UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 
 FORM 10-Q 
  (Mark One)x

          

          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended September 30, 2009 OR  o

          

          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period from  to Commission File Number: 1-9728 
 [GRAPHIC MISSING] EPOCH HOLDING CORPORATION (Exact Name of Registrant as Specified in Its Charter)  Delaware

          

          20-1938886(State or Other Jurisdiction ofIncorporation or Organization)

          

          (I.R.S. EmployerIdentification No.)
 640 Fifth Avenue, New York, NY 10019 (Address of Principal Executive Offices) (212) 303-7200 (Registrant's Telephone Number, Including Area Code) 
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer, non-accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.  Large accelerated filer o

          

          Accelerated filer x

          

          Non-accelerated filer o(Do not Check if Smaller Reporting Company)

          

          Smaller reporting company o
 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x As of November 3, 2009, there were 22,173,769 shares of the registrants common stock, $.01 par value per share, issued and outstanding.
     TABLE OF CONTENTS [GRAPHIC MISSING] EPOCH HOLDING CORPORATION AND SUBSIDIARIES   QUARTERLY REPORT ON FORM 10-Q FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 2009 TABLE OF CONTENTS  Form 10-Q Item No.

          

          PageNo.PART I. FINANCIAL INFORMATIONItem 1.Financial Statements.





1Condensed Consolidated Balance Sheets  September 30, 2009 (Unaudited) and June 30, 2009





1Condensed Consolidated Statements of Operations (Unaudited)  Three Months Ended September 30, 2009 and 2008





2Condensed Consolidated Statements of Changes in Stockholders' Equity  For the Year Ended June 30, 2009 and Three Months Ended September 30, 2009 (Unaudited)





3Condensed Consolidated Statements of Cash Flows (Unaudited)  Three Months Ended September 30, 2009 and 2008





4Notes to Condensed Consolidated Financial Statements (Unaudited)





5  13Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations.





14  28Item 3.Quantitative and Qualitative Disclosures About Market Risk.





29  30Item 4.Controls and Procedures.





30  31PART II. OTHER INFORMATIONItem 1.Legal Proceedings.





32Item 1A.Risk Factors.





32Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.





32Item 5.Other Information.





32Item 6.Exhibits.





33Signature





34
 Items other than those listed above have been omitted because they are not applicable.
 i    TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Item 1. Financial Statements. EPOCH HOLDING CORPORATION AND SUBSIDIARIES   CONDENSED CONSOLIDATED BALANCE SHEETS(In Thousands)  September 30,2009

          

          June 30,2009(Unaudited)ASSETSCurrent assets:Cash and cash equivalents

          

          $

          38,016

          

          

          $

          37,055Accounts receivable

          

          

          9,007

          

          

          

          7,523Prepaid and other current assets

          

          

          1,464

          

          

          

          1,574Total current assets

          

          

          48,487

          

          

          

          46,152Property and equipment, net of accumulated depreciation of $2,014 and $1,803, respectively

          

          

          1,139

          

          

          

          1,275Security deposits

          

          

          1,301

          

          

          

          1,119Deferred income taxes, net

          

          

          3,164

          

          

          

          3,209Held-to-maturity securities, at amortized cost (fair value of $2,424)  (Note 5)

          

          

          2,431

          

          

          

          Other investments (cost of $3,675 and $3,559, respectively)  (Note 6)

          

          

          3,715

          

          

          

          3,252Total assets

          

          $

          60,237

          

          

          $

          55,007LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued liabilities

          

          $

          1,186

          

          

          $

          636Accrued compensation and benefits

          

          

          5,541

          

          

          

          3,573Income taxes payable

          

          

          271

          

          

          

          46Total current liabilities

          

          

          6,998

          

          

          

          4,255Deferred rent

          

          

          706

          

          

          

          728Subtenant security deposit

          

          

          235

          

          

          

          234Total liabilities

          

          

          7,939

          

          

          

          5,217Commitments and contingencies  (Note 7)Stockholders equity:Common stock

          

          

          226

          

          

          

          225Additional paid-in capital

          

          

          52,265

          

          

          

          50,848Retained earnings

          

          

          2,886

          

          

          

          1,256Accumulated other comprehensive loss

          

          

          (101

          )

          

          

          (307

          )Treasury stock, at cost  (Note 8)

          

          

          (2,978

          )

          

          

          (2,232

          )Total stockholders equity

          

          

          52,298

          

          

          

          49,790Total liabilities and stockholders equity

          

          $

          60,237

          

          

          $

          55,007
 The accompanying notes are an integral part of these condensed consolidated financial statements.
 1    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)(In Thousands, Except per Share Data)  Three Months EndedSeptember 30,2009

          

          2008Operating Revenues:Investment advisory and management fees

          

          $

          11,141

          

          

          $

          8,478Performance fees

          

          

          276

          

          

          

          Total operating revenues

          

          

          11,417

          

          

          

          8,478Operating expenses:Employee related costs (excluding share-based compensation)

          

          

          4,516

          

          

          

          4,117Share-based compensation

          

          

          971

          

          

          

          1,330Occupancy and technology

          

          

          1,083

          

          

          

          879Professional fees and services

          

          

          693

          

          

          

          719General and administrative

          

          

          381

          

          

          

          473Depreciation and amortization

          

          

          211

          

          

          

          106Total operating expenses

          

          

          7,855

          

          

          

          7,624Operating income

          

          

          3,562

          

          

          

          854Other income (loss):Net realized gains (losses) on other investments

          

          

          56

          

          

          

          (257

          )Interest and other income

          

          

          252

          

          

          

          291Total other income

          

          

          308

          

          

          

          34Income before income taxes

          

          

          3,870

          

          

          

          888Provision for income taxes

          

          

          1,573

          

          

          

          306Net income

          

          $

          2,297

          

          

          $

          582Earnings per share:  (Note 10)Basic and Diluted

          

          $

          0.10

          

          

          $

          0.03Weighted average shares outstanding:Basic

          

          

          22,196

          

          

          

          22,077Diluted

          

          

          22,319

          

          

          

          22,104Cash dividends declared per share

          

          $

          0.03

          

          

          $

          0.03
 The accompanying notes are an integral part of these condensed consolidated financial statements.
 2    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY For the Three Months Ended September 30, 2009 and Year Ended June 30, 2009(Dollars and Shares in Thousands)  Preferred StockSeries AConvertible

          

          Common Stock

          

          AdditionalPaid-inCapital

          

          RetainedEarnings

          

          AccumulatedOther ComprehensiveIncome (Loss)

          

          Treasury Stock

          

          TotalStockholdersEquityShares

          

          Amount

          

          Shares

          

          Amount

          

          Shares

          

          AmountBalances at June 30, 2008

          

          

          10

          

          

          $

          10

          

          

          

          20,290

          

          

          $

          203

          

          

          $

          44,745

          

          

          $

          698

          

          

          $

          (228

          )

          

          

          9

          

          

          $

          (83

          )

          

          $

          45,345Net income

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          5,860

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          5,860Net unrealized losses on available-for-sale securities, net of tax

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (915

          )

          

          

          

          

          

          

          

          

          

          

          (915

          )Reclassification of realized losses included in net income, net of tax

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          836

          

          

          

          

          

          

          

          

          

          

          

          836Comprehensive income

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          5,781Issuance and forfeitures of restricted common stock

          

          

          

          

          

          

          

          

          

          

          536

          

          

          

          5

          

          

          

          295

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          300Amortization of unearned share-based compensation

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          4,196

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          4,196Conversion of preferred stock

          

          

          (10

          )

          

          

          (10

          )

          

          

          1,667

          

          

          

          17

          

          

          

          (7

          )

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          Common stock dividends

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (5,302

          )

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (5,302

          )Income tax benefit from dividends paid on unvested shares

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          112

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          112Net sales/purchases of shares for employee withholding

          

          

          

          

          

          

          

          

          

          

          (31

          )

          

          

          

          

          

          

          (203

          )

          

          

          

          

          

          

          

          

          

          

          31

          

          

          

          (207

          )

          

          

          (410

          )Repurchase of common shares

          

          

          

          

          

          

          

          

          

          

          (264

          )

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          264

          

          

          

          (1,942

          )

          

          

          (1,942

          )Excess income tax benefit from vesting of restricted shares

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          1,710

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          1,710Balances at June 30, 2009

          

          

          

          

          

          

          

          

          

          

          22,198

          

          

          

          225

          

          

          

          50,848

          

          

          

          1,256

          

          

          

          (307

          )

          

          

          304

          

          

          

          (2,232

          )

          

          

          49,790Net income

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          2,297

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          2,297Net unrealized gains on available-for-sale securities, net of tax

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          239

          

          

          

          

          

          

          

          

          

          

          

          239Reclassification of realized gains included in net income, net of tax

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (33

          )

          

          

          

          

          

          

          

          

          

          

          (33

          )Comprehensive income

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          2,503Issuance and forfeitures of restricted common stock

          

          

          

          

          

          

          

          

          

          

          52

          

          

          

          1

          

          

          

          3

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          4Amortization of unearned share-based compensation

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          967

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          967Common stock dividends

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (667

          )

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (667

          )Income tax benefit from dividends paid on unvested shares

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          13

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          13Net sales/purchases of shares for employee withholding

          

          

          

          

          

          

          

          

          

          

          7

          

          

          

          

          

          

          

          2

          

          

          

          

          

          

          

          

          

          

          

          (7

          )

          

          

          (10

          )

          

          

          (8

          )Repurchase of common shares

          

          

          

          

          

          

          

          

          

          

          (82

          )

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          82

          

          

          

          (736

          )

          

          

          (736

          )Excess income tax benefit from vesting of restricted shares

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          432

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          432Balances at September 30, 2009

          

          

          

          

          

          $

          

          

          

          

          22,175

          

          

          $

          226

          

          

          $

          52,265

          

          

          $

          2,886

          

          

          $

          (101

          )

          

          

          379

          

          

          $

          (2,978

          )

          

          $

          52,298
 The accompanying notes are an integral part of these condensed consolidated financial statements.
 3    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(In Thousands)  Three Months EndedSeptember 30,2009

          

          2008Cash flows from operating activities:Net income

          

          $

          2,297

          

          

          $

          582Adjustments to reconcile net income to net cash provided by/(used in) operating activities:Deferred income taxes

          

          

          (125

          )

          

          

          Amortization of bond premiums

          

          

          3

          

          

          

          Share-based compensation

          

          

          971

          

          

          

          1,330Depreciation and amortization

          

          

          211

          

          

          

          106Net realized (gains)/losses on investments

          

          

          (56

          )

          

          

          257Equity in net (income)/loss from limited liability company

          

          

          (49

          )

          

          

          58Income tax benefit from vesting of restricted shares

          

          

          (432

          )

          

          

          (1,513

          )Income tax benefit from payment of dividends on unvested shares

          

          

          (13

          )

          

          

          (18

          )(Increase)/decrease in operating assets:Accounts receivable

          

          

          (1,484

          )

          

          

          190Prepaid and other current assets

          

          

          138

          

          

          

          (435

          )Increase/(decrease) in operating liabilities:Accounts payable and accrued liabilities

          

          

          550

          

          

          

          135Accrued compensation and benefits

          

          

          1,968

          

          

          

          (1,779

          )Income taxes payable

          

          

          670

          

          

          

          (1,141

          )Deferred rent

          

          

          (22

          )

          

          

          (21

          )Net cash provided by/(used in) operating activities

          

          

          4,627

          

          

          

          (2,249

          )Cash flows from investing activities:Proceeds from other transactions

          

          

          

          

          

          

          200Investments in held-to-maturity securities

          

          

          (2,434

          )

          

          

          Investments in Company-sponsored products and other investments

          

          

          (10

          )

          

          

          (10

          )Capital expenditures

          

          

          (75

          )

          

          

          (12

          )Security deposits, net

          

          

          (181

          )

          

          

          (5

          )Net cash (used in)/provided by investing activities

          

          

          (2,700

          )

          

          

          173Cash flows from financing activities:Cash dividends paid

          

          

          (667

          )

          

          

          (664

          )Repurchase of common stock

          

          

          (746

          )

          

          

          (1,125

          )Income tax benefit from vesting of restricted shares

          

          

          432

          

          

          

          1,513Income tax benefit from payment of dividends on unvested shares

          

          

          13

          

          

          

          18Net gains (losses)/on sale of shares for employee withholding

          

          

          2

          

          

          

          (67

          )Net cash used in financing activities

          

          

          (966

          )

          

          

          (325

          )Net increase/(decrease) in cash and cash equivalents during period

          

          

          961

          

          

          

          (2,401

          )Cash and cash equivalents at beginning of period

          

          

          37,055

          

          

          

          37,436Cash and cash equivalents at end of period

          

          $

          38,016

          

          

          $

          35,035Supplemental disclosure of cash flow information:Cash paid for income taxes

          

          $

          658

          

          

          $

          1,653Supplemental disclosure of non-cash investing activities:Net change in unrealized gains (losses) on available-for-sale securities, net of tax

          

          $

          206

          

          

          $

          (315

          )
 The accompanying notes are an integral part of these condensed consolidated financial statements.
 4    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Three Months Ended September 30, 2009 and 2008(Unaudited) Note 1  Organization Business Epoch Holding Corporation (Epoch or the Company), a Delaware corporation, is a holding company whose sole line of business is investment advisory and investment management services. The operations of the Company are conducted through its wholly-owned subsidiary, Epoch Investment Partners, Inc. (EIP). EIP is a registered investment adviser under the Investment Advisers Act of 1940, as amended (the Investment Advisers Act). EIP provides investment advisory and investment management services to retirement plans, mutual funds, endowments, foundations and high net worth individuals. Headquartered in New
York, NY, the Companys current product offerings include U.S. All Cap Value, U.S. Value, U.S. Smid (small/mid) Cap Value, U.S. Small Cap Value, U.S. Choice, Global Small Cap Value, Global Absolute Return, Global Choice, Global All Cap, International Small Cap, Balanced, and Global Equity Shareholder Yield. Business Segments The Companys sole line of business is the investment advisory and investment management business. There are no other operating or reportable segments. Note 2  Summary of Significant Accounting Policies Basis of Presentation The unaudited condensed consolidated financial statements of the Company included herein have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), and in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The fiscal year-end Condensed Balance Sheet was derived from audited financial
statements and, in accordance with interim financial statement standards, does not include all disclosures required by GAAP for annual financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial condition and interim results of operations have been made. The results for the interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The Companys unaudited condensed consolidated financial statements and the related notes should be read together with the consolidated financial statements and the related notes included in the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2009. Certain reclassifications have been made to prior
period condensed consolidated financial statements to conform to the current period presentation. The following accounting policy was implemented by the Company during the three months ended September 30, 2009. For a complete listing of the Companys significant accounting policies, please refer to our Annual Report on Form 10-K for the year ended June 30, 2009. Held-to-Maturity Securities During the three months ended September 30, 2009, the Company purchased approximately $2.4 million in long-term corporate bonds. Since management has the positive intent and ability to hold these investments until they mature, these investments have been accounted for as held-to-maturity investments. The investments are carried at amortized cost. Premiums and discounts on investments in debt securities are amortized over the contractual lives of these securities. The method of amortization results in a constant effective yield on those securities. Interest on debt securities is recognized in income as earned.
 5    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Three Months Ended September 30, 2009 and 2008(Unaudited) Note 2  Summary of Significant Accounting Policies   (continued) Recently Issued Accounting Standards FASB Codification In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles  a replacement of FASB Statement No. 162 (SFAS 168) (FASB ASC 105-10). SFAS 168 replaces all previously issued accounting standards and establishes the FASB Accounting Standards CodificationTM (FASB ASC) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities
in the preparation of financial statements in conformity with U.S. GAAP. SFAS 168 is effective for all interim and annual periods ending after September 15, 2009. The FASB ASC is not intended to change existing U.S. GAAP. The adoption of this pronouncement only resulted in changes to the Companys financial statement disclosure references. As such, the adoption of this pronouncement had no effect on the Companys condensed consolidated financial position, results of operations, or cash flows. In order to facilitate the transition to the FASB ASC, the Company has elected to show all references to FASB ASC within this report on Form 10-Q along with a parenthetical reference to the previous accounting standard. Note 3  Fair Value Measurements In accordance with FASB ASC 820-10 (SFAS 157, Fair Value Measurements), the Company established a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows: 

          Level 1  inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets. 

          Level 2  inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. 

          Level 3  inputs to the valuation methodology are unobservable and significant to the fair value measurement. An asset or liabilitys categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). FASB ASC 820-10 allows three types of valuation approaches: a market approach, which uses observable prices and other relevant information that is generated by market transactions involving identical or comparable assets or liabilities; an income approach, which uses valuation techniques to convert future amounts to a single, discounted present value amount; and a cost approach, which is based on the amount that currently would be required to replace the service capacity of an asset.
 6    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Three Months Ended September 30, 2009 and 2008(Unaudited) Note 3  Fair Value Measurements   (continued) The following is a description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy. Other Investments Other investments consist of investments in Company-sponsored investment vehicles, including mutual funds, an investment product separate account, and a limited liability company. The investments in the mutual funds and in the separate account are accounted for as available-for-sale investments and valued under the market approach through the use of unadjusted quoted market prices available in an active market and are classified within Level 1 of the valuation hierarchy. The fair market value of these investments at September 30, 2009 was $3.3 million. The investment in the Epoch Global Absolute Return Fund, LLC is accounted for under the equity method, whereby the Company records its percentage share of realized and unrealized earnings or losses in the Condensed Consolidated Statement of Operations. Accordingly, FASB ASC 820-10 does not apply to this investment. The carrying value of this investment at September 30, 2009 was $0.4 million. The following table presents, for each of the hierarchy levels previously described, the Companys assets that are measured at fair value as of September 30, 2009 (in thousands):  As of September 30, 2009Fair Value Measurements

          

          Quoted Prices in Active Markets forIdentical Assets (Level 1)

          

          Significant Other Observable Inputs(Level 2)

          

          SignificantUnobservable Inputs(Level 3)Other investments:Available-for-sale

          

          $

          3,279

          

          

          $

          3,279

          

          

          $

          

          

          

          $

          
 At September 30, 2009, the Company did not hold any financial liabilities measured at fair value. Financial Instruments that Approximate Fair Value: FASB ASC 825-10 (SFAS 107, Disclosure about Fair Value of Financial Instruments) requires disclosure of estimated fair values of certain financial instruments, both on and off the Condensed Consolidated Balance Sheets. The method and assumptions are as follows: Cash and Cash Equivalents: Cash and cash equivalents include cash in checking and money market accounts, as well as highly liquid investments in money market funds consisting of short-term securities of the U.S. government and its agencies. Cash equivalents are stated at cost, which approximates fair value due to their short maturity. Security Deposits: Security deposits are funds held in certificates of deposit as required by the lessors of the Companys leased and sub-leased office premises. These investments mature, and are renewed, in one-year intervals, and accordingly are valued at cost plus accrued interest, which approximates fair value. Other Financial Instruments: Accounts receivable, accounts payable and accrued liabilities are stated at cost, which approximates fair value due to their short maturities.
 7    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Three Months Ended September 30, 2009 and 2008(Unaudited) Note 4  Accounts Receivable The Companys accounts receivable balances do not include an allowance for doubtful accounts for the periods presented and there have been no bad debt expenses recognized during the three months ended September 30, 2009 and 2008, respectively. Management believes these receivables are fully collectible. Significant Customers For the three months ended September 30, 2009, CI Investments Inc. (CI), a Canadian-owned investment management company, accounted for approximately 11% of consolidated revenues. The Companys services and relationship with this client are important to the Companys ongoing growth strategy, and retention of this client is significant to the ongoing results of operations of the Company. For the three months ended September 30, 2008, CI accounted for approximately 14% of consolidated revenues. Note 5  Held-to-Maturity Securities The Companys investment securities classified as held-to-maturity consist of long-term corporate bonds. These investments are carried at amortized cost. Gross unrealized gains and losses, and fair value of these securities at the end of the period are as follows (in thousands):  AmortizedCost

          

          Gross Unrealized

          

          FairValueGains

          

          LossesHeld-to-maturity securities

          

          $

          2,431

          

          

          $

          

          

          

          $

          (7

          )

          

          $

          2,424
 The fair value of investments in held-to-maturity securities is valued under the market approach through the use of quoted prices for similar investments in active markets. The contractual maturities of the investment securities classified as held-to-maturity at September 30, 2009 are as follows:  Contractual Maturities

          

          AmortizedCost

          

          FairValueAfter one year through three years

          

          $

          371

          

          

          $

          366After three years through five years

          

          

          2,060

          

          

          

          2,058Total held-to-maturity securities

          

          $

          2,431

          

          

          $

          2,424
 8    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Three Months Ended September 30, 2009 and 2008(Unaudited) Note 6  Other Investments The Companys Other investments at September 30, 2009 and June 30, 2009 are summarized as follows (in thousands):  September 30, 2009

          

          June 30, 2009CostBasis

          

          Gross Unrealized

          

          EstimatedFairValue

          

          CostBasis

          

          Gross Unrealized

          

          EstimatedFairValueGains

          

          Losses

          

          Gains

          

          LossesAvailable-for-sale securities:Epoch Global All Cap separate account

          

          $

          2,138

          

          

          $

          248

          

          

          $

          (30

          )

          

          $

          2,356

          

          

          $

          2,072

          

          

          $

          128

          

          

          $

          (142

          )

          

          $

          2,058Company-sponsored mutual funds

          

          

          1,101

          

          

          

          65

          

          

          

          (243

          )

          

          

          923

          

          

          

          1,099

          

          

          

          34

          

          

          

          (327

          )

          

          

          806Total available-for-sale securities

          

          

          3,239

          

          

          

          313

          

          

          

          (273

          )

          

          

          3,279

          

          

          

          3,171

          

          

          

          162

          

          

          

          (469

          )

          

          

          2,864Equity method investment:Epoch Global Absolute Return Fund, LLC

          

          

          436

          

          

          

          

          

          

          

          

          

          

          

          436

          

          

          

          388

          

          

          

          

          

          

          

          

          

          

          

          388Total Other Investments

          

          $

          3,675

          

          

          $

          313

          

          

          $

          (273

          )

          

          $

          3,715

          

          

          $

          3,559

          

          

          $

          162

          

          

          $

          (469

          )

          

          $

          3,252
 The unrealized losses for each period presented have been unrealized for twelve months or more. Management has reviewed its investment securities for other-than-temporary impairment in accordance with its accounting policy outlined in Note 2 of the Companys Annual Report filed on Form 10-K for the year ended June 30, 2009. Based on managements assessment, the Company does not believe that the declines are other-than-temporary for all periods presented. The gross unrealized losses from available-for-sale securities were primarily caused by overall weakness in the financial markets and world economy. The securities are expected to recover
their value over time, and management has the intent and ability to hold these investments until such recovery occurs. Proceeds as well as realized gains and losses recognized from investments classified as available-for-sale are as follows: (in thousands):  For the Three Months Ended September 30,2009

          

          2008Proceeds

          

          Gross Realized

          

          Proceeds

          

          Gross RealizedGains

          

          Losses

          

          Gains

          

          LossesInvestments:Available-for-sale securities:Epoch Global All Cap separate account

          

          $

          953

          

          

          $

          125

          

          

          $

          (71

          )

          

          $

          932

          

          

          $

          

          

          

          $

          (257

          )
 There were no gross realized gains or losses from Company-sponsored mutual funds for the periods presented. Realized gains and losses from available-for-sale securities are included in Other income in the Condensed Consolidated Statements of Operations using the specific identification method.
 9    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Three Months Ended September 30, 2009 and 2008(Unaudited) Note 7  Commitments and Contingencies Employment Agreements The Company entered into a three-year employment agreement with its Chief Executive Officer in November 2007, effective January 1, 2008. The agreement calls for a base annual salary of $350 thousand and bonus compensation in accordance with the Companys bonus and incentive compensation plans. The agreement also calls for certain payments in the event of termination. The payments could vary depending on the cause of termination and whether or not the Board of Directors elects to enforce a non-compete agreement. The agreement was reviewed and approved by the Companys Compensation Committee and the Board of Directors. There are no employment contracts with any other employees or officers of the Company. There are written agreements with certain employees, which provide for sales commissions or bonuses, subject to the attainment of certain performance criteria or continuation of employment. Such commitments under the various agreements total approximately $0.7 million at September 30, 2009. Of this amount, approximately $0.3 million is included in accrued compensation and benefits in the Condensed Consolidated Balance Sheet at September 30, 2009. An additional $0.1 million will be accrued during the remainder of the fiscal year ending June 30, 2010 and shortly
thereafter. Approximately $0.3 million represents restricted stock awards to be issued during the remainder of the fiscal year ending June 30, 2010 and shortly thereafter. Legal Matters From time to time, the Company or its subsidiaries may become parties to claims, legal actions and complaints arising in the ordinary course of business. Management is not aware of any claims which would have a material adverse effect on its condensed consolidated financial position, results of operations, or cash flows. Note 8  Treasury Stock Common Stock Repurchase Plan On June 24, 2008, the Companys Board of Directors approved the repurchase of up to a maximum of 250,000 shares, or just over 1%, of the Companys then fully diluted outstanding Common Stock. The repurchase plan called for the repurchases to be made in the open market and/or in privately negotiated transactions from time to time in compliance with applicable laws, rules and regulations, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended, subject to prevailing market and business conditions. The plan did not obligate the Company to purchase any particular number of shares, and could be suspended or discontinued at
any time. The Company completed this repurchase plan by February 2009. In March 2009, the Companys Board of Directors authorized the Company to repurchase up to an additional 250,000 shares, pursuant to the same conditions, except the repurchase plan does not contain an expiration date. During the three months ended September 30, 2009 and 2008, the Company repurchased 81,900 shares and 63,900 shares at a weighted average price of $8.99 and $8.98, respectively. All shares repurchased are shown as Treasury stock at cost, in the Stockholders equity section of the Condensed Consolidated Balance Sheet. Employee Tax Withholding To satisfy statutory employee tax withholding requirements related to the vesting of common shares, the Company purchases from employees, and then resells in the open market, shares relinquished by employees to satisfy employee tax withholding obligations. At September 30, 2009, there were 24,823 shares at a weighted average cost of $8.75 held to be resold by the Company in the open market. These shares are shown as
 10    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Three Months Ended September 30, 2009 and 2008(Unaudited) Note 8  Treasury Stock   (continued) Treasury stock at cost in the Stockholders equity section of the Condensed Consolidated Balance Sheets. Any resulting gain or loss on resale is accounted for as an adjustment to Additional paid-in capital. Note 9  Share-Based Compensation The Company granted $0.2 million and $2.3 million in restricted stock awards to employees during the three months ended September 30, 2009 and 2008, respectively. For the three months ended September 30, 2009, a total of 21,538 shares were granted at a weighted average price of $8.93. For the three months ended September 30, 2008, a total of 197,943 shares were granted at a weighted average price of $11.43. The Company granted $0.4 million in restricted stock awards to non-employee directors during the three months ended September 30, 2009 and 2008, respectively. For the three months ended September 30, 2009, a total of 39,798 shares were granted at a weighted average price of $8.85. For the three months ended September 30, 2008, a total of 38,620 shares were granted at a weighted average price of $9.10. Employee share-based compensation expense for restricted stock is recognized as follows: 12.5% immediately, and the remaining 87.5% ratably over the three-year vesting period of those awards. Non-employee director awards are recognized over a one-year period. Neither employee nor director share awards are subject to performance-based accelerated vesting. During the fiscal year ended June 30, 2009 the Company issued nonqualified options to purchase 630,060 shares of common stock to employees of the Company. These stock options vest and are recognized ratably over three years from the grant date and have a term of seven years. The options have an exercise price of $6.17. However, upon vesting, the options are exercisable only if the volume weighted average price of the Companys common stock equals or exceeds $9.25 for a period of at least 20 trading days. Issuance of these awards will result in total stock compensation expense of approximately $1.1 million over the requisite service period. The
fair value of the option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used:  Expected term (years)

          

          

          4.0Expected volatility

          

          

          50

          %Dividend yield

          

          

          1.94

          %Risk-free interest rate

          

          

          1.59

          %Estimated discount due to restriction of exercise

          

          

          15

          %Forfeiture rate

          

          

          7.5

          %
 The expected life and forfeiture rate assumptions are based on the vesting period for each option grant and expected exercise behavior. The assumptions for expected volatility and dividend yield are based on recent historical experience. Risk-free interest rates are set using the grant-date U.S. Treasury yield curves for the same periods as the expected term. For the three months ended September 30, 2009 and 2008, there were no options issued. Total unrecognized compensation costs at September 30, 2009, including weighted average recognition period at September 30, 2009 is as follows (in thousands):  Award

          

          Unrecognized Compensation Cost

          

          Weighted Average Recognition PeriodUnvested Restricted Stock

          

          $

          4,888

          

          

          

          1.8 yearsUnvested Stock Options

          

          $

          823

          

          

          

          2.3 years
 11    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Three Months Ended September 30, 2009 and 2008(Unaudited) Note 10  Earnings per Share Basic earnings per share (EPS) is computed by dividing net earnings by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net earnings, adjusted for the effect of dilutive securities, by the weighted average number of common and common equivalent shares outstanding during the period. The Company uses the treasury stock method to reflect the dilutive effect of unexercised stock options. The Company had 1,577,173 and 1,035,000 issued and outstanding stock options at September 30, 2009 and 2008, respectively. The calculation of EPS excluded 960,000 of the issued and outstanding stock options for the three months ended September 30, 2009 as the exercise price of those options was higher than the average market price of the common stock for the period. The calculation of EPS excluded 510,000 of the issued and outstanding stock options for the three months ended September 30, 2008, as the exercise price of those options was higher than the average market price of the common stock for the period. The conversion of those particular
options, whose exercise price or contingent conversion price was higher than the average market price of the common stock during the respective period, would have an anti-dilutive effect. The following table presents the computation of basic and diluted EPS for the three months ended September 30, 2009 and 2008, respectively (in thousands, except per share data):  Three Months EndedSeptember 30,2009

          

          2008Numerator:Net income available to common stockholders:Net income

          

          $

          2,297

          

          

          $

          582Denominator:Weighted average common shares outstanding

          

          

          22,196

          

          

          

          22,077Net common stock equivalents assuming the exercise of in-the-money stock options

          

          

          123

          

          

          

          27Weighted average common and common equivalent shares outstanding assuming dilution

          

          

          22,319

          

          

          

          22,104Basic and diluted earnings per share

          

          $

          0.10

          

          

          $

          0.03
 Note 11  Comprehensive Income A summary of comprehensive income is as follows (in thousands):  Three Months EndedSeptember 30,2009

          

          2008Net income

          

          $

          2,297

          

          

          $

          582Other comprehensive income:Change in unrealized gains (losses) on available-for-sale securities, net of taxes

          

          

          239

          

          

          

          (572

          )Reclassification of realized (gains) losses to net income, net of taxes

          

          

          (33

          )

          

          

          257Comprehensive income

          

          $

          2,503

          

          

          $

          267
 12    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Three Months Ended September 30, 2009 and 2008(Unaudited) Note 12  Subsequent Events For purposes of preparing the accompanying condensed consolidated financial statements and the related notes, the Company evaluated subsequent events through the date the financial statements were first available for issuance on November 6, 2009. Dividends on Common Stock On October 9, 2009, the Board of Directors declared a quarterly cash dividend of $0.03 per share, or approximately $665 thousand in total, payable on November 13, 2009 to all shareholders of record at the close of business on October 30, 2009. The Company expects regular quarterly cash dividends going forward to be paid in February, May, August and November of each fiscal year, and anticipates a total annual dividend of $0.12 per common share. However, the actual declaration of future cash dividends, and the establishment of record and payment dates, is subject to determination by the Board of Directors each quarter after its review of the
Companys financial performance, as well as general business conditions, capital requirements, and any contractual, legal and regulatory restrictions. The Company may change its dividend policy at any time. Strategic Relationship On July 9, 2009, EIP entered into a strategic relationship with New York Life Investments, whereby the MainStay Group of Funds was to adopt the Companys current family of mutual funds (the Epoch Funds), subject to approval by the shareholders of the Epoch Funds. The proposed transaction was approved by the Board of Directors of the Epoch Funds and subsequently approved by the shareholders of the Epoch funds at a special meeting on October 30, 2009. The transaction is expected to be completed by mid-November 2009. EIP will continue to be responsible for the day-to-day investment management of the funds through a sub-advisory
relationship, while MainStay Investments (MainStay), the retail distribution arm of New York Life Investments, will be responsible for the distribution and administration of the funds. Each of the Epoch Funds will be co-branded as a MainStay Epoch fund. The four existing Epoch Funds currently have approximately $800 million in assets under management. In addition to the existing sub-advisory relationship between EIP and New York Life Investments as of September 30, 2009, and the adoption of the Epoch Funds indicated above, EIP and New York Life Investments have entered into an arrangement wherein, among other things, EIP and an affiliate of New York Life Investments will establish a distribution and administration relationship with respect to certain separately managed account and unified managed account products, and New York Life Investments agrees to certain minimum sales targets. *****
 13    TABLE OF CONTENTS Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations. Set forth on the following pages is managements discussion and analysis of our financial condition and results of operations for the three months ended September 30, 2009 and 2008. Such information should be read in conjunction with our unaudited condensed consolidated financial statements together with the notes to the unaudited condensed consolidated financial statements. When we use the terms the Company, management, we, us, and our, we mean Epoch Holding Corporation, a Delaware corporation, and its consolidated subsidiaries. Forward-Looking Statements Certain information included, or incorporated by reference in this Quarterly Report on Form 10-Q and other materials filed or to be filed by Epoch Holding Corporation (Epoch or the Company) with the Securities and Exchange Commission (the SEC) contain statements that may be considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by forward-looking words such as may, might, will, should, expect, plan, anticipate, believe,
estimate, predict, potential or continue, and the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about the Company, may include projections of the Companys future financial performance based on the Companys anticipated growth strategies and trends in the Companys business. These statements are only predictions based on the Companys current expectations and projections about future events. There are important factors that could cause the Companys actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. In particular, you should consider the risks and uncertainties outlined in Factors Which May Affect Future Results. These risks and uncertainties are not exhaustive. Other sections of this Quarterly Report on Form 10-Q may include additional factors which could adversely impact the Companys business and financial performance. Moreover, the Company operates in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for the Companys management to predict all risks and uncertainties, nor can the Companys management assess the impact of all factors on the Companys business or the extent to which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements. Although the Company believes the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, level of activity, performance or achievements. Moreover, neither the Company nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. The Company is under no duty to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q, nor to conform the Companys prior statements to actual results or revised
expectations, and the Company does not intend to do so. Forward-looking statements include, but are not limited to, statements about the Companys: 

          business strategies and investment policies, 

          possible or assumed future results of operations and operating cash flows, 

          competitive position, 

          potential growth opportunities, 

          potential operating performance, achievements, productivity improvements, efficiency and cost reduction efforts, 

          expected tax rate, 

          expectations with respect to the economy, securities markets, the market for mergers and acquisitions activity, the market for asset management activity and other industry trends, 

          product development,
 14    TABLE OF CONTENTS 

          business environment, and 

          the effect of future legislation and regulation on the Company. Available Information Reports the Company files electronically with the SEC via the SECs Electronic Data Gathering, Analysis and Retrieval system (EDGAR) may be accessed through the internet. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, atwww.sec.gov. The Company maintains a website which contains current information on operations and other matters. The website address iswww.eipny.com. Through the Investor Relations section of our website, and Link to SEC Website therein, we make available, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statement, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act) as soon as reasonably practicable after we electronically file such material with, or furnish it
to, the SEC. Also available free of charge on our website within the Investors Relations section is our Code of Ethics and Business Conduct and charters for the Audit, Nominating/Corporate Governance, and the Compensation Committees of our Board of Directors. Factors Which May Affect Future Results There are numerous risks which may affect the results of operations of the Company. Factors which could affect the Companys success include, but are not limited to, the ability to attract and retain clients, performance of the financial markets and invested assets managed by the Company, retention of key employees, misappropriation of assets and information by employees, system failures, significant changes in regulations, the costs of compliance associated with existing regulations and the penalties associated with non-compliance, and the risks associated with the loss of key members of the management team. In addition, the Companys ability to expand or alter its product offerings, whether through acquisitions or internal development is critical to its long-term success and has inherent risks. This success is dependent on the ability to identify and fund those products or acquisitions on terms which are favorable to the Company. There can be no assurance that any of these operating factors or acquisitions can be achieved or, if undertaken, they will be successful. These and other risks related to our Company are discussed in detail under Part I, Item 1A. Risk Factors in the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2009. Critical Accounting Estimates Our significant accounting estimates are described in Note 2 of the Notes to the Consolidated Financial Statements, as well as Managements Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended June 30, 2009. The Companys Critical Accounting Estimates have not changed from those reported in the Companys Form 10-K for the fiscal year ended June 30, 2009. Overview The Company is a global asset management firm with accomplished and experienced professionals. Our professional staff averages over 20 years of experience in our industry. The Company combines in-house research and insight, an absolute-return orientation, and a dedication to serving the informed investor. Headquartered in New York City, the Company had approximately $9.8 billion in assets under management (AUM) as of September 30, 2009. The Companys operating subsidiary, Epoch Investment Partners (EIP), is a registered investment adviser under the Investment Advisers Act of 1940, as amended (the Investment Advisers Act). It has one line of business, and that is to provide investment advisory and investment management services to its clients such as investment companies, retirement plans, mutual fund clients, endowments, foundations, and high net
 15    TABLE OF CONTENTS worth individuals. These services are provided through separately managed accounts and commingled vehicles, such as mutual funds and private investment funds. The overall investment philosophy is focused on achieving a superior risk-adjusted return by investing in companies that generate free cash flow and are undervalued relative to our investment teams value determinations. Security selection and portfolio construction are designed to protect capital in declining markets while participating in rising markets. Revenues are generally derived as a percentage of AUM. Therefore, among other factors, revenues are dependent on 

          performance of financial markets, 

          the ability to maintain existing clients, and 

          changes in the composition of AUM. AUM consists of actively traded securities. The fair value of AUM is determined by an independent pricing service, which uses publicly available, unadjusted quoted market prices to measure our AUM. The Company substantiates values obtained for assets with another independent pricing service to confirm all prices are valid. Since virtually no security in AUM is fair valued by the Company, there is no significant judgment involved in the calculation of AUM in a way that directly impacts the Companys revenue recognition. Financial and Business Highlights During the three months ended September 30, 2009, nearly all equity markets improved. Favorable market conditions significantly impacted our operations for the quarter. Some notable achievements during the three months ended September 30, 2009 were as follows: 

          The Companys AUM increased to approximately $9.8 billion at September 30, 2009, an increase of nearly $2.0 billion, or 24%, from June 30, 2009. AUM increased from September 30, 2008 by 61%, or just over $3.7 billion. 

          The Company continued to attract new assets, with net inflows exceeding $0.8 billion during the period. 

          Operating leverage, which is defined as the total revenue growth rate that exceeds the rate of growth of expenses, rose considerably. Operating revenues increased by 35% from the same period a year ago, while operating expenses increased by 3%. Operating margin for the quarter ended September 30, 2009 was 31%. 

          During September 2009, management entered into a new sublease agreement for 10,000 square feet, and terminated a sublease for 3,000 square feet which was set to expire June 2010. The additional space should provide capacity for future firm expansion. 

          The Companys financial position remains strong, with cash balances of $38.0 million, or 63% of total assets, working capital of $41.5 million, and a current ratio of 6.9. The Company expects its working capital to continue to improve during the next quarter as a result of its increase in operating margin.
 16    TABLE OF CONTENTS Summary operating information for the quarter ended September 30, 2009 and 2008 is presented in the table below:  Three Months Ended September 30,

          

          Change(Dollars in Thousands)

          

          2009

          

          2008

          

          $

          

          %Operating Revenues

          

          $

          11,417

          

          

          $

          8,478

          

          

          $

          2,939

          

          

          

          35

          %Operating Income

          

          $

          3,562

          

          

          $

          854

          

          

          $

          2,708

          

          

          

          317

          %Operating Margin(1)

          

          

          31

          %

          

          

          10

          %Net Income

          

          $

          2,297

          

          

          $

          582

          

          

          $

          1,715

          

          

          

          295

          %Earnings Per Share:Basic and diluted

          

          $

          0.10

          

          

          $

          0.03

          

          

          $

          0.07

          

          

          

          233

          %AUM (in millions)

          

          $

          9,796

          

          

          $

          6,085

          

          

          $

          3,711

          

          

          

          61

          %
  (1)

          Defined as operating income divided by operating revenues. Operating margin significantly improved from the same period a year ago. The main driver of this was the increase in revenue due to higher levels of AUM, primarily as a result of net inflows from new and existing business. Market appreciation, particularly since March 2009, also contributed to the AUM increase. The Company had net inflows of approximately $3.3 billion for the twelve months ended September 30, 2009, and finished the period ended September 30, 2009 with AUM of $9.8 billion, a 61% increase from AUM of $6.1 billion at September 30, 2008. The average assets under management for the three months ended September 30, 2009 was approximately $8.8 billion compared to approximately $6.6 billion for the three months ended September 30, 2008, an increase of approximately 35%. U.S. equity markets declined approximately 5  10% from September 30, 2008, but increased substantially since March 2009. Global equity markets performed slightly better over the past twelve months.  The Company continued to concentrate on expense management and cost containment during the three months ended September 30, 2009. Operating expenses were slightly higher, increasing by $0.2 million compared with the same period a year ago. Lease termination costs from the early termination of subleased premises, as well as accelerated amortization of leasehold improvements on the related premises, were the primary reasons for the increase. Business Environment As an investment management and advisory firm, our results of operations can be directly impacted by global market, political, and economic trends. The Companys business environment and equity markets are influenced by several factors, including corporate profitability, investor confidence, unemployment, and financial market transparency. These factors can directly affect market appreciation or depreciation, which in turn, impacts our investment advisory and management business. During the three months ended September 30, 2009, investor sentiment improved amid signs that the Federal Reserves expansive monetary policy, coupled with a variety of stimulus programs, succeeded in pulling the economy back onto a more stable path. Equities staged an impressive rally from March 2009 lows. However, uncertainty still exists as to how strong and stable the current economic rebound will be, particularly given current levels of unemployment and consumer confidence.
 17    TABLE OF CONTENTS The improving economy and market environment in the United States during the three months ended September 30, 2009 was emulated by most equity markets around the world.  Index

          

          Three Months Ended September 30, 2009

          

          Twelve Months September 30, 2009Dow Jones Industrial Average(1)

          

          

          15.8

          %

          

          

          (7.4

          )%NASDAQ Composite(2)

          

          

          15.9

          %

          

          

          1.5

          %S&P 500(3)

          

          

          15.6

          %

          

          

          (6.9

          )%MSCI World (Net)(4)

          

          

          17.4

          %

          

          

          (2.3

          )%Russell 3000 Value(5)

          

          

          18.6

          %

          

          

          (10.8

          )%
  (1)

          Dow Jones Industrial Average is a trademark of Dow Jones & Company, which is not affiliated with Epoch. (2)

          NASDAQ Composite Index is a trademark of the NASDAQ Stock Market, Inc., which is not affiliated with Epoch. (3)

          S&P 500 is a trademark of Standard & Poors, a division of the McGraw-Hill Companies, Inc., which is not affiliated with Epoch. (4)

          MSCI World Index is a trademark of MSCI Inc., which is not affiliated with Epoch. (5)

          Russell 3000 Value Index is a trademark of Russell Investments, which is not affiliated with Epoch. Company Impact and Outlook The equity market rally enhanced our revenue stream and increased our AUM by approximately $1.1 billion during the three months ended September 30, 2009. The Company continues to acquire new flows, from both new and existing clients. Despite the recent stock market gains, we continue to be cautiously optimistic. Management remains focused on ways to further develop our existing distribution channels. We continue to review and revise our cost containment and expense management policies, ensuring that operating costs are monitored, assessed and aligned with our business strategy. Above all, we continue to seek to identify value creating opportunities for our clients, our employees, and our shareholders. Assets Under Management and Flows (AUM) The following table sets forth the changes in our AUM for the periods presented (dollars in millions):  Three Months Ended September 30,2009

          

          2008Beginning of period assets

          

          $

          7,891

          

          

          $

          6,634Client Flows:Inflows/new accounts

          

          

          983

          

          

          

          607Outflows/closed accounts

          

          

          (171

          )

          

          

          (409

          )Net inflows

          

          

          812

          

          

          

          198Market appreciation/(depreciation)

          

          

          1,093

          

          

          

          (747

          )Net change

          

          

          1,905

          

          

          

          (549

          )End of period assets

          

          $

          9,796

          

          

          $

          6,085Percent change in total AUM

          

          

          24.1

          %

          

          

          (8.3

          )%Organic growth percentage(1)

          

          

          10.3

          %

          

          

          3.0

          %
  (1)

          Net inflows divided by beginning of period assets.
 18    TABLE OF CONTENTS For the three months ended September 30, 2009 and 2008, approximately 51% and 55%, respectively, of investment advisory and management fees were earned from services to mutual funds under advisory and sub-advisory contracts whose fees are calculated based upon daily net asset values, and approximately 49% and 45%, respectively, of fees were earned from services provided for separate accounts whose fees are calculated based upon asset values at the end of the period. No material impact to revenues or operating results arose during the periods presented as a result of differences between the average daily AUM for the funds where our fees are calculated based upon daily net asset values and the period ending AUM for those funds. The charts on the following page show the Companys products as a percentage of AUM as of September 2009 and 2008, respectively: [GRAPHIC MISSING]  As of September 30, 2009

          

          1-Year Change

          

          3-Month ChangeDistribution Channel

          

          AUM

          

          Amt

          

          %

          

          Amt

          

          %Sub-advisory

          

          $

          5,034

          

          

          $

          2,213

          

          

          

          78.4

          %

          

          $

          702

          

          

          

          16.2

          %Institutional

          

          

          4,500

          

          

          

          1,510

          

          

          

          50.5

          %

          

          

          1,191

          

          

          

          36.0

          %High net worth

          

          

          262

          

          

          

          (12

          )

          

          

          (4.4

          )%

          

          

          12

          

          

          

          4.8

          %Total AUM

          

          $

          9,796

          

          

          $

          3,711

          

          

          

          61.0

          %

          

          $

          1,905

          

          

          

          24.1

          %
 [GRAPHIC MISSING]
 19    TABLE OF CONTENTS The following table and charts shows the Companys AUM by product, annual and quarterly changes at September 30, 2009, as well as Epoch investment products as a percentage of AUM as of September 30, 2009 and September 30, 2008, respectively (in millions): [GRAPHIC MISSING]  As of September 30, 2009

          

          1-Year Change

          

          3-Month ChangeProduct

          

          AUM

          

          Amt

          

          %

          

          Amt

          

          %U.S. Value

          

          $

          2,791

          

          

          

          1,241

          

          

          

          80.1

          %

          

          

          451

          

          

          

          19.3

          %U.S. All Cap Value/Balanced

          

          

          2,420

          

          

          

          819

          

          

          

          51.2

          %

          

          

          404

          

          

          

          20.0

          %Global Equity Shareholder Yield

          

          

          1,762

          

          

          

          499

          

          

          

          39.5

          %

          

          

          247

          

          

          

          16.3

          %U.S. Small/Smid Cap Value

          

          

          1,291

          

          

          

          555

          

          

          

          75.4

          %

          

          

          217

          

          

          

          20.2

          %International/Int. Small Cap

          

          

          469

          

          

          

          83

          

          

          

          21.5

          %

          

          

          73

          

          

          

          18.4

          %Global Absolute Return/ Choice

          

          

          875

          

          

          

          504

          

          

          

          135.8

          %

          

          

          500

          

          

          

          133.3

          %Global Small Cap

          

          

          188

          

          

          

          10

          

          

          

          5.6

          %

          

          

          13

          

          

          

          7.4

          %Total AUM

          

          $

          9,796

          

          

          

          3,711

          

          

          

          61.0

          %

          

          

          1,905

          

          

          

          24.1

          %
 [GRAPHIC MISSING]
 20    TABLE OF CONTENTS Results of Operations Three Months Ended September 30, 2009 and 2008 For the three months ended September 30, 2009, the Company recorded net income of $2.3 million, an increase of $1.7 million from the same period a year ago. Basic earnings per share were $0.10 per share for the three months ended September 30, 2009, compared to $0.03 per share for the same period a year ago. The primary drivers for the significant improvement in net income were as follows: 

          Operating revenues increased by $2.9 million, or 35%, during the three months ended September 30, 2009 compared with the same period a year ago. This increase was caused by both market appreciation and continued net inflows. The Company had net inflows of approximately $3.3 billion for the twelve months ended September 30, 2009, and approximately $0.8 billion for the three months ended September 30, 2009. 

          Other income increased by $0.3 million compared with the same period a year ago. The prior year comparable period included $0.3 million in realized losses on investments. 

          Offsetting these increases in income was a $0.2 million increase in operating expenses from the same period a year ago. An increase in employee related costs, as well as costs related to the termination of a sublease, were the primary reasons for the overall change. Operating Revenues:  Three Months EndedSeptember 30,

          

          Change(Dollars in Thousands)

          

          2009

          

          2008

          

          $

          

          %Investment advisory and management fees

          

          $

          11,141

          

          

          $

          8,478

          

          

          $

          2,663

          

          

          

          31

          %
 The increase in revenues was attributable to the increase in AUM compared with the same period a year ago, primarily as a result of net inflows from new and existing business. Market appreciation, particularly since March 2009, also contributed to the increase in AUM. The Company had net inflows of approximately $3.3 billion for the twelve months ended September 30, 2009, and finished the period ended September 30, 2009 with AUM of $9.8 billion, a 61% increase from AUM of $6.1 billion at September 30, 2008. The average assets under management for the three months ended September 30, 2009 was approximately $8.8 billion compared to approximately $6.6 billion for the three months ended September 30, 2008, an increase of approximately 35%. U.S. equity markets declined approximately 5  10% from September 30, 2008, but increased substantially since March 2009. Global equity markets performed slightly better over the past twelve months. For the three months ended September 30, 2009, CI Investments Inc. (CI), a Canadian-owned investment management company, accounted for approximately 11% of revenues. For the three months ended September 30, 2008, CI accounted for approximately 14% of revenues.  Three Months Ended September 30,

          

          Change(Dollars in Thousands)

          

          2009

          

          2008

          

          $

          

          %Performance fees

          

          $

          276

          

          

          $

          

          

          

          $

          276

          

          

          

          NM
  NM  not meaningful The Company recognized performance fees during the three months ended September 30, 2009 from clients whose agreements included a performance measurement period of September 30, 2009. These fee arrangements generated performance fees based upon certain pre-established benchmarks. The Company currently has incentive agreements that provide for quarterly or annual performance measurement periods.
 21    TABLE OF CONTENTS Operating Expenses:  Three Months EndedSeptember 30,

          

          Change(Dollars in Thousands)

          

          2009

          

          2008

          

          $

          

          %Employee related costs (excluding share-based compensation)

          

          $

          4,516

          

          

          $

          4,117

          

          

          $

          399

          

          

          

          10

          %As a percent of total revenue

          

          

          40

          %

          

          

          49

          %
 Expenses in this category include salaries, benefits, severance, incentive compensation, signing bonuses and commission expenses. These expenses increased primarily as a result of increased incentive compensation accruals stemming from higher AUM and revenue levels. Employee headcount was virtually unchanged from the comparable period a year ago.  Three Months Ended September 30,

          

          Change(Dollars in Thousands)

          

          2009

          

          2008

          

          $

          

          %Share-based compensation

          

          $

          971

          

          

          $

          1,330

          

          

          $

          (359

          )

          

          

          (27

          )%As a percent of total revenue

          

          

          9

          %

          

          

          16

          %
 The Company believes that share-based compensation promotes unity in the workplace and a common objective with shareholders. Employee share-based compensation expense for restricted stock is recognized as follows: 12.5% immediately, and the remaining 87.5% ratably over the three-year service period of those awards. Employee share-based compensation expense for stock options is recognized ratably over the three year service period from the grant date. The Company traditionally has issued share awards to certain senior executives during the first three months following the June 30 fiscal year end and to other employees during the first three months following the calendar year. Effective in the prior fiscal year, the Company began issuing share awards to all employees during the first three months following the calendar year. The reduction in share-based compensation from the comparable period a year ago is reflective of this change. In the three months ended September 30, 2009 and 2008, a total of 21,538 and 197,943 shares of restricted stock, respectively, were issued to employees. The value of these awards was $0.2 million and $2.3 million, respectively. The decrease in the number of shares issued is the result of the change in issuance of awards to senior officers previously discussed. A total of 2,692 and 24,742 shares of the awards issued in the three months ended September 30, 2009 and 2008, respectively, or approximately 12.5%, were immediately vested. The remaining 87.5% of the shares vest over the subsequent three years. During the three months ended September 30, 2009
a total of 9,796, or $0.1 million, were forfeited by terminated employees. There were no forfeitures during the three months ended September 30, 2008. During the three months ended September 30, 2009 and 2008, a total of 39,798 and 38,620 shares of restricted stock, respectively, were granted to directors of the Company. The value of these awards was $0.4 million in each period. Share grants to directors generally transpire in the three months ended September 30. All director stock awards vest over one year. Director share-based compensation expense is recognized ratably over the one-year vesting period of those awards. During the second half of fiscal year ended June 30, 2009, the Company issued options to purchase 630,060 shares of common stock to employees of the Company. These stock options vest and are recognized ratably over three years from the grant date and have a term of seven years. The options have an exercise price of $6.17. However, upon vesting, the options are exercisable only if the volume weighted average price of the Companys common stock equals or exceeds $9.25 for a period of at least 20 trading days. Issuance of these awards will result in total stock compensation expense of $1.1 million over the requisite service period.
 22    TABLE OF CONTENTS  Three Months Ended September 30,

          

          Change(Dollars in Thousands)

          

          2009

          

          2008

          

          $

          

          %Occupancy and technology

          

          $

          1,083

          

          

          $

          879

          

          

          $

          204

          

          

          

          23

          %As a percent of total revenue

          

          

          9

          %

          

          

          10

          %
 Occupancy and technology expenses consist primarily of office space rentals, market data services, and information technology. A sublease termination fee incurred during the period associated with the Companys early termination of a sublease was the primary reason for the increase in this expense. The Company expects to occupy new office space under a new sublease during our second fiscal quarter. We expect this expense to be higher during the next quarter as a result of higher rent from the new space.  Three Months Ended September 30,

          

          Change(Dollars in Thousands)

          

          2009

          

          2008

          

          $

          

          %Professional fees and services

          

          $

          693

          

          

          $

          719

          

          

          $

          (26

          )

          

          

          (4

          )%As a percent of total revenue

          

          

          6

          %

          

          

          8

          %
 These expenses include outside legal fees for general corporate legal affairs, independent accountants fees, consulting fees, employee placement fees and other professional services. These expenses were virtually unchanged when compared with the same period a year ago.  Three Months Ended September 30,

          

          Change(Dollars in Thousands)

          

          2009

          

          2008

          

          $

          

          %General and administrative

          

          $

          381

          

          

          $

          473

          

          

          $

          (92

          )

          

          

          (19

          )%As a percent of total revenue

          

          

          3

          %

          

          

          6

          %
 General and administrative expenses consist primarily of expenses for travel and entertainment, advertising and marketing, and other office related expenses. A decrease in travel-related expenses as a result of the Companys expense management and cost control efforts was the main reason for the decline.  Three Months Ended September 30,

          

          Change(Dollars in Thousands)

          

          2009

          

          2008

          

          $

          

          %Depreciation and amortization

          

          $

          211

          

          

          $

          106

          

          

          $

          105

          

          

          

          99

          %As a percent of total revenue

          

          

          2

          %

          

          

          1

          %
 Depreciation and amortization increased when compared with the same period a year ago. Managements decision to terminate an office sublease by the end of October 2009 resulted in a change to the estimated useful life of the underlying leasehold improvements and certain equipment, thus accelerating depreciation and amortization during the period by approximately $90 thousand.  Three Months Ended September 30,

          

          Change(Dollars in Thousands)

          

          2009

          

          2008

          

          $

          

          %Other income

          

          $

          308

          

          

          $

          34

          

          

          $

          274

          

          

          

          806

          %As of percent of income before income taxes

          

          

          8

          %

          

          

          4

          %
 Other income includes interest income, dividend income, realized gains and losses on investments, and rental income from subleased office space. The prior year period included realized losses of $0.3 million from the sales of investments in its Company sponsored separate account.
 23    TABLE OF CONTENTS  Three Months Ended September 30,

          

          Change(Dollars in Thousands)

          

          2009

          

          2008

          

          $

          

          %Provision for income taxes

          

          $

          1,573

          

          

          $

          306

          

          

          $

          1,267

          

          

          

          NMEffective income tax rate

          

          

          40.6

          %

          

          

          34.5

          %
  NM  not meaningful In calculating the provision for income taxes, the Company uses an estimate of the annual effective income tax rate based upon the facts and circumstances known at each interim period. The effective income tax rate is adjusted, as appropriate. The increase in the effective income tax rate is the result of higher income levels when compared with the same period a year ago. Three Months Ended September 30, 2009 and Prior Quarter Ended June 30, 2009 Summary operating information for the three months ended September 30, 2009 and June 30, 2009 is presented in the table below:  Three Months EndedSept. 30,

          

          June 30,

          

          Prior Quarter Change(Dollars in Thousands)

          

          2009

          

          2009

          

          $

          

          %Operating Revenues

          

          $

          11,417

          

          

          $

          9,070

          

          

          $

          2,347

          

          

          

          26

          %Operating Income

          

          $

          3,562

          

          

          $

          1,967

          

          

          $

          1,595

          

          

          

          81

          %Operating Margin(1)

          

          

          31

          %

          

          

          22

          %AUM (in millions)

          

          $

          9,796

          

          

          $

          7,891

          

          

          $

          1,905

          

          

          

          24

          %
  (1)

          Defined as operating income divided by operating revenues. The Companys operating income increased by 81% in the current quarter ended September 30, 2009 when compared with the prior quarter ended June 30, 2009, and is reflective of an increase in operating revenues as a result of higher AUM levels. Market appreciation and the Companys continued ability to attract new assets were the reasons for the revenue growth. Partially offsetting the increase in revenue was an increase in operating expenses stemming from managements decision to terminate an existing sublease for larger office space, the sublease of which was signed by management in September. This caused the Company to recognize lease
termination costs as well as accelerated depreciation costs on the previous leasehold improvements. Liquidity and Capital Resources The Companys operating cash flows are primarily influenced by the timing and receipt of investment management fees, and the payment of operating expenses, including incentive compensation to employees. Investment management fees are generally collected within 90 days of billing. The Company traditionally has paid cash incentive compensation during the first three months following the fiscal year to certain senior executives, and to other employees during the first three months following the calendar year. Commencing in the fiscal quarter ending March 31, 2009, the Company began to pay cash incentive compensation to all employees during the
first three months following the calendar year. To implement such a shift, the Company utilized a six-month stub period for those senior executives.
 24    TABLE OF CONTENTS Investing cash flows are principally influenced by activities to acquire property and equipment, reinvestment of earnings from investments in Company-sponsored products, and proceeds from other transactions. Financing cash flows are predominately influenced by the payment of common stock dividends and the repurchase of the Companys common stock. The Company has been making quarterly dividend payments on its common stock since the quarter ended December 31, 2007. The Company remains committed to growing its business in this challenging market environment and expects that its main uses of cash will be to invest in new products, enhance its distribution network, pay quarterly dividends, acquire shares of its common stock when appropriate, enhance technology infrastructure and pay corporate operating expenses, which are predominantly variable in nature and therefore fluctuate with revenue and AUM levels. The Company also anticipates using cash during the upcoming quarter to furnish and improve the newly subleased office space. The Company continues to seek opportunities to prudently reduce its variable costs and
discretionary spending wherever possible. Sources of Liquidity Sources of funds for the Companys operations are derived from investment advisory and investment management fees, interest on the Companys cash, cash equivalents, and held-to-maturity securities, and sublease income. The Companys balance sheet continues to reflect significant liquidity. As of September 30, 2009, the Company had $47.0 million in liquid assets, consisting of cash and cash equivalents of $38.0 million and $9.0 million of accounts receivable to fund its business growth strategy. Given the availability of these funds, the Company does not maintain or anticipate a need for an external source of liquidity. At September 30, 2009, accounts payable and accrued liabilities, which consist of trade payables, accrued professional fees, and other liabilities, were $1.2 million. The increase in accounts payable and accrued liabilities during the period is reflective of accruals for the lease termination costs previously discussed, professional fees for legal work performed in connection with the New York Life strategic arrangement, and pending trade settlement of share repurchases. Accrued compensation and benefits, which consist primarily of accrued incentive compensation, were $5.5 million. The increase in accrued incentive compensation reflected in the cash flow statement results from the timing of payments made for certain senior executives previously discussed, as well as higher levels of incentive compensation accruals in conjunction with higher AUM and operating revenue levels when compared with the same period a year ago. The Company also realized excess tax benefits of $0.4 million during the three months ended September 30, 2009. Excess tax benefits reduce the amount of income taxes to be paid. Excess tax benefits arise in connection with the Companys share-based compensation. When a restricted stock award vests, the market price on the date the stock vests to the employee may be higher than the original grant-date fair market value of the award. If so, the difference between the cumulative amount that has been recognized through the Statement of Operations and the vesting amount results in an excess tax benefit. Excess tax benefits reduce income taxes payable
and increase additional paid-in capital in the period they are recognized. The Company has no debt and management does not foresee any reason to incur debt unless a significant business opportunity warrants such action. The Companys business does not require it to maintain significant capital balances. Management believes that the sources of liquidity described above will be sufficient to meet the Companys operating needs for the foreseeable future and will enable it to continue to implement its growth strategy.
 25    TABLE OF CONTENTS Cash Flows A summary of cash flow data for the three months ended September 30, 2009 and 2008, respectively, is as follows (in thousands):  Three Months EndedSeptember 30,2009

          

          2008Cash flows provided by/(used in):Operating activities

          

          $

          4,627

          

          

          $

          (2,249

          )Investing activities

          

          

          (2,700

          )

          

          

          173Financing activities

          

          

          (966

          )

          

          

          (325

          )Net increase/(decrease) in cash and cash equivalents

          

          

          961

          

          

          

          (2,401

          )Cash and cash equivalents at beginning of period

          

          

          37,055

          

          

          

          37,436Cash and cash equivalents at end of period

          

          

          38,016

          

          

          

          35,035Percent of total assets

          

          

          63

          %

          

          

          67

          %
 Cash Flows from Operating Activities Net cash provided by operating activities of $4.6 million during the three months ended September 30, 2009 reflects net income and the timing in the cash settlement of assets and liabilities during the period. The difference from the prior comparable period reflects the change in net income, the timing of incentive compensation payments for certain senior executives, the change in excess tax benefits recognized on share-based compensation, and the timing differences in the cash settlement of assets and liabilities. Cash Flows from Investing Activities Cash flows used in investing activities totaled $2.7 million for three months ended September 30, 2009. Purchases of long-term corporate bonds with more attractive interest rates than money market instruments accounted for most of the funds used in investing activities. These securities are classified as held-to-maturity securities on the Condensed Consolidated Balance Sheet as it is managements intention to hold these securities until they mature. Cash Flows from Financing Activities Cash flows used in financing activities primarily reflect the payment of common stock dividends, share buy-backs and the recognition of excess tax benefits on share-based compensation. Cash used for financing activities totaled $1.0 million for the three months ended September 30, 2009. Dividends paid during the three months ended September 30, 2009 were approximately $0.7 million. The Company also repurchased 81,900 shares under our authorized repurchase program for approximately $0.7 million during the same period. Working Capital The Companys working capital and current ratio (current assets divided by current liabilities) for the three months ended September 30, 2009 and recent fiscal year ended June 30, 2009 is set forth in the table below (in thousands):  September 30,2009

          

          June 30,2009

          

          Change$

          

          %Current Assets

          

          $

          48,487

          

          

          $

          46,152

          

          

          $

          2,335

          

          

          

          5

          %Current Liabilities

          

          

          6,998

          

          

          

          4,255

          

          

          

          2,743

          

          

          

          64

          %Working Capital

          

          $

          41,489

          

          

          $

          41,897

          

          

          $

          (408

          )

          

          

          (1

          )%Current Ratio(1)

          

          

          6.9

          

          

          

          10.8

          

          

          

          (3.9

          )

          

          

          (36

          )%
  (1)

          current assets divided by current liabilities.
 26    TABLE OF CONTENTS The Company expects its working capital to increase over the next quarter as a result of its increase in operating margin. Capital Expenditures In September 2009, the Company entered into a sublease agreement for 10,000 square feet. While the Company does not have material commitments for future leasehold improvements, it is anticipated that the Company will incur higher levels of capital expenditures during the next quarter ending December 31, 2009 as it improves the new space and acquires additional equipment and technology. These future capital expenditures are expected to paid from cash generated from operations. Quarterly Common Stock Dividends Quarterly dividends of approximately $0.7 million were paid in August 2009 and August 2008. On October 9, 2009, the Board of Directors declared a quarterly cash dividend of $0.03 per share, or approximately $665 thousand in total, payable on November 13, 2009 to all shareholders of record at the close of business on October 30, 2009. The Company expects regular quarterly cash dividends going forward to be paid in February, May, August and November of each fiscal year, and anticipates a total annual dividend of $0.12 per common share. However, the actual declaration of future cash dividends, and the establishment of record and payment dates, is subject to determination by the Board of Directors each quarter after its review of the
Companys financial performance, as well as general business conditions, capital requirements, and any contractual, legal and regulatory restrictions. The Company may change its dividend policy at any time. Common Stock Repurchase Plan On June 24, 2008, the Companys Board of Directors approved the repurchase of up to a maximum of 250,000 shares, or just over 1%, of the Companys then fully diluted outstanding Common Stock. The repurchase plan called for the repurchases to be made in the open market and/or in privately negotiated transactions from time to time in compliance with applicable laws, rules and regulations, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended, subject to prevailing market and business conditions. The plan did not obligate the Company to purchase any particular number of shares, and could be suspended or discontinued at
any time. The Company completed this repurchase by February 2009. In March 2009, the Companys Board of Directors authorized the Company to repurchase up to an additional 250,000 shares, pursuant to the same conditions, except the repurchase plan does not contain an expiration date. During the three months ended September 30, 2009 and 2008, the Company repurchased 81,900 shares and 63,900 shares at a weighted average price of $8.99 and $8.98, respectively. All shares repurchased are shown as Treasury stock at cost, in the Stockholders equity section of the Condensed Consolidated Balance Sheet. Contractual Obligations The Companys headquarters and operations are located in New York, New York. Business is conducted at a location with approximately 13,000 square feet under a long-term lease that expires in September 2015. In September 2009, as a result of anticipated firm expansion, the Company terminated an existing sublease for 3,000 square feet of office space, and entered into a new sublease for 10,000 square feet of space. This new space is expected to be occupied during the quarter ended December 31, 2009. The Company is also the primary party to another lease in New York, New York with approximately 8,500 square feet, which expires in November 2010. In January 2002, a sublease agreement was executed with an unrelated third party for this property. While the Company remains responsible under terms of the original lease, the subtenant has assumed those responsibilities and is performing its obligations under the sublease agreement. Proceeds from the sublease, net of profit sharing with the landlord, more than offset the Companys obligations under this lease.
 27    TABLE OF CONTENTS The subtenant has performed its obligations under the sublease agreement and the Company is not aware of any credit issues with the subtenant. As of September 30, 2009, the remaining future minimum payments under this lease total $0.7 million. Future minimum receipts from the subtenant, net of profit sharing with the landlord, slightly exceed $0.5 million as of September 30, 2009. The Company entered into a three-year employment agreement with its Chief Executive Officer in November 2007, effective January 1, 2008. The agreement calls for a base annual salary of $350 thousand and bonus compensation in accordance with the Companys bonus and incentive compensation plans. The agreement also calls for certain payments in the event of termination. The payments could vary depending on the cause of termination and whether or not the Board of Directors elects to enforce a non-compete agreement. The agreement was reviewed and approved by the Companys Compensation Committee and the Board of Directors. Summary of Contractual Obligations The following table summarizes all contractual obligations, including the aforementioned office leases (in thousands):  Payments Due inFiscal Years Ended June 30,  RemainingPayments in2010

          

          2011  2012

          

          2013  2014

          

          2015 andThereafter

          

          TotalPrimary New York operations(1)

          

          $

          987

          

          

          $

          2,841

          

          

          $

          2,854

          

          

          $

          1,784

          

          

          $

          8,466Subleased New York lease

          

          

          481

          

          

          

          200

          

          

          

          

          

          

          

          

          

          

          

          681Other operating leases

          

          

          34

          

          

          

          12

          

          

          

          4

          

          

          

          

          

          

          

          50Total obligations

          

          

          1,502

          

          

          

          3,053

          

          

          

          2,858

          

          

          

          1,784

          

          

          

          9,197Sublease income, net(2)

          

          

          (430

          )

          

          

          (96

          )

          

          

          

          

          

          

          

          

          

          

          (526

          )Net obligations

          

          $

          1,072

          

          

          $

          2,957

          

          

          $

          2,858

          

          

          $

          1,784

          

          

          $

          8,671
  (1)

          In September 2009, the Company terminated a sublease agreement, which was to expire in June 2010, and entered into a new sublease agreement effective October 2009. (2)

          Amounts are net of landlord profit sharing. Off-Balance Sheet Arrangements As of September 30, 2009, the Company had no off-balance sheet arrangements. New Accounting Pronouncements FASB Codification In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles  a replacement of FASB Statement No. 162 (SFAS 168) (FASB ASC 105-10). SFAS 168 replaces all previously issued accounting standards and establishes the FASB Accounting Standards CodificationTM (FASB ASC) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities
in the preparation of financial statements in conformity with U.S. GAAP. SFAS 168 is effective for all interim and annual periods ending after September 15, 2009. The FASB ASC is not intended to change existing U.S. GAAP. The adoption of this pronouncement only resulted in changes to the Companys financial statement disclosure references. As such, the adoption of this pronouncement had no effect on the Companys condensed consolidated financial position, results of operations, or cash flows. In order to facilitate the transition to the FASB ASC, the Company has elected to show all references to FASB ASC within this report on Form 10-Q along with a parenthetical reference to the previous accounting standard.
 28    TABLE OF CONTENTS Item 3. Quantitative and Qualitative Disclosures About Market Risk. Market Risk The Companys predominant exposure to market risk is directly related to its role as an investment adviser for the mutual funds and separate accounts the Company manages. Changes in value of assets managed will impact the level of management and performance fee revenues. Approximately 51% of the Companys revenue is derived from daily net asset values, while the remaining 49% of revenue is derived from market values of AUM at the end of the quarter. Declines in equity security market prices could cause revenues to decline because of lower investment management fees by causing: 

          the value of AUM to decrease. 

          the returns realized on AUM to decrease, impacting performance fees. 

          clients to withdraw funds in favor of investments in markets that they perceive to offer greater opportunity. Underperformance of client accounts relative to competing products could exacerbate these factors. The management of market risk on behalf of our clients, and the impact on fees to the Company, is a significant focus for us and we use a variety of risk measurement techniques to identify and manage market risk. Other Investments Market Risk The Company is exposed to fluctuations in the market price of its Other investments. Other investments consist of investments in Company-sponsored investment vehicles, including mutual funds, and investment product separate account, and a limited liability company. Investments the Company makes are generally seed capital or to establish a performance track record. The Company does not hedge its market risk related to these securities and does not intend to do so in the future. At September 30, 2009 and June 30, 2009, respectively, the Company performed a sensitivity analysis to assess the potential loss in the fair value of these market-risk sensitive securities. The following table represents the estimated impact on the Companys financial position assuming a hypothetical 10% decline in associated market indices (I):  FairValue

          

          Fair Value Assuming 10% Decline

          

          Decrease in Stockholders Equity(1)At September 30, 2009:Available-for-sale securities:Epoch Global All Cap separate account

          

          $

          2,356

          

          

          $

          2,163

          

          

          $

          193Company-sponsored mutual funds

          

          

          922

          

          

          

          841

          

          

          

          81Equity method:Epoch Global Absolute Return Fund, LLC

          

          

          436

          

          

          

          399

          

          

          

          37Total Investments

          

          $

          3,715

          

          

          $

          3,403

          

          

          $

          312At June 30, 2009:Available-for-sale securities:Epoch Global All Cap separate account

          

          $

          2,058

          

          

          $

          1,890

          

          

          $

          168Company-sponsored mutual funds

          

          

          806

          

          

          

          737

          

          

          

          69Equity method:Epoch Global Absolute Return Fund, LLC

          

          

          388

          

          

          

          357

          

          

          

          31Total Investments

          

          $

          3,252

          

          

          $

          2,984

          

          

          $

          268
  (1)

          Investments in the Company-sponsored mutual funds and the Epoch Global All-Cap separate account are classified as available-for-sale securities. Unrealized gains or losses on available-for-sale securities are excluded from earnings and recorded in other comprehensive income (loss) as a separate component of stockholders equity until realized. The investment in the Epoch Global Absolute Return Fund, LLC is
 29    TABLE OF CONTENTS accounted for using the equity method, under which the Companys share of net realized and unrealized earnings or losses from the limited liability company is reflected in income. Interest Rate Risk The Companys investment income consists primarily of interest income and realized gains and losses on its investments. The Companys investment income is highly sensitive to fluctuation in interest rates. During the three months ended September 30, 2009, the Company purchased approximately $2.4 million in long-term corporate bonds. Since it is managements intent to hold these investments until they mature, these investments have been accounted for as held-to-maturity securities. The Company does not hedge its market risk related to these securities and does not intend to do so in the future. The Company believes that a hypothetical
change in the interest rate of 100 basis points would not have a material impact on its condensed consolidated results of operations, financial condition or cash flows. The table below provides information about the Companys investment securities held-to-maturity, including expected principal flows for the fiscal years June 30, 2010 through June 30, 2015 and thereafter (in thousands):  Payments Due inFiscal Years Ended June 30,2010

          

          2011

          

          2012

          

          2013

          

          2014

          

          2015 and Thereafter

          

          TotalPrincipal Cash Flows

          

          Fair Market Value atSeptember 30, 2009Corporate Bonds

          

          $

          

          

          

          $

          

          

          

          $

          350

          

          

          $

          1,450

          

          

          $

          500

          

          

          $

          

          

          

          $

          2,300

          

          

          $

          2,424Weighted average interest rate

          

          

          

          

          

          

          

          

          

          

          3.55

          %

          

          

          2.48

          %

          

          

          3.25

          %
 Cash and Cash Equivalents Cash and cash equivalents include cash in checking and money market accounts, as well as highly liquid investments in money market funds consisting of short-term securities of the U.S. government and its agencies. Cash and cash equivalents are exposed to market risk due to changes in interest rates, which impacts interest income. Cash equivalents are stated at cost, which approximates fair value due to their short maturity. The Company consistently monitors the quality of the institution where its cash is deposited, the balance of which, at times, may be in excess of the Federal Deposit Insurance Corporation insurance limits. Presently, the Company neither participates in hedging activities nor does it have any derivative financial instruments. Item 4. Controls and Procedures. Evaluation of Disclosure Controls and Procedures. The Company has established and maintains disclosure controls and other procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), that are designed to provide reasonable assurance that material information relating to Epoch Holding Corporation and its subsidiaries on a consolidated basis required to be disclosed in its reports filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated accurately to the Companys
management, including its principal executive officer and principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can only provide reasonable, not absolute assurance, that the objectives of the disclosure controls and procedures are met. For the quarter ended September 30, 2009, management, with the participation of the Companys principal executive officer and principal financial and accounting officer, has evaluated the effectiveness of the design and operation of the Companys disclosure controls and procedures. Based on such evaluation of these disclosure controls and procedures, the Companys principal executive officer and principal financial and
 30    TABLE OF CONTENTS accounting officer have concluded that the Companys disclosure controls and procedures were effective during the period covered by this Quarterly Report on Form 10-Q. The Company has also established and maintains internal control over financial reporting as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of condensed consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States. In the ordinary course of business, the Company routinely enhances its internal controls and procedures for financial reporting by either upgrading its current systems or implementing new systems. During the fiscal quarter ended September 30, 2009, there was no change in
the Companys internal controls over financial reporting (as defined in Rule 13a-5(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
 31    TABLE OF CONTENTS PART II. OTHER INFORMATION Item 1. Legal Proceedings. From time to time, the Company or its subsidiaries may become parties to claims, legal actions and complaints arising in the ordinary course of business. Management is not aware of any claims which would have a material adverse effect on its consolidated financial position, results of operations, or cash flows. Item 1a. Risk Factors. See Part I. Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  Business Environment in this report for a discussion of the conditions in the financial markets and economic conditions affecting our business. In addition, for further discussion of our potential risks and uncertainties, see information under the heading Risk Factors in our annual report on Form 10-K for the year ended June 30, 2009. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. (c) Purchases of Equity Securities by the Issuer. The table below provides information with respect to the treasury shares the Company purchased under the Companys share repurchase plans during the three months ended September 30, 2009.  Period

          

          Total Number of Shares Purchased

          

          Average Price Paid per Share

          

          Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

          

          Maximum Number of Shares that May Yet Be Purchased Under Outstanding Plans or Programs(1)July 1, 2009  July 31, 2009

          

          

          

          

          

          $

          

          

          

          

          

          

          

          

          227,200August 1, 2009  August 31, 2009

          

          

          

          

          

          $

          

          

          

          

          

          

          

          

          227,200September 1, 2009  September 30, 2009

          

          

          81,900

          

          

          $

          8.99

          

          

          

          81,900

          

          

          

          145,30081,900

          

          

          

          

          

          

          

          81,900
  (1)

          As of November 3, 2009, there were 121,700 shares that could be purchased under our share repurchase program To satisfy statutory employee tax withholding requirements related to the vesting of common shares from employee stock awards, the Company purchases, and then resells in the open market, shares to satisfy employee tax withholding obligations. At September 30, 2009, there were 24,823 shares held in treasury to be resold by the Company in the open market. Item 5. Other Information. The Companys Annual Meeting of Stockholders will be held on Thursday, December 3, 2009 at 9:00 A.M. at The Cornell Club of New York City, 6 East 44th Street, New York, New York 10017.
 32    TABLE OF CONTENTS Item 6. Exhibits.  ExhibitNo.

          

          Description3.1

          

          Certificate of Incorporation of the Registrant, as amended.(A)3.2

          

          Amended and Restated By-Laws of Epoch Holding Corporation (as adopted April 2, 2008).(B)4.1

          

          Amended and Restated 2004 Omnibus Long-Term Incentive Compensation Plan.(F)4.4

          

          Stockholders Agreement dated as of June 2, 2004 among J Net Enterprises, Inc. and certain of its stockholders.(C)4.5

          

          Registration Rights Agreement dated as of June 2, 2004 among J Net Enterprises, Inc. and certain of its stockholders.(C)10.1

          

          Employment Agreement by and between Epoch Holding Corporation and William W. Priest, dated as of November 28, 2007 and effective as of January 1, 2008.(D)10.2

          

          1992 Incentive and Non-qualified Stock Option Plan.(E)10.40

          

          Form of Indemnification Agreement between the Registrant and each director and officer of the Registrant.(I)10.45

          

          Office lease between Vornado 640 Fifth Avenue LLC (Landlord) and Epoch Investment Partners, Inc. (Tenant).(G)10.46

          

          Form of Restricted Stock Agreement.(H)10.47

          

          Office lease between 680 Fifth Avenue Associates, L.P. (Landlord) and JNet Enterprises (Tenant).(H)10.48

          

          Office sublease between J Net Enterprises, Inc. (Tenant) and The Game Show Network (subtenant).(H)10.49

          

          Office sublease between Epoch Investment Partners, Inc. (Tenant) and Centerview Partners Holdings LLC (subtenant).(I)31.1

          

          Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.(I)31.2

          

          Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.(I)32.1

          

          Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(I)
  (A)

          Incorporated by reference to Registrants Form 8-K dated December 7, 2004. (B)

          Incorporated by reference to Registrants Form 8-K dated April 2, 2008. (C)

          Incorporated by reference to Registrants Form 8-K dated June 3, 2004. (D)

          Incorporated by reference to Registrants Form 8-K dated December 3, 2007. (E)

          Incorporated by reference to Registrants 1992 Proxy Statement. (F)

          Incorporated by reference to Registrants Form S-8 dated December 29, 2008. (G)

          Incorporated by reference to Registrants Annual Report on Form 10-K for the fiscal year ended June 30, 2005. (H)

          Incorporated by reference to Registrants Annual Report on Form 10-K/A for the fiscal year ended June 30, 2006. (I)

          Filed herewith.
 33    TABLE OF CONTENTS SIGNATURE Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.  EPOCH HOLDING CORPORATION (Registrant)Date: November 6, 2009

          

          By:/s/ Adam BorakChief Financial Officer (Principal Financial and Accounting Officer)
 34