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Related Party Transactions

3 Months Ended

Jan. 31, 2020

19. Related Party Transactions

Sponsored funds

The Company is an investment adviser to, and has administrative agreements with, certain funds that it sponsors for which employees of the Company are officers and/or directors. Substantially all of the services to these entities for which the Company earns a fee, including management, distribution and shareholder services, are provided under contracts that set forth the services to be provided and the fees to be charged. Certain of these contracts are subject to annual review and approval by the funds’ boards of directors or trustees.

Revenues for services provided or related to sponsored funds are as follows:

		Three Months Ended
		January 31,
(in thousands)		2020		2019
Management fees	$	266,290	$	242,666
Distribution and underwriter fees		21,578		23,090
Service fees		33,939		29,360
Shareholder services fees included in other revenue		1,526		1,583
Total	$	323,333	$	296,699

For the three months ended January 31, 2020 and 2019, the Company contractually waived management fees it was otherwise entitled to receive of $5.5 million and $4.3 million, respectively. Separately, for the same periods, the Company provided subsidies to sponsored funds of $5.4 million and $9.2 million, respectively. Fee waivers and fund subsidies are recognized as a reduction to management fees in the Consolidated Statements of Income.

Sales proceeds and net realized gains (losses) from investments in non-consolidated sponsored funds are as follows:

		Three Months Ended
		January 31,
(in thousands)		2020		2019
Proceeds from sales	$	1	$	(4,282)
Net realized gains		5		24

The Company pays all ordinary operating expenses of certain sponsored funds (excluding investment advisory and administrative fees) for which it earns an all-in-management fee. For the three months ended January 31, 2020 and 2019, expenses of $3.2 million and $3.4 million, respectively, were incurred by the Company pursuant to these arrangements.

Included in management fees and other receivables at January 31, 2020 and October 31, 2019 are receivables due from sponsored funds of $109.9 million and $104.1 million, respectively. Included in accounts payable and accrued expenses at both January 31, 2020 and October 31, 2019 are payables due to sponsored funds of $2.2 million relating primarily to fund subsidies.

Loan to affiliate

On December 23, 2015, EVMC, a wholly owned subsidiary of the Company, loaned $5.0 million to Hexavest under a term loan agreement to seed a new investment strategy. The loan renews automatically for an additional one-year period on each anniversary date unless written termination notice is provided by EVMC. The Company earns interest equal to the one-year Canadian Dollar Offered Rate plus 100 basis points. Hexavest may prepay the loan in whole or in part at any time without penalty. For the three months ended January 31, 2020 and 2019, the Company recorded $43,000 and $45,000, respectively, of interest income related to the loan in gains (losses) and other investment income, net, in the Company’s Consolidated Statement of Income. Interest due from Hexavest under this arrangement included in other assets on the Company’s Consolidated Balance Sheets was $13,000 and $15,000 at January 31, 2020 and October 31, 2019, respectively.

Employee loan program

The Company has established an Employee Loan Program under which a program maximum of $20.0 million is available for loans to officers (other than executive officers) and other key employees of the Company for purposes of financing the exercise of employee stock options. Loans are written for a seven-year period, at varying fixed interest rates (currently ranging from 1.0 percent to 2.9 percent), are payable in annual installments commencing with the third year in which the loan is outstanding, and are collateralized by the stock issued upon exercise of the option. All loans under the program must be made on or before October 31, 2022. Loans outstanding under this program, which are full recourse in nature, are reflected as notes receivable from stock option exercises in shareholders’ equity and totaled $7.4 million and $8.4 million at January 31, 2020 and October 31, 2019, respectively.