Good morning, ladies and gentlemen. My name is Shannon and I will be your conference moderator today. At this time, I would like to welcome everyone to the Eaton Vance Corporation Second Quarter Earnings Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. At this time, I would like to turn the call over to Mr. Dan Cataldo, Treasurer. Mr. Cataldo, you may begin.

Thank you and welcome to our second quarter 2015 earnings call and webcast. Here this morning are Tom Faust, Chairman and CEO of Eaton Vance, and Laurie Hylton, our CFO. We will first comment on the quarter and then we will take your questions. The full earnings release and charts we will refer to during the call are available on our website, eatonvance.com under the heading, Press Releases. Today’s presentation contains forward-looking statements about our business and financial results. The actual results may differ materially from those projected due to risks and uncertainties in our business including, but not limited to those discussed in our SEC filings. These filings, including our 2014 Annual Report and Form 10-K are available on our website on request at no charge. I will now turn the call over to Tom.

Good morning and thank you for joining us. April 30 marked the close of our second fiscal quarter and the midpoint of our fiscal 2015. We finished the quarter with record assets under management, had one of our strongest quarters of net flows in company history and made progress advancing our NextShares, actively managed exchange traded product initiative toward market introduction. We reported adjusted earnings per diluted share of $0.58 for the second quarter, down $0.03 from the preceding quarter and down $0.01 from the year ago quarter. Because our second fiscal quarter has three fewer days than the other fiscal quarters, we experienced a seasonal decline in revenue and earnings every second quarter. Relative to the first quarter of fiscal 2015, we estimate that the day count effect lowered earnings by about $0.025 per diluted share, accounting for most of the sequential earnings decline. Also contributing to sequentially lower earnings was a decline of about $0.01 per diluted share in net income and gains on our seed capital portfolio. On a year-over-year comparative basis, the penny drop in adjusted earnings per diluted share was more than accounted for by lower performance fees received and a decline in net investment income and gains on our seed capital portfolio. Flat management fee revenues year-over-year reflect a 7% increase in average consolidated assets under management and an offsetting decline in average fee rates. As our AUM growth has been led by lower fee products. Laurie will provide more detail on the company's fee rates by product in her remarks shortly. Net flows of $6.8 billion in the second quarter are the third highest quarterly flow results in company history and represent a 9% annualized internal growth rate. As in most recent quarters, Parametric Exposure Management business led the way with $4.3 billion…

Thank you and good morning. As Tom mentioned, we are reporting adjusted earnings per diluted share of $0.58 for the second quarter of fiscal 2015 compared to $0.59 for the second quarter fiscal 2014 and $0.61 for the first quarter of fiscal 2015. On a GAAP basis, we earned $0.58 per diluted share in the second quarter fiscal 2015, $0.59 in the second quarter fiscal 2014 and $0.24 in the first quarter of fiscal 2015. As you can see in attachment two to our press release adjustments from reported GAAP earnings in the first quarter of fiscal 2015, primarily reflect a one-time payment made to terminate closed end fund service and additional compensation arrangements. As a reminder, in the first quarter, we made a $73 million one-time payment to terminate service and additional compensation arrangements with the major distribution partner that were in place for certain closed end funds. The arrangements required us to make quarterly payment based on the managed assets of these funds. The $73 million payment was recorded at distribution expense in the first quarter of 2015. Terminating the arrangements reduces distribution expense by roughly $.07 per diluted share annually. Excluding the effect of the one-time payment, our operating margin remained flat at 34.8% in the second quarter fiscal 2015, compared to the first quarter fiscal 2015 and declined from 35.4% in the second quarter fiscal 2014. Second quarter total revenue decreased 1%, sequentially, and year-over-year, primarily reflecting a decrease in distribution and service fee revenues. The sequential and year-over-year decrease in distribution service fees reflects the continuing shift in managed assets away from fund share classes in which distribution and service fees are paid. Investment advisory and administrative fees were flat sequentially and year-over-year, despite the increase in assets under management, reflecting a lower blended effective…

[Operator Instructions] Your first question comes from the line of Chris Shutler with William Blair. Your line is open. Please go ahead.

Hi. This is actually Andrew Nicholas filling in for Chris Shutler. Thanks for taking my questions. My first question just has to do with the $200,000 estimate for broker-dealer costs related technology specific to the next year's build out. I am curious if you can kind of walk us through whether or not there would be something that Eaton Vance would be willing to help pay for? If so does that change your $8 million next year spending estimate for fiscal 2015?

Yes. We have said and this was - you may have seen this and there were a couple news articles that came out last week on this topic, but we have said publicly that for broker-dealers that are at the front of the line that are early in embracing NextShares, where they have some level of what strike us as reasonable estimates of their internal costs to implement those systems that we will help pay for that. At the moment, I would say that is included in the current estimates. We have said approximate $8 million of spending this year. Clearly, we do not have a huge amount of room in that for paying lots of six-figure bills, which is where we think this will be, but for the right partner, for the right broker-dealer, we want to take this issue off the table by providing financial support that conversion. To me, this should not come as a big shock. There has been, I would say, pretty extensive involvement over the years of financial partnership and financial support between fund companies and broker-dealers. This is just one element of that that's new and different here, because there is really no precedent for up a product structure of this of this type, so just to repeat, yes, we do intend to offer selected broker-dealers who are motivated to be first movers that we will contribute to their development costs on converting their systems to accommodate trading in NextShares. It is our hope and expectation at this point that that will fit within our current budget numbers for the year, but for the right advisor, for the for the right broker-dealer firm, we would certainly be willing to make this worth their while and part of that is certainly the conversion economics.

Great. Thank you. That is helpful. Then to switch gears a little bit, it was obviously a strong quarter for fixed income products, particularly on the institutional side. I was just wondering if you guys could add a little color there as to what strategies, particularly in institutional channel were strong. If there are any indications of those strategies continuing their strength through the rest of 2015? Thank you.

In the call slides, Slide #11, is listing and I think, this is in order of the leading areas of the contribution for the quarter. This is not just in fixed income, but several of these are fixed-income categories and I can comment on the ones that were in fixed income. I believe I said that, within fixed income we had at least $400 million of contribution from four areas. Those being cash management, Municipal ladders, multi-strategy income and high-yield; cash management, I believe was roughly $900 million. That was institutional business. Municipal ladders, I believe, I said a number of $750 million multi-strategy income. This is from memory. This was somewhere in the 4s, I believe, and most of that was that was in mutual funds high-yield income, again, from memory I believe also was in the 4s, also primarily for mutual fund business. The other part of question do we view those as potentially recurring, and I would say in all cases, yes, we do. The one of those that is the lumpiest would be cash management that those are the big mandates by assets. They tend to be relatively low fees, but that would be the one that is I would say that maybe speculative as to whether we have more of those coming in the next quarter. The other one is I think it is pretty likely that we have got a strong trend of current business with - it is not lumpy institutional business, but for the most part broad-based retail business.

Thanks again.

Your next question comes from Craig Siegenthaler of Credit Suisse. Your line is open. Please go ahead.

Thanks. Good morning.

Hi, Craig. Good morning.

Just to start I have a few questions here related to NextShares, so first one, can you help us frame the rest that NextShares would need delay the launch in Q1 or Q2. The reason I am asking I sounds like there is still a lot of work need to be get done in terms of getting the funds on a broker platforms, final SEC approvals and also the pluming. It just sounds like there was a lot to do over the next six months, so maybe you can help us think about that.

Yes. The first on the regulatory side, we do need a couple of approvals. We need approval of the registration statements on the individual funds and we also need what I'd call 19(b)(4) listing and trading approval of those. In the case of Eaton Vance funds, the filings have been made and we certainly do not control the timing of that, but we do not expect that to be a delay. NASDAQ has communicated publicly their intent to be ready to trade by October 1st so again that means third quarter is probably unlikely assuming they are going to push towards the end of that timeframe. Whether launching in the fourth quarter beyond SEC approval of our product and beyond NASDAQ's readiness, primarily hinges on two things. One of those is, our desire to launch this as part of a consortium of fund companies. At some point, we draw the line and say that the consortium is in place. If you are not going to be ready by a certain date, you are not going to be part of that particular group in terms of what we envision is some joint marketing efforts in conjunction with product launches. You are probably aware that three of the applicants, three of the other licensees, have now either received SEC exemptive relief or expected in the next couple of days they have got notice of relief in a couple of cases, we need more fund companies to apply for and receive exemptive relief. We need more fund companies to get a registration statements filed for individual funds to file 19(b)(4)s for those. There is a fair bit of work to be done there. Though that certainly could be done in time for a fourth quarter launched, can we have no 30 fund companies…

Thanks, Tom. Then final question, do you think there will be an acceleration in licensee sign-ups by July 1st just given that the early window, I think, is going to expire on July 1st and there were few reasons before really now to sign-up, but there now there is sort of a firm reason to sign-up.

I think that is right. We have been pretty transparent about our pricing on this and part of that pricing is that there is a 30% reduction in licensing and services free rate that would apply generally to firms that sign a preliminary agreement with us and then file an exemptive application by the end of June, so there is an incentive to do that. That 30% is about 1.5 basis points. To so some firms that may not be particularly motivating, but for many firms it is quite motivating and I think it is likely that we will see a significant of additional firms become early adopters and, because the process of filing for SEC exemptive relief is a public process, we should also see the identity of the firms that have signed with us today, but we are not yet public of that changing also over the next six weeks or so. The biggest thing for us in going from the current 10 companies that are under agreement to up 20-year or some excess of that, really I think it is getting comfort that this is something that the broker-dealers will support. I think we have come a long way in helping the broker-dealers understand that this is good for the business and something they should embrace. If we get in a position where major broker-dealers are in effect encouraging other fund companies to do this, because their publicly supporting this, I think, we are potentially in a position where we will see a quite rapid acceleration in the rate of adoption by fund companies.

Thanks, Tom.

Your next question comes from the line of Bill Katz of Citi. Your line is open. Please go ahead.

Hi. This is actually Ryan Bailey filling in for Bill. Our questions were also related to NextShares. We were kind of wondering without giving too much detail if you could size the licensees who have signed up, but have not been public yet. That is the first. Secondly, what are your thoughts on fixed income for the ETMF opportunity? We were wondering it seems like fixed income or the licensee so far had more than [ph], so wondering what the opportunity that is there?

Yes. We included in the release the number of $500 billion of mutual fund assets across the 10 companies, so that includes the six companies names which have been disclosed as well as the four that have not been so, I think you can probably do the math on figuring out what the average is and what the total is on that. Due to confidentiality agreements, we are not in a position really to try and size individual firms that have not been disclosed for obvious reasons. The way we think about NextShares generally and this is answering the part of your question related to fixed income. This is the only exchange traded structure that is fully compatible with active management and works fully for all asset classes. As I think your question acknowledges, there have been some limited uptake of fully transparent active ETFs as approved since 2008. I think currently there are about $20 billion roughly or so in that structure that compares to roundly $10 trillion in actively managed mutual funds, so it is a tiniest drop in the bucket. That is 0.2%. If you really drilled down and look inside that $20 trillion, the largest category by a significant amount is ultra short bond funds, which I think it is something like $6 billion or $7 billion out of the $20 billion. I think that is maybe an indication that we have had seen the most success there probably telling that that is not an area where at least some active managers are particularly worried about preserving their secrets sauce. This is one step or half a step away from a money market fund. In that range, we are seeing activity and some success in a fully transparent structure. A handful of other companies have been…

Got it. Thank you very much.

Your next question comes from the line of Robert Lee of KBW. Your line is open. Please go ahead.

Great. Thank you. Good morning. Hey, maybe keeping with the NextShares theme, but this also I guess relates to capital management. I think of back in the fourth quarter when you first announced that the approval from the SEC, it came up about having to seed some of these products that potentially given I think you are going to market or plan to go to market with, I think, it is about a dozen products. Are you still thinking that seed demands at least initially could be a fairly hefty and should how should we be thinking that as we look later in the year that may or may not impact how are your thoughts around share repurchase or can you just recycle existing seed into those?

We filed for 18 funds. I think, we probably will not launch all 18 on the same day, but we do have the expectation that that number or something very close to that will be our initial products set. We probably we will be able to do that in such a way that some of the capital that we use for seed purposes gets recycle among those different products where the first way is get up to scale then we recycle some of the capital into following product. I do not think we have definitive answers to how big these funds will be in terms of seed capital requirements from our NASDAQ exchange requirements number right? What was it?

It was $200,000 or $2 million.

Yes. I think it is something like $2 million, so that is not a big number relative to our overall currency capital portfolio and I do not think ultimately it is going to be the determining number here. The determining number here is going to be what do we need to do to in a practical business sense to get these up and running. I think we are thinking about on the order of $20 million of fund that is a little bit premature, it may be different than that. We are at a point with $300 and some million seed capital portfolio. I think, it is likely that that portfolio away from NextShares we will be shrinking rather than growing over the next six months. That is certainly our intent in part, because we are looking at NextShares as a potential use of capital, but I guess we do not see this 20 times. Let us say, we did 20 times 10. Then recycled some of that capital and then also potentially pull down some of the other positions we have today. I think, we are looking at possibly, this is really just a guess at this point, but maybe $100 million to $200 million of seed capital requirement to get these funds up and running, netting some of the offsets from more over seed capital and some of the other things. It is a guess at this point. We do not really know that answer, but we certainly do not see a need to do an outside financing to make this work. We have not particularly explored this, so there are third-party sources of financing for seed capital for funds that we are aware of, so it won't necessarily all be funded off our own balance sheet. It is possible that there will be outside investors that could do this. Just as a reminder, we have roughly $380 million today in cash and short-term investments.

Great. Maybe a follow-up, two questions or two-part question maybe around flows, I mean, the first one is in fixed income, you obviously had a pretty meaningful step up in gross sales and I know you pointed out that there was a $900 million, I guess, in the cash management which I believe flows through there, but it was a pretty again a pretty decent step up. Is there anything else there they maybe we should think of it as, I do not know, maybe I will use non-recurring. Maybe that is not the right way to put it, maybe call it non-recurring or kind of one other big kind of chunky mandates that may have driven that besides cash management?

No. In fact, I would say if anything that was - the other thing we highlighted that went the other way was we had a roughly $400 million one-time withdrawal from - I guess, this is actually in the alternatives category, but it is from global macro. There was nothing else. You highlighted the one piece, the $900 million or so in cash management, the two fastest growing, I think, will likely be the two fastest growing parts of that over the next few quarters that were in this current number. One is the muni ladder business which was $750 million and I think every quarter that number has been growing. It is a broad-based business and we think we are in the very early innings of a very major business there. The second one I highlighted is the short duration strategic income fund that we got all the stars are aligned in terms of performance and yields and a very large category and it is getting a lot of sales attention it is a mutual fund asset, so you can follow the flows of that from standard mutual fund sources, but we expect that to continue to ramp up pretty nicely. The other one we did which was not much of a factor and this current quarter is our multi-sector income strategy and I highlighted that we have a pipeline of a roundly $1 billion of institutional accounts that we expect to fund. I mean they are supposed to fund. I think most of that supposed to fund within the next month or so, but even with some delays there we would expect to get most of that $1 billion in the third quarter, so if there is a one-time item that in cash in the second quarter, we expect some one-time items in multi-sector income with some visible wins one not funded opportunities that we expect all of that we expect to fund by the end of this month or 1st of June.

Yes. Maybe just one last question, thanks for indulging me. I just thought was the private fund assets if my numbers were correct, were up about 13% year-over-year. I am just kind of curious, is that the old exchange funds? Are you seeing any kind of resurgence in interest or demand for those?

A little bit. That would not be driving. I think that is probably slightly positive flows. We have had some more interest there. I think it is probably CITs [ph] that are the main driver of that business what asset classes are that?

Just looking.

Bob, the big drivers there are

Just okay.

Rob I think drivers there are comingled institutional product and the growth has been primarily in the emerging markets. You mentioned the exchange funds those have been growing as interest has picked up there. The other category of asset that shows up there is, CLOs and we have issued a couple of floating rate CLO, so I would say some combination of those products.

Great. Thanks for taking my questions guys and girls.

Thank you.

Your next question comes from the line of Eric Berg of RBC Capital Markets. Your line is open. Please go ahead.

Hi. This is Kenneth Lee filling in for Eric. Just I think you touched upon this briefly, but I wanted to get a better sense on your continuing dialogue with fund companies on NextShares. Just to clarify, did you see that fund transparency is not a big concern among the fund companies you have been talking to? If so, would you says that the biggest pushback you have been receiving when speaking with potential partners. What is holding up potential partners from signing up? Thanks.

Maybe I did not understand you right, so I think I had said that the holdings transparency is a big concern, and that one of the attractive features about NextShares is that allows them to offer the benefits of an exchange traded product with better performance and better tax efficiency without requiring daily holdings disclosure. I think, maybe that is what you said. The question about why do not we have 100 fund companies as opposed to 10 or 20 as opposed to 10, is that basically the question?

Yes. Well, just in your dialogue like what could be preventing potential partners from signing up - fund transparency. Are there any other major issues that are…

Well, again, the transparency is not really an issue. That is an issue in our favor. No one says I am not going to do this, because I will only offer product that has daily transparency. No mutual fund company offers daily transparency, so that is a positive. Not a negative. Why do not we have more fund companies? I guess, I would offer maybe a handful of reasons. One is that fund companies are busy, executives are busy, generally, the bigger the company the more involved the decision-making process. We have been talking to fund companies really primarily since December. That is when we got our exemptive order approved, was early December. Typically a decision like this involves many parts of the organization and this is not just the marketing group, but it involves discussions with portfolio management, fund operations, legal, in most cases they are going to consult with their fund board before they commit to doing this, so it is a process to get this approved. I would say, in many companies also there is an issue of where this fits in with their other priorities, so I met with the CEO yesterday who is I think very interested in doing this likes the concept, at least that was what he told me, but he says over the next 6 to 12 months we are very focused on building out an international family of funds, funds that we can use its funds, we can sell outside the United States. It is not a vote against NextShares. He said we will probably be there if this is successful, but we have got other priorities, so that is the second reason. In some cases, there is something in-house that somehow in the exchange traded product world that is already…

Great. Thank you. That is very helpful.

Yes. Thank you.

This concludes questions period for our call today. I would like to turn the call back to Mr. Cataldo for closing remarks.

Great. Thank you and thank you very much for joining us this morning. If you do have follow-up questions, we will be available to take those. If we did not get to your questions, we apologize and we will do our best to get all questions answered. That said, thank you and have an enjoyable Memorial Day weekend.

This concludes today's conference call. You may now disconnect.