702		145,993		-		(96)		NM
Other compensation expenses related to the proposed
	acquisition of Eaton Vance by Morgan Stanley(4)		33,943		-		-		NM		NM
Other costs related to the proposed acquisition of
	Eaton Vance by Morgan Stanley(5)		41,398		8,458		-		389		NM
Adjusted operating income		$	163,458	$	143,141	$	137,931		14		19
Operating margin			16.3	%	(3.0)	%	29.8	%	NM		(45)
Adjusted operating margin			33.3	%	31.6	%	30.3	%	5		10

 

					Attachment 2 (continued)
Reconciliation of income (loss) before income taxes and equity in net income (loss) of affiliates to adjusted income before income taxes and equity in net income (loss) of affiliates and income tax expense (benefit) to adjusted income tax expense:
(in thousands, except as noted)
		Three Months Ended
									%		%
									Change		Change
									Q1 2021		Q1 2021
		January 31,		October 31,		January 31,			vs.		vs.
		2021		2020		2020			Q4 2020		Q1 2020
Income (loss) before income taxes and equity in net
	income (loss) of affiliates	$	120,718	$	(20,747)	$	143,088		NM	%	(16)	%
Management fees of consolidated sponsored
	funds and consolidated CLO entities, pre-tax(1)		1,971		1,404		1,925		40		2
Non-management expenses of consolidated
	sponsored funds, pre-tax(2)		922		942		1,287		(2)		(28)
Accelerated stock-based compensation expense
	related to the proposed acquisition of Eaton
	Vance by Morgan Stanley, pre-tax(3)		5,702		145,993		-		(96)		NM
Other compensation expenses related to the
	proposed acquisition of Eaton Vance by
	Morgan Stanley, pre-tax(4)		33,943		-		-		NM		NM
Other costs related to the proposed acquisition of
	Eaton Vance by Morgan Stanley, pre-tax(5)		41,398		8,458		-		389		NM
Net gains and other investment income related
	to consolidated sponsored funds and other
	seed capital investments, pre-tax(6)		(24,298)		(3,861)		(13,811)		529		76
Other (income) expense of consolidated CLO
	entities, pre-tax(7)		(23,301)		5,285		1,833		NM		NM
Adjusted income before income taxes and equity
	in net income (loss) of affiliates	$	157,055	$	137,474	$	134,322		14		17
Income tax expense (benefit)		$	9,009	$	(7,594)	$	32,578		NM	%	(72)	%
Management fees of consolidated sponsored
	funds and consolidated CLO entities(1)		505		359		497		41		2
Non-management expenses of consolidated
	sponsored funds(2)		236		241		332		(2)		(29)
Accelerated stock-based compensation expense
	related to the proposed acquisition of Eaton
	Vance by Morgan Stanley(3)		1,461		37,345		-		(96)		NM
Other compensation expenses related to the
	proposed acquisition of Eaton Vance by
	Morgan Stanley(4)		8,700		-		-		NM		NM
Other costs related to the proposed acquisition of
	Eaton Vance by Morgan Stanley(5)		286		2,164		-		(87)		NM
Net gains and other investment income related
	to consolidated sponsored funds and other
	seed capital investments(6)		(959)		(722)		(1,715)		33		(44)
Other (income) expense of consolidated CLO
	entities(7)		(5,972)		1,352		474		NM		NM
Net excess tax benefits from stock-based
	compensation plans(8)		27,281		2,872		4,860		850		461
Adjusted income tax expense		$	40,547	$	36,017	$	37,026		13		10
Effective income tax rate			7.5	%	36.6	%	22.8	%	(80)		(67)
Adjusted effective income tax rate			25.8	%	26.2	%	27.6	%	(2)		(7)

 

						Attachment 2 (continued)
Reconciliation of net income (loss) attributable to Eaton Vance Corp. shareholders to adjusted net income attributable to Eaton Vance Corp. shareholders and earnings (loss) per diluted share to adjusted earnings per diluted share:
(in thousands, except per share figures)
		Three Months Ended
									%		%
									Change		Change
									Q1 2021		Q1 2021
		January 31,		October 31,		January 31,			vs.		vs.
		2021		2020		2020			Q4 2020		Q1 2020
Net income (loss) attributable to Eaton Vance
	Corp. shareholders	$	89,914	$	(35,934)	$	103,985		NM	%	(14)	%
Management fees of consolidated sponsored
	funds and consolidated CLO entities, net of tax(1)		1,466		1,045		1,428		40		3
Non-management expenses of consolidated
	sponsored funds, net of tax(2)		686		701		955		(2)		(28)
Accelerated stock-based compensation expense
	related to the proposed acquisition of Eaton
	Vance by Morgan Stanley, net of tax(3)		4,241		108,648		-		(96)		NM
Other compensation expenses related to the
	proposed acquisition of Eaton Vance by
	Morgan Stanley, net of tax(4)		25,243		-		-		NM		NM
Other costs related to the proposed acquisition of
	Eaton Vance by Morgan Stanley, net of tax(5)		41,112		6,294		-		553		NM
Net gains and other investment income
	related to consolidated sponsored funds and
	other seed capital investments, net of tax(6)		(2,783)		(2,100)		(4,920)		33		(43)
Other (income) expense of consolidated CLO
	entities, net of tax(7)		(17,329)		3,933		1,359		NM		NM
Net excess tax benefit from stock-based(8)
	compensation plans		(27,281)		(2,872)		(4,860)		850		461
Impairment loss(9)			-		21,788		-		(100)		NM
Adjusted net income attributable to Eaton
	Vance Corp. shareholders	$	115,269	$	101,503	$	97,947		14		18
Earnings (loss) per diluted share		$	0.74	$	(0.31)	$	0.91		NM		(19)
Management fees of consolidated sponsored
	funds and consolidated CLO entities, net of tax		0.01		0.01		0.01		-		-
Non-management expenses of consolidated
	sponsored funds, net of tax		-		0.01		0.01		(100)		(100)
Accelerated stock-based compensation expense
	related to the proposed acquisition of Eaton
	Vance by Morgan Stanley, net of tax		0.03		0.94		-		(97)		NM
Other compensation expenses related to the
	proposed acquisition of Eaton Vance by
	Morgan Stanley, net of tax		0.21		-		-		NM		NM
Other costs related to the proposed acquisition of
	Eaton Vance by Morgan Stanley, net of tax		0.33		0.05		-		560		NM
Net gains and other investment income
	related to consolidated sponsored funds and
	other seed capital investments, net of tax		(0.02)		(0.02)		(0.04)		-		(50)
Other (income) expense of consolidated CLO
	entities, net of tax		(0.14)		0.03		0.01		NM		NM
Net excess tax benefit from stock-based
	compensation plans		(0.22)		(0.02)		(0.05)		NM		340
Impairment loss			-		0.19		-		(100)		NM
Adjusted earnings per diluted share		$	0.94	$	0.88	$	0.85		7		11

 

Notes to Reconciliations:

(1)   Represents management fees eliminated upon the consolidation of sponsored funds and CLO entities.

(2)   Represents expenses of consolidated sponsored funds.

(3)   Represents stock-based compensation expense accelerated pursuant to the terms of the merger agreement with Morgan Stanley and associated payroll taxes.

(4)   Other compensation pertains to bonus payments made to employees in lieu of the special divided on outstanding and unvested stock options and on shares of restricted stock withheld for tax purposes. Amount includes associated payroll taxes.

(5)   Primarily represents proxy solicitation fees and legal and consulting costs related to the proposed acquisition of Eaton Vance by Morgan Stanley.

(6)   Represents gains, losses and other investment income earned on investments in sponsored strategies, whether accounted for as consolidated funds, separate accounts or equity investments, as well as the gains and losses recognized on derivatives used to hedge these investments. Stated amounts are net of non-controlling interests where applicable.

(7)   Represents other income and expenses of consolidated CLO entities.

(8)   Represents net excess tax benefits from stock-based compensation plans. Amounts have been reduced for executive compensation limitations under Section 162(m) of the Internal Revenue Code.

(9)   Represents an impairment loss recognized on the Company's investment in 49 percent-owned affiliate Hexavest.

 

								Attachment 3
Components of net income attributable
to non-controlling and other beneficial interests
(in thousands)
		Three Months Ended
									%		%
									Change		Change
									Q1 2021		Q1 2021
		January 31,		October 31,		January 31,			vs.		vs.
		2021		2020		2020			Q4 2020		Q1 2020
Consolidated sponsored funds		$	20,555	$	1,040	$	7,177		NM	%	186	%
Majority-owned subsidiaries			1,868		948		1,673		97		12
Net income attributable to non-controlling
	and other beneficial interests	$	22,423	$	1,988	$	8,850		NM		153

						Attachment 4
	Consolidated Balance Sheet
	(in thousands, except share figures)
			January 31,			October 31,
			2021			2020
	Assets
	Cash and cash equivalents	$	606,101		$	799,384
	Management fees and other receivables		279,858			249,806
	Investments		558,376			783,246
	Assets of consolidated CLO entities:
	Cash		19,674			91,795
	Bank loans and other investments		399,234			2,064,133
	Other assets		7,555			28,044
	Deferred sales commissions		62,780			60,655
	Deferred income taxes		21,215			33,423
	Equipment and leasehold improvements, net		72,171			71,830
	Operating lease right-of-use assets		248,923			253,109
	Intangible assets, net		118,782			120,175
	Goodwill		259,681			259,681
	Loan to affiliate		5,000			5,000
	Other assets		140,376			129,017
	Total assets	$	2,799,726		$	4,949,298
	Liabilities, Temporary Equity and Permanent Equity
	Liabilities:
	Accrued compensation	$	111,577		$	246,129
	Accounts payable and accrued expenses		116,403			83,991
	Dividend payable		43,977			42,988
	Debt		621,556			621,348
	Operating lease liabilities		296,796			301,419
	Liabilities of consolidated CLO entities:
	Senior and subordinated note obligations		396,778			1,616,243
	Line of credit		-			43,625
	Other liabilities		13,058			399,562
	Other liabilities		61,045			47,454
	Total liabilities		1,661,190			3,402,759
	Commitments and contingencies
	Temporary Equity:
	Redeemable non-controlling interests		197,842			222,854
	Total temporary equity		197,842			222,854
	Permanent Equity:
	Voting Common Stock, par value $0.00390625 per share:
	Authorized, 1,280,000 shares
	Issued and outstanding, 464,716 and 464,716 shares, respectively		2			2
	Non-Voting Common Stock, par value $0.00390625 per share:
	Authorized, 190,720,000 shares
	Issued and outstanding, 117,010,114 and 114,196,609 shares, respectively		457			446
	Additional paid-in capital		285,910			176,461
	Notes receivable from stock option exercises		(6,288)			(7,086)
	Accumulated other comprehensive loss		(59,448)			(63,276)
	Retained earnings		720,061			1,217,138
	Total permanent equity		940,694			1,323,685
	Total liabilities, temporary equity and permanent equity	$	2,799,726		$	4,949,298

 

							Attachment 5
	Consolidated Assets under Management and Net Flows by Investment Mandate(1)
	(in millions)
			Three Months Ended
			January 31,			October 31,			January 31,
			2021			2020			2020
Equity assets – beginning of period(2)			$	135,174		$	133,008		$	131,895
		Sales and other inflows		7,248			5,904			7,806
		Redemptions/outflows		(7,034)			(7,016)			(6,182)
		Net flows		214			(1,112)			1,624
		Assets acquired(3)		-			2,163			-
		Exchanges		90			(101)			3
		Market value change		17,057			1,216			5,186
Equity assets – end of period			$	152,535		$	135,174		$	138,708
Fixed income assets – beginning of period(4)				73,271			68,955			62,378
		Sales and other inflows		8,757			8,546			5,086
		Redemptions/outflows		(5,298)			(3,952)			(3,947)
		Net flows		3,459			4,594			1,139
		Assets acquired(3)		-			104			-
		Exchanges		21			37			23
		Market value change		1,889			(419)			722
Fixed income assets – end of period			$	78,640		$	73,271		$	64,262
Floating-rate income assets – beginning of period				28,960			28,569			35,103
		Sales and other inflows		2,319			1,578			1,689
		Redemptions/outflows		(1,711)			(1,458)			(3,046)
		Net flows		608			120			(1,357)
		Exchanges		(19)			(22)			(27)
		Market value change		916			293			117
Floating-rate income assets – end of period			$	30,465		$	28,960		$	33,836
Alternative assets – beginning of period(5)				7,424			7,467			8,372
		Sales and other inflows		742			470			675
		Redemptions/outflows		(551)			(560)			(593)
		Net flows		191			(90)			82
		Exchanges		(5)			(1)			-
		Market value change		91			48			99
Alternative assets – end of period			$	7,701		$	7,424		$	8,553
Parametric custom portfolios assets – beginning of period(6)				176,435			175,039			164,895
		Sales and other inflows		12,356			8,680			9,745
		Redemptions/outflows		(9,927)			(7,359)			(6,221)
		Net flows		2,429			1,321			3,524
		Exchanges		9			86			1
		Market value change		23,776			(11)			6,898
Parametric custom portfolios assets – end of period			$	202,649		$	176,435		$	175,318
Parametric overlay services assets – beginning of period				94,473			94,350			94,789
		Sales and other inflows		37,035			21,238			21,313
		Redemptions/outflows		(23,935)			(20,879)			(20,199)
		Net flows		13,100			359			1,114
		Exchanges		(107)			-			-
		Market value change		4,745			(236)			1,611
Parametric overlay services assets – end of period			$	112,211		$	94,473		$	97,514
Total assets under management – beginning of period				515,737			507,388			497,432
		Sales and other inflows		68,457			46,416			46,314
		Redemptions/outflows		(48,456)			(41,224)			(40,188)
		Net flows		20,001			5,192			6,126
		Assets acquired(3)		-			2,267			-
		Exchanges		(11)			(1)			-
		Market value change		48,474			891			14,633
Total assets under management – end of period			$	584,201		$	515,737		$	518,191
(1)	Consolidated Eaton Vance Corp. See Attachment 11 for directly managed assets and flows of 49 percent-owned Hexavest, which are not included in the table above.
(2)	Includes balanced and other multi–asset mandates. Excludes equity mandates reported as Parametric custom portfolios.
(3)	Represents managed assets gained in the acquisition of the business assets of WaterOak Advisors, LLC (WaterOak) on October 16, 2020.
(4)	Includes cash management mandates. Excludes benchmark-based fixed income separate accounts reported as Parametric custom portfolios.
(5)	Consists of absolute return and commodity mandates.
(6)	Equity, fixed income and multi-asset separate accounts managed by Parametric for which customization is a primary feature; other Parametric strategies may also be customized.

 

							Attachment 6
	Consolidated Assets under Management and Net Flows by Investment Vehicle(1)
	(in millions)
			Three Months Ended
			January 31,			October 31,			January 31,
			2021			2020			2020
Funds – beginning of period			$	181,420		$	176,215		$	174,068
		Sales and other inflows		15,435			13,549			11,496
		Redemptions/outflows		(10,828)			(9,283)			(9,161)
		Net flows		4,607			4,266			2,335
		Assets acquired(2)		-			237			-
		Exchanges		10			(4)			-
		Market value change		15,000			706			4,136
Funds – end of period			$	201,037		$	181,420		$	180,539
Institutional separate accounts – beginning of period				163,677			163,818			173,331
		Sales and other inflows		39,658			25,051			23,605
		Redemptions/outflows		(27,903)			(25,070)			(25,449)
		Net flows		11,755			(19)			(1,844)
		Exchanges		(29)			63			-
		Market value change		14,263			(185)			3,771
Institutional separate accounts – end of period			$	189,666		$	163,677		$	175,258
Individual separate accounts – beginning of period				170,640			167,355			150,033
		Sales and other inflows		13,364			7,816			11,213
		Redemptions/outflows		(9,725)			(6,871)			(5,578)
		Net flows		3,639			945			5,635
		Assets acquired(2)		-			2,030			-
		Exchanges		8			(60)			-
		Market value change		19,211			370			6,726
Individual separate accounts – end of period			$	193,498		$	170,640		$	162,394
Total assets under management – beginning of period				515,737			507,388			497,432
		Sales and other inflows		68,457			46,416			46,314
		Redemptions/outflows		(48,456)			(41,224)			(40,188)
		Net flows		20,001			5,192			6,126
		Assets acquired(2)		-			2,267			-
		Exchanges		(11)			(1)			-
		Market value change		48,474			891			14,633
Total assets under management – end of period			$	584,201		$	515,737		$	518,191
(1)	Consolidated Eaton Vance Corp. See Attachment 11 for directly managed assets and flows of 49 percent–owned Hexavest, which are not included in the table above.
(2)	Represents managed assets gained in the acquisition of the business assets of WaterOak on October 16, 2020.

 

												Attachment 7
	Consolidated Assets under Management by Investment Mandate(1)
	(in millions)
				January 31,			October 31,		%			January 31,		%
				2021			2020		Change			2020		Change
Equity(2)			$	152,535		$	135,174		13%		$	138,708		10%
Fixed income(3)				78,640			73,271		7%			64,262		22%
Floating-rate income				30,465			28,960		5%			33,836		-10%
Alternative(4)				7,701			7,424		4%			8,553		-10%
Parametric custom portfolios(5)				202,649			176,435		15%			175,318		16%
Parametric overlay services				112,211			94,473		19%			97,514		15%
Total			$	584,201		$	515,737		13%		$	518,191		13%
(1)	Consolidated Eaton Vance Corp. See Attachment 11 for directly managed assets and flows of 49 percent–owned Hexavest, which are not included in the table above.
(2)	Includes balanced and other multi–asset mandates. Excludes equity mandates reported as Parametric custom portfolios.
(3)	Includes cash management mandates. Excludes benchmark-based fixed income separate accounts reported as Parametric custom portfolios.
(4)	Consists of absolute return and commodity mandates.
(5)	Equity, fixed income and multi-asset separate accounts managed by Parametric for which customization is a primary feature; other Parametric strategies may also be customized.
												Attachment 8
	Consolidated Assets under Management by Investment Vehicle(1)
	(in millions)
				January 31,			October 31,		%			January 31,		%
				2021			2020		Change			2020		Change
Open-end funds			$	120,161		$	108,576		11%		$	108,290		11%
Closed-end funds				24,793			23,098		7%			24,873		0%
Private funds(2)				56,083			49,746		13%			47,376		18%
Institutional separate accounts				189,666			163,677		16%			175,258		8%
Individual separate accounts				193,498			170,640		13%			162,394		19%
Total			$	584,201		$	515,737		13%		$	518,191		13%
(1)	Consolidated Eaton Vance Corp. See Attachment 11 for directly managed assets and flows of 49 percent–owned Hexavest, which are not included in the table above.
(2)	Includes privately offered equity, fixed and floating-rate income, and alternative funds and CLO entities.
												Attachment 9
	Consolidated Assets under Management by Investment Affiliate(1)(2)
	(in millions)
				January 31,			October 31,		%			January 31,		%
				2021			2020		Change			2020		Change
	Eaton Vance Management(3)(4)		$	169,278		$	154,394		10%		$	149,994		13%
	Parametric			356,621			310,183		15%			320,848		11%
	Atlanta Capital			27,698			24,963		11%			25,552		8%
	Calvert(5)			30,604			26,197		17%			21,797		40%
	Total		$	584,201		$	515,737		13%		$	518,191		13%
(1)	Consolidated Eaton Vance Corp. See Attachment 11 for directly managed assets and flows of 49 percent-owned Hexavest, which are not included in the table above.
(2)	The Company's policy for reporting managed assets of investment portfolios overseen by multiple Eaton Vance affiliates is to base the classification on the strategy's primary identity.
(3)	Includes managed assets of Eaton Vance-sponsored funds and separate accounts managed by Hexavest and unaffiliated third-party advisers under Eaton Vance supervision.
(4)	Includes managed assets gained in the acquisition of the business assets of WaterOak on October 16, 2020.
(5)	Includes managed assets of Calvert Equity Fund, which is sub-advised by Atlanta Capital, and Calvert-sponsored funds managed by unaffiliated third-party advisers under Calvert supervision.

 

	Attachment 10
	Average Annualized Management Fee Rates by Investment Mandate(1)(2)
	(in basis points on average managed assets)
		Three Months Ended
					%	%
					Change	Change
					Q1 2021	Q1 2021
		January 31,	October 31,	January 31,	vs.	vs.
		2021	2020	2020	Q4 2020	Q1 2020
	Equity(3)	57.3	56.4	57.0	2%	1%
	Fixed income(4)	40.2	40.4	41.4	0%	-3%
	Floating-rate income	48.9	49.1	49.9	0%	-2%
	Alternative(5)	68.3	70.5	64.5	-3%	6%
	Parametric custom portfolios(6)	16.0	15.5	15.2	3%	5%
	Parametric overlay services	4.8	5.1	4.9	-6%	-2%
	Total	30.4	30.5	30.8	0%	-1%
(1)	Excludes performance-based fees, which were $0.2 million in the three months ended January 31, 2021, $1.5 million in the three months ended October 31, 2020 and $0.2 million in the three months ended January 31, 2020.
(2)	Excludes management fees earned on consolidated investment entities that are eliminated in consolidation, which were $2.0 million in the three months ended January 31, 2021, $1.4 million in the three months ended October 31, 2020 and $1.9 million in the three months ended January 31, 2020. The managed assets and flows of consolidated investment entities are reflected in our consolidated totals.
(3)	Includes balanced and other multi–asset mandates. Excludes equity mandates reported as Parametric custom portfolios.
(4)	Includes cash management mandates. Excludes benchmark-based fixed income separate accounts reported as Parametric custom portfolios.
(5)	Consists of absolute return and commodity mandates.
(6)	Equity, fixed income and multi-asset separate accounts managed by Parametric for which customization is a primary feature; other Parametric strategies may also be customized.

 

	Attachment 11
	Hexavest Inc. Assets under Management and Net Flows
	(in millions)
				Three Months Ended
				January 31,			October 31,			January 31,
				2021			2020			2020
Eaton Vance distributed:
Eaton Vance sponsored funds – beginning of period(1)				$	56		$	93		$	152
		Sales and other inflows			1			1			3
		Redemptions/outflows			(7)			(37)			(26)
		Net flows			(6)			(36)			(23)
		Market value change			7			(1)			1
Eaton Vance sponsored funds – end of period				$	57		$	56		$	130
Eaton Vance distributed separate accounts –
	beginning of period(2)			$	479		$	584		$	1,563
		Sales and other inflows			-			-			6
		Redemptions/outflows			(265)			(94)			(22)
		Net flows			(265)			(94)			(16)
		Market value change			66			(11)			19
Eaton Vance distributed separate accounts – end of period				$	280		$	479		$	1,566
Total Eaton Vance distributed – beginning of period				$	535		$	677		$	1,715
		Sales and other inflows			1			1			9
		Redemptions/outflows			(272)			(131)			(48)
		Net flows			(271)			(130)			(39)
		Market value change			73			(12)			20
Total Eaton Vance distributed – end of period				$	337		$	535		$	1,696
Hexavest directly distributed – beginning of period(3)				$	5,311		$	6,129		$	11,640
		Sales and other inflows			13			23			96
		Redemptions/outflows			(1,933)			(751)			(554)
		Net flows			(1,920)			(728)			(458)
		Market value change			607			(90)			114
Hexavest directly distributed – end of period				$	3,998		$	5,311		$	11,296
Total Hexavest managed assets – beginning of period				$	5,846		$	6,806		$	13,355
		Sales and other inflows			14			24			105
		Redemptions/outflows			(2,205)			(882)			(602)
		Net flows			(2,191)			(858)			(497)
		Market value change			680			(102)			134
Total Hexavest managed assets – end of period				$	4,335		$	5,846		$	12,992
(1)	Managed assets and flows of Eaton Vance-sponsored funds for which Hexavest is adviser or sub-adviser. Eaton Vance receives management fees (and in some cases also distribution fees) on these assets, which are included in the consolidated assets under management, flows and average annualized management fee rates reported in Attachments 5 through 10.
(2)	Managed assets and flows of Eaton Vance-distributed separate accounts managed by Hexavest. Eaton Vance receives distribution fees, but not management fees, on these assets, which are not included in the consolidated assets under management, flows and average annualized management fee rates reported in Attachments 5 through 10.
(3)	Managed assets and flows of pre-transaction Hexavest clients and post-transaction Hexavest clients in Canada. Eaton Vance receives no management fees or distribution fees on these assets, which are not included in the consolidated assets under management, flows and average annualized management fee rates reported in Attachments 5 through 10.

 

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SOURCE Eaton Vance Corp.

FAQ

What were Eaton Vance's earnings for Q1 FY2021?

Eaton Vance reported earnings of $0.74 per diluted share for Q1 FY2021.

How did Eaton Vance's adjusted earnings change in Q1 FY2021?

Adjusted earnings reached a record $0.94 per diluted share, an increase of 11% from Q1 FY2020.

What were Eaton Vance's consolidated net inflows for Q1 FY2021?

Consolidated net inflows for Q1 FY2021 totaled $20 billion.

What is Eaton Vance's total consolidated assets under management as of January 31, 2021?

Total consolidated assets under management reached $584.2 billion.

How did operating expenses change for Eaton Vance in Q1 FY2021?

Operating expenses increased by 29% compared to Q1 FY2020.