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

          

          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Fiscal Year Ended June 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), (Zip Code) (212) 303-7200 (Registrants Telephone Number, Including Area Code) 
 Securities registered pursuant to Section 12(b) of the Act:  Title of Each Class

          

          Name of Each Exchange on Which RegisteredCommon Stock, $0.01 per share par value

          

          NASDAQ Capital Market
 Securities registered pursuant to Section 12(g) of the Act: None 
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x 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 definitions of large accelerated filer, accelerated filer, and smaller reporting company in rule 12b-2 of the Exchange Act. (Check one).  Large accelerated filer o

          

          Accelerated filer x

          

          Non-accelerated filer o(Do not Check if a 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 proceeding 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 December 31, 2008, the last trading day of the registrants most recently completed second fiscal quarter, the aggregate market value of common stock held by nonaffiliates of the registrant was approximately $95.7 million, computed by reference to the closing price of $7.59 on the NASDAQ Capital Market on December 31, 2008. As of September 9, 2009, there were 22,191,173 shares of the registrants common stock, $.01 par value per share, issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the following documents are incorporated herein by reference into the Form 10-K as indicated:  Document

          

          Part of Form 10-K into Which IncorporatedCompanys Definitive Proxy Statement for the 2009 Annual Meeting of Shareholders

          

          Part III
     TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 2009 TABLE OF CONTENTS  Form 10-K Item Number:

          

          PagePART IItem.1.Business





11A.Risk Factors





91B.Unresolved Staff Comments





152.Properties





153.Legal Proceedings





154.Submission of Matters to a Vote of Security Holders





15PART II5.Market for Registrants Common Equity, Related Stockholder Matters and Issuer   Purchases of Equity Securities





166.Selected Financial Data





197.Managements Discussion and Analysis of Financial Condition and Results of   Operations





217A.Quantitative and Qualitative Disclosures About Market Risk





428.Financial Statements and Supplementary Data





459.Changes in and Disagreements with Accountants on Accounting and Financial   Disclosure





749A.Controls and Procedures





749B.Other Information





74PART III10.Directors, Executive Officers and Corporate Governance





7511.Executive Compensation





7512.Security Ownership of Certain Beneficial Owners and Management and Related   Stockholder Matters





7513.Certain Relationships and Related Transactions and Director Independence





7514.Principal Accountant Fees and Services





75PART IV15.Exhibits and Financial Statement Schedules





76Signatures





78
 i    TABLE OF CONTENTS PART I Item 1. Business Forward-Looking Statements Certain information included, or incorporated by reference in this Annual Report on Form 10-K 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 Item 1A. Risk Factors. These risks and uncertainties are not exhaustive. Other sections of this Annual Report on Form 10-K 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 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 Annual Report on Form 10-K, 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 rates, 

          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, 

          business environment, 

          competition, and 

          the effect of future legislation and regulation on the Company.
 1    TABLE OF CONTENTS Overview Epoch Holding Corporation is a holding company headquartered in New York, NY 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). The Company uses a fiscal year, which ends on June 30. References to FY 2009, FY 2008, and FY 2007 in this document refer to the fiscal years ended June 30, 2009, June 30, 2008, and June 30, 2007, respectively. This Annual Report on Form 10-K may also include forward-looking statements which refer to fiscal years subsequent to the historical financial positions and results of operations contained herein. References to future fiscal years also apply to the June 30 year-end. When we use the terms the Company, management, we, us, and our, we mean
Epoch Holding Corporation, a Delaware Corporation, and its consolidated subsidiaries. Recent Events and FY 2009 Highlights* The following highlights mark notable accomplishments or events of the Company which transpired during its recent fiscal year of operations: (1)

          Assets under management (AUM) at June 30, 2009 were $7.9 billion, a 19% increase from a year ago. (2)

          Net AUM inflows were $2.7 billion, despite a challenging market. The Company has experienced positive net inflows every quarter since inception. (3)

          During June 2009, the Company was appointed as a sub-advisor to The MainStay Funds family of mutual funds, the retail distribution arm of New York Life Investment Management LLC. The Company was appointed to sub-advise approximately $1.1 billion of assets in six existing portfolios which are managed by New York Life Investment Management LLC. (4)

          In March 2009, the Epoch Global Equity Shareholder Yield Fund (ESPYX) received the Lipper Fund Award for best in class over the past three years in the Global Multi-Cap Value Funds classification. (5)

          The Company launched the Epoch U.S. Large Cap Equity Fund in December 2008. (6)

          Beginning with the first quarter of FY 2009, the Board of Directors increased the quarterly dividend paid on common shares by 20%, from $0.025 to $0.03 per share. During the second quarter, the Board of Directors declared a special cash dividend of $0.12 per share. (7)

          The Board of Directors authorized the repurchase of up to an additional 250,000 shares of its fully diluted outstanding common stock during the third fiscal quarter. This authorization followed the completion of the previous 250,000 share repurchase program. The Company has repurchased approximately 23,000 shares as of June 30, 2009 since the completion of the first repurchase program. (8)

          On July 1, 2008, our outstanding Preferred Stock was converted by the holder to Common Stock. The conversion eliminated the holders rights to receive the semi-annual dividends on such Preferred Stock. (9)

          The Companys balance sheet continues to strengthen. At June 30, 2009, cash balances were $37.0 million and investments in Company sponsored products were $3.3 million. Combined these represent 73% of total assets. The Company remains debt-free.  *

          See Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, for further financial highlights.
 2    TABLE OF CONTENTS Products EIP, the sole operating segment of the Company, is a registered investment adviser under the Investment Advisers Act. EIP provides investment advisory and investment management services for retirement plans, mutual funds, endowments, foundations and high net worth individuals. As of June 30, 2009, EIP offered the following investment products to its clients: (1)

          U.S. All Cap Value  This product is comprised of a broad range of U.S. companies with market capitalizations that resemble stocks in the Russell 3000, a U.S. Equity index which measures the performance of the 3,000 largest U.S. companies based upon total market capitalization. (2)

          U.S. Value  This product reflects a selection of equities in U.S. companies with market capitalizations generally considered comparable to the Russell 1000, a U.S. Equity index which measures the performance of the 1,000 largest companies in the Russell 3000 Index. (3)

          U.S. Smid (small/mid) Cap Value  This product comprises U.S. companies with market capitalizations generally considered to be comparable to the Russell 2500, a U.S. Equity index which measures the performance of the 2,500 smallest companies in the Russell 3000 Index. (4)

          U.S. Small Cap Value  This product comprises U.S. companies with market capitalizations generally considered to be comparable to the Russell 2000, a U.S. Equity index which measures the performance of the 2,000 smallest companies in the Russell 3000 Index. (5)

          U.S. Choice  This product uses the same security selection process as our other services but the holdings are limited to 20  30 U.S. equity positions and are fully invested. The benchmark for this product is the Russell 3000 Index. (6)

          International Small Cap  This product draws almost all of its holdings from companies outside the U.S., with small cap defined as companies with market capitalization in the bottom 25% of the publicly traded companies in each country where the strategy is applied. The benchmark for this product is the S&P EPAC SmallCap Index. (7)

          Global Small Cap  This product seeks to capitalize upon the continuing globalization of the world economy by investing in small cap companies in the U.S. and throughout the world. The benchmark for this product is the S&P Developed SmallCap Index. (8)

          Global Choice  This product uses the same security selection process as our other services but the holdings are limited to 20  30 global equity positions and are fully invested. The benchmark for this product is the MSCI World Index. (9)

          Global Absolute Return  While this product uses the same security selection process of other products offered by EIP, its holdings are generally limited to fewer than 30 positions. Individual positions can be as high as 15% and cash is used to control loss exposure. The objective of this product is absolute positive return. The benchmark for this product is the MSCI World Index. (10)

          Global Equity Shareholder Yield  This product seeks to invest in a diversified portfolio of global equity securities with a history of attractive dividend yields and positive growth in free cash flow. The primary objective of this product is to seek a high level of income, with capital appreciation as a secondary investment objective. The benchmark for this product is the S&P Developed BMI World Index. (11)

          Balanced Portfolios  This product is available primarily to our high net worth investors. The mix of debt and equity securities is tailored to reflect (i) the clients tolerance for risk and (ii) the clients marginal tax rate or other preferences. As a result, the mix can vary among individual clients. The equity components of these portfolios typically reflect EIPs U.S. All Cap equity structure and generally contain 40  60 positions, almost all of which are held in other EIP products. The debt component of the portfolio is largely comprised of high quality bonds.
 3    TABLE OF CONTENTS Product Development We have developed several products since our inception. Continued product development has stemmed from our close business relationships with our client base, our investment teams skill and market knowledge, as well as our responsiveness to client and market demands. The Company continues to focus on further developing new products and investment strategies for our clients. Performance Highlights Epoch finished its most recent fiscal year with AUM of $7.9 billion, an increase of 19% from the previous year. Over the past five years, Epochs AUM has had a compound annual growth rate of 56.2%. Assets Under Management by Asset Class($ in Millions)  As of June 30Product

          

          2009

          

          2008

          

          2007

          

          2006

          

          2005

          

          2004

          

          CAGR(3)U.S. Value

          

          $

          2,340

          

          

          $

          1,499

          

          

          $

          1,155

          

          

          $

          805

          

          

          $

          

          

          

          $

          

          

          

          

          42.7

          %U.S. All Cap Value/Balanced

          

          

          2,016

          

          

          

          1,601

          

          

          

          1,395

          

          

          

          787

          

          

          

          519

          

          

          

          315

          

          

          

          45.0

          %Global Equity Shareholder Yield

          

          

          1,515

          

          

          

          1,538

          

          

          

          1,323

          

          

          

          219

          

          

          

          

          

          

          

          

          

          

          

          90.5

          %U.S. Small Cap Value/Smid

          

          

          1,074

          

          

          

          832

          

          

          

          1,008

          (2)

          

          

          661

          

          

          

          549

          

          

          

          355

          

          

          

          24.8

          %International/International Small Cap

          

          

          396

          

          

          

          548

          

          

          

          688

          

          

          

          373

          

          

          

          271

          

          

          

          175

          

          

          

          17.7

          %Global Absolute Return/Choice(1)

          

          

          375

          

          

          

          402

          

          

          

          259

          

          

          

          111

          

          

          

          

          

          

          

          

          

          

          

          50.1

          %Global Small Cap

          

          

          175

          

          

          

          214

          

          

          

          173

          (2)

          

          

          297

          

          

          

          63

          

          

          

          3

          

          

          

          125.5

          %Total assets under management

          

          $

          7,891

          

          

          $

          6,634

          

          

          $

          6,001

          

          

          $

          3,253

          

          

          $

          1,402

          

          

          $

          848

          

          

          

          56.2

          %
  (1)

          includes U.S. Choice and Global Choice. (2)

          In the year ended June 30, 2007, approximately $150 million of AUM transferred from the Global Small Cap product to the U.S. Small Cap Value product. (3)

          CAGR  Compound annual growth rate. The compound annual growth rate is calculated by taking the nth root of the total percentage growth rate, where n equals the number of years in the period being considered.
 4    TABLE OF CONTENTS The following table shows each products composite returns, net of management fees, for the six months, one, three, five, and ten years ended June 30, 2009 as well as through inception as measured against their applicable benchmarks:  Product

          

          InceptionDate(1)

          

          Returns*(2)6Months

          

          1Year

          

          3Years

          

          5Years

          

          10Years

          

          SinceInceptionU.S. Value

          

          

          31-Jul-01

          

          

          

          7.9

          %

          

          

          (25.9

          )%

          

          

          (4.0

          )%

          

          

          2.3

          %

          

          

          N/A

          

          

          

          2.2

          %Russell 1000 Value

          

          

          

          

          

          

          (2.9

          )%

          

          

          (29.0

          )%

          

          

          (11.1

          )%

          

          

          (2.1

          )%

          

          

          N/A

          

          

          

          (0.2

          )%U.S. All Cap Value

          

          

          31-Jul-94

          

          

          

          6.3

          %

          

          

          (29.8

          )%

          

          

          (6.3

          )%

          

          

          0.7

          %

          

          

          5.6

          %

          

          

          9.2

          %Russell 3000 Value

          

          

          

          

          

          

          (3.0

          )%

          

          

          (28.7

          )%

          

          

          (11.2

          )%

          

          

          (2.1

          )%

          

          

          0.2

          %

          

          

          7.3

          %Global Equity Shareholder Yield

          

          

          31-Dec-05

          

          

          

          2.7

          %

          

          

          (21.5

          )%

          

          

          (3.7

          )%

          

          

          N/A

          

          

          

          N/A

          

          

          

          (1.5

          )%S&P Developed BMI Index

          

          

          

          

          

          

          8.2

          %

          

          

          (29.0

          )%

          

          

          (7.6

          )%

          

          

          N/A

          

          

          

          N/A

          

          

          

          (4.8

          )%U.S. Small Cap Value

          

          

          31-Dec-02

          

          

          

          7.1

          %

          

          

          (25.1

          )%

          

          

          (7.0

          )%

          

          

          (0.6

          )%

          

          

          N/A

          

          

          

          5.0

          %Russell 2000 Value

          

          

          

          

          

          

          (5.2

          )%

          

          

          (25.2

          )%

          

          

          (12.1

          )%

          

          

          (2.3

          )%

          

          

          N/A

          

          

          

          5.4

          %U.S. Smid Cap Value

          

          

          31-Aug-06

          

          

          

          9.1

          %

          

          

          (26.0

          )%

          

          

          N/A

          

          

          

          N/A

          

          

          

          N/A

          

          

          

          (8.1

          )%Russell 2500 Value

          

          

          

          

          

          

          (0.6

          )%

          

          

          (26.2

          )%

          

          

          N/A

          

          

          

          N/A

          

          

          

          N/A

          

          

          

          (12.2

          )%International Small Cap Value

          

          

          31-Jan-05

          

          

          

          16.2

          %

          

          

          (33.8

          )%

          

          

          (6.9

          )%

          

          

          N/A

          

          

          

          N/A

          

          

          

          3.2

          %S&P EPAC SmallCap Index

          

          

          

          

          

          

          17.3

          %

          

          

          (30.1

          )%

          

          

          (7.9

          )%

          

          

          N/A

          

          

          

          N/A

          

          

          

          1.0

          %Global Absolute Return

          

          

          31-Dec-01

          

          

          

          10.5

          %

          

          

          (19.2

          )%

          

          

          (3.0

          )%

          

          

          4.1

          %

          

          

          N/A

          

          

          

          7.8

          %MSCI World Index (Net)

          

          

          

          

          

          

          6.4

          %

          

          

          (29.5

          )%

          

          

          (8.0

          )%

          

          

          0.0

          %

          

          

          N/A

          

          

          

          1.3

          %U.S. Choice

          

          

          30-Apr-05

          

          

          

          4.6

          %

          

          

          (26.0

          )%

          

          

          (7.5

          )%

          

          

          N/A

          

          

          

          N/A

          

          

          

          (2.4

          )%Russell 3000

          

          

          

          

          

          

          4.2

          %

          

          

          (26.6

          )%

          

          

          (8.3

          )%

          

          

          N/A

          

          

          

          N/A

          

          

          

          (3.0

          )%Global Choice

          

          

          30-Sep-05

          

          

          

          8.8

          %

          

          

          (25.5

          )%

          

          

          (1.9

          )%

          

          

          N/A

          

          

          

          N/A

          

          

          

          2.1

          %MSCI World Index (Net)

          

          

          

          

          

          

          6.4

          %

          

          

          (29.5

          )%

          

          

          (8.0

          )%

          

          

          N/A

          

          

          

          N/A

          

          

          

          (4.2

          )%Global SmallCap

          

          

          31-Dec-02

          

          

          

          11.5

          %

          

          

          (25.3

          )%

          

          

          (4.6

          )%

          

          

          3.3

          %

          

          

          N/A

          

          

          

          8.8

          %S&P Developed SmallCap Index

          

          

          

          

          

          

          12.2

          %

          

          

          (30.9

          )%

          

          

          (8.9

          )%

          

          

          1.5

          %

          

          

          N/A

          

          

          

          8.7

          %
  *

          Index and product returns assume dividend reinvestment. Product returns are net of management fees. (1)

          Epoch Investment Partners became a registered investment adviser under the Investment Advisers Act of 1940 in June 2004. Performance from April 2001 through May 2004 is for Epochs investment team and accounts while at Steinberg Priest & Sloane Capital Management, LLC. For the period July 1994 through March 2001, Chief Investment Officer William W. Priest managed the accounts while at Credit Suisse Asset Management and was the only individual responsible for selecting the securities to buy and sell. (2)

          Past performance is not indicative of future results. EIP earns its revenues from managing client accounts under investment advisory and sub-advisory agreements. Such agreements provide for fees to EIP as a percentage of AUM. Separate account fees are billed on a quarterly basis, in arrears, generally based on the accounts asset value at the end of a quarter. Fees for services performed for mutual funds under advisory and sub-advisory contracts are calculated based upon the daily net asset values of the respective fund, and are generally received in arrears. Advance payments, if received, are deferred and recognized during the periods for which services are provided. The Company launched the Epoch U.S. Large Cap Equity Fund (EPLCX) in December 2008. The Company also sponsors three other mutual funds, the Epoch International Small Cap Fund (EPIEX), the Epoch Global Equity Shareholder Yield Fund (EPSYX), and the Epoch U.S. All Cap Equity Fund (EPACX).
 5    TABLE OF CONTENTS The following table shows each of the Company-sponsored mutual funds performance, net of management fees, for the six months and one year ended June 30, 2009 and returns since fund inception as measured against their applicable benchmarks:  Mutual Fund(2)

          

          MorningstarOverallRating

          

          TickerSymbol

          

          InceptionDate

          

          Returns*(1)6 Months

          

          1 Year

          

          InceptionEpoch International Small Cap Fund

          

          

          [GRAPHIC MISSING]

          

          

          

          EPIEX

          

          

          

          25-Jan-05

          

          

          

          16.1

          %

          

          

          (33.6

          )%

          

          

          3.0

          %S&P EPAC SmallCap Index

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          17.3

          %

          

          

          (30.1

          )%

          

          

          1.0

          %Epoch Global Equity Shareholder Yield Fund

          

          

          [GRAPHIC MISSING]

          

          

          

          EPSYX

          

          

          

          27-Dec-05

          

          

          

          1.9

          %

          

          

          (22.3

          )%

          

          

          (1.9

          )%S&P Developed BMI World Index

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          8.2

          %

          

          

          (29.0

          )%

          

          

          (4.8

          )%Epoch U.S. All Cap Equity Fund

          

          

          [GRAPHIC MISSING]

          

          

          

          EPACX

          

          

          

          25-Jul-05

          

          

          

          5.5

          %

          

          

          (30.2

          )%

          

          

          (4.6

          )%Russell 3000

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          4.2

          %

          

          

          (26.6

          )%

          

          

          (5.1

          )%Epoch U.S. Large Cap Equity Fund

          

          

          NR

          

          

          

          EPLCX

          

          

          

          3-Dec-08

          

          

          

          7.1

          %

          

          

          N/A

          

          

          

          16.3

          %Russell 1000

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          4.3

          %

          

          

          

          

          

          

          12.1

          %
  *

          Index and Fund returns assume dividend reinvestment. (1)

          Past performance is not indicative of future results. (2)

          Represents institutional class of shares. NR  Not rated. Distribution Channels The following table provides information regarding the composition of our AUM and respective compound annual growth rate by distribution channel for each fiscal year since the inception of the Company:  Product

          

          As of June 30

          

          5 YearCAGR2009

          

          2008

          

          2007

          

          2006

          

          2005

          

          2004Sub-advisory

          

          $

          4,332

          

          

          $

          3,080

          

          

          

          2,876

          

          

          $

          1,715

          

          

          $

          922

          

          

          $

          609

          

          

          

          48.1

          %Institutional

          

          

          3,309

          

          

          

          3,263

          (1)

          

          

          2,765

          

          

          

          1,245

          

          

          

          233

          

          

          

          28

          

          

          

          159.7

          %High net worth

          

          

          250

          

          

          

          291

          (1)

          

          

          360

          

          

          

          293

          

          

          

          247

          

          

          

          211

          

          

          

          3.5

          %Total assets under management

          

          $

          7,891

          

          

          $

          6,634

          

          

          $

          6,001

          

          

          $

          3,253

          

          

          $

          1,402

          

          

          $

          848

          

          

          

          56.2

          %
  (1)

          During the fiscal year ended June 30, 2008, approximately $28 million of AUM in separate accounts within the high net worth distribution channel transferred to the Epoch Global Absolute Return Fund, LLC, and approximately $8 million transferred to the Epoch U.S. All Cap Equity Fund, both of which are included within the Institutional distribution channel above. Significant Customers For the fiscal year ended June 30, 2009, CI Investments Inc. (CI), a leading Canadian-owned investment management company for whom EIP acts as a sub-advisor, accounted for approximately 13% of consolidated revenues. Genworth Financial Asset Management, Inc. (Genworth), a prominent investment adviser, through its investments in the Epoch International Small Cap Fund (EPIEX) and the Epoch Global Equity Shareholder Yield Fund (EPSYX), as well as separate account mandates, also accounted for approximately 13% of consolidated revenues. The Companys services and relationships with these clients are
important to the Companys ongoing growth strategy, and retention of these customers is significant to the ongoing results of operations of the Company.
 6    TABLE OF CONTENTS Growth Strategy As the Company enters its sixth full year of operations, its growth strategy will continue to be focused on the development of distribution channels to offer its various products to a broad array of clients. These efforts have included, and will continue to include, developing relationships with investment advisory consultants, initiating managed accounts with third party institutions, and maintaining strong advisory and sub-advisory relationships. Total AUM and annual revenue since FY 2005, the Companys first full fiscal year, is set forth in the graphs below. [GRAPHIC MISSING] The Company routinely evaluates its strategic position and maintains a disciplined acquisition and alliance effort that seeks complementary products or new products which could benefit clients. While the Company continues to actively seek such opportunities, there can be no assurance that acquisitions will be identified and consummated on terms that are favorable to the Company, its business and its stockholders. Management believes that opportunities are available, but will only act on opportunities that it believes are accretive to the Companys long-term business strategy. Paramount to the continued success of the business and the growth in existing products and retention of clients will be the Companys ability to attract and retain key employees. The Company believes it offers competitive compensation to its employees, including share-based compensation, which the Company believes promotes a common objective with shareholders. Competition The investment advisory and investment management business is highly competitive. The Company continuously encounters competitors in the marketplace who offer similar products and services. Many of the Companys competitors have well-established national reputations, greater financial resources, and greater market share than the Company. The Company competes primarily on the basis of investment philosophy, performance, product features, range of products, and client service. While the Company believes it will continue to be successful in growing its AUM, it may be necessary to expend additional resources to compete effectively. Competitive Strengths We are a global asset management firm with accomplished and experienced professionals that combines in-house research and insight, an absolute return orientation, and a dedication to serving the informed investor. Our professional staff averages over 20 years in our industry. Most importantly, all of our employees are shareholders; ownership binds and is a shared value of the firm. We are committed to growing and reinvesting in our business. We believe that a companys capital matters more and more as the costs of doing business have risen in an environment of increasing demands on
 7    TABLE OF CONTENTS compliance and transparency. We are sufficiently capitalized to support operations and continue to grow the business as evidenced by our strong balance sheet. We are a global firm in both product set and in distribution. We offer a set of investment strategies that allow our clients to access investment opportunities around the world. Regulation The Companys business, as well as the financial services industry, is subject to extensive regulation throughout the world. As a matter of public policy, regulatory bodies are charged with safeguarding the integrity of the securities and other financial markets and with protecting the interests of customers participating in those markets. In the U.S., the Securities and Exchange Commission (the SEC) is the federal agency responsible for the administration of the federal securities laws. The Financial Industry Regulatory Authority (FINRA) and the National Futures Association are voluntary, self-regulatory bodies composed
of members that have agreed to abide by the respective bodies rules and regulations. Each of these U.S. regulatory organizations may examine the activities of, and may expel, fine and otherwise discipline, member firms and their employees. The laws, rules and regulations comprising this framework of regulation and the interpretation and enforcement of existing laws, rules and regulations are constantly changing. The effect of any such change cannot be predicted and may impact the manner of operation and profitability of the Company. EIP, the Companys sole operating subsidiary, is registered as an investment adviser with the SEC. As a registered investment adviser, EIP is subject to the requirements of the Investment Advisers Act and the SECs regulations thereunder. Requirements relate to, among other things, principal transactions between an adviser and advisory clients, as well as general anti-fraud prohibitions. The Company is subject to the filing and reporting obligations of the Securities Act of 1933, as amended (the Securities Act) and the Securities Exchange Act of 1934, as amended (the Exchange Act). Regulators are empowered to conduct
administrative proceedings that can result in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of an investment adviser or its directors, officers or employees. The previous descriptions of the regulatory and statutory provisions applicable to the Company and EIP are not complete and are qualified in its entirety by reference to the particular statutory or regulatory provision. Any change in applicable laws or regulations may have a material effect on the Companys business, prospects and operations. Employees As of June 30, 2009, the Company employed 46 full-time employees, including 22 investment management, research and trading professionals, 11 marketing and client service professionals and 13 operations and business management professionals. None of our employees are subject to any collective bargaining agreements. 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 Proxy Statement, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of 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.
 8    TABLE OF CONTENTS Item 1A. Risk Factors As an investment management firm, risk is an inherent part of our business. Capital markets, by their nature, are prone to uncertainty and expose participants to a variety of risks. While the Company devotes significant resources across all of its operations to identify, measure, monitor, manage and analyze market and operating risk, the Companys business, financial condition, operating results, or share price could be materially adversely affected, however, by any of the following risks. You should carefully consider the risks described below before making an investment decision. Risks Related to Our Business Investment performance affects the Companys AUM relating to existing clients and is one of the most important factors in retaining clients and competing for new asset management business. Poor investment performance could impair the Companys revenue and growth because: 

          existing clients might withdraw funds from the Companys asset management business in favor of better performing products, which would result in lower investment advisory fees; 

          third-party financial intermediaries, advisers or consultants may rate the Companys products poorly, which may result in client withdrawals and reduced asset flows from these third parties or their clients; or 

          firms with which the Company has strategic alliances may terminate such relationships with the Company, and future strategic alliances may be unavailable. Some members of management are critical to the Companys success, and the inability to attract and retain key employees could compromise the Companys future success. If key employees were to leave, whether to join a competitor or otherwise, the Company may suffer a decline in revenue or earnings and suffer an adverse effect on the Companys financial position. Loss of key employees may occur due to perceived opportunity for promotion, increased compensation, work environment or other individual reasons, some of which may be beyond the Companys control. Except for the Companys CEO, there are no employment agreements with any other key employees. The loss of services of one or more key employees, or failure to attract, retain and motivate qualified personnel could negatively impact the business, financial condition, results of operations and future prospects. As with other asset management businesses, future performance depends to a significant degree upon the continued contributions of certain officers, portfolio managers and other key marketing, client service and management personnel. There is substantial competition for these types of skilled personnel. Negative performance of the securities markets could reduce revenues. The Companys investment advisory and investment management business also would be expected to generate lower revenues in a market or general economic downturn. Under the Companys asset management business arrangements, investment advisory fees the Company receives typically are based on the market value of AUM. Accordingly, a decline in the prices of securities would be expected to cause the Companys revenue and income to decline by: 

          causing the value of the Companys AUM to decrease, which would result in lower investment advisory fees, and/or 

          causing some of the Companys clients to withdraw funds from the Companys asset management business in favor of investments they perceive as offering greater opportunity or lower risk, which also would result in lower investment advisory fees. Our future results are dependent upon maintaining an appropriate level of expenses, which is subject to fluctuation. The level of our expenses is subject to fluctuation and may increase for the following or other reasons: variations in the level of total compensation expense due to, among other things, incentive compensation, changes in our employee count and mix, and competitive factors. There may also be changes in costs to
 9    TABLE OF CONTENTS maintain and enhance our administrative and operating services infrastructure. In periods of slowing growth or declining revenues, profits and profit margins are adversely affected because certain expenses remain relatively fixed. The Companys investment style in the asset management business may underperform other investment approaches, which may result in significant client or asset departures or a reduction in AUM. Even when securities prices are rising, performance can be affected by investment style. Many of the equity investment strategies in the Companys asset management business share a common investment orientation towards fundamental security selection. The Company believes this style tends to outperform the market in some market environments and underperform it in others. In particular, a prolonged growth environment (i.e., a prolonged period whereby growth stocks outperform value stocks) may cause the Companys investment strategy to go out of favor with some clients, consultants or third-party intermediaries. In combination with
poor performance relative to peers, any changes in personnel, extensive periods in particular market environments, or other difficulties, may result in significant client or asset departures or a reduction in AUM. Because the Companys clients can remove the assets the Company manages on short notice, the Company may experience unexpected declines in revenue and profitability. The Companys investment advisory and sub-advisory contracts are generally cancellable upon very short notice. Institutional and individual clients, and firms with which the Company has strategic alliances, can terminate their relationship with the Company, reduce the aggregate amount of AUM or shift their funds to other types of accounts with different rate structures for a number of reasons  including investment performance, changes in prevailing interest rates and financial market performance. Poor performance relative to other investment management firms may result in decreased inflows into the Companys investment
products, increased withdrawals from the Companys investment products, and the loss of institutional or individual accounts or strategic alliances. In addition, the ability to terminate relationships may allow clients to renegotiate for lower fees paid for asset management services. In addition, in the U.S., as required by the Investment Advisers Act, each of the Companys investment advisory contracts with the mutual funds the Company advises or sub-advises automatically terminates upon its assignment, or transfer of the Companys responsibility for fund management. Each of the Companys other investment advisory contracts subject to the provisions of the Investment Advisers Act, as required by this act, provides that the contract may not be assigned without the consent of the customer. A sale of a sufficiently large block of shares of the Companys voting securities or other
transactions could be deemed an assignment in certain circumstances. An assignment, actual or constructive, will trigger these termination provisions and could adversely affect the Companys ability to continue managing these client accounts. To the extent that a technical assignment of investment advisory contracts arises, the Company will take the necessary steps to provide clients an opportunity to consent to the continuation of their advisory agreements. Such new agreements may need approval by the stockholders of the respective funds. In the event that any of these clients do not consent to a renewal of their agreement, the Company could lose AUM, which would result in a loss of revenue. There may not be a consistent pattern in the Companys financial results from period to period, which may make it difficult for the Company to achieve steady earnings growth on a quarterly basis and may cause the price of the Companys common stock to decline. The Company may experience significant fluctuations in revenue and profits. Because our revenues are based on the value of AUM, a decline in the value of AUM would adversely affect our revenues. Because of market fluctuations, it may be difficult for the Company to achieve steady earnings growth on a quarterly basis, which could lead to large adverse movements in the price of the Companys common stock or increased volatility in the Companys stock price.
 10    TABLE OF CONTENTS Access to clients through intermediaries is important to the Companys asset management business, and reductions in referrals from such intermediaries or poor reviews of the Companys products or the Companys organization by such intermediaries could materially reduce the Companys revenue and impair the Companys ability to attract new clients. The Companys ability to market its services relies, in part, on receiving mandates from the client base of international and regional securities firms, banks, insurance companies, defined contribution plan administrators, investment consultants and other intermediaries. To an increasing extent, the Companys business uses referrals from accountants, lawyers, financial planners and other professional advisers. The inability to have this access could materially adversely affect the Companys business. In addition, many of these intermediaries review and evaluate the Companys products and the Companys organization. Poor
reviews or evaluations of either the particular products or of the Company may result in client withdrawals or an inability to attract new assets through such intermediaries. The Company derives a substantial percentage of its revenues from two significant clients. CI and Genworth each accounted for approximately 13% of revenues for FY 2009. A loss of either one of these clients could negatively impact results of operations of the Company. Our reputation is critical to our success. There have been a number of highly publicized cases involving fraud or other misconduct by employees in the financial services industry, and the Company runs the risk that employee misconduct could occur in the Companys business, as well. For example, misconduct by employees could involve the improper use or disclosure of confidential information, which could result in regulatory sanctions and serious reputational or financial harm. In the Companys business, the Company has discretion to trade client assets on the clients behalf and must do so acting in the best interest of the client. As a result, the Company is subject to a number
of obligations and standards, and the violation of those obligations or standards may adversely affect the Companys clients and the Company. The Company has adopted and implemented a number of insider trading, code of ethics, and other related policies and procedures to address such obligations and standards. It is not always possible to deter employee misconduct, and the precautions the Company takes to detect and prevent this activity may not be effective in all cases. Various factors may prevent the declaration and payment of common stock dividends. The Company began to pay a quarterly dividend, commencing in the quarter ended December 31, 2007. However, the payment of dividends in the future is subject to the discretion of the Companys Board of Directors, and various other factors may prevent us from paying dividends. Our Board of Directors will take into account such matters as general business conditions, the Companys financial results, contractual obligations, and legal and regulatory restrictions. The Company may pursue acquisitions or joint ventures that could present unforeseen integration obstacles or costs and could dilute the stock ownership of the Companys stockholders and holders of the Companys equity securities. As part of the Companys long-term business strategy, the Company may pursue joint ventures and other transactions aimed at expanding the geography and scope of the Companys operations. The Company expects to explore partnership opportunities that the Company believes to be attractive. While the Company is not currently in negotiations with respect to material acquisitions or joint ventures, the Company routinely assesses its strategic position and may in the future seek acquisitions or other transactions to further enhance the Companys competitive position. If the Company is not correct when it assesses the value, strengths and
weaknesses, liabilities and potential profitability of acquisition candidates or is not successful in integrating the operations of the acquired business, the success of the combined business could be compromised. Acquisitions and joint ventures involve a number of risks and present financial, managerial and operational challenges, including potential disruption of the Companys ongoing business and distraction of management, difficulty with integrating personnel and financial and other systems, hiring additional management and other critical personnel and increasing the scope, geographic diversity and complexity of the
 11    TABLE OF CONTENTS Companys operations. The Companys clients may react unfavorably to the Companys acquisition and joint venture strategy, the Company may not realize any anticipated benefits from acquisitions, and the Company may be exposed to additional liabilities of any acquired business or joint venture, any of which could materially adversely affect the Companys revenue and results of operations. In addition, future acquisitions or joint ventures may involve the issuance of additional shares of the Companys common stock, which would dilute existing ownership of the Company. Other operational risks may disrupt the Companys business, result in regulatory action against the Company, or limit the Companys growth. The Companys business is dependent on communications and information systems, including those of the Companys vendors. Any failure or interruption of these systems, whether caused by fire, other natural disaster, power or telecommunications failure, act of terrorism or war or otherwise, could materially adversely affect the Companys operating results. Although the Company has back-up systems in place, the Companys back-up procedures and capabilities in the event of a failure or interruption may not be adequate. The Company relies heavily on its financial, accounting, trading, compliance and other data processing systems. If any of these systems do not operate properly or are disabled, the Company could suffer financial loss, a disruption of the Companys business, liability to clients, regulatory intervention or reputational damage. The inability of the Companys systems to accommodate an increasing volume of transactions also could constrain the Companys ability to expand its businesses. The Company expects that it will need to continue to upgrade and expand these capabilities in the future to avoid disruption of, or constraints on, the
Companys operations. The Company may be exposed to data security risks. A failure to safeguard the integrity and confidentiality of client data from the infiltration by an unauthorized user that is either stored on or transmitted between our information systems or to other third party service provider systems may lead to modifications or theft of critical and sensitive data pertaining to our clients. The costs incurred to correct client data and prevent further unauthorized access could be extensive. Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price. We have documented and tested our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent auditors regarding the Companys internal control over financial reporting. We are in compliance with Section 404 of the Sarbanes-Oxley Act as of June 30, 2009. However, if we fail to maintain adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an
ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. In addition, failure to maintain an effective internal control environment could cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price. Fluctuations in foreign currency exchange rates could lower the Companys net income or negatively impact the portfolios of the Companys clients and may affect the levels of the Companys AUM. Although most portfolios are in U.S. dollar base currency, certain client portfolios are invested in securities denominated in foreign currencies. Foreign currency fluctuations can adversely impact investment performance for a clients portfolio. Accordingly, foreign currency fluctuations may affect the levels of the Companys AUM. As the Companys AUM includes assets that are denominated in currencies other than U.S. dollars, an increase in the value of the U.S. dollar relative to those non-U.S. currencies may result in a decrease in the dollar value of the Companys AUM, which, in turn, would result in lower U.S. dollar
denominated revenue in the Companys business. Additionally, while this risk could be limited by foreign currency hedging, some risks cannot be hedged and there is no guarantee that the Companys hedging activity would be successful. Poor performance could result in decreased AUM, stemming from withdrawal of client assets or a decrease in new assets being raised in the relevant product. Presently, the Company neither participates in hedging activities nor does it have any derivative financial instruments.
 12    TABLE OF CONTENTS Certain changes in accounting and/or financial reporting standards issued by the Financial Accounting Standards Board (FASB), the SEC or other standard-setting bodies could have a material adverse impact on the Companys financial position or results of operations. The Company is subject to the application of U.S. generally accepted accounting principles (GAAP), which periodically are revised and/or expanded. As such, the Company periodically is required to adopt new or revised accounting and/or financial reporting standards issued by recognized accounting standard setters or regulators, including the FASB and the SEC. It is possible that future requirements, including the recently proposed implementation of International Financial Reporting Standards (IFRS), could change the Companys current application of GAAP, resulting in a material adverse impact on the Companys
financial position or results of operations. Sales of a substantial number of shares of our common stock may adversely affect the market price of our common stock. Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales could occur, could adversely affect the market price of our common stock. Risks Related to Our Industry The Company faces strong competition from financial services firms, many of whom have the ability to offer clients a wider range of products and services than the Company can offer, which could lead to pricing pressures that could materially adversely affect the Companys revenue and profitability. The financial services industry is intensely competitive and the Company expects it to remain so. In addition to performance, the Company competes on the basis of a number of factors including the quality of the Companys employees, transaction execution, the Companys products and services, innovation, reputation and price. The Company believes that it will experience pricing pressures in the future as some of the Companys competitors seek to obtain increased market share by reducing fees. The Company faces increased competition due to a trend toward consolidation. In recent years, there has been substantial consolidation and convergence among companies in the financial services industry. In particular, a number of large commercial banks, insurance companies and other broad-based financial services firms have established or acquired asset managers or have merged with other financial institutions. Many of these firms have the ability to offer a wide range of products, from loans, deposit-taking and insurance to brokerage and asset management services, which may enhance their competitive position. They also have the ability to support financial advisory services, with commercial banking, insurance and other
financial services revenue in an effort to gain market share, which could result in pricing pressure in the Companys business. Any event that negatively affects the asset management industry could have a material adverse effect on the Company. Any event affecting the asset management industry that results in a general decrease in AUM or a significant general decline in the number of advisory clients or accounts could negatively impact revenues. Future growth and success depends, in part, upon the growth of the asset management industry. The financial services industry faces substantial litigation and regulatory risks, and the Company may face damage to the Companys professional reputation and legal liability if the Companys services are not regarded as satisfactory or for other reasons. As a financial services firm, the Company depends, to a large extent, on the Companys relationships with its clients and the Companys reputation for integrity and high-caliber professional services to attract and retain clients. As a result, if a client is not satisfied with the Companys services, such dissatisfaction may be more damaging to the Companys business than to other types of businesses.
 13    TABLE OF CONTENTS In recent years, the volume of claims and amount of damages claimed in litigation and regulatory proceedings against financial advisers has been increasing. In the Companys business, the Company makes investment decisions on behalf of its clients which could result in substantial losses. This may subject the Company to the risk of legal liabilities or actions alleging negligent misconduct, breach of fiduciary duty or breach of contract. These risks often may be difficult to assess or quantify and their existence and magnitude often remain unknown for substantial periods of time. The Companys engagements typically include broad indemnities
from the Companys clients and provisions designed to limit the Companys exposure to legal claims relating to the Companys services, but these provisions may not protect the Company or may not be adhered to in all cases. The Company also may be subject to claims arising from disputes with employees for alleged discrimination or harassment, among other things. These risks often may be difficult to assess or quantify, and their existence and magnitude often remain unknown for substantial periods of time. As a result, the Company may incur significant legal expenses in defending against litigation. Substantial legal liability or significant regulatory action against the Company could materially adversely affect the Companys business, financial condition or results of operations or cause significant reputational harm to the Company, which could seriously harm the Companys business. Due to the extensive laws and regulations to which the Company is subject, management is required to devote substantial time and effort to legal and regulatory compliance issues. In addition, the regulatory environment in which the Company operates is subject to change. The Company may be adversely affected as a result of new or revised legislation or regulations or by changes in the interpretation or enforcement of existing laws and regulations. Extensive regulation of the Companys business limits the Companys activities and results in ongoing exposure to the potential for significant penalties, including fines or limitations on the Companys ability to conduct its business. The financial services industry is subject to extensive regulation. The Company is subject to regulation by governmental and self-regulatory organizations in the jurisdictions in which the Company operates around the world. Many of these regulators, including U.S. and non-U.S. government agencies and self-regulatory organizations, as well as state securities commissions in the U.S., are empowered to conduct administrative proceedings that can result in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of an investment adviser. The requirements imposed by the Companys regulators are designed to ensure the
integrity of the financial markets and to protect customers and other third parties who deal with the Company and are not designed to protect the Companys stockholders. Consequently, these regulations often serve to limit the Companys activities, including customer protection and market conduct requirements. The Company faces the risk of significant intervention by regulatory authorities, including extended investigation and surveillance activity, adoption of costly or restrictive new regulations and judicial or administrative proceedings that may result in substantial penalties. Among other things, the Company could be fined or be prohibited from engaging in some of the Companys business activities. In addition, the regulatory environment in which the Company operates is subject to modifications and further regulation. New laws, regulations, or changes in the enforcement of existing laws or regulations applicable to the Company and the
Companys clients also may adversely affect the Companys business, and the Companys ability to function in this environment will depend on the Companys ability to constantly monitor and react to these changes. In addition, the regulatory environment in which the Companys clients operate may impact the Companys business. For example, changes in antitrust laws or the enforcement of antitrust laws could affect the level of mergers and acquisitions activity and changes in state laws may limit investment activities of state pension plans. In particular, for asset management businesses in general, there have been a number of highly publicized regulatory inquiries that focus on the mutual funds industry. These inquiries already have resulted in increased scrutiny in the industry and new rules and regulations for mutual funds and their investment managers. This regulatory scrutiny, along with rulemaking initiatives, may result in an increase in operational and compliance costs or the assessment of significant fines or penalties against the Company and may otherwise limit the Companys ability to engage in certain activities.
 14    TABLE OF CONTENTS In addition, financial services firms are subject to numerous conflicts of interests or perceived conflicts. The Company has adopted various policies, controls and procedures to address or limit actual or perceived conflicts and regularly seeks to review and update the Companys policies, controls and procedures. However, these policies and procedures may result in increased costs, additional operational personnel, and increased regulatory risk. Failure to adhere to these policies and procedures may result in regulatory sanctions or client litigation. Specific regulatory changes also may have a direct impact on the revenue of the Companys asset management business. In addition to regulatory scrutiny and potential fines and sanctions, regulators continue to examine different aspects of the asset management industry. These regulatory changes and other proposed or potential changes may result in a reduction of revenue associated with asset management. Item 1B. Unresolved Staff Comments None. Item 2. Properties The Companys headquarters and operations are located in New York, NY. Business is conducted at a location with approximately 10,000 square feet under a long-term lease that expires in September 2015. To accommodate for the growth in business, the Company entered into a sublease agreement for an additional 3,100 square feet at its Company headquarters in February 2007. This sublease expires in June 2010. The Company is also the primary party to another lease in New York, NY with approximately 8,500 square feet, which expires in November 2010. This property is subleased to an unrelated third party. During December 2008, in an effort to consolidate marketing efforts and reduce costs, the Company closed its two-employee marketing office in Sherman Oaks, CA. The office lease at this location expired in January 2009. Management believes the office space utilized by the Company is adequate for its existing operating needs. Management, however, is in active discussions concerning future space capacity in relation to projected staffing levels, and anticipates obtaining additional space at its Company headquarters during the second quarter of fiscal year 2010. Item 3. 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 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of the Companys security holders during the fourth quarter of our fiscal year ended June 30, 2009.
 15    TABLE OF CONTENTS PART II Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Companys common stock trades on the NASDAQ Capital Market under the trading symbol EPHC. Stock Performance Graph The graph and table that follow compares the performance of an investment in our Common Stock from June 30, 2004 through June 30, 2009 with the Russell 2000 Index, the Dow Jones U.S. Asset Managers Total Stock Market Index*, a composite of publicly traded asset management companies, and an index comprised of public companies with the Standard Industrial Classification (SIC) Code 6282, Investment Advice. The graph assumes a $100 investment in our Common Stock on June 30, 2004, and an equal investment in each of the selected indices, including reinvestment of dividends, if any. The performance shown in the graph represents past performance
and should not be considered an indication of future performance. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURNAmong Epoch Holding Corporation, The Russell 2000 Index, The Dow Jones US Asset Managers TSM Index* and SIC Code 6282 [GRAPHIC MISSING] *

          Formerly known as the Dow Jones Asset Managers Wilshire Index. The foregoing graph shall not be deemed to be soliciting material or filed or incorporated by reference in any previous or future documents filed by the Company with the SEC under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates the information by reference in any such document.
 16    TABLE OF CONTENTS The following table sets forth for the periods indicated the high and low reported sale prices, quarter-end closing prices for the common stock and dividends declared per share:  Common Stock Price Ranges

          

          ClosingPrice ($)

          

          DividendDeclared ($)High ($)

          

          Low ($)FY 2009Fourth Quarter (6/30)

          

          

          8.64

          

          

          

          6.10

          

          

          

          8.64

          

          

          

          0.03Third Quarter (3/31)

          

          

          7.50

          

          

          

          4.08

          

          

          

          6.87

          

          

          

          0.03Second Quarter (12/31)

          

          

          10.46

          

          

          

          6.42

          

          

          

          7.59

          

          

          

          0.15

          (a)First Quarter (9/30)

          

          

          11.95

          

          

          

          8.52

          

          

          

          10.55

          

          

          

          0.03FY 2008Fourth Quarter (6/30)

          

          

          12.62

          

          

          

          9.11

          

          

          

          9.11

          

          

          

          0.025Third Quarter (3/31)

          

          

          14.38

          

          

          

          10.01

          

          

          

          11.98

          

          

          

          0.025Second Quarter (12/31)

          

          

          15.00

          

          

          

          11.05

          

          

          

          15.00

          

          

          

          0.025First Quarter (9/30)

          

          

          16.42

          

          

          

          10.63

          

          

          

          14.08

          

          

          

          
  (a)

          includes special dividend of $0.12 per share The closing price for our common stock as reported on the NASDAQ Capital Market on September 9, 2009 was $8.52. As of September 9, 2009 there were approximately 1,063 holders of record of the Companys common stock. As many of the shares are held in street nominee name, management believes the number of beneficial owners of our common stock is substantially higher. Dividends on Common Stock The Company commenced declaring and paying quarterly cash dividends on its common stock in the second quarter of the fiscal year ended June 30, 2008. A total of $1.5 million of dividends were declared and paid during the fiscal year ended June 30, 2008. Effective with the first quarter of fiscal year 2009, the Company increased its quarterly dividend rate by 20%, from $0.025 to $0.03 per share. A total of $2.7 million of regular dividends were declared and paid during the fiscal year ended June 30, 2009. The Company expects quarterly 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. Special Cash Dividend As a result of the Companys strong cash position and debt-free balance sheet, the Board of Directors declared a special cash dividend on December 19, 2008 of $0.12 per share. The dividend was paid on January 15, 2009 to all shareholders of record at the close of business on December 31, 2008. The aggregate dividend payment totaled approximately $2.6 million. Dividends on Preferred Stock On July 1, 2008, the holder of the 10,000 shares of Series A Convertible Preferred Stock (the Preferred Stock) outstanding, with a face value of $10,000,000, converted the Preferred Stock to 1,666,667 shares of common stock. Accordingly, the Preferred Stock has been cancelled and the conversion eliminated the holders rights to receive the semi-annual dividends on the Preferred Stock.
 17    TABLE OF CONTENTS Rule 10b5-1 Plans Our executive officers may purchase or sell shares of our common stock in the market from time to time. The Companys management encourages these officers to make these transactions through plans that comply with Exchange Act Rule 10b5-1(c). The Company does not receive any proceeds related to these transactions. Equity Compensation Plan Information The following table provides information regarding the status of the Companys equity plans at June 30, 2009:  Plan Category

          

          Number of Securities to Be Issued UponExercise ofOutstanding Options(A)

          

          Weighted-Average Exercise Price ofOutstanding Options(B)

          

          Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (ExcludingSecurities Reflectedin Column (A)) (C)Equity compensation plans approved by security holders

          

          

          1,090,060

          (1)

          

          $

          7.86

          

          

          

          1,998,026

          (3)Equity compensation plans not approved by security holders

          

          

          575,000

          (2)

          

          

          12.59

          

          

          

          Total

          

          

          1,665,060

          

          

          $

          9.49

          

          

          

          1,998,026
  (1)

          Includes 630,060 stock options granted in January 2009 under Epochs Amended and Restated 2004 Omnibus Long-Term Incentive Compensation Plan and the remaining 460,000 stock options granted under the J Net 1992 Incentive and Nonqualified Stock Option Plan (the 1992 Plan). The 1992 Plan expired on September 30, 2002 and the options under this plan will remain outstanding until they are exercised, cancelled or expire. The options under the 1992 Plan have a remaining contractual life of less than one year. See Note 10 to the Consolidated Financial Statements for further information regarding the plans. (2)

          Represents the remaining 500,000 stock options granted on June 21, 2000 and the remaining 75,000 stock options granted on September 14, 1999 to former J Net employees and its board of directors. The contractual life of these options is less than one year. See Note 10 to the Consolidated Financial Statements, under Other Nonqualified Stock Options, for further information regarding these options. (3)

          The 1,998,026 shares may be issued under our Amended and Restated 2004 Omnibus Long-Term Incentive Compensation Plan as options, restricted stock awards or any other form of equity compensation. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities 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 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 may be suspended or discontinued at any time.
The repurchase plan expired on June 30, 2009. The Company completed this repurchase plan by February 2009. In March 2009, the Companys Board of Directorsauthorized 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. The Company did not have any purchases of its equity securities that are registered pursuant to Section 12(b) of the Exchange Act during the three months ended June 30, 2009.
 18    TABLE OF CONTENTS In addition to the repurchase program previously noted, the Company withheld approximately 21 thousand shares from employees during the fourth quarter of FY 2009 as part of a share-withholding program to satisfy employees payroll tax liabilities attributable to the vesting of restricted stock awards. Item 6. Selected Financial Data The table on the following page presents selected financial data of the Company. This data was derived from the Companys consolidated financial statements and reflects the operations and financial position of the Company at the dates and periods indicated. The following selected historical consolidated financial data should be read in conjunction with Part II, Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, and Item 8, Financial Statements and Supplementary Data, of this Form 10-K.
 19    TABLE OF CONTENTS Selected Financial Data(Dollars in Thousands, Except Share Data)  For the Years Ended June 30,2009

          

          2008

          

          2007

          

          2006

          

          2005Consolidated Statements of Operations Data:Investment advisory and management fees

          

          $

          30,535

          

          

          $

          33,634

          

          

          $

          22,964

          

          

          $

          10,136

          

          

          $

          4,120Performance fees

          

          

          624

          

          

          

          172

          

          

          

          971

          

          

          

          95

          

          

          

          187Total operating revenues

          

          

          31,159

          

          

          

          33,806

          

          

          

          23,935

          

          

          

          10,231

          

          

          

          4,307Expenses:Employee related costs (excluding share-based compensation)

          

          

          15,919

          

          

          

          17,711

          

          

          

          13,878

          

          

          

          8,641

          

          

          

          5,777Share-based compensation

          

          

          4,496

          

          

          

          4,176

          

          

          

          6,267

          

          

          

          4,670

          

          

          

          3,427Other expenses

          

          

          7,296

          

          

          

          8,065

          

          

          

          6,307

          

          

          

          3,975

          

          

          

          3,378Total operating expenses

          

          

          27,711

          

          

          

          29,952

          

          

          

          26,452

          

          

          

          17,286

          

          

          

          12,582Operating income (loss)

          

          

          3,448

          

          

          

          3,854

          

          

          

          (2,517

          )

          

          

          (7,055

          )

          

          

          (8,275

          )Other income(1)

          

          

          5,110

          

          

          

          6,049

          

          

          

          10,509

          

          

          

          1,106

          

          

          

          1,167Provision for (benefit from) income taxes(2)

          

          

          2,698

          

          

          

          867

          

          

          

          99

          

          

          

          (227

          )

          

          

          Income (loss) from continuing operations, net of taxes

          

          

          5,860

          

          

          

          9,036

          

          

          

          7,893

          

          

          

          (5,722

          )

          

          

          (7,108

          )Income from discontinued operations, net of $0 taxes

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          571Net income (loss)

          

          

          5,860

          

          

          

          9,036

          

          

          

          7,893

          

          

          

          (5,722

          )

          

          

          (6,537

          )Cumulative preferred stock dividends

          

          

          

          

          

          

          460

          

          

          

          299

          

          

          

          

          

          

          

          Non-cash charge attributable to beneficial conversion feature of preferred stock

          

          

          

          

          

          

          

          

          

          

          700

          

          

          

          

          

          

          

          Net income (loss) available to common stockholders

          

          $

          5,860

          

          

          $

          8,576

          

          

          $

          6,894

          

          

          $

          (5,722

          )

          

          $

          (6,537

          )Balance Sheet Data(5):Cash and cash equivalents

          

          $

          37,055

          

          

          $

          37,436

          

          

          $

          3,097

          

          

          $

          2,234

          

          

          $

          739Short-term investments

          

          $

          

          

          

          $

          

          

          

          $

          21,850

          

          

          $

          5,400

          

          

          $

          7,600Accounts receivable

          

          $

          7,523

          

          

          $

          6,391

          

          

          $

          6,293

          

          

          $

          2,486

          

          

          $

          1,221Total assets

          

          $

          55,007

          

          

          $

          54,349

          

          

          $

          39,374

          

          

          $

          13,568

          

          

          $

          13,031Long term borrowings

          

          $

          

          

          

          $

          

          

          

          $

          

          

          

          $

          

          

          

          $

          Total liabilities

          

          $

          5,217

          

          

          $

          9,004

          

          

          $

          3,931

          

          

          $

          4,713

          

          

          $

          3,454Total stockholders equity

          

          $

          49,790

          

          

          $

          45,345

          

          

          $

          35,443

          

          

          $

          8,855

          

          

          $

          9,577Common Share Data:Earnings (loss) per share from continuing operations:Basic

          

          $

          0.26

          

          

          $

          0.42

          

          

          $

          0.35

          

          

          $

          (0.31

          )

          

          $

          (0.39

          )Diluted

          

          $

          0.26

          

          

          $

          0.41

          

          

          $

          0.35

          

          

          $

          (0.31

          )

          

          $

          (0.39

          )Cash dividends declared per common share(3)

          

          $

          0.24

          

          

          $

          0.075

          

          

          $

          

          

          

          $

          

          

          

          $

          Weighted average shares outstanding:Basic

          

          

          22,133

          

          

          

          20,181

          

          

          

          19,726

          

          

          

          18,724

          

          

          

          18,025Diluted

          

          

          22,133

          

          

          

          21,911

          

          

          

          20,807

          

          

          

          18,724

          

          

          

          18,025Other Supplemental Data:Operating margin

          

          

          11

          %

          

          

          11

          %

          

          

          (11

          )%

          

          

          (69

          )%

          

          

          (192

          )%Working capital

          

          $

          41,897

          

          

          $

          36,792

          

          

          $

          32,685

          

          

          $

          6,945

          

          

          $

          7,367Current ratio(4)

          

          

          10.8

          

          

          

          5.6

          

          

          

          12.6

          

          

          

          3.0

          

          

          

          4.3Cash provided by (used in) operations

          

          $

          855

          

          

          $

          11,349

          

          

          $

          2,389

          

          

          $

          (1,133

          )

          

          $

          (5,909

          )Assets under management (in millions):

          

          $

          7,891

          

          

          $

          6,634

          

          

          $

          6,001

          

          

          $

          3,253

          

          

          $

          1,402Net AUM flows (in millions):

          

          $

          2,650

          

          

          $

          1,087

          

          

          $

          1,778

          

          

          $

          1,640

          

          

          $

          594Number of employees

          

          

          46

          

          

          

          46

          

          

          

          43

          

          

          

          38

          

          

          

          28
 (1)

          Other income includes both cumulative dividends received and realized gains recognized from dispositions of certain of the Companys privately held investments. See Note 12 to the Consolidated Financial Statements. (2)

          Provision for income taxes was reduced in FY 2008 by the release of a valuation allowance against certain deferred tax assets, and in FY 2007 by the utilization of net operating loss carryforwards. See Note 13 to the Consolidated Financial Statements. (3)

          The Company commenced declaring and paying cash dividends in the second quarter of FY 2008. (4)

          Current ratio is derived by dividing current assets by current liabilities. (5)

          Certain prior year amounts have been reclassified to conform to the 2009 presentation.
 20    TABLE OF CONTENTS Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion together with our historical financial statements and related notes included elsewhere herein and the information set forth under Item 6, Selected Financial Data. The discussion contains forward-looking statements that involve risks and uncertainties. For additional information regarding some of the risks and uncertainties that affect our business and the industry in which we operate, please read Item 1A.  Risk Factors included elsewhere herein. Our actual results may differ materially from those estimated or projected in any of these forward-looking statements. Overview The Company is a global asset management firm with accomplished and experienced professionals. Our professional staff averages over 20 years experience in our industry. The Company combines in-house research and insight, an absolute-return orientation, and a dedication to serving the investor. Headquartered in New York City, the Company had over $7.9 billion in assets under management (AUM) as of June 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 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 revenue recognition. The Company continues to be debt- free with considerable liquidity available to help it through the current financial market environment while astutely managing the firm over the long term. The Companys financial strength continues to enable it to take advantage of attractive growth opportunities, invest in technologies and experienced professional staff, and above all, provide its clients with sound investment management advice and service. Financial Highlights The past fiscal year has been an extremely challenging and difficult environment for our business. Several major global market indices declined by historic amounts, reaching all time lows during our third fiscal quarter ended March 31, 2009. From mid-March to the end of our recent fiscal year, markets began to steadily recover. Despite overall weakness in the financial markets this past fiscal year, the Company achieved several noteworthy accomplishments: 

          AUM at June 30, 2009 was $7.9 billion, representing a 19% increase from a year ago, and a 39% increase from the prior quarter. Contributing to the AUM increase was the Companys appointment as a sub-advisor to New York Lifes MainStay Funds family of mutual funds in late June 2009. 

          Net AUM inflows were $2.7 billion. The Company has experienced positive net inflows every quarter since inception.
 21    TABLE OF CONTENTS 

          In March 2009, the Epoch Global Equity Shareholder Yield Fund (ESPYX) received the Lipper Fund Award for best in class over the past three years in the Global Multi-Cap Value Funds classification. 

          Annual operating margin remained virtually unchanged from the previous year at 11%, while increasing to 22% during the most recent fiscal quarter. 

          The Companys balance sheet continues to strengthen. Cash balances were $37.0 million, or 67% of total assets as of June 30, 2009. Working capital increased by $5.1 million to $41.9 million, while the current ratio improved to 10.8, well above industry average. The Company remains debt-free. Summary operating information for the fiscal years ended June 30, 2009 and 2008 is presented in the table below:  Change(Dollars in Thousands, Except per Share Data)

          

          2009

          

          2008

          

          $

          

          %Operating Income

          

          $

          3,448

          

          

          $

          3,854

          

          

          $

          (406

          )

          

          

          (11

          )%Net Income

          

          $

          5,860

          

          

          $

          9,036

          

          

          $

          (3,176

          )

          

          

          (35

          )%Earnings Per Share:Basic

          

          $

          0.26

          

          

          $

          0.42

          

          

          $

          (0.16

          )

          

          

          (38

          )%Diluted

          

          $

          0.26

          

          

          $

          0.41

          

          

          $

          (0.15

          )

          

          

          (37

          )%Operating Margin(1)

          

          

          11

          %

          

          

          11

          %

          

          

          

          

          

          

          
  (1)

          Defined as operating income divided by total operating revenues. The Company achieved an operating profit during the fiscal year, although slightly less than that of the previous year. Operating revenues declined by $2.6 million, or 8%, as a result of financial market weakness. A $2.2 million, or 7%, decrease in operating expenses primarily offset this negative impact. Reductions in employee compensation and general, administrative and occupancy costs, focal points of the Companys expense management and cost control efforts, were the primary drivers of the decline in operating expenses. For the year ended June 30, 2009, the Companys net income declined by $3.2 million from the same period a year ago. The decline was primarily attributable to changes in investment income and corporate income taxes as follows: 

          Other income decreased by $0.9 million, or 16%, from the prior year. Lower interest income in the current year was a primary reason for this decline. Short-term interest rates declined over 200 basis points from the previous fiscal year. 

          Income tax expense increased by $1.8 million from the prior year. During the prior year, the Company released a valuation allowance of approximately $3.1 million against certain deferred tax assets, primarily deferred stock compensation expense and compensation accruals, as Management believes that these benefits can, more likely than not, be utilized in the future.
 22    TABLE OF CONTENTS 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 business environment in which we operate is influenced by several factors, including business profitability, investor confidence, unemployment, and financial market transparency. These factors can directly affect capital appreciation or depreciation, which in turn, impacts our investment advisory and management business.  Index

          

          Three Months EndedJune 30, 2009

          

          FiscalYear EndedJune 30, 2009Dow Jones Industrial Average(1)

          

          

          12.0

          %

          

          

          (23.0

          )%NASDAQ Composite(2)

          

          

          20.5

          %

          

          

          (19.2

          )%S&P 500(3)

          

          

          15.9

          %

          

          

          (26.2

          )%MSCI World (Net)(4)

          

          

          20.8

          %

          

          

          (29.5

          )%Russell 3000 Value(5)

          

          

          16.8

          %

          

          

          (28.7

          )%
  (1)

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

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

          S&P 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. The financial environment globally and in the United States was volatile during fiscal 2009 and challenging market conditions persisted throughout most of our fiscal year. The sharp decline in equity markets across the globe and continuing dislocations in the credit markets adversely affected the entire financial sector during fiscal 2009. The equity and credit markets suffered from sub-prime lending issues and major write-downs related to the credit crisis, and failures of major financial institutions, which led to a pullback in consumer spending, increased unemployment, and significant declines in the values of assets owned by financial
institutions. Investors confidence continued to weaken, which caused a shift in the markets from equity and corporate bonds to U.S. Treasury notes and bonds. U.S. and global equity market indices declined sharply during the fiscal year. Throughout our first fiscal quarter ended September 30, 2008, both U.S. and world economic conditions were unprecedented and challenging with tighter credit conditions and slower growth. Credit markets continued to experience illiquidity and wider credit spreads. Continued concerns about the impact of residential and commercial mortgage loan products and structured investment vehicles caused the broader equity and credit markets to deteriorate. In the U.S., equity markets decreased during the quarter by 5  10%. On a broad basis, developed global markets decreased by approximately 15%.The Federal Reserve provided
additional liquidity and stability to the financial markets and tried to mitigate the negative economic impact related to the credit markets. Subsequent to the end of our first fiscal quarter, credit conditions worsened considerably and the U.S. financial services industry changed dramatically. U.S. and foreign central banks, in response to a further weakening in the economy, took several steps. The U.S. Federal Government assumed a conservatorship role in two government sponsored entities (GSEs), Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association. Lehman Brothers Holdings Inc. declared bankruptcy, and the U.S. Federal government provided a loan to American International Group Inc. (AIG) in exchange for an equity interest in
AIG. The Federal Reserve announced enhancements to its programs to provide additional liquidity to the asset-backed commercial paper and money markets, and indicated that it planed to purchase from primary dealers short-term debt obligations issued by GSEs. The U.S. Treasury proposed a plan to buy mortgage-related, illiquid and other troubled assets from U.S. financial institutions and, in October, the Emergency Economic Stabilization Act of 2008 was enacted. Overall economic activity continued to weaken throughout the U.S. and the world during our second fiscal quarter ended December 31, 2008. Retail sales were weak, particularly throughout the holiday season.
 23    TABLE OF CONTENTS Lending activity continued to decline, as credit conditions tightened further. The unemployment rate continued to rise. There were several bank failures. The Federal Reserve and foreign central banks and governments around the world continued to provide additional liquidity and stability to the financial markets to try to mitigate the negative economic impact related to the credit markets. The Federal Reserve, while working in unison with several foreign central banks, lowered both the benchmark interest and discount rates to nearly 0% during December. During the quarter, stocks around the globe endured a period of remarkable volatility and posted one
of their biggest down quarters on record. In all, U.S. and global markets declined by approximately 20% during the quarter ended December 31, 2008. Throughout our third fiscal quarter ended March 31, 2009, overall economic activity continued to remain weak, both domestically and internationally. U.S. gross domestic product (GDP) shrank at a 6.1% annual pace, having already fallen at a 6.3% rate in the previous quarter, and marked the worst two-quarter performance for GDP in nearly a half century. Retail sales and lending activity remained weak. Housing continued to plummet and business investment plunged as firms slashed plans to expand in the backdrop of a deepening recession. The unemployment rate climbed higher. The U.S. federal government put in place the largest economic
stimulus plan in U.S. history. This plan supplemented the interest rate and other actions taken by the Federal Reserve and the U.S. Treasury over the previous several months. During the quarter, stocks around the world continued to endure a period of remarkable volatility and continued to record large declines. Despite favorable market performance in the latter part of March, U.S. and global markets declined by approximately 10-15% during the quarter ended March 31, 2009. In a continuation of the equity market rebound that began in March, U.S. stocks posted strong gains during the quarter ended June 30, 2009 and put an end to the longest streak of quarterly losses since 1970. Equities rallied sharply in April and May from their March lows amid signs that the economy was in the process of bottoming and that government measures to stabilize the financial markets were starting to bear fruit. Investor sentiment was buoyed by scattered signs that the downward economic spiral was slowing during the quarter. Particularly encouraging to some were signs of an end to the severe contraction in the housing sector, as the
government reported increases in housing starts and home sales. The rate of job losses also appeared to slow and gauges of consumer sentiment showed substantial gains. However, the rally dissipated and share prices fell in the final weeks of the quarter as this early optimism receded in the face of tepid economic news. Negative economic data mitigated the positive as the quarter progressed, and the case for a sustainable recovery lost steam. Weaker than expected economic data, particularly related to unemployment numbers and consumer spending continued to concern investors. The weakness at the end of June was not enough to erase earlier strength, however, and all global equity markets ended the quarter in positive territory, led by an extraordinary rally in financial shares. Overall, U.S. markets increased by approximately 15  20% and global markets by approximately 25  30% during the quarter ended June 30, 2009. Despite this, however, the broad U.S. and
global market indexes remained about 35% to 40% below their 2007 highs, clear evidence of the enduring impact of the economic crisis. Company Impact and Outlook While the past fiscal year was extremely challenging for our industry, marked by unprecedented financial volatility and economic and market weakness, the Company continued to grow and prosper. Additional distribution channels were developed, our client base expanded, new investment products continued to be introduced, corporate liquid assets as well as liquidity ratios improved, and, once again, the Company experienced annual net AUM inflows, a feat achieved every year since inception. Despite the difficult and challenging business environment that persists, the Company believes it is well positioned for the future primarily as a result of our proven investment philosophy and above average risk-adjusted investment performance. Our investment strategies, which emphasize a free cash flow analytical approach to the evaluation of equities, should continue to produce superior returns at a lower risk for our clients. The Company believes that free cash flow will be the analytical tool of choice for investors and share price performance will depend on which companies show operational efficiencies, control capital expenditures, and
properly manage their cash flow, at a time when borrowing to fund growth or operations has tightened. The emphasis on cash flow analysis has become increasingly relevant, as the use of accounting measures alone has proven to inadequately capture issues surrounding financial condition of many companies, particularly in the financial sector.
 24    TABLE OF CONTENTS Results of Operations Assets Under Management The Companys AUM has continued to increase, experiencing positive net inflows every quarter since inception. The graphs below depict the annual AUM, average AUM and revenue growth since FY 06. [GRAPHIC MISSING] [GRAPHIC MISSING] AUM as of June 30, 2009 was $7.9 billion compared with AUM of $6.6 billion and $6.0 billion at June 30, 2008 and 2007, respectively.
 25    TABLE OF CONTENTS A summary of AUM by distribution channel as well as their respective annual changes at each fiscal year end follows: (in millions): [GRAPHIC MISSING]  As of June 30, 2009

          

          1-Year ChangeDistribution Channel

          

          AUM

          

          Amt

          

          %Sub-advisory

          

          $

          4,332

          

          

          $

          1,252

          

          

          

          40.6

          %Institutional

          

          

          3,309

          

          

          

          46

          

          

          

          1.4

          %High net worth

          

          

          250

          

          

          

          (41

          )

          

          

          (14.1

          )%Total AUM

          

          $

          7,891

          

          

          $

          1,257

          

          

          

          18.9

          %
 [GRAPHIC MISSING]  As of June 30, 2008

          

          1-Year ChangeDistribution Channel

          

          AUM

          

          Amt

          

          %Sub-advisory

          

          $

          3,080

          

          

          $

          204

          

          

          

          7.1

          %Institutional

          

          

          3,263

          

          

          

          498

          

          

          

          18.0

          %High net worth(1)

          

          

          291

          

          

          

          (69

          )

          

          

          (19.2

          )%Total AUM

          

          $

          6,634

          

          

          $

          633

          

          

          

          10.5

          %
  (1)

          During the fiscal year ended June 30, 2008, approximately $28 million of AUM in separate accounts within the High net worth distribution channel transferred to the Epoch Global Absolute Return Fund, LLC, and approximately $8 million transferred to the Epoch U.S. All Cap Equity Fund, both of which are included within the Institutional distribution channel above.
 26    TABLE OF CONTENTS [GRAPHIC MISSING]  As of June 30, 2007

          

          1-Year ChangeDistribution Channel

          

          AUM

          

          Amt

          

          %Sub-advisory

          

          $

          2,876

          

          

          $

          1,161

          

          

          

          67.7

          %Institutional

          

          

          2,765

          

          

          

          1,520

          

          

          

          122.1

          %High net worth

          

          

          360

          

          

          

          67

          

          

          

          22.9

          %Total AUM

          

          $

          6,001

          

          

          $

          2,748

          

          

          

          84.5

          %
 Assets Under Management and Flows AUM increased to $7.9 billion at June 30, 2009, from $6.6 billion at June 30, 2008. This increase was primarily attributable to the ongoing expansion of the Companys client base and flows into existing accounts, offset by market depreciation. The Company continued to expand its institutional and sub-advisory businesses. The Company experienced growth in AUM in nearly all products, and particularly in its U.S. Value and U.S. All Cap products as a percentage of AUM (in millions).  Year Ended June 30,2009

          

          2008

          

          2007Beginning of period assets

          

          $

          6,634

          

          

          $

          6,001

          

          

          $

          3,253Client Flows:Inflows/new accounts

          

          

          3,569

          

          

          

          1,924

          

          

          

          2,080Outflows/closed accounts

          

          

          (919

          )

          

          

          (837

          )

          

          

          (302

          )Net inflows

          

          

          2,650

          

          

          

          1,087

          

          

          

          1,778Market appreciation/(depreciation)

          

          

          (1,393

          )

          

          

          (454

          )

          

          

          970Net change

          

          

          1,257

          

          

          

          633

          

          

          

          2,748End of period assets

          

          $

          7,891

          

          

          $

          6,634

          

          

          $

          6,001Percent change in total AUM

          

          

          18.9

          %

          

          

          10.5

          %

          

          

          84.5

          %Organic growth percentage(1)

          

          

          39.9

          %

          

          

          18.1

          %

          

          

          54.7

          %
  (1)

          Net inflows divided by beginning of period assets. For the fiscal years ended June 30, 2009, 2008, and 2007 approximately 55%, 55%, and 50%, 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 45%, 45%, and 50%, respectively, of fees were earned from services provided for separate accounts whose fees are calculated based upon asset values at the end of the quarter. 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 quarter-ending AUM for those funds.
 27    TABLE OF CONTENTS Recent Strategic Relationship On July 9, 2009, EIP entered into a strategic relationship with New York Life Investment Management LLC, whereby the MainStay Group of Funds will adopt the Companys current family of mutual funds (the Epoch Funds), subject to approval by shareholders of the Epoch Funds at a special meeting on October 30, 2009. The proposed transaction has been approved by the Board of Directors of the Epoch Funds. 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. Upon approval by the shareholders of each of the Epoch Funds, each fund 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 June 30, 2009, and the proposed 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. The following charts show the Companys AUM by product and annual changes, as well as their percentage of AUM as of June 30, 2009, 2008 and 2007, respectively (in millions): [GRAPHIC MISSING]  As of June 30, 2009

          

          1-Year ChangeProduct

          

          AUM

          

          Amt

          

          %U.S. Value

          

          $

          2,340

          

          

          $

          842

          

          

          

          56.1

          %U.S. All Cap/Balanced

          

          

          2,016

          

          

          

          413

          

          

          

          25.8

          %Global Equity Shareholder Yield

          

          

          1,515

          

          

          

          (23

          )

          

          

          (1.5

          )%U.S. Small/Smid Cap Value

          

          

          1,074

          

          

          

          242

          

          

          

          29.1

          %International/Int. Small Cap

          

          

          396

          

          

          

          (154

          )

          

          

          (28.0

          )%Absolute Return/Choice

          

          

          375

          

          

          

          (24

          )

          

          

          (6

          )%Global Small Cap

          

          

          175

          

          

          

          (39

          )

          

          

          (18.2

          )%Total AUM

          

          $

          7,891

          

          

          $

          1,257

          

          

          

          18.9

          %
 28    TABLE OF CONTENTS [GRAPHIC MISSING]  As of June 30, 2008

          

          1-Year ChangeProduct

          

          AUM

          

          Amt

          

          %U.S. Value

          

          $

          1,499

          

          

          $

          345

          

          

          

          29.8

          %U.S. All Cap/Balanced

          

          

          1,601

          

          

          

          206

          

          

          

          14.8

          %Global Equity Shareholder Yield

          

          

          1,538

          

          

          

          215

          

          

          

          16.3

          %U.S. Small/Smid Cap Value

          

          

          832

          

          

          

          (177

          )

          

          

          (17.5

          )%International/Int. Small Cap

          

          

          548

          

          

          

          (140

          )

          

          

          (20.1

          )%Absolute Return/Choice

          

          

          402

          

          

          

          143

          

          

          

          55.2

          %Global Small Cap

          

          

          214

          

          

          

          41

          

          

          

          23.7

          %Total AUM

          

          $

          6,634

          

          

          $

          633

          

          

          

          10.5

          %
 [GRAPHIC MISSING]  As of June 30, 2007

          

          1-Year ChangeProduct

          

          AUM

          

          Amt

          

          %U.S. Value

          

          $

          1,155

          

          

          $

          350

          

          

          

          43.5

          %U.S. All Cap/Balanced

          

          

          1,395

          

          

          

          608

          

          

          

          77.3

          %Global Equity Shareholder Yield

          

          

          1,323

          

          

          

          1,104

          

          

          

          504.1

          %U.S. Small/Smid Cap Value

          

          

          1,008

          

          

          

          347

          

          

          

          52.5

          %International/Int. Small Cap

          

          

          688

          

          

          

          315

          

          

          

          84.5

          %Absolute Return/Choice

          

          

          259

          

          

          

          148

          

          

          

          133.3

          %Global Small Cap

          

          

          173

          

          

          

          (124

          )

          

          

          (41.8

          )%Total AUM

          

          $

          6,001

          

          

          $

          2,748

          

          

          

          84.5

          %
 29    TABLE OF CONTENTS FY 2009 Versus FY 2008  Change(Dollars in Thousands)

          

          2009

          

          2008

          

          $

          

          %Operating RevenuesInvestment advisory and management fees

          

          $

          30,535

          

          

          $

          33,634

          

          

          $

          (3,099

          )

          

          

          (9

          )%Performance fees

          

          

          624

          

          

          

          172

          

          

          

          452

          

          

          

          263

          %Total operating revenues

          

          $

          31,159

          

          

          $

          33,806

          

          

          $

          (2,647

          )

          

          

          (8

          )%
 The decrease in total revenues for the fiscal year ended June 30, 2009 was attributable to the lower levels of AUM during the year when compared with the prior year. The average assets under management for the fiscal year ended June 30, 2009 was approximately $6.0 billion compared to approximately $6.3 billion for the prior year, a decrease of approximately 5%. The primary cause for this decrease was a significant decline in global equity markets from the prior year. Global equity markets declined approximately 25  30% during the twelve months ended June 30, 2009. This was partly offset by net AUM inflows from new and existing
customers of nearly $2.7 billion for the fiscal year ended June 30, 2009. An increase in performance fees, stemming from relative investment performance on new performance based accounts, also mitigated the overall decline in revenue. AUM increased by 19%, to $7.9 billion as of June 30, 2009. The sub-advisory business increased by 41%, to $4.3 billion, augmented by the appointment of EIP as a sub-advisor to The MainStay Funds family of mutual funds during the last week of the fiscal year. The Company was appointed to sub-advise approximately $1.1 billion of assets in six existing portfolios which are managed by New York Life Investment Management LLC. For the twelve months ended June 30, 2009, CI Investments Inc. (CI), a Canadian-owned investment management company, and Genworth Financial Asset Management, Inc. (Genworth), an investment adviser, through its investments in the Epoch International Small Cap Fund (EPIEX) and the Epoch Global Equity Shareholder Yield Fund (EPSYX), as well as separate account mandates, each accounted for approximately 13% of revenue.  Change(Dollars in Thousands)

          

          2009

          

          2008

          

          $

          

          %Employee related costs (excluding share-based compensation)

          

          $

          15,919

          

          

          $

          17,711

          

          

          $

          (1,792

          )

          

          

          (10

          )%As of percent of total revenue

          

          

          51

          %

          

          

          52

          %
 Expenses in this category include salaries, benefits, severance, incentive compensation, commissions, and payroll taxes. These expenses decreased from the prior year, primarily due to a reduction in incentive compensation, stemming from the reduction in AUM levels and revenues during the year, particularly the first nine months of the fiscal year. Employee staffing levels for the year ended June 30, 2009 were virtually unchanged from the prior year. These expenses for the fiscal year ended June 30, 2009 included $7.1 million of bonuses and sales commissions compared to $9.4 million for the fiscal year ended June 30, 2008. Expenses in this category are expected to increase during the next fiscal year, as the Company has added a few senior level employees to staff during the first quarter of fiscal 2010.  Change(Dollars in Thousands)

          

          2009

          

          2008

          

          $

          

          %Share-based compensation

          

          $

          4,496

          

          

          $

          4,176

          

          

          $

          320

          

          

          

          8

          %As of percent of total revenue

          

          

          14

          %

          

          

          12

          %
 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
 30    TABLE OF CONTENTS awards. Employee share-based compensation expense for stock options is recognized ratably over the three-year service period from grant date. The Company traditionally has issued share awards to certain senior executives during the first three months following the fiscal year and to other employees during the first three months following the calendar year. Effective in the fiscal year ended June 30, 2009, the Company began issuing share awards to all employees during the first three months following the calendar year. The increase in share based compensation during the fiscal year ended June 30, 2009 incorporates a six-month stub period for those senior executives. During the fiscal years ended June 30, 2009 and 2008, a total of 575,066 and 491,528 shares of restricted stock, respectively, were issued to employees. The value of these awards was $4.7 million and $5.6 million, respectively. The increase in the number of shares issued reflects a lower price at which shares were granted compared to the prior year. A total of 71,886 and 61,441 shares of the awards issued in the fiscal years ended June 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 fiscal years ended June 30, 2009 and 2008, a total of
76,946 and 163,365 shares, $0.3 million and $1.0 million respectively, were forfeited by terminated employees. During the 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 annually over three years. The related expense is 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. No options were issued during the fiscal year ended June 30, 2008. During the fiscal years ended June 30, 2009 and 2008, a total of 38,620 and 35,604 shares of restricted stock, respectively, were granted to non-employee directors of the Company for FY 2009 and FY 2008 services. 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.  Change(Dollars in Thousands)

          

          2009

          

          2008

          

          $

          

          %General, administrative and occupancy

          

          $

          4,651

          

          

          $

          5,164

          

          

          $

          (513

          )

          

          

          (10

          )%As of percent of total revenue

          

          

          15

          %

          

          

          15

          %
 General, administrative and occupancy expenses consist primarily of office rentals, travel and entertainment expenses, information technology expenses, and other office related expenses. The decrease in this expense category was primarily the result of reduced travel related expenses and technology costs, targets of the Companys expense management and cost control efforts. Occupancy costs are expected to increase during the next fiscal year as Management is currently in active discussions concerning future space capacity in relation to existing and future staffing levels. It is anticipated that the Company will obtain additional space during the second quarter of fiscal year 2010.  Change(Dollars in Thousands)

          

          2009

          

          2008

          

          $

          

          %Professional service fees

          

          $

          2,211

          

          

          $

          2,481

          

          

          $

          (270

          )

          

          

          (11

          )%As of percent of total revenue

          

          

          7

          %

          

          

          7

          %
 Professional service fees consist primarily of consulting fees, outside legal fees for general corporate legal affairs, independent accountants fees, employee placement fees, and other professional services. A decrease in placement fees was the primary cause for the decline in professional fees and services. The prior year period included placements fees for certain senior level employees. A decrease in legal fees also contributed to the overall decline from the same period a year ago as the prior period included certain legal expenses incurred in the origination of new investment vehicles.
 31    TABLE OF CONTENTS  Change(Dollars in Thousands)

          

          2009

          

          2008

          

          $

          

          %Other income

          

          $

          5,110

          

          

          $

          6,049

          

          

          $

          (939

          )

          

          

          (16

          )%As of percent of income before income taxes

          

          

          60

          %

          

          

          61

          %
 Other income primarily includes realized gains and losses on sales of investments, interest income, and rental income from subleased office space. The prior year period included realized gains of $3.7 million from the sales of marketable securities, realized gains of $0.3 million from the Strategic Data Corporation transaction, approximately $1.3 million of interest income, and $0.6 million of sublease income. The current year includes realized gains of $4.7 million from the Strategic Data Corporation transaction, losses on investments of $0.8 million, approximately $0.5 million of interest income, and $0.6 million of sublease income. Significantly lower short term interest rates during the fiscal year ended June 30, 2009, falling by more than 200 basis points from the previous fiscal year,
caused interest income to decline. The Company does not anticipate other income levels being as high during the next fiscal year.  Change(Dollars in Thousands)

          

          2009

          

          2008

          

          $

          

          %Provision for income taxes

          

          $

          2,698

          

          

          $

          867

          

          

          $

          1,831

          

          

          

          211

          %Effective income tax rate

          

          

          31.5

          %

          

          

          8.8

          %
 Provision for income taxes, as well as the effective income tax rate, significantly increased during the fiscal year ended June 30, 2009 when compared with the prior year. During the prior year, the Company released a valuation allowance of approximately $3.1 million against certain deferred tax assets, primarily deferred stock compensation expense and compensation accruals, as Management believes that these benefits can, more likely than not, be utilized in the future. The FY 2009 net change in the valuation allowance related to deferred tax assets was a decrease of approximately $0.5 million, primarily related to the utilization of Section 382 losses against current year income. The Company also released valuation allowances previously established against depreciation and leasehold improvement impairments. FY 2008 Versus FY 2007  Change(Dollars in Thousands)

          

          2008

          

          2007

          

          $

          

          %Operating RevenuesInvestment advisory and management fees

          

          $

          33,634

          

          

          $

          22,964

          

          

          $

          10,670

          

          

          

          46

          %Performance fees

          

          

          172

          

          

          

          971

          

          

          

          (799

          )

          

          

          (82

          )%Total operating revenues

          

          $

          33,806

          

          

          $

          23,935

          

          

          $

          9,871

          

          

          

          41

          %
 The increase in total revenues for the fiscal year ended June 30, 2008 was attributable to an increase in AUM, driven by new business mandates and flows into existing accounts, offset by market depreciation. A reduction in performance-based fees, stemming from reduced overall market returns compared to the prior year, also partially offset the increase. AUM increased approximately 11% during fiscal year 2008, to $6.6 billion. The average assets under management for the fiscal year ended June 30, 2008 was approximately $6.3 billion compared to approximately $4.6 for the prior year period, an increase of approximately 37%. A significant percentage of revenues in FY 2008 were derived from two clients, CI and Genworth. CI represented 16% of FY 2008 consolidated revenues while Genworth, through its investments in EPIEX and EPSYX as well as separate account mandates, represented approximately 25%.
 32    TABLE OF CONTENTS  Change(Dollars in Thousands)

          

          2008

          

          2007

          

          $

          

          %Employee related costs (excluding share-based compensation)

          

          $

          17,711

          

          

          $

          13,878

          

          

          $

          3,833

          

          

          

          28

          %As of percent of total revenues

          

          

          52

          %

          

          

          58

          %
 Increased employee headcount to support the growth and expansion of the business, coupled with higher incentive based compensation, were the primary reasons for this increase. Employee headcount averaged 46 persons for FY 2008 compared with 40 persons for FY 2007. These expenses for the fiscal year ended June 30, 2008 included $9.4 million of bonuses and sales commissions as compared to $7.3 million for the fiscal year ended June 30, 2007.  Change(Dollars in Thousands)

          

          2008

          

          2007

          

          $

          

          %Share-based compensation

          

          $

          4,176

          

          

          $

          6,267

          

          

          $

          (2,091

          )

          

          

          (33

          )%As of percent of total revenues

          

          

          12

          %

          

          

          26

          %
 Amortization of the shares issued to employee owners in connection with the acquisition of EIP in June 2004, which equaled approximately $3.1 million per year, was completed as of June 30, 2007. This was the primary reason for the reduction in this expense. This reduction was partially offset by amortization of new stock awards. During the fiscal years ended June 30, 2008 and 2007, a total of 491,528 and 695,893 shares of restricted stock, respectively, were issued to employees. The value of these awards was $5.6 million and $4.3 million, respectively. A total of 61,441 and 87,003 shares of the awards issued in the fiscal years ended June 30, 2008 and 2007, respectively, or approximately 12.5%, were immediately vested. The remaining 87.5% of the shares vest over the subsequent three years. During the fiscal years ended June 30, 2008 and 2007, a total of 163,365 and 26,201 shares, $1.0 million and $0.1 million respectively, were forfeited by terminated employees. During the fiscal years ended June 30, 2008 and 2007, a total of 35,604 and 66,228 shares of restricted stock, respectively, were granted to non-employee directors of the Company for FY 2008 and FY 2007 services. 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.  Change(Dollars in Thousands)

          

          2008

          

          2007

          

          $

          

          %General, administrative and occupancy

          

          $

          5,164

          

          

          $

          3,891

          

          

          $

          1,273

          

          

          

          33

          %As of percent of total revenues

          

          

          15

          %

          

          

          16

          %
 Increases in market data service costs due to continued business expansion, increased travel to support distribution efforts, as well as rent on additional office space leased at the Companys headquarters in February 2007, were the primary contributors of this expense categorys increase.  Change(Dollars in Thousands)

          

          2008

          

          2007

          

          $

          

          %Professional service fees

          

          $

          2,481

          

          

          $

          2,020

          

          

          $

          461

          

          

          

          23

          %As of percent of total revenues

          

          

          7

          %

          

          

          8

          %
 The primary reason for this increase was increased tax consulting services. Increased legal fees in conjunction with our continued business expansion and review of strategic opportunities also contributed to the increase.  Change(Dollars in Thousands)

          

          2008

          

          2007

          

          $

          

          %Other income

          

          $

          6,049

          

          

          $

          10,509

          

          

          $

          (4,460

          )

          

          

          (42

          )%As of percent of income before income taxes

          

          

          61

          %

          

          

          131

          %
 33    TABLE OF CONTENTS The fiscal year ended June 30, 2008 included realized gains of $3.7 million from the sales of marketable securities, realized gains of $0.3 million from the Strategic Data Corporation transaction, approximately $1.3 million of interest income, and $0.6 million of sublease income. The fiscal year ended June 30, 2007 included $8.1 million of non-recurring cumulative dividends and realized gains recognized from the disposition of privately held investments (see Significant Transactions), approximately $1.3 million of interest income, and $0.6 million of sublease income.  Change(Dollars in Thousands)

          

          2008

          

          2007

          

          $

          

          %Provision for income taxes

          

          $

          867

          

          

          $

          99

          

          

          $

          768

          

          

          

          NMEffective income tax rate

          

          

          8.8

          %

          

          

          1.2

          %
  NM  not meaningful The Company was not subject to regular income tax rates in FY 2007 because of its net operating loss carryforwards, but was obligated to pay tax under the federal alternative minimum tax (AMT), which limits the application of net operating loss carryforwards to 90% of taxable income, in addition to certain AMT adjustments. The Company was subject to regular income tax rates during FY 2008, as the remaining net operating losses available to be utilized by the Company are subject to annual limitations, and were less, in the aggregate, than were available in the prior year. The total provision for income taxes in FY 2008 was significantly reduced by a release of valuation allowances against certain deferred tax assets. 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 cash incentive compensation to its employees. Investment management fees are generally collected within 90 days of billing. The Company has traditionally 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 year ended June 30, 2009, the Company began to pay cash incentive compensation to all employees during the
first three months following the calendar year. To implement such shift, the Company utilized a six-month stub period for those senior executives. Investing cash flows are principally influenced by activities to acquire property and equipment, re-investment of earnings from investments in Company-sponsored products, and proceeds from other transactions. Financing cash flows are predominantly 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. 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 and cash equivalents, and sublease income. As of June 30, 2009, the Company had $44.5 million of liquid assets, consisting of $37.0 million of cash and cash equivalents and $7.5 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.
 34    TABLE OF CONTENTS At June 30, 2009, accounts payable and accrued liabilities, which consist of trade payables, accrued professional fees, and other liabilities, were $0.6 million. Accrued compensation and benefits, which consists primarily of accrued incentive compensation, was $3.6 million. The decrease in accrued incentive compensation from the prior year results from the timing of payments made for certain senior executives as previously indicated. The Company also realized excess tax benefits of $1.7 million during the fiscal year ended June 30, 2009. Excess tax benefits reduce the amount of income taxes to be paid. Excess tax benefits arise in connection with the Companys stock 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. There is 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. Cash Flows A summary of cash flow data for the fiscal years ended June 30 is as follows (in thousands):  2009

          

          2008

          

          2007Cash flows provided by (used in):Operating activities

          

          $

          855

          

          

          $

          11,349

          

          

          $

          2,389Investing activities

          

          

          4,596

          

          

          

          23,570

          

          

          

          (11,451

          )Financing activities

          

          

          (5,832

          )

          

          

          (580

          )

          

          

          9,925Net (decrease) increase in cash and cash equivalents

          

          

          (381

          )

          

          

          34,339

          

          

          

          863Cash and cash equivalents at beginning of period

          

          

          37,436

          

          

          

          3,097

          

          

          

          2,234Cash and cash equivalents at end of period

          

          

          37,055

          

          

          

          37,436

          

          

          

          3,097Short-term investments

          

          

          

          

          

          

          

          

          

          

          21,850Cash, cash equivalents and short-term investments at end of period

          

          $

          37,055

          

          

          $

          37,436

          

          

          $

          24,947Percent of total assets

          

          

          67

          %

          

          

          69

          %

          

          

          63

          %
 Cash Flows from Operating Activities For FY 2009, net cash provided by operating activities was $0.9 million. The decrease in cash provided by operations reflects the payment of income taxes and the timing of payments of incentive compensation to certain senior executives during FY 2009. The remaining fluctuation from the prior year stems from the change in net income as well as timing differences in the cash settlement of assets and liabilities, particularly the increase in year-end accounts receivable balances. Accounts receivable balances were 18% higher at June 30, 2009 when compared with June 30, 2008 and is reflective of performance fees earned during the fourth quarter ended June
30, 2009, as well as additional clients with quarterly billing arrangements. For the fiscal years ended June 30, 2008 and June 30, 2007, net cash provided by operating activities improved by $9.0 million and $3.5 million, respectively. The increases resulted from improved operating results and changes in operating assets and liabilities. Cash Flows from Investing Activities Cash flows from investing activities totaled $4.6 million and $23.6 million for the fiscal year ended June 30, 2009 and June 30, 2008, respectively. Current year investing activities included receipts of $4.9 million representing the final installment payments from the Strategic Data transaction. The Company also invested approximately $0.3 million into the Epoch Large Cap U.S. Equity fund in January 2009. Prior year
 35    TABLE OF CONTENTS investing activities included the funding of approximately $3.6 million into several Company-sponsored products as well as $21.9 million of proceeds from the sale of short-term investments and $5.1 million of proceeds from the sale of shares of marketable securities. In FY 2008, in response to increasing credit quality concerns present in the fixed income securities market, the Company liquidated all of its short-term investments. Proceeds from these liquidations were then invested in cash and cash equivalents. No gains or losses were realized from these liquidations. During the fiscal year ended June 30, 2007, the Company used $11.5 million in investing activities. Investing cash flows included $6.2 million of proceeds received from the sales of marketable securities. These proceeds, as well as the $10 million received in the private placement of preferred stock, were invested in short-term investments. Cash Flows from Financing Activities Cash flows from 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 $5.8 million and $0.6 million for the fiscal years ended June 30, 2009 and June 30, 2008, respectively. The Company initiated the payment of common stock dividends in the quarter ended December 31, 2007 and the share buy-back program in June 2008. Dividends paid during the fiscal year ended June 30, 2009 were approximately $5.3 million, which includes a special dividend of $2.6 million. During the same period, the Company repurchased 263,900 shares under our authorized repurchase program for approximately $1.9 million. Partially offsetting these financing outflows was the recognition of $1.7 million in excess tax benefits related to the vesting of restricted stock. Cash used in financing activities for the fiscal year ended June 30, 2008 were primarily related to $2.0 million in payments of dividends offset by excess tax benefits of $1.6 million. Cash provided from financing activities for the fiscal year ended June 30, 2007 included the $10 million proceeds received from the issuance of the preferred stock. Working Capital: The Companys working capital and current ratio for the past two years is set fourth in the table below (dollars in thousands):  June 30,

          

          Change2009

          

          2008

          

          $

          

          %Current Assets

          

          $

          46,152

          

          

          $

          44,753

          

          

          $

          1,399

          

          

          

          3

          %Current Liabilities

          

          

          4,255

          

          

          

          7,961

          

          

          

          (3,706

          )

          

          

          (47

          )%Working Capital

          

          $

          41,897

          

          

          $

          36,792

          

          

          $

          5,105

          

          

          

          14

          %Current Ratio(1)

          

          

          10.8

          

          

          

          5.6

          

          

          

          5.2

          

          

          

          93

          %
  (1)

          current assets divided by current liabilities. Dividends on Common Stock The Company commenced declaring and paying quarterly cash dividends on its common stock in the quarter ended December 31, 2007. The dividend rate was $0.025 per share per quarter, for each of the quarters ended December 31, 2007, March 31, 2008, and June 30, 2008. A total of $1.5 million of dividends were declared and paid during the fiscal year ended June 30, 2008. On July 9, 2008, the Board of Directors declared a 20% increase in the quarterly per share dividend rate on the Companys common stock, from $0.025 per share to $0.03 per share. Quarterly dividends were paid in August and November 2008 as well as February and May 2009. A total of $2.7 million of regular dividends were declared and paid during the fiscal year ended June 30, 2009. On July 9, 2009, the Board of Directors declared a quarterly cash dividend payable on August 14, 2009 to all shareholders of record at the close of business on July 31, 2009. The Company expects regular quarterly
 36    TABLE OF CONTENTS 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. Special Cash Dividend As a result of the Companys strong cash position and debt-free balance sheet, the Board of Directors declared a special cash dividend on December 19, 2008 of $0.12 per share. The dividend was paid on January 15, 2009 to all shareholders of record at the close of business on December 31, 2008. The aggregate dividend payment totaled approximately $2.6 million. This dividend represented a small portion of the Companys cash balances, the remainder of which is being utilized to achieve key business objectives in growing its business and providing a reserve for any unstable economic conditions. Dividends on Preferred Stock As a result of the November 7, 2006 preferred stock issuance, the Company began paying semi-annual dividends on newly issued Series A Convertible Preferred Stock (the Preferred Stock), payable December 31 and June 30 of each year. The semi-annual dividend payments were $230 thousand each June and December. The Company paid $460 thousand in preferred dividends during the fiscal year ended June 30, 2008 and $299 thousand in preferred dividends during the fiscal year end June 30, 2007, which represents dividends for the period from November 7, 2006 through June 30, 2007. On July 1, 2008, the holder converted the Preferred Stock to 1,666,667 shares of Common Stock. Accordingly, the Preferred Stock has been cancelled and the conversion eliminated the holders rights to receive the semi-annual dividends on the Preferred 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 in 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 fiscal years ended June 30, 2009 and 2008, the Company repurchased 263,900 and 8,900 shares at a weighted average price of $7.36 and $9.25, respectively. All shares repurchased are shown as Treasury stock at cost, in the Stockholders equity section of the Consolidated Balance Sheets. Contractual Obligations The Companys headquarters and operations are located in New York, NY. Business is conducted at a location with approximately 10,000 square feet under a long-term lease that expires in September 2015. To accommodate for the growth in business, the Company entered into a sublease agreement for an additional 3,100 square feet at its Company headquarters in February 2007. This sublease expires in June 2010. The Company is also the primary party to another lease in New York, NY 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 the 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, offset the Companys obligations under this lease.
 37    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 June 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, total $0.7 million as of June 30, 2009. During December 2008, in an effort to consolidate marketing efforts and reduce costs, the Company closed its two-employee marketing office in Sherman Oaks, California. The office lease at the California location expired in January 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 then in effect. 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 the 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 officers or employees of the Company. 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,Total

          

          2010

          

          2011  2012

          

          2013  2014

          

          2015 andThereafterPrimary New York operations

          

          $

          4,727

          

          

          $

          976

          

          

          $

          1,421

          

          

          $

          1,434

          

          

          $

          896Subleased New York lease

          

          

          681

          

          

          

          481

          

          

          

          200

          

          

          

          

          

          

          

          Other operating leases

          

          

          64

          

          

          

          47

          

          

          

          13

          

          

          

          4

          

          

          

          Total obligations

          

          

          5,472

          

          

          

          1,504

          

          

          

          1,634

          

          

          

          1,438

          

          

          

          896Sublease income, net(1)

          

          

          (670

          )

          

          

          (574

          )

          

          

          (96

          )

          

          

          

          

          

          

          Net obligations

          

          $

          4,802

          

          

          $

          930

          

          

          $

          1,538

          

          

          $

          1,438

          

          

          $

          896
  (1)

          amounts are net of landlord profit sharing Off-Balance Sheet Arrangements As of June 30, 2009, the Company had no off-balance sheet arrangements. Significant Transactions Strategic Data Corporation Transaction During the fiscal year ended June 30, 2000, J Net Enterprises, Inc. (J Net), the predecessor company to Epoch, made an investment in Strategic Data Corp. (SDC), a technology-related company that specialized in advertising optimization technology. During the fiscal year ended June 30, 2001, the carrying value of this investment was deemed to be impaired by J Nets management and written down to zero. On February 20, 2007, SDCs stockholders approved the acquisition of its stock by Fox Interactive Media, Inc. (FIM). Under the terms of the agreement, FIM acquired all of the outstanding common stock, preferred stock, and vested and unvested stock options of SDC. As a result of the merger, the Company, as a holder of preferred stock of SDC, received an initial cash payment of approximately $2.2 million on March 22, 2007, which was recorded as a realized gain of $1.6 million and dividend income of $0.6 million in the Consolidated Statements of Operations for FY 2007. The SDC merger also called for contingent payments, upon the achievement of certain targets and milestones, payable over a period of approximately 3.5 years from the closing, as well as release of an escrow fund. The first target measurement date was November 2007 and the Company accrued approximately $344 thousand at that time. The Company received those proceeds during the quarter ended March 31, 2008. The second target measurement date was June 2008 and the Company accrued an additional $200 thousand at
 38    TABLE OF CONTENTS that time, the proceeds of which were received during the quarter ended September 30, 2008. Both amounts have been included in Realized gains on investments in the Consolidated Statement of Operations for FY 2008. The merger agreement was subsequently amended during the quarter ended December 31, 2008 to provide for a final settlement of all contingent payments by December 31, 2008. As such, additional payments totaling $4.7 million were received in December 2008. These payments represented the final contingent payments and are included in Realized gains on investments in the Consolidated Statements of Operations for FY 2009. There are no further rights to any payments. eStara Transaction During the fiscal year ended June 30, 2000, J Net made an investment in eStara, Inc. (eStara), a technology-related company that provided conversion and tracking solutions to enhance on-line sales. During fiscal year ended June 30, 2003, J Nets management concluded its ability to recover its investment was remote and wrote down the remaining carrying value to zero. On October 2, 2006, eStaras stockholders approved the acquisition of its stock by Art Technology Group, Inc. (NASDAQ ticker symbol ARTG). Under the terms of the agreement, ARTG acquired all of the outstanding common stock, preferred stock, and vested and
unvested stock options of eStara. In exchange for the eStara preferred shares held, the Company received 2,431,577 common shares of ARTG and $267 thousand in cash. The common shares received from ARTG were subject to a lock-up agreement pursuant to which the shares were released to the Company in equal monthly installments over a period of 12 months, which commenced January 2007. During the FY 2008, the Company sold approximately 1.4 million shares of ARTG and recognized realized gains of approximately $3.7 million. Upon sale, these gains were reclassified, in accordance with the provisions of Statement of Financial Accounting Standard (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities(FASB ASC320-10), from Accumulated other comprehensive income (loss) a separate component of stockholders equity, to Realized gains on investments in the Consolidated Statements of Operations. All of the remaining shares of ARTG were sold before the end of FY 2008. For the fiscal year ended June 30, 2007, realized gains of $0.2 million and dividend income of $2.4 million were recognized for cash and common shares received as payment for the cumulative dividends on the eStara preferred stock. Additionally, the Company sold approximately 1.0 million shares of ARTG and recorded realized gains of approximately $1.5 million. Tellme Corporation Transaction During the fiscal year ended June 30, 2001, J Net made an investment in Tellme Networks, Inc. (Tellme), a technology-related company that specialized in voice technologies. The investment in Tellme was reduced from $2.0 million to $157 thousand at June 1, 2004, in connection with the Companys acquisition of EIP. On March 12, 2007, Tellme announced an agreement by Microsoft Corporation to acquire all of the outstanding common stock, preferred stock, and vested and unvested stock options of Tellme. This merger closed on April 30, 2007. As a result of the merger, the Company, as a holder of preferred stock of Tellme, received a cash payment of approximately $2.0 million during the quarter ended June 30, 2007. Accordingly, approximately $1.8 million was included in Realized gains on investments in the Consolidated Statements of Operations for FY 2007. Fair Value Measurements The fair value of the Companys financial assets is determined in accordance with the fair value hierarchy established in SFAS No. 157,Fair Value Measurements (SFAS 157). The Companys financial assets recorded at fair value consist of available-for-sale investments. Fair values for these investments are determined based upon unadjusted quoted market prices. These investments trade on financial exchanges, with active daily prices. Management believes that there is no credit risk associated with these investments.
 39    TABLE OF CONTENTS 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. Management has the intent, and ability to hold these investments until such recovery occurs. The Company does not hold any derivative instruments or financial liabilities. See Note 6 to the Consolidated Financial Statements for a further discussion on Fair Value Measurements. Critical Accounting Estimates The Companys consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP). In connection with the preparation of the Companys financial statements, management is required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and disclosure of contingent assets and liabilities. Management bases their assumptions, estimates and judgments on historical experience, current trends and other factors that it feels to be relevant at the time the Companys consolidated financial
statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that the Companys financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. The Companys significant accounting policies and estimates are discussed in Note 2, Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. Management believes that the following accounting estimates are the most subjective, resulting from the need to make estimates about the effect of matters that are inherently uncertain. Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of the Companys Board of Directors. Provision for (Benefit from) Income Taxes Managements judgment is required in developing the Companys provision for (benefit from) income taxes, including the determination of deferred tax assets and liabilities and any valuation allowances that might be required against net deferred tax assets. The Companys ability to utilize accumulated net operating losses (NOLs) to their full extent prior to their expiration cannot be reasonably assured. Share-Based Compensation The Company commenced issuing options to purchase shares of common stock to employees of the Company during the fiscal year ended June 30, 2009. The Company values stock options based upon the Black-Scholes option-pricing model and recognizes this value as an expense over the requisite service period. Implementation of the Black-Scholes option-pricing model requires the Company to make certain assumptions, including expected volatility, risk-free interest rate, expected dividend yield and expected life of the options. The Company utilized assumptions that it believed to be most appropriate at the time of the valuation. Management makes certain assumptions when recognizing share-based compensation, net of forfeitures. If actual events were to differ from managements assumptions, differences could potentially be material. Recently Issued Accounting Standards FASB Codification: SFAS No. 168.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 will only result in changes to the Companys financial statement disclosure references. As such, the adoption of this pronouncement has no effect on the Companys consolidated financial position, results of operations, or cash flows.
 40    TABLE OF CONTENTS In order to facilitate the transition to the FASB ASC, the Company has elected to show all references to U.S. GAAP within this report on Form 10-K as usual along with a parenthetical FASB ASC reference. Fair Value Measurements: SFAS No. 157.  In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements (SFAS 157) (FASB ASC 820-10). SFAS 157 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. SFAS 157 was effective for the Company July 1, 2008. SFAS 157 establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and to minimize the use of unobservable inputs when
measuring fair value. The adoption of SFAS 157 did not have a material effect on the Companys consolidated financial position, results of operations, or cash flows. SFAS No. 159.  In February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159) (FASB ASC 825-10). SFAS 159 permits certain financial assets and financial liabilities to be measured at fair value, using an instrument-by-instrument election. The initial effect of adopting SFAS 159 must be accounted for as a cumulative effect adjustment to opening retained earnings for the fiscal year of adoption. Retrospective application to fiscal years preceding the effective date is not permitted. SFAS 159 was effective for the Company July 1, 2008. The adoption of
SFAS 159 did not have a material effect on the Companys consolidated financial position, results of operations, or cash flows. FSP No. 157-3.  In October 2008, the FASB issued FASB Staff Position (FSP) 157-3,Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active(FSP 157-3) (FASB ASC 820-10). FSP 157-3 does not reinterpret or change SFAS 157s existing principles but rather is intended to enhance comparability and consistency in fair value measurements of financial assets that trade in markets that are inactive. FSP 157-3 primarily re-asserts that when the market is inactive, management is not required to use thinly traded quotes or quotes reflecting distressed prices. Rather,
management should look to other means to estimate fair value, such as the income approach, which discounts the estimated cash flows and results in a Level 3 classification because the inputs are not observable. Revisions resulting from a change in the valuation technique or its application shall be accounted for as a change in accounting estimate. FSP 157-3 was effective immediately upon issuance. The Company does not currently own such investment instruments and, as such, the adoption of this pronouncement had no effect on its consolidated financial position, results of operations, or cash flows. FSP FAS No. 157-4.  In April 2009, the FASB issued FSP No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly(FSP FAS No. 157-4) (FASB ASC 820-10-65-4). FSP FAS No. 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157, when the volume and level of activity for the asset or liability have significantly decreased. It also includes guidance on identifying circumstances that indicate a transaction is not orderly.FSP FAS No. 157-4 is effective for interim
periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The Company adopted FSP FAS No. 157-4 during the quarter ended March 31, 2009. The adoption of this pronouncement had no effect on its consolidated financial position, results of operations, or cash flows. FSP FAS No. 107-1/APB 28-1.  In April 2009, the FASB issued FSP FAS 107-1 and Accounting Principles Board (APB) 28-1,Interim Disclosures about Fair Value of Financial Instruments (FSP FAS No. 107-1/APB 28-1) (FASB ASC 825-10-65-1). The FSP amends SFAS No. 107, Disclosures about Fair Value of Financial Instruments to require an entity to provide disclosures about fair value of financial instruments in interim financial information. This FSP is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15,
2009. The Company adopted FSP FAS No. 107-1/APB 28-1 during the quarter ended March 31, 2009. The adoption of this pronouncement had no effect on its consolidated financial position, results of operations, or cash flows. Other Than Temporary Impairments: FSP FAS 115-2 and FSP FAS 124-2.  In April 2009, the FASB issued FSP FAS No. 115-2 and No. 124-2, Recognition and Presentation of Other-Than-Temporary Impairments(FSP FAS No. 115-2 and
 41    TABLE OF CONTENTS FSP FAS No. 124-2) (FASB ASC 320-10-65-1).This standard provides guidance in determining whether impairments in debt securities are other than temporary, and modifies the presentation and disclosures surrounding such instruments. FSP FAS No. 115-2 and FSP FAS No. 124-2 is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The Company adopted FSP FAS No. 115-2 and FSP FAS No. 124-2 during the quarter ended March 31, 2009. The adoption of this pronouncement had no effect on its consolidated financial position, results of operations, or cash flows. SAB No. 111.  In April 2009, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 111 (SAB 111) (FASB ASC 320-10-S99-1) on Other-Than-Temporary Impairments. SAB 111 amends Topic 5.M. in the Staff Accounting Bulletin Series entitled Other-Than-Temporary Impairment of Certain Investments in Debt and Equity Securities (Topic 5. M.). SAB 111 maintains the SEC staffs previous views related to equity securities and amends Topic 5.M. to exclude debt securities from its scope. The Company elected to adopt SAB 111 during the quarter ended March 31, 2009. The
adoption of this pronouncement had no effect on its consolidated financial position, results of operations, or cash flows. Earnings per Share: FSP EITF No. 03-6-1.  In June 2008, the FASB issued FSP EITF No. 03-6-1,Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (FASB ASC 260-10). FSP EITF No. 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and therefore need to be included in the earnings allocation in calculating earnings per share under the two-class method described in SFAS No. 128,Earnings per Share (FASB ASC 260-10-05). FSP EITF No. 03-6-1 requires companies to treat unvested share-based payment awards that have
non-forfeitable rights to dividends or dividend equivalents as a separate class of securities in calculating earnings per share. FSP EITF No. 03-6-1 is effective for the Company July 1, 2009; earlier application is not permitted. The Company has completed its evaluation of the impact of FSP EITF No. 03-6-1 and has determined that its adoption will have no effect on its consolidated financial position, results of operations, or cash flows. Subsequent Events: SFAS No. 165.  In May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS 165) (FASB ASC 105-10). SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, SFAS 165 provides clarity around the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events
or transactions occurring after the balance sheet date in its financial statements, and the disclosure that an entity should make about events or transactions that occurred after the balance sheet date. SFAS 165 is effective for interim and annual financial reporting periods ending after June 15, 2009 and shall be applied prospectively. The Company adopted SFAS 165 for the annual financial reporting period ending June 30, 2009. The adoption of SFAS No. 165 did not have a material effect on the Companys consolidated financial position, results of operations, or cash flows. See Note 16, Subsequent Events, to the Consolidated Financial Statements. Item 7A. Quantitative and Qualitative Disclosures About Market Risk In the normal course of business, the Companys financial position is subject to different types of risk, including market risk. Market risk is the risk that the Company will incur losses primarily due to adverse changes in equity prices. Management is responsible for identifying, assessing and managing market and other risks. The following information, together with information included in other parts of Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, illustrate the significant characteristics of certain items that have market risk to the Company. AUM Market Price Risk As noted in Risk Factors in Item 1A, 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 the value of assets managed will impact the level of management and performance fee revenues.
 42    TABLE OF CONTENTS Approximately 55% of the Companys revenue is derived from daily net asset values, while the remaining 45% 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. Corporate Investments Market Risk The Company is exposed to fluctuations in the market price of its investments. Investments consist of investments in Company-sponsored investment vehicles, including mutual funds, an 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 June 30, 2009 and 2008, 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 (in thousands):  Fair Value

          

          Fair ValueAssuming 10%Decline

          

          Decrease inStockholdersEquity(1)At 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

          

          

          $

          268At June 30, 2008:Available-for-sale securities:Epoch Global All Cap separate account

          

          $

          2,748

          

          

          $

          2,484

          

          

          $

          264Company-sponsored mutual funds

          

          

          733

          

          

          

          669

          

          

          

          64Equity method:Epoch Global Absolute Return Fund, LLC

          

          

          478

          

          

          

          447

          

          

          

          31$

          3,959

          

          

          $

          3,600

          

          

          $

          359
  (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 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.
 43    TABLE OF CONTENTS 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 (FDIC) insurance limits. Presently, the Company neither participates in hedging activities nor does it have any derivative financial instruments.
 44    TABLE OF CONTENTS Item 8. Financial Statements and Supplementary Data The financial statements and supplementary financial information required by this Item are listed in the Index to Financial Statements below: EPOCH HOLDING CORPORATION AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS, SUPPLEMENTARY DATA AND FINANCIAL STATEMENT SCHEDULES  (1) Financial Statements:Report of Management on Internal Control over Financial Reporting





46Report of Independent Registered Public Accounting Firm





47Consolidated Balance Sheets at June 30, 2009 and 2008





48Consolidated Statements of Operations for the Years Ended June 30, 2009, 2008 and 2007





49Consolidated Statements of Changes in Stockholders Equity for the Years Ended June 30, 2009, 2008 and 2007





50Consolidated Statements of Cash Flows for the Years Ended June 30, 2009, 2008 and 2007





51Notes to Consolidated Financial Statements





52(2) Supplementary Data:Quarterly Financial Information (Unaudited) for the years ended June 30, 2009 and 2008.





73Certain financial statement schedules are omitted because the required information is provided in the Consolidated Financial Statements or the notes thereto.All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.
 45    TABLE OF CONTENTS REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING The management of the Company is responsible for establishing and maintaining adequate internal control over the Companys financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended. A companys internal control over financial reporting is a process designed by, or under the supervision of, the companys principal executive and principal financial officers, or persons performing similar functions, and effected by the companys Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in conformity with accounting principles generally accepted in the United States of America. There are inherent limitations in the effectiveness of internal control over financial reporting, including the possibility that misstatements may not be prevented or detected. Accordingly, even effective internal controls over financial reporting, no matter how well designed and operated, can provide only reasonable, not absolute, assurance with respect to financial statement preparation. Furthermore, the effectiveness of internal controls can change with circumstances. Management has assessed the effectiveness of the Companys internal control over financial reporting as of June 30, 2009 based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control  Integrated Framework. Based on that assessment, management has concluded that, as of June 30, 2009, the Companys internal control over financial reporting is effective. CF & Co., L.L.P., an independent registered public accounting firm, has issued an attestation report on the effective operation of Epoch Holding Corporation and Subsidiaries internal control over financial reporting as of June 30, 2009. As stated in their report appearing herein, CF & Co., L.L.P. has expressed an unqualified opinion on the effective operation of internal control over financial reporting as of June 30, 2009. September 14, 2009
 46    TABLE OF CONTENTS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Epoch Holding Corporation and Subsidiaries: We have audited the accompanying consolidated balance sheets of Epoch Holding Corporation and Subsidiaries as of June 30, 2009 and 2008, and the related consolidated statements of operations, changes in stockholders equity, and cash flows for each of the years in the three-year period ended June 30, 2009. We also have audited Epoch Holding Corporation and Subsidiaries internal control over financial reporting as of June 30, 2009, based on criteria established inInternal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Epoch Holding Corporation and
Subsidiaries management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management report on internal control over financial reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the companys internal control over financial reporting based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Epoch Holding Corporation and Subsidiaries as of June 30, 2009 and 2008, and the results of their operations and their cash flows for each of the years in the three-year period ended June 30, 2009, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, Epoch Holding Corporation and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of June 30, 2009, based on criteria established inInternal
Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). CF & Co., L.L.P. Dallas, Texas September 14, 2009
 47    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS(In Thousands, Except Share Data)  June 30,2009

          

          2008ASSETSCurrent assets:Cash and cash equivalents

          

          $

          37,055

          

          

          $

          37,436Accounts receivable

          

          

          7,523

          

          

          

          6,391Deferred income taxes, net  (Note 13)

          

          

          528

          

          

          

          271Prepaid and other current assets

          

          

          1,046

          

          

          

          655Total current assets

          

          

          46,152

          

          

          

          44,753Property and equipment, net of accumulated depreciation of $1,803 and $1,369, respectively

          

          

          1,275

          

          

          

          1,689Security deposits

          

          

          1,119

          

          

          

          1,104Deferred income taxes, net  (Note 13)

          

          

          3,209

          

          

          

          2,844Investments (cost of $3,559 and $4,187, respectively)  (Note 5)

          

          

          3,252

          

          

          

          3,959Total assets

          

          $

          55,007

          

          

          $

          54,349LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued liabilities

          

          $

          636

          

          

          $

          884Accrued compensation and benefits

          

          

          3,573

          

          

          

          5,630Income taxes payable

          

          

          46

          

          

          

          1,447Total current liabilities

          

          

          4,255

          

          

          

          7,961Deferred rent

          

          

          728

          

          

          

          813Subtenant security deposit

          

          

          234

          

          

          

          230Total liabilities

          

          

          5,217

          

          

          

          9,004Commitments and contingencies  (Note 8)Stockholders equity:Preferred stock, series A convertible, $1 par value per share, 1,000,000 shares authorized; -0- and 10,000 shares issued and outstanding at June 30, 2009 and 2008, respectively  (Note 9)

          

          

          

          

          

          

          10Common stock, $0.01 par value per share, 60,000,000 shares authorized; 22,502,992 issued and 22,198,811 outstanding at June 30, 2009 and 20,299,585 shares issued and 20,290,685 outstanding at June 30, 2008, respectively

          

          

          225

          

          

          

          203Additional paid-in capital

          

          

          50,848

          

          

          

          44,745Retained earnings

          

          

          1,256

          

          

          

          698Accumulated other comprehensive loss

          

          

          (307

          )

          

          

          (228

          )Treasury stock, at cost (304,181 and 8,900 shares, respectively)

          

          

          (2,232

          )

          

          

          (83

          )Total stockholders equity

          

          

          49,790

          

          

          

          45,345Total liabilities and stockholders equity

          

          $

          55,007

          

          

          $

          54,349
 The accompanying notes are an integral part of these consolidated financial statements.
 48    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS(In Thousands, Except Share Data)  For the Years Ended June 30,2009

          

          2008

          

          2007Operating Revenues:Investment advisory and management fees

          

          $

          30,535

          

          

          $

          33,634

          

          

          $

          22,964Performance fees

          

          

          624

          

          

          

          172

          

          

          

          971Total operating revenues

          

          

          31,159

          

          

          

          33,806

          

          

          

          23,935Operating expenses:Employee related costs (excluding share-based compensation)

          

          

          15,919

          

          

          

          17,711

          

          

          

          13,878Share-based compensation

          

          

          4,496

          

          

          

          4,176

          

          

          

          6,267General, administrative and occupancy

          

          

          4,651

          

          

          

          5,164

          

          

          

          3,891Professional fees and services

          

          

          2,211

          

          

          

          2,481

          

          

          

          2,020Depreciation and amortization

          

          

          434

          

          

          

          420

          

          

          

          396Total operating expenses

          

          

          27,711

          

          

          

          29,952

          

          

          

          26,452Operating income (loss)

          

          

          3,448

          

          

          

          3,854

          

          

          

          (2,517

          )Other income:  (Note 12)Realized gains on investments

          

          

          3,889

          

          

          

          4,169

          

          

          

          5,176Dividend income

          

          

          49

          

          

          

          46

          

          

          

          2,942Interest and other income

          

          

          1,172

          

          

          

          1,834

          

          

          

          2,391Total other income

          

          

          5,110

          

          

          

          6,049

          

          

          

          10,509Income before income taxes

          

          

          8,558

          

          

          

          9,903

          

          

          

          7,992Provision for income taxes  (Note 13)

          

          

          2,698

          

          

          

          867

          

          

          

          99Net income

          

          

          5,860

          

          

          

          9,036

          

          

          

          7,893Preferred stock dividends

          

          

          

          

          

          

          460

          

          

          

          299Non-cash charge attributable to beneficial conversion feature of preferred stock  (Note 9)

          

          

          

          

          

          

          

          

          

          

          700Net income available to common stockholders for basic earnings per share

          

          $

          5,860

          

          

          $

          8,576

          

          

          $

          6,894Earnings per share  (Note 14)Basic

          

          $

          0.26

          

          

          $

          0.42

          

          

          $

          0.35Diluted

          

          $

          0.26

          

          

          $

          0.41

          

          

          $

          0.35Weighted Average Shares Outstanding:Basic

          

          

          22,133

          

          

          

          20,181

          

          

          

          19,726Diluted

          

          

          22,133

          

          

          

          21,911

          

          

          

          20,807Cash dividends declared per share

          

          $

          0.24

          

          

          $

          0.075

          

          

          $

          -
 The accompanying notes are an integral part of these consolidated financial statements.
 49    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY For the Years Ended June 30, 2009, 2008 and 2007(Dollars and Shares in Thousands)  Preferred StockSeries A Convertible

          

          Common Stock

          

          Additional Paid-in Capital

          

          Retained Earnings (Accumulated Deficit)

          

          Accumulated Other Comprehensive Income (Loss)

          

          Treasury Stock

          

          Total Stockholders' EquityShares

          

          Amount

          

          Shares

          

          Amount

          

          Shares

          

          AmountBalances at June 30, 2006

          

          

          

          

          

          $

          

          

          

          

          19,154

          

          

          $

          191

          

          

          $

          21,915

          

          

          $

          (13,251

          )

          

          $

          

          

          

          

          

          

          

          $

          

          

          

          $

          8,855Net income

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          7,893

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          7,893Net unrealized gains on available-for-sale securities

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          4,045

          

          

          

          

          

          

          

          

          

          

          

          4,045Reclassification of gains included in net income

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (1,543

          )

          

          

          

          

          

          

          

          

          

          

          (1,543

          )Comprehensive income

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          10,395Issuance and forfeitures of restricted common stock

          

          

          

          

          

          

          

          

          

          

          735

          

          

          

          7

          

          

          

          505

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          512Amortization of unearned share-based compensation

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          5,755

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          5,755Issuance of common stock upon exercise of stock options

          

          

          

          

          

          

          

          

          

          

          46

          

          

          

          1

          

          

          

          313

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          314Issuance of series A convertible preferred stock

          

          

          10

          

          

          

          10

          

          

          

          

          

          

          

          

          

          

          

          9,990

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          10,000Preferred stock issuance cost

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (89

          )

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (89

          )Preferred stock dividends

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (299

          )

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (299

          )Beneficial conversion feature associated with preferred stock  (Note 9)

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          700

          

          

          

          (700

          )

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          Balances at June 30, 2007

          

          

          10

          

          

          

          10

          

          

          

          19,935

          

          

          

          199

          

          

          

          39,089

          

          

          

          (6,357

          )

          

          

          2,502

          

          

          

          

          

          

          

          

          

          

          

          35,443Net income

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          9,036

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          9,036Net unrealized gains on available-for-sale securities

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          864

          

          

          

          

          

          

          

          

          

          

          

          864Reclassification of gains included in net income

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (3,594

          )

          

          

          

          

          

          

          

          

          

          

          (3,594

          )Comprehensive income

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          6,306Issuance and forfeitures of restricted common stock

          

          

          

          

          

          

          

          

          

          

          364

          

          

          

          4

          

          

          

          331

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          335Amortization of unearned share-based compensation

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          3,841

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          3,841Preferred stock dividends

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (460

          )

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (460

          )Common stock dividends ($0.075 per share)

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (1,521

          )

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (1,521

          )Income tax benefit from dividends paid on unvested shares

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          43

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          43Net loss on sales of shares for employee withholding

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (133

          )

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (133

          )Repurchase of common shares

          

          

          

          

          

          

          

          

          

          

          (9

          )

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          9

          

          

          

          (83

          )

          

          

          (83

          )Excess income tax benefit from vesting of restricted shares

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          1,574

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          1,574Balances 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

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (915

          )

          

          

          

          

          

          

          

          

          

          

          (915

          )Reclassification of realized losses included in net income

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          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  (Note 9)

          

          

          (10

          )

          

          

          (10

          )

          

          

          1,667

          

          

          

          17

          

          

          

          (7

          )

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          Common stock dividends ($0.24 per share)  (Note 15)

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (5,302

          )

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (5,302

          )Income tax benefit from dividends paid on unvested shares

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          112

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          112Net loss on sales of shares for employee withholding

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (203

          )

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (203

          )Repurchase of common shares

          

          

          

          

          

          

          

          

          

          

          (295

          )

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          295

          

          

          

          (2,149

          )

          

          

          (2,149

          )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

          )

          

          $

          49,790
 50    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS(In Thousands)  For the Years Ended June 30,2009

          

          2008

          

          2007Cash flows from operating activities:Net income

          

          $

          5,860

          

          

          $

          9,036

          

          

          $

          7,893Adjustments to reconcile net income to net cash provided by operating activities:Deferred income taxes

          

          

          (622

          )

          

          

          (3,115

          )

          

          

          Share-based compensation

          

          

          4,496

          

          

          

          4,176

          

          

          

          6,267Depreciation and amortization

          

          

          434

          

          

          

          420

          

          

          

          396Realized gains on investments

          

          

          (3,889

          )

          

          

          (4,169

          )

          

          

          (5,176

          )Equity in net loss from limited liability company

          

          

          90

          

          

          

          22

          

          

          

          Excess income tax benefit from vesting of restricted shares  (Note 13)

          

          

          (1,710

          )

          

          

          (1,574

          )

          

          

          Income tax benefit from payment of dividends on unvested shares

          

          

          (112

          )

          

          

          (43

          )

          

          

          Dividend income received in stock

          

          

          

          

          

          

          

          

          

          

          (2,240

          )(Increase) decrease in operating assets:Accounts receivable

          

          

          (1,132

          )

          

          

          (98

          )

          

          

          (3,807

          )Prepaid and other current assets

          

          

          (591

          )

          

          

          11

          

          

          

          (150

          )(Decrease) increase in operating liabilities:Accounts payable and accrued liabilities

          

          

          (248

          )

          

          

          (17

          )

          

          

          (522

          )Accrued compensation and benefits

          

          

          (2,057

          )

          

          

          3,820

          

          

          

          (258

          )Income taxes payable

          

          

          421

          

          

          

          2,965

          

          

          

          99Deferred rent

          

          

          (85

          )

          

          

          (85

          )

          

          

          (113

          )Net cash provided by operating activities

          

          

          855

          

          

          

          11,349

          

          

          

          2,389Cash flows from investing activities:Proceeds from other transactions  (Note 12)

          

          

          4,938

          

          

          

          375

          

          

          

          Investments in Company-sponsored products and other investments, net

          

          

          (311

          )

          

          

          (3,616

          )

          

          

          (754

          )Capital expenditures

          

          

          (20

          )

          

          

          (96

          )

          

          

          (394

          )Security deposits, net

          

          

          (11

          )

          

          

          (25

          )

          

          

          (100

          )Purchases and sales of short-term investments, net

          

          

          

          

          

          

          21,850

          

          

          

          (16,450

          )Proceeds from sales of marketable securities  (Note 12)

          

          

          

          

          

          

          5,082

          

          

          

          6,247Net cash provided by (used in) investing activities

          

          

          4,596

          

          

          

          23,570

          

          

          

          (11,451

          )Cash flows from financing activities:Common stock dividends

          

          

          (5,302

          )

          

          

          (1,521

          )

          

          

          Repurchase of common stock

          

          

          (2,149

          )

          

          

          (83

          )

          

          

          Excess income tax benefit from vesting of restricted shares  (Note 13)

          

          

          1,710

          

          

          

          1,574

          

          

          

          Income tax benefit from payment of dividends on unvested shares

          

          

          112

          

          

          

          43

          

          

          

          Net loss on sale of shares for employee withholding

          

          

          (203

          )

          

          

          (133

          )

          

          

          Preferred stock dividends

          

          

          

          

          

          

          (460

          )

          

          

          (299

          )Proceeds from issuance of Series A convertible preferred stock

          

          

          

          

          

          

          

          

          

          

          10,000Proceeds from stock option exercise

          

          

          

          

          

          

          

          

          

          

          313Preferred stock issuance costs

          

          

          

          

          

          

          

          

          

          

          (89

          )Net cash (used in) provided by financing activities

          

          

          (5,832

          )

          

          

          (580

          )

          

          

          9,925Net (decrease) increase in cash and cash equivalents during year

          

          

          (381

          )

          

          

          34,339

          

          

          

          863Cash and cash equivalents at beginning of year

          

          

          37,436

          

          

          

          3,097

          

          

          

          2,234Cash and cash equivalents at end of year

          

          $

          37,055

          

          

          $

          37,436

          

          

          $

          3,097Supplemental disclosure of cash flow information:Cash paid for income taxes

          

          $

          3,361

          

          

          $

          1,016

          

          

          $

          Supplemental disclosures of non-cash investing activities:Change in accumulated other comprehensive income

          

          $

          (79

          )

          

          $

          (2,730

          )

          

          $

          2,502
 51    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 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. Unless specifically stated otherwise, references to FY 2009, FY 2008 and FY 2007 refer to the fiscal years ended June 30, 2009, June 30, 2008, and June 30, 2007, respectively. 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 and Principles of Consolidation: The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) and include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. Unearned share-based compensation has been reclassified to Additional paid-in capital in the prior period financial statements to conform to the current year presentation. Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions impact the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of these consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates. Financial Instruments with Concentration of Credit Risk: The financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, and investments. Epoch invests its cash and cash equivalents with high-credit quality financial institutions in amounts, which, at times, may be in excess of the Federal Deposit Insurance Corporation (FDIC) insurance limits. Cash Equivalents: Cash equivalents are highly liquid investments in money market funds consisting of short-term securities of the U.S. government and its agencies with original maturities of 90 days or less when acquired. Property and Equipment: The costs of leasehold improvements are capitalized and such costs are amortized on a straight-line basis over the shorter of their estimated useful lives or lease term, as applicable. All other capital assets are recorded at cost and such costs are depreciated on a straight-line basis over their estimated useful lives. Generally, the useful lives are approximately 3 to 7 years for equipment and office furniture, 1 to 3 years for
 52    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 2  Summary of Significant Accounting Policies   (continued) purchased software, and 3 to 10 years for leasehold improvements and exclude option periods, if any. Repairs and maintenance costs are charged to expense as incurred. Upon sale or disposition of property and equipment, the cost and related accumulated depreciation amounts are removed from the accounts and any resulting gain or loss is recognized in operations. Investments: The Company holds investments in four Company-sponsored mutual funds - the Epoch Global Equity Shareholder Yield Fund (EPSYX), the Epoch U.S. All Cap Equity Fund (EPACX), the Epoch International Small Cap Fund (EPIEX), and the Epoch U.S. Large Cap Equity Fund (EPLCX). The Company also holds investments in the Epoch Global Absolute Return Fund, LLC and in a separate account of Epochs Global All Cap product. The Company intends to hold these investments for a period in excess of one year. The investments in the Company-sponsored mutual funds and the separate account of Epochs Global All Cap product are accounted for as available-for-sale securities. Any resulting change in market value is recorded as unrealized gain or loss in Accumulated other comprehensive income (loss), a separate component of stockholders equity. Realized gains and losses from the available-for-sale securities are included in Other income in the Consolidated Statements of Operations using the specific identification method. EIP is also the managing member of the Epoch Global Absolute Return Fund, LLC, whose underlying assets consist of marketable securities. The Companys investment in this entity is accounted for using the equity method, under which EIPs share of the net earnings or losses from the limited liability company is reflected in Other income, as earned, and any distributions are reflected as reductions from the investment. The Company periodically reviews the carrying value of these investments for impairment by evaluating the nature, duration and extent of any decline in fair value. If the decline in value is determined to be other-than-temporary, the carrying value of the investment is written down to fair value through earnings. No impairment charges have been recognized during the periods presented. Financial Instruments that Approximate Fair Value: Statement of Financial Accounting Standard (SFAS) No. 107, Disclosure about Fair Value of Financial Instruments (FASB ASC 825-10), requires disclosure of estimated fair values of certain financial instruments, both on and off the 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. Treasury Stock: Treasury stock is accounted for under the cost method and is included as a deduction from equity in the Stockholders Equity section of the Consolidated Balance Sheets.
 53    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 2  Summary of Significant Accounting Policies   (continued) Revenue Recognition: Investment advisory and management fees are recognized as services are provided, pursuant to specific terms contained in advisory or sub-advisory contracts between EIP and its clients. Such contracts generally call for revenue to be determined as a percentage of assets under management (AUM). Separate account fees are billed on a quarterly basis, in arrears, generally based on the accounts asset value at the end of the quarter. Fees for services performed for mutual funds under advisory and sub-advisory contracts are calculated based upon the daily net asset values of the respective fund, and are generally received in arrears.
Advance payments, if received, are deferred and recognized during the periods for which services are provided. The Company also has certain contracts which contain incentive clauses that allow the Company to earn performance fees in the event that investment returns meet or exceed targeted amounts specified in the contracts. Revenues for these incentives are recognized only when such performance targets are met or exceeded at the end of the measurement period. Due to the inability to forecast financial markets, no revenues are recognized until the measurement period ends, even when investment returns are exceeding the contractual targets within the measurement period. Share-Based Compensation: The Company has issued restricted stock to employees and directors of the Company, and options to purchase shares of stock to employees of the Company in accordance with our Amended and Restated 2004 Omnibus Long-Term Incentive Compensation Plan. Share-based payments are accounted for in accordance with SFAS 123R, Share-based Compensation (FASB ASC 718-10), using the fair value method. The fair value of the Companys restricted stock awards is based on the closing price of the Companys common stock at the grant date. The Company values stock options based upon the Black-Scholes option-pricing model. Implementation of the Black-Scholes option-pricing model requires the Company to make certain assumptions, including expected volatility, risk-free interest rate, expected dividend yield and expected life of the options. The Company utilized assumptions that it believed to be most appropriate at the time of the valuation. Share-based compensation costs related to share and option awards are charged against income ratably over the requisite service period for the related equity award, with the initial charge generally recorded in the first full month following the grant. Leases: Rentals under operating leases, where the lessor retains substantially all the risks and benefits of ownership of the asset, are charged evenly to expense over the lease term. Benefits received and receivable, as an incentive to enter an operating lease, are also spread evenly over the lease term. Income Taxes: The Company accounts for income taxes in accordance with SFAS No. 109,Accounting for Income Taxes (SFAS 109) (FASB ASC 740-10). SFAS 109 requires that deferred tax assets and liabilities arising from temporary differences between book and tax basis be recognized using the enacted statutory tax rates and laws that will be in effect when such differences are expected to reverse. Deferred tax assets are recognized for temporary differences that will result in deductible amounts in future years. Deferred tax liabilities are recognized for temporary differences that will result in taxable income in future years. SFAS 109 requires a
reduction in deferred tax assets if it is more likely than not that some portion or all of the deferred tax asset will not be realized. Any potential interest and penalty associated with a tax contingency, should one arise, would be included as a component of income tax expense in the period in which the assessment arises.
 54    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 2  Summary of Significant Accounting Policies   (continued) Excess tax benefits and shortfalls related to share-based compensation are recognized as additional paid in capital. If the Company does not have additional paid-in capital credits (cumulative tax benefits recorded to additional paid-in capital), the Company will record an expense for any deficit between recorded tax benefits and tax return benefit. At June 30, 2009, the Company had sufficient excess additional paid-in capital credits to absorb potential deficits between recorded tax benefits and tax return benefits (see Note 13). Earnings per Common Share: Basic earnings per share (EPS) is calculated by dividing net earnings applicable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS includes the determinants of basic EPS and, in addition, reflects the dilutive effect, if any, of the common stock deliverable pursuant to stock options or, for the prior years presented, the common stock issuable upon the conversion of the convertible preferred stock. Comprehensive Income: Total comprehensive income is reported in the Consolidated Statement of Changes in Stockholders Equity and includes net income and, for investment securities available-for-sale, the change in unrealized gains (losses) and the reclassification of realized gains (losses) to net income. Recently Issued Accounting Standards FASB Codification: SFAS No. 168.  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 will only result in changes to the Companys financial statement disclosure references. As such, the adoption of this pronouncement has no effect on the Companys 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 U.S. GAAP within this report on Form 10-K as usual along with a parenthetical FASB ASC reference. Fair Value Measurements: SFAS No. 157.  In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements (SFAS 157) (FASB ASC 820-10). SFAS 157 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. SFAS 157 was effective for the Company July 1, 2008. SFAS 157 establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and to minimize the use of unobservable inputs when
measuring fair value. The adoption of SFAS 157 did not have a material effect on the Companys consolidated financial position, results of operations, or cash flows. SFAS No. 159.  In February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159) (FASB ASC 825-10). SFAS 159 permits certain financial assets and financial liabilities to be measured at fair value, using an instrument-by-instrument election. The initial effect of adopting SFAS 159 must be accounted for as a cumulative effect adjustment to opening retained
 55    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 2  Summary of Significant Accounting Policies   (continued) earnings for the fiscal year of adoption. Retrospective application to fiscal years preceding the effective date is not permitted. SFAS 159 was effective for the Company July 1, 2008. The adoption of SFAS 159 did not have a material effect on the Companys consolidated financial position, results of operations, or cash flows. FSP No. 157-3.  In October 2008, the FASB issued FASB Staff Position (FSP) 157-3,Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active(FSP 157-3) (FASB ASC 820-10). FSP 157-3 does not reinterpret or change SFAS 157s existing principles but rather is intended to enhance comparability and consistency in fair value measurements of financial assets that trade in markets that are inactive. FSP 157-3 primarily re-asserts that when the market is inactive, management is not required to use thinly traded quotes or quotes reflecting distressed prices. Rather,
management should look to other means to estimate fair value, such as the income approach, which discounts the estimated cash flows and results in a Level 3 classification because the inputs are not observable. Revisions resulting from a change in the valuation technique or its application shall be accounted for as a change in accounting estimate. FSP 157-3 was effective immediately upon issuance. The Company does not currently own such investment instruments and, as such, the adoption of this pronouncement had no effect on its consolidated financial position, results of operations, or cash flows. FSP FAS No. 157-4.  In April 2009, the FASB issued FSP No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly(FSP FAS No. 157-4) (FASB ASC 820-10-65-4). FSP FAS No. 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157, when the volume and level of activity for the asset or liability have significantly decreased. It also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP FAS No. 157-4 is effective for interim
periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The Company adopted FSP FAS No. 157-4 during the quarter ended March 31, 2009. The adoption of this pronouncement had no effect on its consolidated financial position, results of operations, or cash flows. FSP FAS No. 107-1/APB 28-1.  In April 2009, the FASB issued FSP FAS 107-1 and Accounting Principles Board (APB) 28-1,Interim Disclosures about Fair Value of Financial Instruments (FSP FAS No. 107-1/APB 28-1) (FASB ASC 825-10-65-1). The FSP amends SFAS No. 107, Disclosures about Fair Value of Financial Instruments to require an entity to provide disclosures about fair value of financial instruments in interim financial information. This FSP is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15,
2009. The Company adopted FSP FAS No. 107-1/APB 28-1 during the quarter ended March 31, 2009. The adoption of this pronouncement had no effect on its consolidated financial position, results of operations, or cash flows. Other Than Temporary Impairments: FSP FAS 115-2 and FSP FAS 124-2.  In April 2009, the FASB issued FSP FAS No. 115-2 and FSP FAS No. 124-2, Recognition and Presentation of Other-Than-Temporary Impairments(FSP FAS No. 115-2 and FSP FAS No. 124-2) (FASB ASC 320-10-65-1).This standard provides guidance in determining whether impairments in debt securities are other than temporary, and modifies the presentation and disclosures surrounding such instruments. FSP FAS No. 115-2 and FSP FAS No. 124-2 is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The
Company adopted FSP FAS No. 115-2 and FSP FAS No. 124-2 during the quarter ended March 31, 2009. The adoption of this pronouncement had no effect on its consolidated financial position, results of operations, or cash flows. SAB No. 111.  In April 2009, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 111 (SAB 111) (FASB ASC 320-10-S99-1) on Other-Than-Temporary Impairments. SAB 111 amends Topic 5.M. in the Staff Accounting Bulletin Series entitled Other-Than-Temporary Impairment of
 56    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 2  Summary of Significant Accounting Policies   (continued) Certain Investments in Debt and Equity Securities (Topic 5.M.). SAB 111 maintains the SEC staffs previous views related to equity securities and amends Topic 5.M. to exclude debt securities from its scope. The Company elected to adopt SAB 111 during the quarter ended March 31, 2009. The adoption of this pronouncement had no effect on its consolidated financial position, results of operations, or cash flows. Earnings per Share: FSP EITF No. 03-6-1.  In June 2008, the FASB issued FSP EITF No. 03-6-1,Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (FASB ASC 260-10). FSP EITF No. 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and therefore need to be included in the earnings allocation in calculating earnings per share under the two-class method described in SFAS No. 128,Earnings per Share (FASB ASC 260-10-05). FSP EITF No. 03-6-1 requires companies to treat unvested share-based payment awards that have
non-forfeitable rights to dividends or dividend equivalents as a separate class of securities in calculating earnings per share. FSP EITF No. 03-6-1 is effective for the Company July 1, 2009; earlier application is not permitted. The Company has completed its evaluation of the impact of FSP EITF No. 03-6-1 and has determined that its adoption will have no effect on its consolidated financial position, results of operations, or cash flows. Subsequent Events: SFAS No. 165.  In May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS 165) (FASB ASC 105-10). SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, SFAS 165 provides clarity around the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events
or transactions occurring after the balance sheet date in its financial statements, and the disclosure that an entity should make about events or transactions that occurred after the balance sheet date. SFAS 165 is effective for interim and annual financial reporting periods ending after June 15, 2009 and shall be applied prospectively. The Company adopted SFAS 165 for the annual financial reporting period ending June 30, 2009. The adoption of SFAS No. 165 did not have a material effect on the Companys consolidated financial position, results of operations, or cash flows. See Note 16, Subsequent Events. Note 3  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 fiscal years ended June 30, 2009, 2008 and 2007, respectively. Management believes these receivables are fully collectible. Significant Customers and Contracts: For the twelve months ended June 30, 2009, CI Investments Inc. (CI), a Canadian-owned investment management company, and Genworth Financial Asset Management, Inc. (Genworth), an investment adviser, through its investments in the Epoch International Small Cap Fund (EPIEX) and the Epoch Global Equity Shareholder Yield Fund (EPSYX), as well as separate account mandates, each accounted for approximately 13% of revenue. The Companys services and relationships with these clients are important to the Companys ongoing growth strategy, and retention of these clients is significant to the ongoing
results of operations of the Company. During FY 2008, CI accounted for approximately 16% of FY 2008 consolidated revenues while Genworth accounted for approximately 25%. During FY 2007, CI accounted for approximately 17% of FY 2007 consolidated revenues while Genworth accounted for approximately 24%.
 57    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 4  Property and Equipment As of June 30, 2009 and 2008, property and equipment consisted of the following (in thousands):  June 30,2009

          

          2008Leasehold improvements

          

          $

          1,869

          

          

          $

          1,869Equipment and office furniture

          

          

          883

          

          

          

          863Purchased software

          

          

          326

          

          

          

          326Total property and equipment, at cost

          

          

          3,078

          

          

          

          3,058Less: accumulated depreciation and amortization

          

          

          (1,803

          )

          

          

          (1,369

          )Total property and equipment, net

          

          $

          1,275

          

          

          $

          1,689
 Note 5  Investments The Companys investments at June 30, 2009 and 2008 are summarized as follows (in thousands):  June 30, 2009

          

          June 30, 2008Cost

          

          Gross Unrealized

          

          FairValue

          

          Cost

          

          Gross Unrealized

          

          Fair ValueGains

          

          Losses

          

          Gains

          

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

          

          $

          2,072

          

          

          $

          128

          

          

          $

          (142

          )

          

          $

          2,058

          

          

          $

          2,879

          

          

          $

          111

          

          

          $

          (242

          )

          

          $

          2,748Company-sponsored mutual funds

          

          

          1,099

          

          

          

          34

          

          

          

          (327

          )

          

          

          806

          

          

          

          830

          

          

          

          191

          

          

          

          (288

          )

          

          

          733Total available-for-sale securities

          

          

          3,171

          

          

          

          162

          

          

          

          (469

          )

          

          

          2,864

          

          

          

          3,709

          

          

          

          302

          

          

          

          (530

          )

          

          

          3,481Equity method investment:Epoch Global Absolute Return Fund, LLC

          

          

          388

          

          

          

          

          

          

          

          

          

          

          

          388

          

          

          

          478

          

          

          

          

          

          

          

          

          

          

          

          478$

          3,559

          

          

          $

          162

          

          

          $

          (469

          )

          

          $

          3,252

          

          

          $

          4,187

          

          

          $

          302

          

          

          $

          (530

          )

          

          $

          3,959
 Management has reviewed its investment securities for other-than-temporary impairment in accordance with its accounting policy outlined in Note 2. 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 in the Statement of Operations from investments classified as available-for-sale are as follows (in thousands):  June 30, 2009

          

          June 30, 2008

          

          June 30, 2007Proceeds

          

          Gross Realized

          

          Proceeds

          

          Gross Realized

          

          Proceeds

          

          Gross RealizedGains

          

          Losses

          

          Gains

          

          Losses

          

          Gains

          

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

          

          $

          2,577

          

          

          $

          2

          

          

          $

          (850

          )

          

          $

          956

          

          

          $

          27

          

          

          $

          (186

          )

          

          $

          

          

          

          $

          

          

          

          $

          Company-sponsored mutual funds

          

          

          12

          

          

          

          12

          

          

          

          

          

          

          

          64

          

          

          

          64

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          Marketable securities(1)

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          5,014

          

          

          

          3,689

          

          

          

          

          

          

          

          2,457

          

          

          

          1,543

          

          

          

          Total

          

          $

          2,589

          

          

          $

          14

          

          

          $

          (850

          )

          

          $

          6,034

          

          

          $

          3,780

          

          

          $

          (186

          )

          

          $

          2,457

          

          

          $

          1,543

          

          

          $

          
  (1)

          See Note 12 for further details. Note 6  Fair Value Measurements As discussed in Note 2, the Company adopted SFAS 157 (FASB ASC 820-10) at the beginning of FY 2009. SFAS 157 establishes 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:
 58    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 6  Fair Value Measurements   (continued) 

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

          Level 2  inputs to 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 quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). SFAS 157 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. 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: 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 two investments at June 30, 2009 totaled $2.9 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 and is included in the Consolidated Statement of Operations. Accordingly, SFAS 157 does not apply to this investment. The following table presents, for each of the hierarchy levels previously described, the Companys assets that are measured at fair value as of June 30, 2009 (in thousands):  As of June 30, 2009Fair Value Measurements

          

          Quoted Prices in Active Markets for Identical Assets (Level 1)

          

          Significant Other Observable Inputs (Level 2)

          

          Significant Unobservable Inputs (Level 3)Investments:Available-for-sale

          

          $

          2,864

          

          

          $

          2,864

          

          

          $

          

          

          

          $

          
 At June 30, 2009, the Company did not hold any financial liabilities measured at fair value.
 59    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 7  Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consisted of the following (in thousands):  June 30,2009

          

          2008Trade accounts payable

          

          $

          158

          

          

          $

          295Accrued professional fees

          

          

          115

          

          

          

          108Accrued expenses and other

          

          

          363

          

          

          

          481Total accounts payable and accrued liabilities

          

          $

          636

          

          

          $

          884
 Note 8  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 then in effect. 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 June 30, 2009. Of this amount, approximately $0.4 million is included in accrued compensation and benefits in the Consolidated Balance Sheet at June 30, 2009. An additional $0.2 million will be accrued during the fiscal year ended June 30, 2010. Approximately $0.1 million represents restricted
stock awards to be issued during the fiscal year ending June 30, 2010. 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 consolidated financial position, results of operations, or cash flows. 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 in 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 fiscal years ended June 30, 2009 and 2008, the Company repurchased 263,900 and 8,900 shares, respectively, at a weighted average price of $7.36 and $9.25, respectively. All shares repurchased are shown as Treasury stock at cost, in the Stockholders equity section of the Consolidated Balance Sheets.
 60    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 8  Commitments and Contingencies   (continued) Employee Tax Withholding: To satisfy employee tax withholding requirements related to the vesting of common shares, the Company purchases from employees, and then resells in the open market, shares utilized by employees to cover and pay for employee tax withholdings. At June 30, 2009, there were 31,381 shares held to be resold by the Company in the open market. These shares are shown as Treasury stock at cost in the Stockholders equity section of the Consolidated Balance Sheets. Any resulting gain or loss on resale is accounted for as an adjustment to Additional paid-in capital. Investment Management Contracts: Most of the Companys revenues are derived pursuant to written investment advisory and management agreements. These agreements may be terminated by either party with notice or terminated in the event of an assignment (as defined in the Investment Company Act of 1940, as amended (the 1940 Act)). Generally, any change in control of the Company would constitute an assignment under the 1940 Act. Additionally, mutual fund agreements generally must be approved and renewed annually. Leases: The Companys headquarters and operations are located in New York, NY. Business is conducted at a location with approximately 10,000 square feet under a long-term lease that expires in September 2015. To accommodate for the growth in business, the Company entered into a sublease agreement for an additional 3,100 square feet at its Company headquarters in February 2007. This lease expires in June 2010. The Company is also the primary party to another lease in New York, NY with approximately 8,500 square feet, which expires in November 2010. This property is subleased to an unrelated third party. While the Company remains responsible for obligations under the lease, the sublease income, net of profit sharing with the landlord, offset the Companys obligations under this lease. 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 June 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, are approximately $0.7 million as of June 30, 2009. The aforementioned leases are classified as operating leases and contain rent escalation clauses and other inducements provided by the landlord. Rent expense is accrued to recognize lease escalation provisions and inducements provided by the landlord on a straight-line basis over the lease term. These leases also contain other escalation clauses that provide pass through of increases in operating expenses and real estate taxes. During December 2008, in an effort to consolidate marketing efforts and reduce costs, the Company closed its two-employee marketing office in Sherman Oaks, CA. The office lease at this location expired in January 2009. The rental expenses for the Companys continuing operations were $1.4 million for the fiscal years ended June 30, 2009 and 2008, and $1.2 million for the fiscal year ended June 30, 2007. Rental income under the sublease, net of profit sharing expenses with the primary landlord were $545 thousand for the fiscal years ended June 30, 2009 and 2008, and $559 thousand for the fiscal year ended June 30, 2007.
 61    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 8  Commitments and Contingencies   (continued) The following table outlines the minimum annual office lease obligations of the Company and related sublease receipts (in thousands):  For the Years Ending June 30,

          

          Gross

          

          Sublease Receipts(1)

          

          Net Commitment2010

          

          $

          1,457

          

          

          $

          (574

          )

          

          $

          8832011

          

          

          904

          

          

          

          (96

          )

          

          

          8082012

          

          

          717

          

          

          

          

          

          

          

          7172013

          

          

          717

          

          

          

          

          

          

          

          7172014

          

          

          717

          

          

          

          

          

          

          

          7172015 and thereafter

          

          

          896

          

          

          

          

          

          

          

          896Total minimum lease payments (receipts)

          

          $

          5,408

          

          

          $

          (670

          )

          

          $

          4,738
  (1)

          amounts are net of landlord profit sharing. Note 9  Preferred Stock On November 6, 2006, the Company entered into a Securities Purchase Agreement with General American Investors Company, Inc. (GAM or the Purchaser), whereby GAM invested $10 million in Epoch and Epoch issued GAM 10,000 shares of Series A Convertible Preferred Stock (the Preferred Stock). Stock issuance costs of $89 thousand were incurred for legal and accounting services. No placement or other broker fees were paid in connection with this transaction. The Preferred Stock had an annual cumulative cash dividend of 4.60%, payable semi-annually on June 30 and December 31, commencing December 31, 2006. These securities were convertible, in whole or in part at any time, into shares of the Companys common stock at a fixed conversion price of $6.00 per share, or 1,666,667 common shares in total. The conversion price of $6.00 per common share contained a beneficial conversion feature of $0.42 per share to the November 6, 2006 closing price of $6.42. This beneficial conversion feature of $0.7 million, which is the difference between the above closing price and the conversion price, was fully amortized through Retained earnings at the date of closing. A corresponding amount was credited to Additional paid-in capital. The holder of the Preferred Stock had voting rights equivalent to the holders of the Companys common stock, and was entitled to vote on an as-converted basis (1,666,667 shares) with the holders of the common stock together as a single class. The Preferred Stock also provided for customary preference upon a Liquidation, as defined in the Certificate of Designation. On July 1, 2008, the holder converted the Preferred Stock to 1,666,667 shares of Common Stock. Accordingly, the Preferred Stock has been cancelled and the conversion eliminated the holders rights to receive the semi-annual dividends on the Preferred Stock. Prior to conversion, the number of shares of common stock issuable upon the conversion of the Preferred Stock had no effect on the Companys basic earnings per share calculation, but was included in its diluted earnings per share calculation. Upon conversion, the issued shares of common stock are included in the calculation of both the basic and diluted earnings per share. Note 10  Long-Term Incentive Compensation The Company has one share-based compensation plan under which awards can be currently issued and an expired share-based compensation plan with stock options which remain in force until they are exercised,
 62    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 10  Long-Term Incentive Compensation   (continued) cancelled or expire. The Company also has stock options that were issued outside of board approved plans. Each of these are described in detail below. Share-based compensation costs for such plans were $4.5 million, $4.2 million, and $6.3 million for the fiscal years ended June 30, 2009, 2008, and 2007, respectively. The total income tax benefit recognized in the income statement for share-based compensation arrangements was $1.9 million, $1.8 million, and $1.4 million for the fiscal years ended June 30, 2009, 2008, and 2007, respectively. 2004 Omnibus Long-Term Incentive Compensation Plan: At the annual meeting of shareholders on November 18, 2004, stockholders approved the 2004 Omnibus Long-Term Incentive Compensation Plan (the 2004 Plan). The 2004 Plan allowed the Company to issue 3,000,000 shares of common stock subject to stock options, restricted stock awards or other share-based compensation. At the annual meeting of shareholders on December 4, 2008, stockholders approved an amendment to the 2004 Plan to increase the number of shares of Common Stock available for issuance under the 2004 Plan by 2,500,000 shares. The 2004 Plan terminates at the earliest of (a) the time no shares remain available for issuance under the
2004 Plan, (b) the 2004 Plan is terminated by the Board, or (c) the tenth anniversary of the Effective Date. Awards outstanding upon expiration of the 2004 Plan remain in effect until they have been exercised or terminated, or have expired. Restricted stock awards issued to employees under the 2004 Plan vest at the rate of 12.5% immediately and remaining amounts vest at the rate of 12.5%, 25%, and 50% upon the completion of the first, second, and third years of service, respectively. Restricted stock awards issued to non-employee directors under the 2004 Plan vest fully in one year. Stock options issued to employees under the 2004 Plan vest ratably over the three years from the grant date and have a 7-year contractual term. At June 30, 2009 there were 2,871,914 shares issued, 630,060 stock options issued and 1,998,026 shares available for issuance under this Plan. Restricted Stock Awards During FY 2009, 575,066 shares of restricted stock were issued to employees of the Company under the Companys 2004 Plan at a weighted average price of $8.17. During fiscal years ended June 30, 2008 and 2007, 491,528 and 695,893 shares, respectively were issued at weighted average prices of $11.47 and $6.13 per share, respectively. In FY 2009 and FY 2008, non-employee directors received $80,000 for their services. Non-employee director compensation was paid with a minimum of $60,000 in stock and a maximum of $20,000 in cash, at the election of the director. Total shares issued to non-employee directors for FY 2009 were 38,620 shares at a
weighted average price of $9.10. Total shares issued to non-employee directors for FY 2008 were 35,604 shares at a weighted average price of $13.39. Total shares issued to non-employee directors for FY 2007 were 66,228 at a weighted average price of $5.08. A summary of the status of the Companys nonvested shares under the 2004 Plan and the Merger Agreement, as of June 30, 2009, 2008, and 2007 respectively, as well as changes during the years ended June 30, 2009, 2008, and 2007 is presented below (shares in thousands):  For the Years Ended June 30,2009

          

          2008

          

          2007Shares

          

          Weighted Average Grant-Date Fair Value

          

          Shares

          

          Weighted Average Grant-Date Fair Value

          

          Shares

          

          Weighted Average Grant-Date Fair ValueNonvested at beginning of the period

          

          

          1,228

          

          

          $

          7.34

          

          

          

          1,456

          

          

          $

          5.20

          

          

          

          4,176

          

          

          $

          2.35Granted under the 2004 Plan

          

          

          613

          

          

          

          8.23

          

          

          

          527

          

          

          

          11.60

          

          

          

          762

          

          

          

          6.04Shares vested under:Merger Agreement

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (3,160

          )

          

          

          1.662004 Plan

          

          

          (653

          )

          

          

          6.13

          

          

          

          (591

          )

          

          

          5.55

          

          

          

          (296

          )

          

          

          4.87Forfeited

          

          

          (77

          )

          

          

          9.10

          

          

          

          (164

          )

          

          

          8.57

          

          

          

          (26

          )

          

          

          6.08Nonvested at end of the period

          

          

          1,111

          

          

          $

          8.42

          

          

          

          1,228

          

          

          $

          7.34

          

          

          

          1,456

          

          

          $

          5.20
 63    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 10  Long-Term Incentive Compensation   (continued) As of June 30, 2009, there was $5.3 million of unrecognized compensation costs related to nonvested restricted stock awards granted under the 2004 Plan. That cost is expected to be recognized over a weighted-average period of 2.0 years. The total fair value of restricted stock awards vested during the years ended June 30, 2009, 2008 and 2007 was $6.3 million, $5.9 million and $1.3 million, respectively. The aggregate intrinsic value of nonvested shares at June 30, 2009 was $9.6 million. Stock Option Awards 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. 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, the contingent conversion price, 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 on 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 grant-date U.S. Treasury yield curves for the same periods as the expected term. A summary of the Companys stock options outstanding under the 2004 Plan as of June 30, 2009 is as follows (shares in thousands):  Shares

          

          Weighted Average Exercise PriceOutstanding and exercisable at beginning of period

          

          

          

          

          

          $

          Granted

          

          

          630

          

          

          

          6.17Exercised

          

          

          

          

          

          

          Cancelled

          

          

          

          

          

          

          Forfeited

          

          

          

          

          

          

          Outstanding at end of the period

          

          

          630

          

          

          $

          6.17
 Weighted average fair value of stock options granted during the period was $1.82. As of June 30, 2009, there was $0.9 million of unrecognized compensation costs related to the stock options granted under the 2004 Plan. That cost is expected to be recognized over a weighted-average period of 2.6 years. None of the issued stock options were vested at June 30, 2009. No options were issued under the 2004 Plan during the fiscal years ended June 30, 2008 and 2007, respectively.
 64    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 10  Long-Term Incentive Compensation   (continued) The following table summarizes information about the 2004 Plan stock options outstanding and exercisable at June 30, 2009 (shares in thousands and intrinsic value in millions):  Options Outstanding

          

          Options ExercisableExercise Price

          

          Number Outstanding

          

          Remaining Contractual Life

          

          Aggregate Intrinsic Value

          

          Number Exercisable

          

          Remaining Contractual Life

          

          Aggregate Intrinsic Value$6.17

          

          

          630

          

          

          

          2.6 years

          

          

          $

          1.6

          

          

          

          0

          

          

          

          2.6 years

          

          

          $

          
 The aggregate intrinsic value of outstanding options under the above plan at June 30, 2009 was $1.6 million. No options were exercisable at June 30, 2009. Expired Stock Option Plan: On January 12, 1993, J Net Enterprises, Inc. (J Net) stockholders approved the 1992 Incentive and Non-qualified Stock Option Plan (the 1992 Plan). On August 17, 1994, the Board adopted certain amendments (the Amendments) to the 1992 Plan which were approved by J Nets stockholders on January 10, 1995. The Amendments increased the number of shares of J Nets common stock authorized for issuance pursuant to the 1992 Plan from 1,045,000 to 2,545,000. The 1992 Plan terminated in accordance with its terms on September 30, 2002. Options outstanding at the termination date totaled 877,500. Although the 1992 Plan
has expired, the issued and outstanding options remain in force until they are exercised, cancelled or expire. The options under the 1992 Plan have a remaining contractual life of less than one year. Options outstanding under the 1992 stock option plan are summarized below as follows (shares in thousands):  For the Years Ended June 30,2009

          

          2008

          

          2007Shares

          

          Weighted Average Exercise Price

          

          Shares

          

          Weighted Average Exercise Price

          

          Shares

          

          Weighted Average Exercise PriceOutstanding and exercisable at beginning of period

          

          

          460

          

          

          $

          10.18

          

          

          

          460

          

          

          $

          10.18

          

          

          

          520

          

          

          $

          10.20Granted

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          Exercised

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (60

          )

          

          

          10.42Cancelled

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          Outstanding and exercisable at end of period

          

          

          460

          

          

          $

          10.18

          

          

          

          460

          

          

          $

          10.18

          

          

          

          460

          

          

          $

          10.18
 The intrinsic value of options exercised during FY 2007 was approximately $0.3 million. The following table summarizes information about the 1992 Plan stock options outstanding and exercisable at June 30, 2009 (shares in thousands):  Options Outstanding

          

          Options ExercisableExercisePrices

          

          NumberOutstanding

          

          RemainingContractualLife

          

          AggregateIntrinsicValue

          

          NumberExercisable

          

          RemainingContractualLife

          

          Aggregate IntrinsicValue$10.1250

          

          

          450

          

          

          

          0.6 years

          

          

          $

          

          

          

          

          450

          

          

          

          0.6 years

          

          

          $

          $12.4375

          

          

          10

          

          

          

          0.9 years

          

          

          

          

          

          

          

          10

          

          

          

          0.9 years

          

          

          

          460

          

          

          

          

          

          

          $

          

          

          

          

          460

          

          

          

          

          

          

          $

          
 At June 30, 2009, the 1992 Plan stock options outstanding had no aggregate intrinsic value because the market price of the Companys stock was less than the exercise prices of all options outstanding.
 65    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 10  Long-Term Incentive Compensation   (continued) Other Nonqualified Stock Options: On September 14, 1999, nonqualified stock options to purchase an aggregate of 140,000 shares of common stock were granted to the J Net Board of Directors and a non-employee then serving as the Secretary at an exercise price of $9.00 per share, the fair market value on the date of grant. The options vested 50% on each of the first and second anniversaries of the date of grant and expire ten years from the date of grant. On October 31, 2001, a total of 30,000 options were cancelled as a result of a directors resignation. On June 21, 2000, nonqualified stock options to purchase an aggregate of 500,000 shares of common stock were granted to the former President and Chief Operating Officer and the former Executive Vice President and Chief Financial Officer at an exercise price of $13.13 per share, the fair market value on the date of the grant. The options vested in thirds on each of the first, second and third anniversaries of the date of grant and expire ten years from the date of the grant. As of June 30, 2003, all the options were exercisable. On June 21, 2003, the former President and Chief Operating Officer and the former Executive Vice President and Chief
Financial Officers employment contracts expired and were not renewed. The expiration of those contracts did not affect the expiration of the options, which expire on June 21, 2010. There were no other nonqualified options granted during the fiscal years ended June 30, 2009, 2008 and 2007, respectively. Changes in nonqualified options outstanding are summarized below (shares in thousands):  For the Years Ended June 30,2009

          

          2008

          

          2007Shares

          

          WeightedAverageExercisePrice

          

          Shares

          

          WeightedAverageExercisePrice

          

          Shares

          

          WeightedAverageExercisePriceOutstanding and exercisable at beginning of period

          

          

          575

          

          

          $

          12.59

          

          

          

          575

          

          

          $

          12.59

          

          

          

          610

          

          

          $

          12.38Granted

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          Exercised

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (35

          )

          

          

          9.00Cancelled

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          Outstanding and exercisable at end of period

          

          

          575

          

          

          $

          12.59

          

          

          

          575

          

          

          $

          12.59

          

          

          

          575

          

          

          $

          12.59
 The intrinsic value of options exercised during FY 2007 was approximately $8 thousand. The following table summarizes information about the nonqualified stock options outstanding and exercisable at June 30, 2009 (in thousands):  Options Outstanding

          

          Options ExercisableExercisePrices

          

          Number Outstanding

          

          Contractual Life

          

          Intrinsic Value

          

          Number Exercisable

          

          Contractual Life

          

          IntrinsicValue$9.00

          

          

          75

          

          

          

          0.2 years

          

          

          $

          

          

          

          

          75

          

          

          

          0.2 years

          

          

          $

          $13.125

          

          

          500

          

          

          

          1.0 year

          

          

          

          

          

          

          

          500

          

          

          

          1.0 year

          

          

          

          575

          

          

          

          

          

          

          $

          

          

          

          

          575

          

          

          

          

          

          

          $

          
 At June 30, 2009, the other nonqualified stock options outstanding had no aggregate intrinsic value because the market price of the Companys stock was less than the exercise prices of all options outstanding. Note 11  Defined Contribution Plan The Company sponsors a defined contribution plan (the Plan) for all of its employees. The Plan qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the Plan,
 66    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 11  Defined Contribution Plan   (continued) participating employees may defer up to 60% of their pre-tax gross wages, subject to annual Internal Revenue Code contribution limits. Employees vest immediately in their contributions. The Plan allows the Company to make discretionary contributions. The Company made contributions of approximately $123 thousand and $135 thousand to the Plan during FY 2009 and FY 2008, respectively. No contributions were made during FY 2007. These annual Company contributions vest immediately. The Company intends to contribute to the Plan on an annual basis. Note 12  Other Income a) Strategic Data Corporation Transaction: During the fiscal year ended June 30, 2000, J Net, the predecessor company to Epoch, made an investment in Strategic Data Corp. (SDC), a technology-related company that specialized in advertising optimization technology. During the fiscal year ended June 30, 2001, the carrying value of this investment was deemed to be impaired by J Nets management and written down to zero. On February 20, 2007, SDCs stockholders approved the acquisition of its stock by Fox Interactive Media, Inc. (FIM). Under the terms of the agreement, FIM acquired all of the outstanding common stock, preferred stock, and vested and unvested stock options of SDC. As a result of the merger, the Company, as a holder of preferred stock of SDC, received an initial cash payment of approximately $2.2 million on March 22, 2007, which was recorded as a realized gain of $1.6 million and dividend income of $0.6 million in the Consolidated Statements of Operations for FY 2007. The SDC merger also called for contingent payments, upon the achievement of certain targets and milestones, payable over a period of approximately 3.5 years from the closing, as well as release of an escrow fund. The first target measurement date was November 2007 and the Company accrued approximately $344 thousand at that time. The Company received those proceeds during the quarter ended March 31, 2008. The second target measurement date was June 2008 and the Company accrued an additional $200 thousand at that time, the proceeds of which were received during the quarter ended September 30, 2008. Both amounts have been included in Realized gains on
investments in the Consolidated Statement of Operations for FY 2008. The merger agreement was subsequently amended during the quarter ended December 31, 2008 to provide for a final settlement of all contingent payments by December 31, 2008. As such, additional payments totaling $4.7 million were received in December 2008. These payments represented the final contingent payments and are included in Realized gains on investments in the Consolidated Statements of Operations for FY 2009. There are no further rights to any payments. (b) eStara Transaction: During the fiscal year ended June 30, 2000, J Net made an investment in eStara, Inc. (eStara), a technology-related company that provided conversion and tracking solutions to enhance on-line sales. During fiscal year ended June 30, 2003, J Nets management concluded its ability to recover its investment was remote and wrote down the remaining carrying value to zero. On October 2, 2006, eStaras stockholders approved the acquisition of its stock by Art Technology Group, Inc. (NASDAQ ticker symbol ARTG). Under the terms of the agreement, ARTG acquired all of the outstanding common stock, preferred stock, and vested and
unvested stock options of eStara. In exchange for the eStara preferred shares held, the Company received 2,431,577 common shares of ARTG and $267 thousand in cash. The common shares received from ARTG were subject to a lock-up agreement pursuant to which the shares were released to the Company in equal monthly installments over a period of 12 months, which commenced January 2007.
 67    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 12  Other Income   (continued) During the FY 2008, the Company sold approximately 1.4 million shares of ARTG and recognized realized gains of approximately $3.7 million. Upon sale, these gains were reclassified, in accordance with the provisions of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, (FASB ASC 320-10) from Accumulated other comprehensive income (loss) a separate component of stockholders equity, to Realized gains on investments in the Consolidated Statements of Operations. All of the remaining shares of ARTG were sold before the end of FY 2008. For the fiscal year ended June 30, 2007, realized gains of $0.2 million and dividend income of $2.4 million were recognized for cash and common shares received as payment for the cumulative dividends on the eStara preferred stock. Additionally, the Company sold approximately 1.0 million shares of ARTG and recorded realized gains of approximately $1.5 million. (c) Tellme Corporation Transaction: During the fiscal year ended June 30, 2001, J Net made an investment in Tellme Networks, Inc. (Tellme), a technology-related company that specialized in voice technologies. The investment in Tellme was reduced from $2.0 million to $157 thousand at June 1, 2004, in connection with the Companys acquisition of EIP. On March 12, 2007, Tellme announced an agreement by Microsoft Corporation to acquire all of the outstanding common stock, preferred stock, and vested and unvested stock options of Tellme. This merger closed on April 30, 2007. As a result of the merger, the Company, as a holder of preferred stock of Tellme, received a cash payment of approximately $2.0 million during the quarter ended June 30, 2007. Accordingly, approximately $1.8 million was included in Realized gains on investments in the Consolidated Statements of Operations for FY 2007. Note 13  Provision for Income Taxes The components of the provision for income taxes are as follows (in thousands):  For the Years Ended June 30,2009

          

          2008

          

          2007Current income tax expense:Federal

          

          $

          2,951

          

          

          $

          2,971

          

          

          $

          1,265State and local

          

          

          369

          

          

          

          1,011

          

          

          

          387Alternative minimum tax

          

          

          

          

          

          

          

          

          

          

          99Total current income tax expense

          

          

          3,320

          

          

          

          3,982

          

          

          

          1,751Deferred income tax benefit:Federal

          

          

          (504

          )

          

          

          (2,521

          )

          

          

          (1,265

          )State and local

          

          

          (118

          )

          

          

          (594

          )

          

          

          (387

          )Total deferred income tax benefit

          

          

          (622

          )

          

          

          (3,115

          )

          

          

          (1,652

          )Total provision for income taxes

          

          $

          2,698

          

          

          $

          867

          

          

          $

          99
 The Company utilized $0.6 million in net operating loss deductions to reduce current taxable income during the fiscal year ended June 30, 2009. Net operating loss deductions utilized during fiscal year ended June 30, 2008 and 2007, were $0.6 million and $3.7 million, respectively. The tax effect of these deductions were $0.2 million in both fiscal years ended June 30, 2009 and 2008, and $1.6 million for fiscal year ended June 30, 2007.
 68    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 13  Provision for Income Taxes   (continued) The Companys effective income tax rate for the years ended June 30, 2009, 2008 and 2007 differs from the amount computed using income before income taxes and applying the U.S. federal statutory income tax rate to such amounts because of the effect of the following items:  For the Years Ended June 30,2009

          

          2008

          

          2007U.S. federal statutory income tax rate

          

          

          34.0

          %

          

          

          34.0

          %

          

          

          34.0

          %Increase (decrease) in tax resulting from:State and local taxes, net of federal income tax benefit

          

          

          1.5

          

          

          

          6.7

          

          

          

          Interest on installment gain deferral

          

          

          

          

          

          

          2.6

          

          

          

          Valuation allowance

          

          

          (4.7

          )

          

          

          (35.0

          )

          

          

          (29.6

          )Dividend received deduction

          

          

          (0.1

          )

          

          

          (0.1

          )

          

          

          (8.8

          )Share-based compensation

          

          

          

          

          

          

          

          

          

          

          13.0Alternative minimum tax

          

          

          

          

          

          

          

          

          

          

          1.2Basis difference on sale of investment

          

          

          

          

          

          

          

          

          

          

          (7.8

          )Other, net

          

          

          0.8

          

          

          

          0.6

          

          

          

          (0.8

          )Effective income tax rate

          

          

          31.5

          %

          

          

          8.8

          %

          

          

          1.2

          %
 In accordance with SFAS 109 (FASB ASC 740-10), deferred tax assets should be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The future realization of the Companys deferred tax assets depends upon the availability of sufficient future taxable income. In making this determination, the Company considers all available positive and negative evidence. The Company considers, among other things, the overall business environment, the Companys historical earnings including significant pretax losses since inception, and industry outlook. The current year decrease in the state and local effective tax rate was primarily due to changes in the apportionment factor driven by the composition of investment income as well as the single sales factor for New York State. The FY 2009 net change in the valuation allowance related to deferred tax assets was a decrease of approximately $0.5 million, primarily related to the utilization of Section 382 losses against current year income. The Company also released valuation allowances previously established against depreciation and leasehold improvement impairments. The Company released a valuation allowance for FY 2008 against certain deferred tax assets, primarily deferred stock compensation expense and compensation accruals, as Management believes that these benefits can, more likely than not, be utilized in the future. For FY 2007, the Company reversed a valuation allowance primarily as a result of the application of net operating loss carryforwards, to reduce current taxable income to zero, as well as to reflect changes in other temporary items. Deferred income taxes are provided for the effects of temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements. These temporary differences will result in future income or deductions for income tax purposes and are measured using the federal enacted rate together with the state and local enacted tax rates, net of federal benefit, that will be in effect when such items are expected to reverse. The Company has recorded a valuation allowance for certain deferred tax assets, as, based upon currently available evidence, it is more likely than not that these tax benefits may
not be realized.
 69    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 13  Provision for Income Taxes   (continued) Significant components of the Companys deferred income tax assets and liabilities are as follows (in thousands):  For the Years Ended June 30,2009

          

          2008Deferred tax assets:Net operating loss carryforwards  IRC Section 382

          

          $

          4,224

          

          

          $

          4,478Share-based compensation

          

          

          2,178

          

          

          

          2,003Alternative minimum tax credit  IRC Section 383

          

          

          1,171

          

          

          

          1,171Accrued compensation

          

          

          1,315

          

          

          

          785Depreciation and amortization

          

          

          158

          

          

          

          98Unrealized losses on available-for-sale securities

          

          

          129

          

          

          

          96Leasehold improvement impairments

          

          

          86

          

          

          

          144Equity method losses and impairments

          

          

          42

          

          

          

          367Total deferred tax assets

          

          

          9,303

          

          

          

          9,142Less: valuation allowance

          

          

          (5,566

          )

          

          

          (6,027

          )Deferred tax assets, net of valuation allowance

          

          

          3,737

          

          

          

          3,115Total deferred tax liability

          

          

          

          

          

          

          Total net deferred tax assets

          

          $

          3,737

          

          

          $

          3,115
 The June 30, 2009 valuation allowance balance primarily relates to the Companys accumulated net operating losses and alternative minimum tax credits. Due to the Companys limited operating history and Internal Revenue Code carryback ineligibility for these deferred tax assets, Management has placed a full valuation allowance against them. The Company has $10.3 million of acquired net operating losses (NOLs), the tax effect of which is $4.2 million, which expire between 2022 and 2026. The Company also has $1.2 million of acquired alternative minimum tax credits from the merger. The ability to utilize these NOLs and tax credits are limited for federal, state and local purposes. These limitations are covered by Sections 382 and 383, respectively, of the Internal Revenue Code (IRC). Such NOLs can be utilized by the Company against taxable income only at a rate of approximately $600 thousand per year due to these limitations. The Company realized excess tax benefits of $1.7 million and $1.6 million during the fiscal years ended June 30, 2009 and 2008, respectively. Excess tax benefits reduce the amounts of income taxes to be paid. Excess tax benefits arise in connection with the Companys stock 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. No such benefits were realized for fiscal year ended June 30, 2007, as the Company was not yet in a regular income tax position. In July 2006, the FASB issued Financial Interpretation No. 48 (FIN 48). FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. The Company did not have any uncertain tax positions for any of the years presented.
 70    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 14  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 1,665,060 issued and outstanding stock options at June 30, 2009 and 1,035,000 at June 30, 2008 and 2007. The calculation of diluted EPS excluded 1,665,060 issued and outstanding stock options for FY 2009 and 510,000 and 960,000 issued and outstanding stock options for FY 2008 and 2007, respectively. 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 had an anti-dilutive effect. The preferred stock was converted into 1,666,667 common shares on July 1, 2008 which were, accordingly, included in the basic EPS calculation for FY 2009. For FY 2008 and 2007, the 1,666,667 shares of common stock issuable upon conversion of the preferred stock had no effect on basic EPS, but were included in the calculation of diluted EPS. The table that follows presents the computation of basic and diluted EPS for the years ended June 30, 2009, 2008, and 2007 respectively: (In Thousands Except per Share Data):  For the Years Ended June 30,2009

          

          2008

          

          2007Numerator:Net income available to common stockholders:Net income

          

          $

          5,860

          

          

          $

          9,036

          

          

          $

          7,893Preferred stock dividends

          

          

          

          

          

          

          (460

          )

          

          

          (299

          )Non-cash charge attributable to beneficial conversion feature of preferred stock

          

          

          

          

          

          

          

          

          

          

          (700

          )Net income available to common stockholders for basic EPS

          

          

          5,860

          

          

          

          8,576

          

          

          

          6,894Preferred stock dividends

          

          

          

          

          

          

          460

          

          

          

          299Net income available to common stockholders after assumed conversions for diluted EPS

          

          $

          5,860

          

          

          $

          9,036

          

          

          $

          7,193Denominator:Weighted average common shares outstanding for basic EPS

          

          

          22,133

          

          

          

          20,181

          

          

          

          19,726Common stock issuable upon conversion of preferred stock

          

          

          

          

          

          

          1,667

          

          

          

          1,078Net common stock equivalents assuming the exercise of in-the-money stock options

          

          

          

          

          

          

          63

          

          

          

          3Weighted average common and common equivalent shares outstanding, assuming dilution, for diluted EPS

          

          

          22,133

          

          

          

          21,911

          

          

          

          20,807Earnings per share:Basic

          

          $

          0.26

          

          

          $

          0.42

          

          

          $

          0.35Diluted

          

          $

          0.26

          

          

          $

          0.41

          

          

          $

          0.35
 71    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 15  Special Cash Dividend On December 19, 2008, the Board of Directors declared a special cash dividend of $0.12 per share on the Companys common stock. The dividend was paid on January 15, 2009 to all shareholders of record at the close of business on December 31, 2008. The aggregate dividend payment totaled approximately $2.6 million. Note 16  Subsequent Events For purposes of preparing the accompanying consolidated financial statements and the related notes, the Company evaluated subsequent events through the date the financial statements were filed with the SEC on September 14, 2009. Dividends on Common Stock On July 9, 2009, the Board of Directors declared a quarterly cash dividend of $0.03 per share, or approximately $668 thousand in total, payable on August 14, 2009 to all shareholders of record at the close of business on July 31, 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 Investment Management LLC, whereby the MainStay Group of Funds will adopt the Companys current family of mutual funds (the Epoch Funds), subject to approval by the shareholders of the Epoch Funds at a special meeting on October 30, 2009. The proposed transaction has been approved by the Board of Directors of the Epoch Funds. 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. Upon approval by the shareholders of each of the Epoch Funds, each fund 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 June 30, 2009, and the proposed 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.
 72    TABLE OF CONTENTS EPOCH HOLDING CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2009, 2008, and 2007 Note 17  Quarterly Financial Data (Unaudited) The tables below present selected quarterly financial data for FY 2009 and FY 2008, respectively. The data presented should be read in conjunction with the consolidated financial statements and Managements Discussion and Analysis of Financial Condition and Results of Operations included herein (in thousands, except per share and AUM data):  Fiscal Year 2009

          

          Sept. 30

          

          Dec. 31

          

          Mar. 31

          

          Jun. 30

          

          TotalOperating revenues(1)

          

          $

          8,478

          

          

          $

          6,768

          

          

          $

          6,843

          

          

          $

          9,070

          

          

          $

          31,159Operating expenses

          

          $

          7,624

          

          

          $

          6,436

          

          

          $

          6,548

          

          

          $

          7,103

          

          

          $

          27,711Operating income

          

          $

          854

          

          

          $

          332

          

          

          $

          295

          

          

          $

          1,967

          

          

          $

          3,448Other income(2)

          

          $

          34

          

          

          $

          4,675

          

          

          $

          218

          

          

          $

          183

          

          

          $

          5,110Income before income taxes

          

          $

          888

          

          

          $

          5,007

          

          

          $

          513

          

          

          $

          2,150

          

          

          $

          8,558Net income

          

          $

          582

          

          

          $

          2,973

          

          

          $

          274

          

          

          $

          2,031

          

          

          $

          5,860Earnings per share:Basic

          

          $

          0.03

          

          

          $

          0.13

          

          

          $

          0.01

          

          

          $

          0.09

          

          

          $

          0.26Diluted

          

          $

          0.03

          

          

          $

          0.13

          

          

          $

          0.01

          

          

          $

          0.09

          

          

          $

          0.26Weighted-average shares outstanding:(3)Basic

          

          

          22,077

          

          

          

          22,066

          

          

          

          22,171

          

          

          

          22,198

          

          

          

          22,133Diluted

          

          

          22,104

          

          

          

          22,066

          

          

          

          22,171

          

          

          

          22,198

          

          

          

          22,133Cash dividends declared per share(4)(5)

          

          $

          0.03

          

          

          $

          0.15

          

          

          $

          0.03

          

          

          $

          0.03

          

          

          $

          0.24Assets under management (in millions)

          

          $

          6,085

          

          

          $

          5,348

          

          

          $

          5,669

          

          

          $

          7,891

          

          

          $

          7,891
 (1)

          Operating revenues include approximately $0.6 million in performance fees earned during the fourth quarter. (2)

          Other income includes approximately $4.7 million in realized gains from the final installment in the SDC transaction during the second quarter. (3)

          On July 1, 2008, the Preferred Stock was converted into 1,666,667 shares of common stock by its holder. (4)

          On July 9, 2008, the Companys Board of Directors declared a 20% increase in the quarterly per share dividend rate from $0.025 to $0.03 per share, effective for the first quarter of FY 2009. (5)

          Includes a $0.12 per share special dividend declared during the second quarter of FY 2009.  Fiscal Year 2008

          

          Sept. 30

          

          Dec. 31

          

          Mar. 31

          

          Jun. 30

          

          TotalOperating revenues(6)

          

          $

          7,877

          

          

          $

          8,723

          

          

          $

          8,482

          

          

          $

          8,724

          

          

          $

          33,806Operating expenses

          

          $

          7,569

          

          

          $

          7,623

          

          

          $

          7,745

          

          

          $

          7,015

          

          

          $

          29,952Operating income

          

          $

          308

          

          

          $

          1,100

          

          

          $

          737

          

          

          $

          1,709

          

          

          $

          3,854Other income(7)

          

          $

          1,383

          

          

          $

          3,096

          

          

          $

          731

          

          

          $

          839

          

          

          $

          6,049Income before income taxes

          

          $

          1,691

          

          

          $

          4,196

          

          

          $

          1,468

          

          

          $

          2,548

          

          

          $

          9,903Net income

          

          $

          2,097

          

          

          $

          2,547

          

          

          $

          675

          

          

          $

          3,717

          

          

          $

          9,036Earnings per share:Basic

          

          $

          0.10

          

          

          $

          0.12

          

          

          $

          0.03

          

          

          $

          0.17

          

          

          $

          0.42Diluted

          

          $

          0.10

          

          

          $

          0.12

          

          

          $

          0.03

          

          

          $

          0.16

          

          

          $

          0.41Weighted-average shares outstanding:Basic

          

          

          20,051

          

          

          

          20,141

          

          

          

          20,247

          

          

          

          20,288

          

          

          

          20,181Diluted

          

          

          21,816

          

          

          

          21,849

          

          

          

          20,291

          

          

          

          21,987

          

          

          

          21,911Cash dividends declared and paid per share(8)

          

          $

          

          

          

          $

          0.025

          

          

          $

          0.025

          

          

          $

          0.025

          

          

          $

          0.075Assets under management (in millions)

          

          $

          6,426

          

          

          $

          6,682

          

          

          $

          6,197

          

          

          $

          6,634

          

          

          $

          6,634
 (6)

          Operating revenues include approximately $0.2 million in performance fees earned during the second quarter. (7)

          Other income includes approximately $2.1 million in realized gains from the sale of marketable securities for FY 2008 (8)

          The Company commenced declaring and paying quarterly dividends on its common stock during the second quarter of FY 2008.
 73    TABLE OF CONTENTS Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Disclosure Controls and Procedures The Company has established and maintains disclosure controls and other procedures that are designed to ensure 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 Securities Exchange Act of 1934, as amended, 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 to the Companys management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. For the fiscal year ended June 30, 2009, the Company carried out an evaluation, under the supervision and with the participation of the Companys management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures were effective during the period covered by this report. 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 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. Changes have been made to the Companys internal controls and procedures for financial reporting as a
result of these efforts. During the fiscal quarter ended June 30, 2009, there was no change in the Companys internal controls over financial reporting that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting. Managements Report on Internal Control Over Financial Reporting The Report of Management on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm are set forth in the financial statements beginning on page 45 hereof and are incorporated herein by reference. Item 9B. Other Information None.
 74    TABLE OF CONTENTS PART III Item 10. Directors, Executive Officers and Corporate Governance Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Item 13. Certain Relationships and Related Transactions and Director Independence Item 14. Principal Accountant Fees and Services The information required by items 10, 11, 12, 13 and 14 are incorporated by reference from the definitive proxy statement for our 2009 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Exchange Act.
 75    TABLE OF CONTENTS PART IV Item 15. Exhibits and Financial Statement Schedules (a) (1) and (2) Consolidated Financial Statements and Schedules. For a list of the consolidated financial statements and consolidated financial statement schedules filed as a part of this Annual Report on Form 10-K, see Index to Financial Statements, Supplementary Data and Financial Statement Schedules on page 45. (a) (3) The exhibits filed and incorporated by reference are listed in the Index of Exhibits required by Item 601 of Regulation S-K at Item b below. (b) Exhibits  Exhibit No.

          

          Description3.1

          

          Certificate of Incorporation of the Registrant, as amended.(B)3.1

          

          Amended and Restated By-Laws of Epoch Holding Corporation (as adopted April 2, 2008).(J)4.2

          

          Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock.(H)4.3

          

          Registration Rights Agreement dated November 7, 2006 by and between Epoch Holding Corporation and between General American Investors Company, Inc.(H)4.4

          

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

          

          Registration Rights Agreement dated as of June 2, 2004 among J Net Enterprises, Inc. and certain of its stockholders.(A)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.(I)10.2

          

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

          

          Form of Indemnification Agreement between the Registrant and each officer of the Registrant.(C)10.44

          

          Amended and Restated 2004 Omnibus Long-Term Incentive Compensation Plan.(E)10.45

          

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

          

          Form of Restricted Stock Award.(G)10.47

          

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

          

          Office sublease between JNet Enterprises (Tenant) and The Game Show Network (subtenant).(G)10.49

          

          Securities Purchase Agreement dated November 6, 2006 by and between Epoch Holding Corporation and General American Investors Company, Inc.(H)21.1

          

          List of Registrants significant subsidiaries.(K)23.1

          

          Consent of CF & Co., L.L.P.(L)31.1

          

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

          

          Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(L)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.(L)
  (A)

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

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

          Incorporated by reference to Registrants Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2003. (D)

          Incorporated by reference to Registrants 1992 Proxy Statement.
 76    TABLE OF CONTENTS (E)

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

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

          Incorporated by reference to Registrants Annual Report on Form 10-K/A for the fiscal year ended June 30, 2007. (H)

          Incorporated by reference to Registrants Form 8-K dated November 9, 2006. (I)

          Incorporated by reference to Registrants Form 8-K dated November 28, 2007. (J)

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

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

          Filed herewith. Our SEC file number reference for documents filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended, is 1-09728.
 77    TABLE OF CONTENTS SIGNATURES Pursuant to the requirements of Section 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)Dated: September 14, 2009

          

          By:/s/ William W. PriestWilliam W. PriestChief Executive Officer
 Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.  Signature

          

          Title

          

          Date/s/ Allan R. TesslerAllan R. Tessler

          

          Chairman of the Board

          

          September 14, 2009/s/ William W. PriestWilliam W. Priest

          

          Chief Executive Officer(Principal Executive Officer)

          

          September 14, 2009/s/ Adam BorakAdam Borak

          

          Chief Financial Officer(Principal Financial and Accounting Officer)

          

          September 14, 2009/s/ Enrique R. ArzacEnrique R. Arzac

          

          Director

          

          September 14, 2009/s/ Jeffrey L. BerensonJeffrey L. Berenson

          

          Director

          

          September 14, 2009/s/ Peter A. FlahertyPeter A. Flaherty

          

          Director

          

          September 14, 2009/s/ Eugene M. FreedmanEugene M. Freedman

          

          Director

          

          September 14, 2009
 78