EATON VANCE CORP - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations

(Edgar Glimpses Via Acquire Media NewsEdge) This Item includes statements that are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding our expectations, intentions or strategies regarding the future. All statements, other than statements of historical facts, included in this Form 10-Q regarding our financial position, business strategy and other plans and objectives for future operations are forward-looking statements. The terms "may", "will", "could", "anticipate", "plan", "continue", "project", "intend", "estimate", "believe", "expect" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. Although we believe that the assumptions and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that they will prove to have been correct or that we will take any actions that may now be planned. Certain important factors that could cause actual results to differ materially from our expectations are disclosed in the "Risk Factors" section of this Form 10-Q and Item 1A in our latest annual report on Form 10-K.

All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by such factors. We do not assume any obligation to update any forward-looking statements. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, futureevents or otherwise.

General 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 powerful marketing, distribution and customer service organization. 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.

We are a market leader in a number of investment areas, including value equity, equity income, quality core and growth equity, systematic emerging market equity, floating-rate bank loan, municipal bond, investment grade, global and high-yield bond investing. Through our subsidiary Parametric Portfolio Associates LLC ("Parametric") we offer a leading range of engineered portfolio implementation services, including tax-managed core and specialty index strategies, futures- and options-based portfolio overlays and centralized portfolio management of multi-manger portfolios. 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 and credit quality range and encompass both taxable and tax-free investments. We offer a range of alternative investment strategies, including commodity-based investments and a spectrum of absolute return strategies. As of January 31, 2013, we had $247.8 billion in assets under management.

Our principal retail marketing strategy is to distribute funds and separately managed accounts through financial intermediaries in the advice channel. We have a broad reach in this marketplace, with distribution partners including national and regional broker-dealers, independent broker-dealers, independent financial advisory firms, banks and insurance companies. We support these distribution partners with a team of approximately 135 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. Through our wholly owned affiliates and consolidated subsidiaries we manage investments for a broad range of clients in the institutional and high-net-worth global marketplace, 34 including corporations, sovereign wealth funds, endowments, foundations, family offices and public and private employee retirement plans.

Our revenue is derived primarily from investment advisory, administrative, distribution and service fees received from Eaton Vance funds and investment advisory 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 shares or 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, facilities expense and information technology expense.

Our discussion and analysis of our financial condition and results of operations 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.

Market Developments The first quarter of fiscal 2013 was a period of favorable market action, as reflected by the 6.7 percent total return of the S&P 500 Index. Over the last twelve months, the S&P 500 Index has returned 16.8 percent.

The Company's ending consolidated assets under management increased by $48.3 billion, or 24 percent, in the first quarter to $247.8 billion on January 31, 2013, reflecting the acquisition of The Clifton Group Investment Management Company ("Clifton") on December 31, 2012, strong net inflows and favorable market action. Average assets under management increased sequentially by $19.6 billion, or 10 percent, to $216.2 billion in the first quarter, reflecting one month of Clifton ownership and the partial effects of the quarter's net inflows and market appreciation.

The Clifton acquisition, as anticipated, had a significant impact on both our overall effective fee rate and our effective investment advisory and administrative fee rate in the quarter. Upon acquisition, the Clifton business had an overall effective fee rate of approximately 7 basis points. The acquisition drove our overall effective fee rate to 59 basis points in the first quarter of fiscal 2013 from 63 basis points in the first quarter of fiscal 2012.

Our effective investment advisory and administrative fee rate similarly decreased to 49 basis points in the first quarter of fiscal 2013 from 51 basis points in the first quarter of last year.

Consolidated Assets under Management Consolidated assets under management of $247.8 billion on January 31, 2013 increased 29 percent from the $191.7 billion reported on January 31, 2012.

Long-term net inflows for the last twelve months reflect long-term fund net outflows of $0.4 billion, institutional separate account net inflows of $5.3 billion, high-net-worth separate account net inflows of $1.0 billion, and retail managed account net inflows of $0.7 billion. Clifton assets acquired contributed $34.8 billion, while net price appreciation in managed assets increased assets under management by $15.0 billion. A decrease in cash management assets reduced assets under management by $0.4 billion.

35 We report managed assets and flow data by investment mandate. The "Alternative" category includes a range of absolute return strategies, as well as commodity- and currency-linked investments. In the first quarter of fiscal 2013, we added a new category, "Implementation Services," to reflect the growing importance to our business of Parametric's tax-managed core, centralized portfolio management and specialty index businesses and the former Clifton Group's futures- and options-based overlay services.

Consolidated Assets under Management by Investment Mandate(1)(4) January 31, (in millions) 2013 % of Total 2012 % of Total % Change Equity(2) $ 86,518 35 % $ 84,957 44 % 2 % Fixed income 49,679 20 % 45,514 24 % 9 % Floating-rate income 28,656 11 % 24,376 13 % 18 % Alternative 14,345 6 % 10,462 6 % 37 %Implementation services(3) 68,420 28 % 25,864 13 % 165 % Cash management 155 0 % 533 0 % -71 % Total $ 247,773 100 % $ 191,706 100 % 29 % (1) Consolidated Eaton Vance Corp. See table on page 39 for directly managed assets and flows of 49 percent-owned Hexavest Inc.

(2) Balances include assets in balanced accounts holding income securities.(3) Balances include amounts reclassified from equity for the prior year period.

(4) Assets under management for which we estimate fair value are not material to the total value of the assets we manage.

Equity and implementation services assets under management included $55.7 billion and $49.5 billion of assets managed for after-tax returns on January 31, 2013 and 2012, respectively. Fixed income assets included $29.6 billion and $27.2 billion of tax-exempt municipal bond assets on January 31, 2013 and 2012, respectively.

Net inflows totaled $5.4 billion in the first quarter of fiscal 2013 compared to net outflows of $1.1 billion in the first quarter of fiscal 2012. Long-term fund net inflows of $2.2 billion in the first quarter of fiscal 2013 reflect gross inflows of $9.1 billion, net of redemptions of $6.9 billion. Long-term fund net outflows of $1.2 billion in the first quarter of fiscal 2012 reflect gross inflows of $6.9 billion, net of redemptions of $8.1 billion.

Separate account net inflows totaled $3.2 billion in the first quarter of fiscal 2013 compared to net inflows of $0.1 billion in the first quarter of fiscal 2012. Institutional separate account net inflows totaled $3.0 billion in the first quarter of fiscal 2013 compared to net outflows of $0.4 billion in the first quarter of fiscal 2012, reflecting gross inflows of $6.8 billion and $1.8 billion in the first quarter of fiscal 2013 and 2012, respectively, net of withdrawals of $3.8 billion and $2.2 billion, respectively. High-net-worth account net inflows totaled $0.2 billion in the first quarter of fiscal 2013 compared to $0.5 billion in the first quarter of fiscal 2012, reflecting gross inflows of $1.4 billion and $1.0 billion in the first quarter of fiscal 2013 and 2012, respectively, net of withdrawals of $1.2 billion and $0.6 billion, respectively. Retail managed account gross inflows of $2.2 billion were offset by withdrawals of $2.2 billion in the first quarter of fiscal 2013, while retail managed account gross inflows of $1.7 billion were offset by withdrawals of $1.7 billion in the first quarter of fiscal 2012.

The following tables summarize our assets under management and asset flows by investment mandate and investment vehicle for the three months ended January 31, 2013 and 2012: 36 Consolidated Net Flows by Investment Mandate(1) Three Months Ended January 31, % (in millions) 2013 2012 ChangeEquity assets - beginning of period(2) $ 80,782 $ 84,281 -4 % Sales and other inflows 4,496 4,777 -6 % Redemptions/outflows (4,959 ) (6,476 ) -23 % Net flows (463 ) (1,699 ) -73 % Assets acquired(4) 1,572 - NM (3) Exchanges (8 ) (8 ) 0 % Market value change 4,635 2,383 95 % Equity assets - end of period $ 86,518 $ 84,957 2 %Fixed income assets - beginning of period 49,003 43,708 12 % Sales and other inflows 3,377 2,627 29 % Redemptions/outflows (3,375 ) (2,453 ) 38 % Net flows 2 174 -99 % Assets acquired(4) 472 - NM Exchanges (22 ) 40 NM Market value change 224 1,592 -86 %Fixed income assets - end of period $ 49,679 $ 45,514 9 % Floating-rate income assets - beginning of period 26,388 24,322 8 % Sales and other inflows 3,260 1,460 123 % Redemptions/outflows (1,359 ) (1,289 ) 5 % Net flows 1,901 171 NM Exchanges 33 (8 ) NM Market value change 334 (109 ) NMFloating-rate income assets - end of period $ 28,656 $ 24,376 18 % Alternative assets - beginning of period 12,864 10,650 21 % Sales and other inflows 1,809 1,105 64 % Redemptions/outflows (1,055 ) (1,202 ) -12 % Net flows 754 (97 ) NM Assets acquired(4) 650 - NM Exchanges (13 ) (38 ) -66 % Market value change 90 (53 ) NMAlternative assets - end of period $ 14,345 $ 10,462 37 % Implementation services assets - beginning of period(5) 30,302 24,574 23 % Sales and other inflows 6,479 1,527 324 % Redemptions/outflows (3,316 ) (1,196 ) 177 % Net flows 3,163 331 856 % Assets acquired(4) 32,064 - NM Market value change 2,891 959 201 %Implementation services assets - end of period $ 68,420 $ 25,864 165 % Long-term assets - beginning of period 199,339 187,535 6 % Sales and other inflows 19,421 11,496 69 % Redemptions/outflows (14,064 ) (12,616 ) 11 % Net flows 5,357 (1,120 ) NM Assets acquired(4) 34,758 - NM Exchanges (10 ) (14 ) -29 % Market value change 8,174 4,772 71 %Total long-term assets - end of period $ 247,618 $ 191,173 30 % Cash management fund assets - end of period 155 533 -71 % Total assets under management - end of period $ 247,773 $ 191,706 29 % (1) Consolidated Eaton Vance Corp. See table on page 39 for directly managed assets and flows of 49 percent-owned Hexavest Inc.

(2) Balances include assets in balanced accounts holding income securities.

(3) Not meaningful ("NM") (4) Balances represent Clifton assets acquired on December 31, 2012.

(5) Balances include amounts reclassified from equity for the prior year period.

37 Consolidated Net Flows by Investment Vehicle(1) Three Months Ended January 31, % (in millions) 2013 2012 ChangeLong-term fund assets - beginning of period $ 113,249 $ 111,705 1 % Sales and other inflows 9,079 6,905 31 % Redemptions/outflows (6,876 ) (8,113 ) -15 % Net flows 2,203 (1,208 ) NM Assets acquired(2) 638 - NM Exchanges (19 ) (14 ) 36 % Market value change 3,091 2,181 42 %Long-term fund assets - end of period $ 119,162 $ 112,664 6 % Institutional separate account assets - beginning of period 43,338 38,003 14 % Sales and other inflows 6,785 1,824 272 % Redemptions/outflows (3,821 ) (2,215 ) 73 % Net flows 2,964 (391 ) NM Assets acquired(2) 34,120 - NM Exchanges 5 (29 ) NM Market value change 2,923 1,143 156 % Institutional separate account assets - end of period $ 83,350 $ 38,726 115 % High-net-worth separate account assets - beginning of period 15,036 13,256 13 % Sales and other inflows 1,379 1,021 35 % Redemptions/outflows (1,198 ) (552 ) 117 % Net flows 181 469 -61 % Exchanges (15 ) (957 ) -98 % Market value change 1,043 487 114 % High-net-worth separate account assets - end of period $ 16,245 $ 13,255 23 % Retail managed account assets - beginning of period 27,716 24,571 13 % Sales and other inflows 2,178 1,746 25 % Redemptions/outflows (2,169 ) (1,736 ) 25 % Net flows 9 10 -10 % Exchanges 19 986 -98 % Market value change 1,117 961 16 %Retail managed account assets - end of period $ 28,861 $ 26,528 9 % Total long-term assets - beginning of period 199,339 187,535 6 % Sales and other inflows 19,421 11,496 69 % Redemptions/outflows (14,064 ) (12,616 ) 11 % Net flows 5,357 (1,120 ) NM Assets acquired(2) 34,758 - NM Exchanges (10 ) (14 ) -29 % Market value change 8,174 4,772 71 %Total long-term assets - end of period $ 247,618 $ 191,173 30 % Cash management fund assets - end of period 155 533 -71 % Total assets under management - end of period $ 247,773 $ 191,706 29 % (1) Consolidated Eaton Vance Corp. See page 39 for directly managed assets and flows of 49 percent-owned Hexavest Inc.

(2) Balances represent Clifton assets acquired on December 31, 2012.

38 The following table summarizes our assets under management by investment affiliate for the three months ended January 31, 2013 and 2012: Consolidated Assets under Management by Investment Affiliate (1) Three Months Ended January 31, (in millions) 2013 2012 % Change Eaton Vance Management (2) $ 134,554 $ 133,538 1 % Parametric 96,725 44,179 119 % Atlanta Capital 16,494 13,989 18 % Total $ 247,773 $ 191,706 29 % (1) Consolidated Eaton Vance Corp. See below for directly managed assets and flows of 49 percent-owned Hexavest Inc.

(2) Includes managed assets of wholly owned subsidiaries Eaton Vance Investment Counsel and Fox Asset Management LLC, as well as certain Eaton Vance-sponsored funds and accounts managed by Hexavest and unaffiliated third-party advisors under Eaton Vance supervision.

As of January 31, 2013, 49 percent-owned affiliate Hexavest Inc. ("Hexavest") managed $14.5 billion of client assets, an increase of 20 percent from the $12.1 billion of managed assets on October 31, 2012. Net inflows into Hexavest-managed funds and separate accounts were $1.9 billion in the first quarter of fiscal 2013. Other than Eaton Vance-sponsored funds for which Hexavest is advisor or sub-advisor, 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 three months ended January 31, 2013: Hexavest Assets under Management and Net Flows Three Months Ended January 31, 2013 Eaton Vance-Distributed Eaton Vance- Hexavest Eaton Vance- Distributed Total Directly Sponsored Separate Eaton Vance- (in millions) Total Distributed(1) Funds(2) Accounts(3) Distributed Managed assets - beginning of period $ 12,110 $ 12,073 $ 37 $ - $ 37 Sales and other inflows 2,162 920 94 1,148 1,242 Redemptions/outflows (268 ) (263 ) (5 ) - (5 ) Net flows 1,894 657 89 1,148 1,237 Market value change 540 494 9 37 46 Managed assets - end of period $ 14,544 $ 13,224 $ 135 $ 1,185 $ 1,320 (1) Managed assets and flows of pre-transaction Hexavest clients and post-transaction Hexavest clients in Canada. Eaton Vance receives no management or distribution revenue on these assets, which are not included in the Eaton Vance consolidated results.

(2) Managed assets and flows of Eaton Vance-sponsored pooled investment vehicles for which Hexavest is advisor or sub-advisor. Eaton Vance receives management and/or distribution revenue on these assets, which are included in the Eaton Vance consolidated results.

(3) Managed assets and flows of Eaton Vance-distributed separate accounts managed by Hexavest. Eaton Vance receives distribution revenue, but not management revenue, on these assets, which are not included in the Eaton Vance consolidated results.

39 Consolidated Assets under Management by Asset Class(1) January 31, (in millions) 2013 % of Total 2012 % of Total % Change Open-end funds: Class A $ 31,058 13 % $ 32,295 17 % -4 % Class B 911 0 % 1,220 1 % -25 % Class C 9,841 4 % 9,695 5 % 2 % Class I 33,601 14 % 28,027 15 % 20 % Class R 310 0 % 351 0 % -12 % Other(2) 716 0 % 579 0 % 24 % Total open-end funds 76,437 31 % 72,167 38 % 6 % Private funds(3) 19,131 8 % 17,895 9 % 7 % Closed-end funds 23,749 9 % 23,135 12 % 3 % Total fund assets 119,317 48 % 113,197 59 % 5 %Institutional account assets 83,350 34 % 38,726 20 % 115 % High-net-worth account assets 16,245 6 % 13,255 7 % 23 % Retail managed account assets 28,861 12 % 26,528 14 % 9 % Total separate account assets 128,456 52 % 78,509 41 % 64 % Total $ 247,773 100 % $ 191,706 100 % 29 % (1) Consolidated Eaton Vance Corp. See table on page 39 for directly managed assets and flows of 49 percent-owned Hexavest Inc.

(2) Includes other classes of Eaton Vance open-end funds.

(3) Includes privately offered equity, fixed income and floating-rate bank loan funds and CLO entities.

We currently sell our sponsored open-end mutual funds under four primary pricing structures: front-end load commission ("Class A"); level-load commission ("Class C"); institutional no-load ("Class I"), and retirement plan no-load ("Class R").

We waive the front-end sales load on Class A shares under certain circumstances.

In such cases, the shares are sold at net asset value.

Fund assets represented 48 percent of total assets under management on January 31, 2013, down from 59 percent on January 31, 2012, while separate account assets, which include institutional, high-net-worth and retail managed account assets, increased to 52 percent of total assets under management on January 31, 2013 from 41 percent on January 31, 2012. Fund assets under management increased $5.9 billion, or 5 percent, from $113.4 billion on October 31, 2012, reflecting 8 percent organic growth and market appreciation of $3.1 billion. Separate account assets under management increased $42.4 billion, or 49 percent, from $86.1 billion on October 31, 2012, reflecting $34.8 billion of managed assets gained in the Clifton acquisition, 15 percent organic growth and market appreciation of $5.1 billion.

Average assets under management presented in the following table represent a monthly average by asset class. This table is intended to provide information useful in the analysis of our asset-based revenue and distribution expenses.

With the exception of our separate account investment advisory fees, which are generally calculated as a percentage of either beginning, average or ending quarterly assets, our investment advisory, administrative, distribution and service fees, as well as certain expenses, are generally calculated as a percentage of average daily assets.

40 Consolidated Average Assets under Management by Asset Class(1) Three Months Ended January 31, % (in millions) 2013 2012 Change Open-end funds: Class A $ 30,556 $ 32,562 -6 % Class B 932 1,239 -25 % Class C 9,716 9,595 1 % Class I 31,609 26,978 17 % Class R 307 359 -14 % Other(2) 684 596 15 % Total open-end funds 73,804 71,329 3 % Private funds(3) 18,361 17,532 5 % Closed-end funds 23,385 22,729 3 % Total fund assets 115,550 111,590 4 % Institutional account assets 56,969 37,555 52 % High-net-worth account assets 15,668 12,769 23 % Retail managed account assets 28,037 25,477 10 % Total separate account assets 100,674 75,801 33 % Total $ 216,224 $ 187,391 15 % (1) Assets under management attributable to acquisitions that closed during the relevant periods are included on a weighted average basis for the period from their respective closing dates.

(2) Includes other classes of Eaton Vance open-end funds.

(3) Includes privately offered equity, fixed income and floating-rate bank loan funds and CLO entities.

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.

We define adjusted net income attributable to Eaton Vance Corp. shareholders and adjusted earnings per diluted share as net income attributable to Eaton Vance Corp. shareholders and earnings per diluted share, respectively, adjusted to exclude changes in the estimated redemption value of non-controlling interests redeemable at other than fair value ("non-controlling interest value adjustments"), closed-end fund structuring fees and other items management deems non-recurring (such as special dividends) or non-operating in nature. Neither adjusted net income attributable to Eaton Vance Corp. shareholders nor adjusted earnings per diluted share should be construed to be a substitute for, or superior to, net income attributable to Eaton Vance Corp. shareholders nor earnings per diluted share computed in accordance with U.S. GAAP. However, our management and Board of Directors look at these adjusted numbers as a measure of underlying performance, since the excluded items generally do not reflect normal operating performance.

41 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 three months ended January 31, 2013 and 2012: Three Months Ended January 31, %(in thousands, except per share data) 2013 2012 Change Net income attributable to Eaton Vance Corp.

shareholders $ 49,805 $ 47,271 5 % Non-controlling interest value adjustments(1) 10,647 8,102 31 % Adjusted net income attributable to Eaton Vance Corp. shareholders $ 60,452 $ 55,373 9 % Earnings per diluted share $ 0.38 $ 0.40 -5 %Non-controlling interest value adjustments 0.09 0.07 29 % Special dividend adjustment(2) 0.03 - NM Adjusted earnings per diluted share $ 0.50 $ 0.47 6 % (1) Please see page 49, "Net Income Attributable to Non-controlling and Other Beneficial Interests," for a further discussion of the non-controlling interest value adjustment referenced above.

(2) Reflects the impact of the special dividend on our earnings per diluted share calculation due to the disproportionate allocation of distributions in excess of earnings to common shareholders under the two-class method.

We reported net income attributable to Eaton Vance Corp. shareholders of $49.8 million, or $0.38 per diluted share, in the first quarter of fiscal 2013 compared to net income attributable to Eaton Vance Corp. shareholders of $47.3 million, or $0.40 per diluted share, in the first quarter of fiscal 2012. We reported adjusted net income attributable to Eaton Vance Corp. shareholders of $60.5 million, or $0.50 per diluted share, in the first quarter of fiscal 2013 compared to adjusted net income attributable to Eaton Vance Corp. shareholders of $55.4 million, or $0.47 per diluted share, in the first quarter of fiscal 2012. The change in net income and adjusted net income attributable to Eaton Vance Corp. shareholders can be primarily attributed to the following: · An increase in revenue of $22.9 million, or 8 percent, primarily due to a 15 percent increase in average assets under management, offset by a decrease in our annualized effective fee rate to 59 basis points in the first quarter of fiscal 2013 from 63 basis points in the first quarter of fiscal 2012 as a result of the Clifton acquisition.

· An increase in expenses of $15.1 million, or 7 percent, reflecting increases in compensation, distribution, fund-related and other expenses, offset by lower service fees and reduced amortization of deferred sales commissions. · A $3.0 million decrease in gains and other investment income, reflecting a decrease in investment gains and investment income earned on our seed capital portfolio.

· An $8.4 million decrease in non-operating income (expense) of the Company's consolidated CLO entity which can be attributed to a decline in the performance of the consolidated CLO entity.

42 · An increase in income taxes of $0.8 million, or 2 percent, reflecting an increase in the Company's effective tax rate for the quarter, offset by the 4 percent decrease in income before taxes. The increase in the Company's effective tax rate relates in part to the inclusion in income before taxes of consolidated CLO entity loss attributable to other beneficial interest holders and therefore not subject to tax recovery by the Company.

· An increase in equity in net income of affiliates, net of tax, of $1.7 million, primarily reflecting our 49 percent equity interest in Hexavest.

· A decrease in net income attributable to non-controlling and other beneficial interests of $5.3 million, primarily reflecting a decrease in consolidated CLO entity net income attributed to other beneficial interest holders, offset by an increase in the estimated redemption value of non-controlling interests in our majority-owned subsidiary Parametric.

Weighted average diluted shares outstanding increased by 4.2 million shares, or 4 percent, in the first quarter of fiscal 2013 over the first quarter of fiscal 2012. The change reflects an increase in the total number of shares outstanding due to the exercise of employee stock options and an increase in the dilutive effect of in-the-money options resulting from the 32 percent increase in the average share price over the prior year period.

Revenue Our average overall effective fee rate (total revenue, excluding other revenue, as a percentage of average assets under management) was 59 basis points in the first quarter of fiscal 2013 compared to 63 basis points in the first quarter of fiscal 2012. As noted above, the decrease in our average overall effective fee rate can be primarily attributed to the acquisition of Clifton, whose business operates at a significantly lower overall effective fee rate.

The following table shows our investment advisory and administrative fees, distribution and underwriter fees, service fees and other revenue for the three months ended January 31, 2013 and 2012: Three Months Ended January 31, % (in thousands) 2013 2012 Change Investment advisory and administrative fees $ 263,281 $ 239,452 10 % Distribution and underwriter fees 22,751 22,515 1 % Service fees 31,130 32,299 -4 % Other revenue 1,355 1,340 1 % Total revenue $ 318,517 $ 295,606 8 % Investment advisory and administrative fees Investment advisory and administrative fees are determined by contractual agreements with our sponsored funds and separate accounts, and are generally based upon a percentage of the market value of assets under management. Net asset flows and changes in the market value of managed assets affect the amount of managed assets on which investment advisory and administrative fees are earned, while changes in asset mix among different investment mandates and products affect our average effective fee rate. Investment advisory and administrative fees represented 83 percent of total revenue in the first quarter of fiscal 2013 compared to 81 percent in the first quarter of fiscal 2012.

The increase in investment advisory and administrative fees of 10 percent, or $23.8 million, in the first quarter of fiscal 2013 from the same period a year earlier can be primarily attributed to the 15 percent increase in average assets under management, offset by lower average effective fee rates due primarilyto the shift in 43 product mix resulting from the Clifton acquisition. Fund assets, which had an average effective fee rate of 67 basis points in the first quarter of fiscal 2013, decreased to 48 percent of total assets under management on January 31, 2013 from 59 percent of total assets under management on January 31, 2012, while separately managed account assets, which had an average effective fee rate of 28 basis points in the first quarter of fiscal 2013, increased to 52 percent of total assets under management on January 31, 2013 from 41 percent of total assets under management on January 31, 2012.

Distribution and underwriter fees Distribution plan payments, which are made under contractual agreements with certain share classes of our sponsored funds and private funds, are calculated as a percentage of average assets under management. These fees fluctuate with both the level of average assets under management and the relative mix of assets. Underwriter commissions are earned on the sale of shares of our sponsored mutual funds on which investors pay a sales charge at the time of purchase (Class A share sales). Sales charges and underwriter commissions are waived or reduced on shareholder purchases that exceed specified minimum amounts and on certain categories of investors. Underwriter commissions fluctuate with the level of Class A share sales and the mix of Class A shares sold with and without sales charges.

Distribution plan payments decreased 2 percent, or $0.4 million, to $20.1 million in the first quarter of fiscal 2013 from the same period a year earlier, reflecting decreases in average Class B, Class R and certain private fund distribution fees, offset by an increase in Class A and Class C distribution fees.

The following table shows the total distribution payments with respect to our Class A, Class B, Class C, Class R and private funds for the three months ended January 31, 2013 and 2012: Three Months Ended January 31, % (in thousands) 2013 2012 Change Class A $ 212 $ 160 33 % Class B 1,553 2,075 -25 % Class C 17,222 16,976 1 % Class R 191 223 -14 % Private funds 895 1,043 -14 % Total distribution plan payments $ 20,073 $ 20,477 -2 % Underwriter fees and other distribution income increased to $2.7 million in the first quarter of fiscal 2013, an increase of 31 percent, or $0.6 million, over the same period a year earlier, primarily reflecting an increase of $0.2 million in underwriter fees received on sales of Class A shares and an increase of $0.4 million in contingent deferred sales charges received on certain Class A share redemptions.

Service fees Service fees, which are paid to Eaton Vance Distributors, Inc. ("EVD") pursuant to distribution or service plans adopted by our sponsored mutual funds, are calculated as a percent of average assets under management in specific mutual fund share classes (principally Classes A, B, C and R). Certain private funds also make service fee payments to EVD. Service fees are paid to EVD as principal underwriter or placement agent to the funds for service and/or the maintenance of shareholder accounts.

Service fee revenue decreased 4 percent, or $1.2 million, to $31.1 million in the first quarter of fiscal 2013 from the same period a year earlier, primarily reflecting a 4 percent decrease in average assets under management in funds and classes of funds subject to service fees.

44 Other revenue Other revenue, which consists primarily of sub-transfer agent fees, miscellaneous dealer income, custody fees and sublease income, was substantially unchanged in the first quarter of fiscal 2013 over the same period a year ago.

Expenses Operating expenses increased by 7 percent, or $15.1 million, in the first quarter of fiscal 2013 from the same period a year earlier, reflecting increases in compensation, distribution, fund-related and other expenses, offset by lower service fees and reduced amortization of deferred sales commissions as more fully described below.

The following table shows our operating expenses for the three months ended January 31, 2013 and 2012: Three Months Ended January 31, % (in thousands) 2013 2012 Change Compensation and related costs: Cash compensation $ 94,662 $ 80,286 18 % Stock-based compensation 14,167 16,397 -14 % Total compensation and related costs 108,829 96,683 13 % Distribution expense 33,889 32,328 5 % Service fee expense 28,264 28,673 -1 %Amortization of deferred sales commissions 4,783 5,820 -18 % Fund-related expenses 7,424 6,651 12 % Other expenses 34,648 32,631 6 % Total expenses $ 217,837 $ 202,786 7 % Compensation and related costs Compensation expense increased by $12.1 million in the first quarter of fiscal 2013 from the same quarter a year earlier, reflecting increases in sales-and operating income-based incentives, increases in base salaries and benefits and other compensation, offset by a decrease in stock-based compensation.

The following table shows our compensation and related costs for the three months ended January 31, 2013 and 2012: 45 Three Months Ended January 31, % (in thousands) 2013 2012 ChangeBase salaries and employee benefits $ 46,495 $ 42,105 10 % Stock-based compensation 14,167 16,397 -14 % Operating income-based incentives 30,752 26,827 15 % Sales and revenue-based incentives 15,590 9,840 58% Other compensation expense 1,825 1,514 21 % Total $ 108,829 $ 96,683 13 % Base salaries and employee benefits increased by 10 percent, or $4.4 million, primarily reflecting the Clifton acquisition, an increase in base compensation associated with higher headcount and annual merit increases, and increases in employee benefits and payroll taxes. Operating-income based incentives increased by 15 percent, or $3.9 million, primarily reflecting the Clifton acquisition and an 8 percent increase in pre-bonus adjusted operating income. Sales and revenue-based incentives increased by 58 percent, or $5.7 million, primarily due to the increase in gross sales and other inflows and an increase in institutional separate account revenue. Other compensation expense increased by 21 percent, or $0.3 million, reflecting higher severance costs and sign-on bonuses. Stock-based compensation decreased by 14 percent, or $2.2 million, reflecting revised retirement terms of newly granted employee stock options.

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 certain Class C share and closed-end funds, marketing support payments to our distribution partners and other discretionary marketing expenses.

The following table shows our distribution expense for the three months ended January 31, 2013 and 2012: Three Months Ended January 31, % (in thousands) 2013 2012 Change Class A share commissions $ 2,195 $ 1,332 65 %Class C share distribution fees 13,823 13,642 1 % Closed-end fund dealer compensation payments 4,330 4,175 4 % Intermediary marketing support payments 9,740 8,464 15 % Discretionary marketing expenses 3,801 4,715 -19 % Total $ 33,889 $ 32,328 5 % Class A share commissions increased by 65 percent, or $0.9 million, reflecting an increase in certain Class A fund sales on which we pay a commission. Class C share distribution fees increased by 1 percent, or $0.2 million, reflecting an increase in Class C share assets held more than one year on which those fees are based. Closed-end fund dealer compensation payments increased 4 percent, or $0.2 million, reflecting an increase in average assets under management subject to those arrangements. Marketing expenses associated with intermediary marketing support payments to our distribution partners increased by 15 percent, or $1.3 million, reflecting increases in average assets subject to those arrangements.

Discretionary marketing expenses decreased by 19 percent, or $0.9 million, primarily reflecting a decrease in the use of outside marketing consultants.

46 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 service arrangements. These fees are calculated as a percent of average assets under management in certain share classes of our mutual funds (principally Classes A, B, C and R), as well as certain private funds. Service fee expense decreased by 1 percent, or $0.4 million, in the first quarter of fiscal 2013 from the same quarter a year earlier, reflecting a decrease in average fund assets retained more than one year in funds and share classes that are subject to service fees as a result of the ongoing shift to low or no-service fee share classes.

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 decreased 18 percent in the first quarter of fiscal 2013 from the same period a year earlier, primarily reflecting a decrease in average Class B share, Class C share and privately offered funds deferred sales commissions. In the first quarter of fiscal 2013, 24 percent of total amortization related to Class B shares, 69 percent to Class C shares and 7 percent to privately offered funds. In the first quarter of fiscal 2012, 24 percent of total amortization related to Class B shares, 62 percent to Class C shares and 14 percent to privately offered funds.

Fund-related expenses Fund-related expenses consist primarily of fees paid to sub-advisors, compliance costs and other fund-related expenses. Fund-related expenses increased 12 percent, or $0.8 million, in the first quarter of fiscal 2013 over the same period a year earlier, reflecting increases in expenses borne by us on certain funds for which we are paid an all-in fee, offset by reduced subsidies of startup and other small funds provided to enhance their cost competitiveness.

Other expenses Other expenses consist primarily of travel, facilities, information technology, professional services, communications and other miscellaneous corporate expenses, including the amortization of intangible assets.

Other expenses increased by 6 percent, or $2.0 million, in the first quarter of fiscal 2013 from the same period a year earlier, primarily reflecting increases in information technology expense of $1.1 million, professional services expense of $0.8 million, other corporate expenses of $0.7 million and communications expense of $0.1 million, offset by a decrease in facilities-related expenses of $0.7 million. The increase in information technology expense can be attributed to increases in system maintenance and repairs, outside custody and other back office services and other information technology consulting expenses. The increase in professional services expense can be attributed to increases in external legal costs and various corporate consulting engagements associated with various corporate initiatives. The increase in other corporate expenses reflects an increase in charitable giving, other corporate taxes and the amortization of intangibles assets related to the Clifton acquisition, offset by a decrease in general corporate banking fees. The decrease in facilities-related expenses can be primarily attributed to a decrease in depreciation expense.

47 Non-operating Income (Expense) Three Months Ended January 31, % (in thousands) 2013 2012 Change Gains and other investment income, net $ 5,207 $ 8,177 -36 % Interest expense (8,570 ) (8,413 ) 2 % Other income (expense) of consolidated CLO entity: Gains and other investment income, net 1,793 10,280 -83 % Interest expense (4,221 ) (4,311 ) -2 % Total non-operating (expense) income $ (5,791 ) $ 5,733 NM Gains and other investment income, net, decreased 36 percent in the first quarter of fiscal 2013 compared to the same period a year ago, primarily reflecting decreases in gains and other investment income earned by our consolidated funds.

Interest expense was substantially unchanged, reflecting constant levels of interest accrued on our fixed-rate senior notes.

Net loss of our consolidated CLO entity totaled $2.5 million in the first quarter of fiscal 2013, representing $2.4 million of other expense and $0.1 million of other operating expenses. $3.3 million of consolidated CLO entity net loss was included in net income (loss) attributable to non-controlling and other beneficial interests, reflecting third-party note holders' proportionate interest in the net income (loss) of the entity. $0.8 million of consolidated CLO entity net gain was included in net income attributable to Eaton Vance Corp.

shareholders, representing management fees earned and the Company's proportionate interest in the net income (loss) of the entity.

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 37.9 percent in the first quarter of fiscal 2013 compared to 35.7 percent in the first quarter of fiscal 2012. The increase in our overall effective tax rate in the first quarter of fiscal 2013 from the same period a year earlier relates in part to the consolidated CLO entity net loss allocated to other beneficial interest holders and therefore not subject to tax recovery by the Company. Excluding the effect of the consolidated CLO entity net income (loss) allocated to other beneficial interest holders, our effective tax rate would have been 36.7 percent and 37.5 percent in the first quarter of fiscal 2013 and 2012, 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. There were no significant changes in our estimates surrounding these positions in either of the periods presented.

Equity in Net Income of Affiliates, Net of Tax Equity in net income of affiliates, net of tax, for the first quarter of fiscal 2013 primarily reflects our 49 percent equity interest in Hexavest, our 7 percent equity interest in a private equity partnership managed by a third party and equity interests in certain funds we sponsor or manage, notably Eaton Vance Municipal Opportunities Fund, Eaton Vance Real Estate Fund, Eaton Vance Tax-Advantaged Bond Strategies Long-Term Fund and Eaton Vance Richard Bernstein All Asset Strategy Fund. Equity in net income of affiliates, net of tax, increased by 48 $1.7 million in the first quarter of fiscal 2013 over the same period a year earlier, primarily due to the inclusion of our 49 percent equity interest in Hexavest, offset by a decrease in the net income of the private equity partnership.

Net Income Attributable to Non-controlling and Other Beneficial Interests Net income attributable to non-controlling and other beneficial interests decreased by $5.3 million in the first quarter of fiscal 2013 from the same period a year earlier, reflecting a $2.5 million increase in non-controlling interest value adjustments related to our majority owned subsidiaries primarily related to Parametric and a $0.5 million increase in net income attributable to non-controlling interest holders in the Company's consolidated funds and majority owned subsidiaries, offset by an $8.3 million decrease in net income (loss) attributable to other beneficial interest holders in the Company's consolidated CLO entity. Non-controlling interest value adjustments of $10.6 million and $8.1 million in the first quarter of fiscal 2013 and 2012, respectively, primarily reflect the growth of Parametric over the twelve-month periods ended December 31, 2012 and 2011, respectively.

Net income attributable to non-controlling and other beneficial interests is not adjusted for taxes due to the underlying tax status of our consolidated subsidiaries. Parametric, Parametric Risk Advisors LLC ("Parametric Risk Advisors") and Atlanta Capital Management Company LLC ("Atlanta Capital") are limited liability companies that are treated as partnerships for tax purposes.

Funds and the CLO entity we consolidate are registered investment companies or private funds that are treated as pass-through entities for tax purposes.

Changes in Financial Condition, Liquidity and Capital Resources The assets and liabilities of our consolidated CLO entity do not affect our liquidity or capital resources. The collateral assets of our consolidated CLO entity are held solely to satisfy the obligations of the CLO entity and we have no right to these assets beyond our direct investment in and management fees generated from the entity, both of which are eliminated in consolidation. The note holders of the CLO entity have no recourse to the general credit of the Company. As a result, the assets and liabilities of our consolidated CLO entity are excluded from the discussion of liquidity and capital resources below.The following table summarizes certain key financial data relating to our liquidity, capital resources and uses of cash on January 31, 2013 and October 31, 2012 and for the three months ended January 31, 2013 and 2012.

49 Balance Sheet and Cash Flow Data January 31, October 31, (in thousands) 2013 2012 Balance sheet data: Assets: Cash and cash equivalents $ 218,283 $ 462,076 Investment advisory fees and other receivables 148,648 133,589 Total liquid assets $ 366,931 $ 595,665 Investments $ 482,329 $ 486,933 Liabilities: Debt $ 500,000 $ 500,000 Three Months Ended January 31, (in thousands) 2013 2012 Cash flow data: Operating cash flows $ (72,206 ) $ (8,215 ) Investing cash flows 12,132 4,221 Financing cash flows (183,575 ) (31,511 ) Liquidity and Capital Resources Liquid assets consist of cash and cash equivalents and investment advisory fees and other receivables. Cash and cash equivalents consist of cash and short-term, highly liquid investments that are readily convertible to cash. Investment advisory 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 27 percent and 39 percent of total assets attributable to Eaton Vance Corp. shareholders on January 31, 2013 and October 31, 2012, respectively, excluding those assets identified as assets of the consolidated CLO entity. The Company's seed investments in consolidated funds and separate accounts are not treated as liquid assets because they may be longer term in nature.

The $228.7 million decrease in liquid assets in the first three months of fiscal 2013 primarily reflects net cash used for operating activities of $72.2 million, the payment of $167.0 million of regular and special dividends to shareholders, the repurchase of $13.3 million of Non-Voting Common Stock, net cash paid for acquisitions of $81.3 million, and the payment of $43.5 million to acquire additional interests in Parametric, offset by net proceeds from the sale of available-for-sale securities of $43.8 million, net inflows into consolidated funds from non-controlling interest holders of $8.9 million, proceeds from the issuance of Non-Voting Common Stock of $59.7 million and $12.0 million reflecting the impact of our consolidated CLO entity's investing and financing activities.

On January 31, 2013, our debt consisted of $500 million in aggregate principal amount of 6.5 percent ten-year unsecured notes due in 2017. We also maintain a $300 million unsecured revolving credit facility with several banks that expires on June 4, 2015. The facility provides that we may borrow at LIBOR-based rates of interest 50 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 January 31, 2013 or at any point during the fiscal quarter. We were in compliance with all of the covenants as of January 31, 2013.

We continue to monitor our liquidity daily. We remain committed to growing our business and expect that our main uses of cash will be to invest in new products, acquire shares of our Non-Voting Common Stock, pay dividends, make strategic acquisitions, enhance technology infrastructure and pay 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 and to satisfy our future commitments as more fully described in Contractual Obligations below. The risk exists, however, that if we determine 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-Voting Common Stock as needed, or if we are unable to obtain such financing on acceptable terms, our business could be adversely impacted.

Recoverability of our Investments Our $482.3 million of investments as of January 31, 2013 consisted of our 49 percent equity interest in Hexavest and positions in Eaton Vance-managed funds and separate accounts entered into for investment and business development purposes. Investments in Eaton Vance-managed funds are generally in liquid debt or equity securities and are carried at fair market value. We test our investments, excluding our equity method investments but including our investments in non-consolidated CLO entities and investments classified as available-for-sale, 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 underlying credit quality of the issuer and our ability and intent to hold the investment. If markets deteriorate during the quarters ahead, our assessment of impairment on a quantitative basis may lead us to impair investments that were in an unrealized loss position at January 31, 2013.

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 the first three months of fiscal 2013 that would indicate that an impairment loss exists at January 31, 2013.

We periodically review our deferred sales commissions and 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 the first three months of fiscal 2013 that would indicate that an impairment loss exists at January 31, 2013.

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 operating 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 funds and separate accounts (proceeds received from the 51 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 other intangible assets, depreciation, stock-based compensation and the net change in deferred income taxes.

Cash used for operating activities totaled $72.2 million in the first three months of fiscal 2013, an increase of $64.0 million from $8.2 million of cash used for operating activities in the first three months of fiscal 2012. The increase in net cash used for operating activities year-over-year primarily reflects a net decrease of $47.7 million related to timing differences in the cash settlement of other assets and liabilities and a decrease of $6.4 million related to the operating activities of our consolidated CLO entity.

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 and equity method investments.

Cash provided by investing activities totaled $12.1 million in the first three months of fiscal 2013 compared to $4.2 million in the first three months of fiscal 2012. The increase in cash provided by investing activities year-over-year can be primarily attributed to an increase of $35.3 million in net proceeds from the sale of available for sale securities, a $53.4 million increase in net proceeds from the sale and maturities of investments within our consolidated CLO entity, offset by our acquisition of Clifton for $67.2 million and a contingent payment of $14.1 million to the sellers of TABS under the terms of the 2008 acquisition agreement.

Financing Cash Flows Financing cash flows primarily reflect distributions to non-controlling interest holders of our majority-owned subsidiaries and consolidated funds, the purchase of additional non-controlling interests in our majority-owned subsidiaries, the issuance and repurchase of our Non-Voting Common Stock, excess tax benefits associated with stock option exercises and the payment of dividends to our shareholders. Financing cash flows also include proceeds from the issuance of capital stock by consolidated investment companies and cash paid to meet redemptions by non-controlling interest holders of these funds.

Cash used for financing activities totaled $183.6 million in the first three months of fiscal 2013 compared to $31.5 million in the first three months of fiscal 2012. In the first quarter of fiscal 2013 we paid $43.5 million to acquire additional interests in our majority-owned subsidiary, Parametric and we repurchased and retired a total of 0.5 million shares of our Non-Voting Common Stock for $13.3 million under our authorized repurchase programs and issued 4.6 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 $59.7 million. We have authorization to purchase an additional 3.5 million shares under our current share repurchase authorization and anticipate that future repurchases will continue to be an ongoing use of cash. Our dividends per share were $1.20 in the first three months of fiscal 2013, including a special one-time dividend of $1.00 per share declared and paid in December 2012, compared to $0.19 per share in the first three months of fiscal 2012. We currently expect to declare and pay comparable regular dividends on our Voting and Non-Voting Common Stock on a quarterlybasis.

52 Contractual Obligations The following table details our future contractual obligations as of January 31, 2013: Payments due by period Less than 1 1-3 4-5 After 5 (in millions) Total Year Years Years Years Operating leases - facilities and equipment(1) $ 391 $ 21 $ 41 $ 38 $ 291 Senior notes 500 - - 500 - Interest payments on senior notes 163 33 65 65 - Investment in private equity partnership 1 - 1 - - Unrecognized tax benefits(2) 10 - 10 - - Total $ 1,065 $ 54 $ 117 $ 603 $ 291 Contractual obligations of consolidated CLO: Senior and subordinated note obligations $ 433 $ - $ - $ - $ 433 Interest payments on senior notes 17 3 5 6 3 Total contractual obligations of consolidated CLO $ 450 $ 3 $ 5 $ 6 $ 436 (1) Minimum payments have not been reduced by minimum sublease rentals of $3.0 million due in the future under noncancelable subleases.

(2) This amount includes unrecognized tax benefits along with accrued interest and penalties.

In July 2006, we committed to invest up to $15.0 million in a private equity partnership that invests in companies in the financial services industry. We had invested $13.9 million of the $15.0 million commitment as of January 31, 2013.

The remaining commitment is included in the table above.

Interests held by non-controlling interest holders of Parametric Risk Advisors and Atlanta Capital are not subject to mandatory redemption. The purchase of non-controlling interests is predicated, for each subsidiary, on the exercise of a series of puts held by non-controlling interest holders and calls held by us.

Neither the exercise of the puts nor the exercise of the calls is contingent upon the non-controlling interest holders of the acquired entities remaining employed by the Company. 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. As a result, there is significant uncertainty as to the timing of any non-controlling interest purchase in the future. The value assigned to the purchase of an originating non-controlling interest is based, in each case, on a multiple of earnings before interest and taxes of the subsidiary, which is a measure that is intended to represent fair market value. There is no discrete floor or ceiling on any non-controlling interest purchase. As a result, there is significant uncertainty as to the amount of any non-controlling interest purchase in the future. 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 cashin future years.

53 We have presented all redeemable non-controlling interests at redemption value on our Consolidated Balance Sheet as of January 31, 2013. We have recorded the current quarter 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 quarter change in the estimated redemption value of non-controlling interests redeemable at other than fair value 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, redeemable at either fair value or other than fair value, totaled $89.9 million on January 31, 2013 compared to $98.8 million on October 31, 2012.

Redeemable non-controlling interests as of January 31, 2013 consist of third-party investors' ownership in consolidated investment funds of $23.7 million, non-controlling interests in Parametric, Parametric Risk Advisors and Atlanta Capital redeemable at other than fair value of $0.6 million, $8.7 million and $32.1 million, respectively, non-controlling interests in Parametric redeemable at fair value and issued in conjunction with the Clifton acquisition of $13.9 million and redeemable interests in profit interests granted under subsidiary-specific long-term incentive plans of Parametric and Atlanta Capital of $6.0 million and $4.9 million, respectively. Redeemable non-controlling interests as of October 31, 2012 consist of third-party investors' ownership in consolidated investment funds of $20.1 million, non-controlling interests in Parametric, Parametric Risk Advisors and Atlanta Capital redeemable at other than fair value of $33.7 million, $8.7 million and $32.1 million, respectively, and redeemable interests in profit interests granted under subsidiary-specific long-term incentive plans of Parametric and Atlanta Capital of $2.0 million and $2.2 million, respectively.

Related to its acquisition of the TABS business in December 2008, the Company is obligated to make three further annual contingent payments based on prescribed multiples of TABS's revenue for the twelve months ending December 31, 2014, 2015 and 2016. There is no defined floor or ceiling on such payments, resulting in significant uncertainty as to the amount of any payment 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. The Company made a contingent payment of $14.1 million with respect to the twelve months ended December 31, 2012 in the first quarter of fiscal 2013.

In December 2012, certain non-controlling interest holders of Parametric exercised their final put option pursuant to the terms of the original acquisition agreement requiring the Company to purchase an additional 3.4 percent capital and 5.7 percent profit interest in the entity. The $43.5 million exercise price of the put option was based on a multiple of estimated earnings before taxes for the calendar year ended December 31, 2012. The payment was treated as an equity transaction and reduced redeemable non-controlling interests at closing on December 20, 2012. Indirect profit interests granted to Parametric's employees under a long-term equity incentive plan of that entity increased to 4.9 percent at January 31, 2013, reflecting a 0.76 percent profit interest granted on November 1, 2012 under the plan. Indirect capital and profit interests in Parametric held by the principals of Clifton totaled 1.9 percent on January 31, 2013, reflecting indirect interests issued in conjunction with the Clifton acquisition on December 31, 2012. Capital and profit interests held by the Company increased to 98.1 percent and 93.3 percent, respectively, on January 31, 2013, reflecting the transactions described above.

Profit interests held by non-controlling interest holders in Atlanta Capital, which include direct profit interests as well as indirect profit interests granted as part of a long-term equity incentive plan of that entity, increased to 19.7 percent on January 31, 2013 from 18.1 percent on October 31, 2012, reflecting an additional 1.6 percent profit interest granted on November 1, 2012 under the long-term equity plan.

The Company will be obligated to make additional payments in respect of the acquired interest in Hexavest in fiscal 2013 and 2014 if Hexavest exceeds defined annual revenue thresholds in the first and second twelve-month periods following the closing, respectively. We have the option to acquire an additional 26 percent interest in Hexavest in 2017. There is no defined floor or ceiling on any payment, resulting in significant uncertainty as to the amount of any payment in the future. Accordingly, future payments to be made have been 54 excluded from the above table until such time as the uncertainty has been resolved. Although the amounts of these payments cannot be predicted with certainty, we anticipate they may be a significant use of cash in future years.

Foreign Subsidiaries We consider the undistributed earnings of our Canadian subsidiary as of January 31, 2013 to be indefinitely re-invested. Accordingly, no U.S. income taxes have been provided thereon. As of January 31, 2013 the Company had approximately $4.4 million of undistributed earnings in our Canadian subsidiary that is not available to fund domestic operations or to distribute to shareholders unless repatriated. The Company would need to accrue and pay U.S. corporate income taxes if such funds were repatriated. The Company's current plans do not demonstrate a need to repatriate these funds.

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 There have been no updates to our critical accounting policies from those disclosed in Management's Discussion and Analysis of Financial Condition in our Form 10-K for the fiscal year ended October 31, 2012.

Accounting Developments Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income On February 5, 2013, the Financial Accounting Standards Board ("FASB") issued new guidance on reporting amounts reclassified out of accumulated other comprehensive income ("AOCI"). The new guidance does not change the requirements for reporting net income or other comprehensive income in the financial statements, but requires new footnote disclosures regarding the reclassification of AOCI by component into net income. The Company will implement the new disclosure requirements in the second quarter of fiscal 2013.

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