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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1994
Commission File Number 1-8100
EATON VANCE CORP.
(Exact name of registrant as specified in its charter)
Maryland 04-2718215
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
24 Federal Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
(617) 482-8260
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Non-Voting Common Stock par value $0.0625 per share Boston Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
Non-Voting Common Stock par value $0.0625 per share
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, and (2) has been subject to such
filing requirements for the past 90 days. YES X NO .
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 the 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 the number of shares outstanding of each of the registrant's
classes of common stock, as of the close of the latest practicable date.
Class Outstanding at
December 31, 1994
Non-Voting Common Stock, $0.0625 par value 9,103,142
Common Stock, $0.0625 par value 19,360
Portions of registrant's Annual Report to Stockholders for the fiscal year
ended October 31, 1994, (Exhibit 13.1 hereto) have been incorporated by
reference into the following Parts of this report: Part I, Part II and Part
IV.
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PART I
ITEM 1. BUSINESS
The Company's principal business is creating, marketing and managing mutual
funds and providing management and counseling services to institutions and
individuals. The Company has been in the investment management business for
over seventy years, tracing its history to two Boston-based investment
managers: Eaton & Howard formed in 1924 and Vance, Sanders & Company
organized in 1934. As of October 31, 1994, the Company managed $15.0
billion in portfolios with investment objectives ranging from high
current income to maximum capital gain.
In addition to its investment management activities, the Company has three
additional lines of business: 1) fiduciary and related banking services; 2)
real estate; and 3) precious metal mining.
On October 31, 1994, the Company and its wholly owned subsidiaries had 385
full-time employees. Investors Bank & Trust Company (IB&T), a 77.3% owned
subsidiary, had an additional 632 employees. On October 31, 1993, the
comparable figures were 356 and 517.
Reference is made to Note 12 of the Notes to Consolidated Financial
Statements contained in the Eaton Vance Corp. Annual Report to Shareholders
for the fiscal year ended October 31, 1994 (which report is furnished as
Exhibit 13.1 hereto) for financial information including total income,
operating profit or loss and identifiable assets attributable to each of
the Company's business segments.
INVESTMENT MANAGEMENT
OVERVIEW
The Company conducts its investment management and counseling business
through two wholly owned subsidiaries, Eaton Vance Management ("EVM") and
Boston Management and Research ("BMR"), each of which is a Massachusetts
business trust registered with the Securities and Exchange Commission ("the
Commission") as an investment adviser under the Investment Advisers Act of
1940, as amended (the "Advisers Act"). Eaton Vance Distributors ("EVD"), a
wholly owned broker/dealer registered under the Exchange Act, markets and
sells the Eaton Vance Funds.
As of October 31, 1994, the Company provided investment advisory and
administration services to 147 Funds ("Funds") and to over 1,000 separately
managed accounts. At that date the Funds had aggregate net assets of $13.4
billion and the Company's separately managed accounts had aggregate net
assets of $1.6 billion. The following table shows net assets in the Funds
and the separately managed accounts for the dates indicated:
Fund And Separate Account Assets
(in millions)
At October 31,
1994 1993 1992 1991 1990
Funds $13,400 $13,100 $ 9,200 $7,400 $5,900
Separately Managed Accounts 1,600 2,200 2,100 2,000 1,300
Total $15,000 $15,400 $11,300 $9,400 $7,200
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ITEM 1. BUSINESS (Continued)
Investment decisions for all but ten of the 147 Funds are made by portfolio
managers employed by the Company and are made in accordance with each
Fund's fundamental investment objectives. The Company's portfolio
management staff consists of 58 portfolio managers and analysts who have,
on average, more than 20 years of experience in the securities industry.
The Company's investment advisory agreements with each of the Funds provide
for fees ranging from 45 to 95 basis points of average net assets annually
for management services provided. The investment advisory agreements must
be approved annually by the trustees of the respective Funds, including a
majority of the independent trustees, i.e., those unaffiliated with the
management company. Amendments to the investment advisory agreements must
be approved by Fund shareholders. These agreements are generally terminable
upon 30 to 60 days notice without penalty.
Investment decisions for the separately managed accounts are made by the
eighteen investment counselors employed by the Company. The investment
counselors are assisted by an additional twelve financial analysts and
managers with part-time counseling responsibilities. The Company's
investment counselors use the same sources of information as Fund portfolio
managers but tailor investment decisions to the needs of individual
clients. The Company's investment advisory fee agreements for the
separately managed accounts provide for fees ranging from 30 to 80 basis
points of average net assets on an annual basis. These agreements are
generally terminable upon 30 to 60 days notice without penalty.
The following table shows investment advisory and administration fees
received for the past five years ended October 31, 1994:
Investment Advisory And Administration Fees*
(in thousands)
Year ended October 31,
1994 1993 1992 1991 1990
Investment Advisory Fees -
Funds $68,284 $59,322 $50,776 $44,550 $40,366
Separately Managed Accounts 9,807 8,934 8,949 6,957 5,922
Administration Fees - Funds 4,257 3,295 4,685 5,388 4,529
Total $82,348 $71,551 $64,410 $56,895 $50,817
* Excludes gold mining investment management fees and administration fees
received from funds other than Eaton Vance Funds.
The Company's growth has resulted from its ability to develop and offer
successfully new funds and to increase the assets of existing Funds. The
Company's strategy is to develop products with clearly understood and
clearly presented investment characteristics coupled with distribution
arrangements that are attractive to third-party distributors of the Funds.
In 1985 the Company was a leader in the introduction of spread commission
funds with self-liquidating distribution payment plans. The Company has
built on this concept by creating state specific double-tax-free mutual
funds which utilize this distribution method.
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ITEM 1. BUSINESS (Continued)
In 1990, the Company introduced the first of its single-state tax-exempt
Funds. In 1991, it introduced nine additional single-state tax-exempt
Funds, a short-term treasury Fund and Eaton Vance Short-Term Global Income
Fund, which invests in domestic and foreign fixed income securities. In
1992, the Company introduced 21 new Funds, including 13 long maturity
single-state tax-free Funds, seven limited maturity single-state tax-free
Funds, and the Eaton Vance Greater China Funds, which seek long-term
capital appreciation through investments in equity securities of companies
which will benefit from the economic development and growth of Southeast
Asia.
In 1993, the Company introduced the Hub and Spoke structure. "Hub and
Spoke" is a two-tiered arrangement in which mutual substantially identical
investment objectives pool their assets by investing in a common portfolio
(Hub). The structure benefits fund shareholder through lower operating
costs, while allowing the Company to offer cost-effective distribution
alternatives to the broker/dealer community and its clients. In 1994, the
Company converted most of its continuously off Funds to a Hub and Spoke
structure and plans to utilize this structure for future funds.
The Company also used the Hub and Spoke structure in 1994 to create five
private-label tax-free funds for G.R. Phelps & Co., a subsidiary of
Connecticut Mutual Life Insurance Company. G.R. Phelps manages and
distributes a growing family of funds through its own 2,000-member sales
force as well as through other distribution channels. By offering spokes
into mature Eaton Vance tax-free hubs, G.R. Phelps was able to broaden its
product line to include one national and four state tax-free funds without
the delays and business risks typically associated with starting new mutual
funds. The Company continues to pursue similar opportunities with other
mutual fund sponsors.
In April of 1994 the EV Greater India Funds were introduced. The Greater
India Funds were the first United States open-end investment companies with
an investment focus on India and the surrounding countries of the Indian
sub-continent and complement the Eaton Vance Greater China Funds. In
addition, the Company entered the offshore fund market with five new "EV
Medallion" funds sold to non-U.S. investors. Each fund is a spoke
investing in an existing hub which also serves U.S. investors by way of a
domestic spoke. The Medallion family consists of a Greater China Growth
Fund, a Greater India Fund, a new Emerging Markets Fund, a High Yield Fund,
and a U.S. Government Income Fund. Additional spokes for the Medallion
family are planned for 1995. The Medallion funds will be sold by U.S.
broker/dealers to non-U.S. clients as well as by broker/dealers operating
offshore.
The Company markets and distributes the Funds through EVD. EVD sells the
Funds through a retail network of national and regional dealers, including
those affiliated with banks and insurance companies. Although the firms in
the Company's retail distribution network have entered into a selling
agreement with the Company, such agreements (which generally are terminable
by either party) do not legally obligate the firms to sell any specific
amount of the Company's investment products. For the 1994 and 1993
calendar years, the five dealer firms responsible for the largest volume of
fund sales accounted for approximately 56% and 59%, respectively, of the
Company's fund sales volume.
While a substantial majority of sales are made through national and large
regional firms, in 1990 the Company embarked on a program to broaden its
channels of distribution by establishing a separate wholesaling force
focusing on banks and financial planners. EVD currently maintains a
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ITEM 1. BUSINESS (Continued)
sales force of more than 30 wholesalers and 30 sales assistants. Whole-
salers and their assistants work closely with the retail distribution
network to assist in selling Eaton Vance Funds.
EVD currently sells the Funds under three separate commission structures:
1) front-end load commission; 2) spread-load commission; and 3) level-load
commission.
In the front-end load commission structure, the shareholder pays the
broker's commission and EVD receives an underwriting commission equal to 0
to 75 basis points of the dollar value of the Fund shares sold.
In the spread-load commission structure, EVD pays a commission to the
dealer at the time of sale and such payments are capitalized and amortized
in the Company's financial statements over a four to six year period. The
shareholder then pays a contingent sales charge to EVD in the event shares
are redeemed within a four, five or six year period from the date of
purchase. EVD uses its own funds (which may be borrowed) to pay such
commissions. EVD "recovers" the dealer commissions paid on behalf of the
shareholder through distribution plan payments limited to an annual rate of
75 basis points of the average net assets of the Fund in accordance with a
distribution plan adopted by the Fund pursuant to Rule 12b-1 under the
Investment Company Act. Like the investment advisory agreement, the
distribution plan must be approved annually by a vote of the trustees,
including a majority of the independent trustees. The Commission has taken
the position that Rule 12b-1 would not permit a Fund to continue making
compensation payments to EVD after termination of the plan and that any
continuance of such payments may subject the Fund to legal action. These
distribution plans are terminable at any time without notice or penalty.
In the level-load commission structure, the shareholder pays no front-end
commissions, contingent deferred sales charges or underwriting commissions.
The Fund does, however, make monthly distribution plan payments similar to
the spread-load Funds, equal to 75 basis points of average net assets and
service fees equal to 25 basis points of average net assets on an annual
basis to the broker/dealer. The introduction of level-load shares is
consistent with the efforts of many broker/dealers to rely less on
transaction fees and more on continuing fees for servicing assets.
Reference is made to Note 12 of the Notes to Consolidated Financial
Statements contained in the Eaton Vance Corp. Annual Report to Shareholders
for the fiscal year ended October 31, 1994 (which report is furnished as
Exhibit 13.1 hereto) for a description of the major customers that provided
over 10% of the total income of the Company.
COMPETITIVE CONDITIONS
The Company is subject to substantial competition in all aspects of its
business. The Company's ability to market investment products is highly
dependent on access to the retail distribution systems of national and
regional securities dealer firms, which generally offer competing
internally and externally managed investment products. Although the
Company has historically been successful in gaining access to these
channels, there can be no assurance that it will continue to do so. The
inability to have such access could have a material adverse effect on the
Company's business.
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ITEM 1. BUSINESS (Continued)
There are few barriers to entry by new investment management firms. The
Company's funds compete against an ever increasing number of investment
products sold to the public by investment dealers, banks, insurance
companies and others that sell tax-free investments, taxable income funds,
equity funds and other investment products. Many institutions competing
with the Company have greater resources than the Company. The Company
competes with other providers of investment products on the basis of the
range of products offered, the investment performance of such products,
quality of service, fees charged, the level and type of sales
representative compensation, the manner in which such products are marketed
and distributed and the services provided to investors.
REGULATION
EVM and BMR are each registered with the Commission under the Advisers Act.
The Advisers Act imposes numerous obligations on registered investment
advisers including fiduciary duties, recordkeeping requirements,
operational requirements and disclosure obligations. Each Eaton Vance Fund
is registered with the Commission under the Investment Company Act and each
nationally offered Fund is qualified for sale (or is exempt) in all states
in the United States and District of Columbia; and each single-state Fund
is qualified for sale (or is exempt) in the state for which it is named and
other designated states. Virtually all aspects of the Company's investment
management business are subject to various federal and state laws and
regulations. These laws and regulations are primarily intended to benefit
shareholders of the Funds and investment counseling clients and generally
grant supervisory agencies and bodies broad administrative powers,
including the power to limit or restrict the Company from carrying on its
investment management business in the event that it fails to comply with
such laws and regulations. In such event, the possible sanctions which may
be imposed include the suspension of individual employees, limitations on
EVM's or BMR's engaging in the investment management business for specified
periods of time, the revocation of EVM's or BMR's registration as an
investment adviser and other censures or fines.
EVD is registered as a broker/dealer under the Securities Exchange Act of
1934 and is subject to regulation by the Commission, the NASD and other
federal and state agencies. EVD is subject to the Commission's net capital
rule designed to enforce minimum standards regarding the general financial
condition and liquidity of a broker/dealer. Under certain circumstances,
this rule limits the ability of the Company to make withdrawals of capital
and receive dividends from EVD. EVD's regulatory net capital has
consistently exceeded such minimum net capital requirements. The securities
industry is one of the most highly regulated in the United States, and
failure to comply with related laws and regulations can result in the
revocation of broker/dealer licenses, the imposition of censures or fines
and the suspension or expulsion from the securities business of a firm, its
officers or employees.
IB&T and, to a lesser extent, the other lines of business of the Company
are also subject to state and federal regulation.
The Company's officers, directors and employees may from time to time own
securities which are held by one or more of the Funds. The Company's
internal policies with respect to individual investments require prior
clearance of certain types of transactions and reporting of all securities
transactions, and restrict certain transactions so as to avoid the
possibility of conflicts of interest.
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FIDUCIARY AND RELATED BANKING SERVICES
Through its 77.3% owned subsidiary Investors Bank & Trust Company (IB&T),
the Company provides domestic and foreign securities processing for pooled
investment vehicles, including investment companies, unit investment trusts
and common trust funds. IB&T also offers a full range of private banking,
custody and trustee services to individuals, investment advisers, attorneys
and private trustees. IB&T opened an office in Toronto, Canada in 1993, and
in Dublin, Ireland in 1994, allowing the Bank to better serve the growing
offshore mutual fund market.
Eaton & Howard, one of the Company's two predecessors, formed IB&T in 1969.
IB&T was the first "non-bank bank" in the country to obtain FDIC insurance.
While it has a charter with full banking powers from the Commonwealth of
Massachusetts, IB&T has elected not to make commercial loans. As a result
of enactment of the Competitive Equality Banking Act of 1987 ("CEBA"),
IB&T, as an FDIC-insured depository institution, became a "bank" for
purposes of the Bank Holding Company Act of 1956 (the "BHC Act"). Pursuant
to CEBA, the Company is permitted to retain its ownership of IB&T without
being treated as a bank holding company for purposes of the BHC Act
provided that, among other requirements, (a) neither the Company nor any of
its affiliates acquires control of an additional insured depository
institution, (b) IB&T does not engage in any activity in which it was not
lawfully engaged as of March 5, 1987, (c) IB&T limits the increase in its
assets to no more than 7% during any 12-month period beginning after August
10, 1988 (this limitation does not apply to assets under custody) and
(d) IB&T does not engage in certain cross-marketing activities with
affiliates. The Company currently is not considered to be a bank holding
company under the BHC Act.
REAL ESTATE
Through Northeast Properties, Inc., a wholly owned subsidiary of the
Company, the Company owns and operates retail, industrial and office rental
properties located in New England and New York State. The book value of
such real estate on October 31, 1994 was $22.2 million, with non-recourse
mortgages of $15.4 million and recourse mortgages of $1.4 million on the
properties. The Company believes the value of its real estate to be higher
than the book value.
PRECIOUS METAL MINING
The Company sponsored and is a limited and general partner in two gold
mining partnerships which invest in the equity and debt securities of
developers of gold mines in North America and Australia. The Company has a
28% net profits interest in one partnership and a 19% net profits interest
in the other. In addition, the Company owns directly 615,000 shares
(approximately 4% of the total outstanding shares) of Dakota Mining
Corporation, an important holding of both partnerships. One partnership
terminates in 1995 and the other in 1997. The Company has marked to market
its investments in equity and debt securities of companies engaged in gold
mining operations held directly by the Company and through the two gold
mining partnerships. This practice is not expected to have a material
effect on the Company's net income in the future.
ITEM 2. PROPERTIES
(a) Northeast Properties, Inc., a wholly owned subsidiary of the Company,
owns various investment properties including an office building located at
24 Federal Street in Boston in which the Company is the primary tenant.
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ITEM 2. PROPERTIES (Continued)
For information with respect to the properties, reference is made to
Schedule XI and Notes 4 and 6 of the Notes to Consolidated Financial
Statements contained in the Eaton Vance Corp. 1994 Annual Report to
Shareholders (Exhibit 13.1 hereto), which are incorporated herein by
reference.
(b) The Company presently owns 100% of the capital stock of Marblehead
Energy Corp. and Energex Corporation, which own interests in certain oil
and gas properties. For further information with respect to such
properties, reference is made to Note 12 of the Notes to Consolidated
Financial Statements contained in the Eaton Vance Corp. Annual Report to
Shareholders (Exhibit 13.1 hereto), which is incorporated herein by
reference.
ITEM 3. LEGAL PROCEEDINGS
At October 31, 1994, there were no material pending legal proceedings to
which the Company or any of its subsidiaries was a party or of which any
of its property was the subject.
The Company was informed on January 13, 1995, however, that a National
Association of Securities Dealers (NASD) arbitration panel in Tampa,
Florida awarded a former wholesaler for the firm $625,000 in damages and an
additional $1,250,000 as punitive damages in response to his claim for
wrongful termination of employment. One member of the three-person panel
dissented as to the award of punitive damages. The Company had requested
dismissal of the wholesaler's claim and counterclaimed for damages of
$435,000. It believes that the wholesaler's termination was fully
justified and even compelled by the facts, and that there is no basis for
the award of actual or punitive damages. As a result, the Company is
examining all possible legal steps to overturn what it regards as a most
inequitable decision, and affirms that it will pursue the matter to the
fullest.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Voting Common Stock, $0.0625 par value, is not traded and, as
of October 31, 1994, was held by five Voting Trustees pursuant to the
Voting Trust described in paragraph (a) of Item 12 hereof, which paragraph
(a) is incorporated herein by reference.
The Company's Non-Voting Common Stock, $0.0625 par value, is traded on the
Boston Stock Exchange and in the Over-the-Counter market on the NASDAQ
National Market System under the symbol EAVN. The approximate number of
holders of record of the Company's Non-Voting Common Stock at October 31,
1994, was 1,109. The additional information required to be disclosed in
Item 5 is found on page 4 of the Company's 1994 Annual Report to
Shareholders (furnished as Exhibit 13.1 hereto), under the caption "Eaton
Vance Corp.", and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Eaton Vance Corp.
Selected Financial Data (Unaudited)
(in thousands, except per share figures)
Year Ended October 31,
1994 1993 1992 1991 1990
Total income $218,006 $189,145 $153,153 $121,464 $ 95,808
Net income 29,786 27,341 19,307 12,718 7,674
Total assets 455,506 425,547 318,199 273,713 222,494
Long-term obligations 60,311 73,228 78,358 63,961 50,633
Per common share-
Net Income $3.14 $3.09 $2.49 $1.74 $1.02
Cash dividends
declared 0.60 0.49 0.36 0.29 0.24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company's largest sources of revenues are investment adviser fees and
distribution fees received from the Eaton Vance funds and investment
counsel fees from the separately managed accounts. Such fees and payments
are generally based on the net asset value of the investment portfolios
managed by the Company and fluctuate with changes in the total value of the
assets under management. Bank fee income, also a significant source of
revenue, is dependent upon assets custodied and administered by IB&T. The
Company's expenses other than the amortization of deferred sales
commissions include primarily employee compensation, occupancy costs,
service fees and other marketing costs.
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RESULTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 1994 COMPARED TO YEAR ENDED OCTOBER 31, 1993
Total revenues rose $28.9 million to $218.0 million from $189.1 million in
1993. This increase can be attributed primarily to increases in investment
adviser fees and distribution income which increased $10.6 million and $8.4
million, respectively, in 1994. Both investment adviser fees and
distribution income are based on the average net asset values of portfolios
managed by the Company, which increased significantly to $15.5 billion for
the year ended October 31, 1994, from $13.1 billion for the year ended
October 31, 1993. Fund assets under management were increased by net sales
of mutual funds of $2.0 billion in 1994 and were reduced, primarily, by
depreciation in the market value of managed assets of $1.8 billion.
Separately managed accounts, in contrast, decreased to $1.6 billion in 1994
from $2.2 billion in 1993. This decrease was primarily due to the
withdrawal of one large public retirement client. Gross sales of mutual
funds of $3.4 billion for 1994 were down 21% from 1993 when the Company
achieved record sales of $4.3 billion. Consistent with the experience of
other mutual fund sponsors, 1994 redemptions rose 38 percent to $1.8
billion from 1993's redemptions of $1.3 billion.
Bank fee income was also a significant contributor to overall revenue
growth in 1994, increasing 31% to $42.5 million from $32.5 million a year
earlier. Like investment adviser and distribution fees, bank fee income is
based on assets custodied and administered by IB&T. The Company experienced
significant growth in these assets in 1994. The Company was advised in
November, however, that a large client intended to terminate its custodial
relationship with IB&T for unit investment trusts for reasons not related
to performance and withdraw such accounts, which amounted to 16.3% of
IB&T's bank fee income in 1994. Such termination is not anticipated to
have a material adverse effect on IB&T's revenues and income, as successful
efforts are being made to replace revenues attributable to this client.
The two major components of total expenses are compensation of officers and
employees and amortization of deferred sales commissions. In 1994, total
operating expenses increased $24.1 million to $165.8 million. The increase
in compensation expense resulted from the hiring of additional personnel at
IB&T to service the additional assets under custody. Larger average dollar
value of assets in spread commission funds increased the amortization of
deferred sales commissions by $11.9 million. Other expenses rose a total of
$7.4 million to $46.4 million in 1994 from $39.0 million in 1993. This
increase was primarily due to an increase in IB&T's equipment leasing costs
of $1.2 million, $1.4 million in development costs associated with two fund
products that were not launched in 1994, and higher marketing and
administrative costs incurred to increase the distribution of the Company's
funds.
The Company sponsored and is a limited and a general partner in two gold
mining partnerships which invest in the equity and debt securities of
developers of gold mines in North America and Australia. Portfolio
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valuations of these gold mining investment partnerships contributed net
partnership losses of $0.3 million in 1994, in comparison with net
partnership gains of $3.9 million in 1993.
Net income of the Company amounted to $29.8 million in 1994 compared to
$27.3 million in 1993. Earnings per share were $3.14 and $3.09,
respectively.
During 1994 the Company's total assets increased significantly due to the
increase in deferred sales commissions to $256.3 million from $240.0
million in 1993 resulting from substantial sales of shares in the Company's
spread-commission funds. Payment of these commissions was funded primarily
by cash flows from operating activities. The difference between the book
and tax accounting treatment for these commissions caused deferred income
taxes to increase by $13.7 million. The increase in deferred income taxes
was partially offset by the cumulative effect of the change in accounting
for income taxes of $1.3 million resulting from the Company's
implementation of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", on November 1, 1993.
YEAR ENDED OCTOBER 31, 1993 COMPARED TO YEAR ENDED OCTOBER 31, 1992
Total revenues rose $36.0 million to $189.1 million from $153.1 million in
1992. This increase can be primarily attributed to increases in investment
advisory fees and distribution income, which increased $6.7 million and
$24.6 million, respectively, in 1993. Investment advisory fees rose less
than distribution income because fund sales were concentrated in spread
commission municipal bond funds, which pay distribution plan fees, while
redemptions were largely from the Eaton Vance Prime Rate Reserves Fund,
which pays an adviser fee incorporating the equivalent of distribution
payments. Both investment adviser fees and distribution income are based on
the average net asset value of portfolios managed by the Company. Ending
assets under management increased significantly in 1993 to $15.4 billion
from $11.3 billion in 1992. Total assets under management were increased by
net sales of mutual funds of $3.0 billion, market appreciation and growth of
separately managed accounts.
Gross sales of mutual funds rose 46% to $4.3 billion from $2.9 billion a
year earlier. Redemptions of the Company's fund shares fell 13% to $1.3
billion from $1.5 billion a year earlier.
The increase in distribution fee income in comparison with the prior year
was restricted by the implementation on July 7, 1993 of an NASD rule
limiting distribution plan payments to 75 basis points per year. At the
time of the implementation, the rule affected approximately $6.8 billion in
assets from which the Company was receiving distribution plan payments at
an annual rate of 1 percent. Although the rule allows the Company to
receive the same present value of distribution plan payments, it requires
the payments to be spread over a longer time period.
Bank fee income was also a significant contributor to overall revenue
growth in 1993, increasing 12% to $32.5 million from $29.0 million a year
earlier. Like investment adviser and distribution fees, bank fee income is
based on assets custodied and administered by IB&T. The assets for which
IB&T provides custody and related services increased 41% to $61.2 billion
in 1993 from $43.3 billion in 1992.
The two major components of total expenses are compensation of officers and
employees and amortization of deferred sales commissions. In 1993, total
operating expenses increased $26.1 million to $141.7 million. Higher
salaries and benefits, marketing incentives and expenses associated with
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the higher level of fund sales caused compensation to increase. Larger
average dollar value of assets in spread commission funds increased the
amortization of deferred sales commissions by $12.9 million. Other
expenses rose a total of $6.7 million to $39.0 million in 1993 from $32.3
million in 1992, primarily due to increases in marketing costs associated
with the higher level of sales, expenses from the Bank's custody activities
and expenses associated with the Company's gold mining activities.
The Company sponsored and is a limited and a general partner in two gold
mining partnerships which invest in the equity and debt securities of
developers of gold mines in North America and Australia. Portfolio
valuations of these gold mining investment partnerships contributed net
partnership gains of $3.9 million in 1993, in comparison with net
partnership losses of $0.2 million in 1992.
Net income of the Company amounted to $27.3 million in 1993 compared to
$19.3 million in 1992. Earnings per share were $3.09 and $2.49,
respectively. During 1993, the Company's total assets increased
significantly due to the increase in deferred sales commissions to $240.0
million from $159.8 million in 1992 resulting from substantial sales of
shares in the Company's spread-commission funds. Payment of these
commissions was funded by cash flows from operating activities and
borrowings. The difference between the book and tax accounting treatment
for these commissions caused deferred income taxes to increase by $17.1
million.
LIQUIDITY AND CAPITAL RESOURCES
In 1994, retained earnings of $24.3 million and net proceeds of $2.4
million from the issuance of new stock to employees under stock purchase
and stock option plans, less $6.4 million used to repurchase outstanding
shares of the Company's stock, increased the Company's consolidated net
worth from $145.3 million at the end of 1993 to $165.6 million on October
31, 1994.
The Company's primary sources of cash flow from operating activities were
net income of $29.8 million, amortization of deferred sales commissions of
$52.8 million, capitalized sales charges received on early redemption of
spread-commission funds of $24.8 million and deferred income taxes of $13.7
million. In 1994, the primary use of capital was for commission payments
associated with sales of spread-commission mutual funds, which were
primarily financed by cash flows from operating activities of $32.9
million. The Company anticipates that the primary use of cash will continue
to be the payment of sales commissions on sales of the Company's spread-
commission funds. The Company anticipates funding the payment of these
commissions through cash flows generated from operating activities and, if
necessary, through borrowings.
On March 18, 1994, the Company privately placed, with three insurance
companies, a $50 million 6.22% Senior note due March, 2004. Principal
payments on the note are due in equal annual installments beginning March
18, 1998. The note may be prepaid in part or in whole on or after March 16,
1996. The proceeds were used to call the Company's outstanding $14 million
of 10% Subordinated Debentures and to reduce the borrowings under a $75
million revolving line of credit with two unaffiliated banks. Certain
covenants in the Senior Note Purchase Agreement and the bank credit
agreement require specific levels of cash flow and net income and others
restrict additional investment and indebtedness. At year end, the Company
had no borrowings under its $75 million bank credit facility. The Company
expects a small continuing cash flow from its real estate activities. The
Company has no present plans for significant investments in new real estate
properties.
-12-
EFFECTS OF INFLATION
The major sources of revenue for the Company, i.e., adviser fees,
administrative fees and distribution plan payments, are calculated as
percentages of assets under management. If, as a result of inflation,
expenses rise and assets under management decline, lower fee income and
higher expenses will reduce or eliminate profits. If expenses rise and
assets rise, bringing increased fees to offset the increased expenses,
profits may not be affected by inflation. There is no predictable relation-
ship between changes in financial assets under management and the rate of
inflation. If inflation leads to increases in the price of gold or in the
price of real estate, the value of the Company's investments in precious
metal properties or real estate may be increased.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements and related notes thereto
and the independent auditors' report appearing on pages 20 through 42 of
the Company's 1994 Annual Report to Shareholders, furnished as Exhibit 13.1
hereto, are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
-13-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The names of all directors and executive officers of Eaton Vance Corp. as
of October 31, 1994, as well as their ages, family relationships between
them, and offices with The Company held by each of them, are as follows:
Family
Name Age Relationship Office
Landon T. Clay (1)(2) 68 None Chairman of the Board of
Directors
M. Dozier Gardner (1)(2) 61 None President, Chief Executive
Officer and Director
James B. Hawkes (1)(2) 53 None Executive Vice President
and Director
H. Day Brigham, Jr. (1)(2) 68 None Vice President, Director
and Chairman of Management
Committee
John G. L. Cabot 60 None Director
Curtis H. Jones (1) 65 None Vice President, Treasurer
and Director
Benjamin A. Rowland, Jr. (1)(2) 59 None Vice President and Director
Ralph Z. Sorenson 61 None Director
Thomas Otis 63 None Vice President and
Secretary
Laurie G. Russell 28 None Vice President and
Internal Auditor
John P. Rynne 52 None Vice President and
Corporate Controller
(1) Member of Management Committee of the Company's Board of Directors
(2) Voting Trustee. See Item 12(a) hereof.
Eaton Vance Corp. was formed as a holding company by its subsidiary, Eaton &
Howard, Vance Sanders Inc., in February, 1981. Eaton & Howard, Vance
Sanders Inc. (renamed Eaton Vance Management, Inc. in June, 1984 and re-
organized as Eaton Vance Management in October, 1990) was formed at the
acquisition of Eaton & Howard, Incorporated by Vance, Sanders & Company,
Inc. on May 1, 1979. In this paragraph, the absence of a corporate name
indicates that, depending on the dates involved, the executive held the
indicated titlesin a firm in the chain of Vance, Sanders & Company, Inc.,
Eaton & Howard, Vance Sanders Inc., or Eaton Vance Corp. Mr. Clay has been
Chairman of the Board of Directors and was Chief Executive Officer from
October, 1971 until October, 1990; he has been a Director of the Company
since January, 1970, and was a Vice President from November, 1968, until
October, 1971. Mr. Gardner was elected President effective October, 1979;
he has been a Director since July, 1970 and the Chief Executive Officer
-14-
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)
since October, 1990. Mr. Brigham has been a Director since April, 1979;
from 1967 through 1973 he was Vice President and General Counsel of Eaton &
Howard, Incorporated, and from 1973 until April, 1979, he was President of
Eaton & Howard. Mr. Cabot, Vice Chairman of Cabot Corporation, became a
Director of Eaton Vance Corp. in March, 1989. Mr. Hawkes has been Executive
Vice President since January, 1990, a Vice President since June, 1975, and
a Director since January, 1982. Mr. Jones was a Vice President of Eaton
Vance Corp. since March, 1982, and Treasurer and a Director from January,
1984. Mr. Jones retired as Vice President, Treasurer and a Director in
November, 1994, and was succeeded by William M. Steul, who most recently
was Vice President, Finance and Chief Financial Officer of Digital
Equipment Corporation. Mr. Rowland has been a Vice President since April,
1969, and a Director since January, 1973. Mr. Sorenson became a Director
of Eaton Vance Corp. in March, 1989. Ms. Russell joined Eaton Vance Corp.
in August, 1994. Ms. Russell was most recently a Senior Accountant with
Deloitte & Touche LLP. Mr. Otis has been Secretary since October, 1969, a
Vice President since April, 1973, and has been the Company's counsel since
1966. Mr. Rynne has been Corporate Controller of Eaton Vance Corp. since
January, 1984.
In general, the foregoing officers hold their positions for a period of one
year or until their successors are duly chosen or elected. Mr. Clay is an
officer, trustee, director or general partner of a number of investment
companies of which Eaton Vance Management or Boston Management and Research
acts as investment adviser. He is Vice President and a Director of Fulcrum
Management, Inc., MinVen, Inc., Vector Mining, Inc., and Compass Mining,
Inc. Mr. Clay is also a Director of Energex Corporation and ADE Corp. (a
manufacturer of non-contact measuring devices).
Mr. Gardner is an officer or trustee of a number of investment companies
for which Eaton Vance Management or Boston Management and Research acts as
investment adviser.
Mr. Brigham is an officer or trustee of a number of investment companies
for which Eaton Vance Management or Boston Management and Research acts as
investment adviser, and Vice President, Secretary and Trustee of EquiFund-
Wright National Fiduciary Equity Funds, The Wright Managed Equity Trust,
The Wright Managed Income Trust and The Wright Managed Money Market Trust.
He is a Director and Secretary of Investors Bank & Trust Company and a
Director of Northeast Properties, Inc.
Mr. Hawkes is an officer, trustee or director of a number of investment
companies for which Eaton Vance Management or Boston Management and
Research acts as investment adviser. He is also a Director of Investors
Bank & Trust Company.
Mr. Rowland is a Director of Investors Bank & Trust Company, Marblehead
Energy Corp., and Energex Corporation.
-15-
ITEM 11. EXECUTIVE COMPENSATION
(a) SUMMARY COMPENSATION TABLE
Other All
Annual Compensation Annual Options Other
Year Salary Bonus Comp. Granted Comp.
Name ($) ($)* ($) (#) ($)
M. Dozier Gardner 1994 365,000 344,046 3,346 0 30,000
Chief Executive 1993 350,000 302,179 13,326 20,000 30,000
Officer 1992 332,000 254,138 9,468 13,000 30,000
Landon T. Clay 1994 350,000 273,648 15,291 0 30,000
Chairman of 1993 335,000 269,500 11,939 0 30,000
the Board 1992 318,000 224,100 9,459 0 30,000
James B. Hawkes 1994 330,000 550,413 723 0 30,000
Executive 1993 315,000 500,997 6,202 75,000 30,000
Vice President 1992 300,000 400,720 4,922 40,000 30,000
Curtis H. Jones 1994 240,000 234,816 1,387 0 30,000
Vice President 1993 229,000 223,600 11,939 0 30,000
& Treasurer 1992 218,000 187,800 9,468 0 30,000
Wharton P. Whitaker 1994 198,000 411,245 3,346 0 30,000
President, EVD 1993 189,000 640,654 11,939 15,000 28,838
1992 180,000 481,012 9,468 10,000 26,896
* Bonuses include payments in lieu of option grants to Mr. Clay in 1994 of
$43,520, in 1993 of $54,500 and in 1992 of $44,100, and to Mr. Jones in
1994 of $34,816, in 1993 of $43,600 and in 1992 of $37,800.
The amounts appearing under "Other Annual Compensation" represent the 10%
discount on the purchase of the Company's stock under the Company's
Employee Stock Purchase Plan and Stock Alternative Plan.
The amounts appearing under "All Other Compensation" represent the
Company's contribution to its Profit Sharing and 401(k) Plans. The
Company's contribution to the Profit Sharing Plan is 15% of the base
compensation of all eligible employees, is allocated based on the
employee's salary and years of service, and is vested at the rate of 20%
for each year of employment. The Company's contribution to the 401(k)
plan, which is presently known as the Savings Plan and Trust, is a 100%
matching of the first $20.00 of the participant's weekly contribution.
Vesting in the Savings Plan and Trust is 100%. The overall contribution to
the employee benefit plans may not exceed the statutory limitation of
$30,000 per year.
-16-
ITEM 11. EXECUTIVE COMPENSATION (Continued)
(b) OPTION GRANTS IN LAST FISCAL YEAR
Number of Percentage of Exercise Expiration Potential Realized
Securities Options Granted Price Date Value at Assumed
Underlying to Employees ($/Sh) Annual Rates of
Options in Fiscal Year Stock Price
Granted Appreciation
Name (#) 5%($) 10%($)
M. Dozier Gardner None
Landon T. Clay None (Cash bonus in lieu of options)
James B. Hawkes None
Curtis H. Jones None (Cash bonus in lieu of options)
Wharton P. Whitaker None
(c) AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES
Number of
Securities
Underlying Number of Unexercised Value of Unexercised
Options Value Options at Fiscal In-the-Money Options
Exercised Realized Year End (#) at Fiscal Year End ($)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
M. Dozier Gardner 3,000 59,550 33,917 27,583 595,642 313,070
Landon T. Clay 0 0 25,000 0 515,350 0
James B. Hawkes 16,856 303,835 63,928 70,216 928,604 443,190
Curtis H. Jones 12,200 294,000 0 0 0 0
Wharton P. Whitaker 5,000 135,000 20,752 15,248 346,188 98,312
-17-
(d) COMPENSATION OF DIRECTORS
Directors not otherwise employed by the Company receive a retainer of
$3,500 per quarter and $750 per meeting. During the fiscal year ended
October 31, 1994, John G.L. Cabot received $20,750 and Ralph Z. Sorenson
received $20,000; in addition, each was granted options for 735 shares.
(e) COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
M. Dozier Gardner, President of the Company, is a member of the Compensa-
tion Committee of the Board of Directors of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
All outstanding shares of the Company's Common Stock, $0.0625 par value,
(which is the only class of the Company's stock having voting rights) are
deposited in a Voting Trust, of which the Voting Trustees were (as of
December 14, 1994), Landon T. Clay (Chairman of the Board of Directors of
the Company), M. Dozier Gardner (President and a Director of the Company),
Benjamin A. Rowland, Jr. (a Vice President and a Director of the Company),
H. Day Brigham, Jr. (a Vice President and a Director of the Company) and
James B. Hawkes (Executive Vice President and a Director of the Company).
The Voting Trust (a copy of which is incorporated by reference as Exhibit
9.1 hereto) expires December 31, 1996. The Voting Trustees have
unrestricted voting rights for the election of the Company's directors. At
December 14, 1994, the Company had outstanding 19,360 shares of Common
Stock. Inasmuch as the five Voting Trustees of said Voting Trust have
unrestricted voting rights with respect to said Common Stock (except that
the Voting Trust Agreement provides that the Voting Trustees shall not vote
such Stock in favor of the sale, mortgage or pledge of all or substantially
all of the Company's assets or for any change in the capital structure or
powers of the Company or in connection with a merger, consolidation,
reorganization or dissolution of the Company without the written consent of
the holders of Voting Trust Receipts representing at least a majority of
such Stock subject at the time to the Voting Trust Agreement), they may be
deemed to be the beneficial owners of all of the Company's outstanding
Common Stock by virtue of Rule 13d-3(a)(1) under the Securities Exchange
Act of 1934. The Voting Trust Agreement provides that the Voting Trustees
shall act by a majority if there be three or more Voting Trustees; other-
wise they shall act unanimously except as otherwise provided in the Voting
Trust Agreement. The address of said Voting Trustees is 24 Federal Street,
Boston, Massachusetts 02110. The following table sets forth the beneficial
owners at December 14, 1994, of the Voting Trust Receipts issued under said
Voting Trust Agreement, which Receipts cover the aggregate of 19,360 shares
of the Common Stock then outstanding:
Title of Class Name Number of Shares of %
Voting Common Stock of
Covered by Receipts Class
Voting Common Stock Landon T. Clay 4,640 24%
Voting Common Stock M. Dozier Gardner 4,640 24%
Voting Common Stock James B. Hawkes 4,640 24%
Voting Common Stock Benjamin A. Rowland, Jr. 2,920 15%
Voting Common Stock H. Day Brigham, Jr. 2,520 13%
-18-
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS (Continued)
Messrs. Clay, Gardner, Rowland, Brigham, and Hawkes are all officers and
Directors of the Company and Voting Trustees of the Voting Trust. No
transfer of any kind of the Voting Trust Receipts issued under the Voting
Trust may be made at any time unless they have first been offered to the
Company at book value. In the event of the death or termination of
employment by the Company of a holder of the Voting Trust Receipts, they
must be offered to the Company at book value. Similar restrictions exist
with respect to the Common Stock, all shares of which are deposited and
held of record in the Voting Trust.
(b) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(1) The Articles of Incorporation of Eaton Vance Corp. ("EVC") provide that
EVC's Non-Voting Common Stock, $0.0625 par value, shall have no voting
rights under any circumstances whatsoever. As of December 14, 1994, the
officers and directors of EVC, as a group, beneficially owned 2,955,135
shares of such Non-Voting Common Stock or 31.71% of the 9,318,094 shares
then outstanding. (Such figures include 241,278 shares subject to options
exercisable within 60 days and is based solely upon information furnished
by the officers and directors.)
The following table sets forth the beneficial ownership (i.e., investment
power within the meaning of Rule 13d-3(a)(2) under the Securities Exchange
Act of 1934) of EVC's Directors and named executive officers of such Non-
Voting Common Stock as at December 14, 1994 (such investment power being
sole unless otherwise indicated):
Title of Class Beneficial Owners Amount of %
Beneficial of
Ownership (1) Class
(2)
Non-Voting Common Stock Landon T. Clay 1,811,419 (3)(4)(7) 19.90
Non-Voting Common Stock M. Dozier Gardner 330,225 (3)(6) 3.62
Non-Voting Common Stock James B. Hawkes 259,530 (3)(4)(6) 2.83
Non-Voting Common Stock Benjamin A. Rowland Jr. 207,404 (3)(5) 2.28
Non-Voting Common Stock H. Day Brigham, Jr. 137,900 1.52
Non-Voting Common Stock Curtis H. Jones 75,175 (6) .83
Non-Voting Common Stock Wharton P. Whitaker 58,500 (3) .64
Non-Voting Common Stock John G. L. Cabot 20,142 (3) .22
Non-Voting Common Stock Ralph Z. Sorenson 8,142 (3) .09
(1) Based solely upon information furnished by the officers and directors.
(2) Based on 9,076,816 outstanding shares plus options exercisable within 60
days of 25,000 for Mr. Clay, 42,500 for Mr. Gardner, 92,644 for Mr.
Hawkes, 24,000 for Mr. Rowland, 28,500 for Mr. Whitaker, 6,142 for Mr.
Cabot and 4,142 for Mr. Sorenson.
(3) Includes shares subject to options exercisable within 60 days granted
to, but not exercised by, each officer and director as listed in Note
(2) above.
-19-
(b) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(Continued)
(4) Includes 4,800 shares held by Mr. Hawkes as custodian for a minor child,
635 shares held by Mr. Hawkes' daughter and 2,500 shares held by Mr.
Clay's children.
(5) Includes 1,200 shares owned by Mr. Rowland's spouse as to which Mr.
Rowland disclaims beneficial ownership.
(6) Includes 36,073 shares owned by Mr. Jones' spouse, 37,609 shares owned
by Mr. Gardner's spouse, and 10,300 shares owned by Mr. Hawkes' spouse.
(7) Includes 1,045 shares held in the trust of Profit Sharing Retirement
Plan for employees of Flowers Antigua of which the sole beneficiary is
the spouse of Mr. Clay. Also includes 6,355 shares held in trust of
Profit Sharing Retirement Plan for employees of LTC Corp., wholly owned
by Mr. Clay.
(2) As of October 31, 1994, certain directors and officers of EVC held
various partnership interests in VenturesTrident, L.P., VenturesTrident II,
L.P., Fulcrum Management Partners, L.P. and Fulcrum Management Partners II,
L.P. (limited partnerships described in Item 13(a) below), each of which
may be deemed to be an "affiliate" of MinVen, Inc. (see Item 13 below) and
EVC as that term is defined in Rule 12b-2 under the Securities Exchange Act
of 1934. These partnership interests are described in Item 13(a) below,
which description is incorporated in this Item by reference.
(3) Landon T. Clay (a director and officer of EVC) owned 15 shares of
common stock of Investors Bank & Trust Company (a 77.3% owned subsidiary)
as at October 31, 1994. As at such date Messrs. Brigham, Hawkes, Jones and
Rowland (directors and officers of EVC) each owned qualifying shares (10
shares) of common stock of Investors Bank & Trust Company, enabling them to
serve as directors of said bank. All officers and directors of the Company,
as a group, beneficially owned in the aggregate 55 shares of such common
stock (or 0.55% of the outstanding common stock of Investors Bank & Trust
Company).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) TRANSACTIONS WITH MANAGEMENT AND OTHERS
On February 28, 1985, the Company became a limited partner in
VenturesTrident, L.P. ("VenturesTrident"), a Delaware Limited Partnership
formed to invest in equity securities of public and private mining
ventures, principally in precious metals. As a limited partner, the
Company has invested an aggregate of $5,000,000 in cash in VenturesTrident.
The investment by the Company was made entirely from internally generated
funds.
The general partner of VenturesTrident is Fulcrum Management Partners, L.P.
("Fulcrum Partners"), a Delaware Limited Partnership of which Landon T.
Clay (the Company's Chairman of the Board and principal stockholder) and
MinVen are the general partners. MinVen owns a 79.24% interest in Fulcrum
Partners, and Mr. Clay owns a 16.09% interest therein. The Company, by
reason of MinVen's 79.24% interest in Fulcrum Partners, indirectly owns an
additional 15.85% interest in VenturesTrident.
VenturesTrident has entered into a service agreement with Fulcrum
Management, Inc. ("Fulcrum Management"), a Denver based wholly-owned
subsidiary of the Company, whereby Fulcrum Management provides management
-20-
(a) TRANSACTIONS WITH MANAGEMENT AND OTHERS (Continued)
and administration services to VenturesTrident for a quarterly fee of
$50,000. Such fee will not be paid to Fulcrum Management by VenturesTrident
during the calendar year ending December 31, 1995, and it is currently
anticipated that VenturesTrident may be liquidated during 1995 or shortly
thereafter. Fulcrum Management has entered into a separate agreement with
Castle Group, Inc., a Colorado corporation, pursuant to which Castle will
provide such services to VenturesTrident.
Mr. Clay and entities controlled by Mr. Clay, other than the Company, have
acquired limited partnership interests in VenturesTrident for cash
investments aggregating $5,550,000. Mr. Clay and such entities, solely
through their ownership of such limited partnership interests, in the
aggregate currently own a 13.48% interest in VenturesTrident; Mr. Clay, by
reason of his 16.093% interest in Fulcrum Partners, indirectly owns an
additional 3.219% interest in VenturesTrident. Mr. Clay's wife, Lavinia D.
Clay, acquired a limited partnership interest in VenturesTrident for an
investment of $100,000; she currently owns a .24% interest in
VenturesTrident. Certain institutions and other investors have also
acquired limited partnership interests in VenturesTrident.
Two other directors of the Company, M. Dozier Gardner and Benjamin A.
Rowland, Jr., have acquired limited partnership interests in
VenturesTrident; each of such investments amounts to $50,000, and each such
director owns a .12% interest in VenturesTrident. Mr. Clay and the other
directors of the Company, by reason of their positions with and ownership
of stock of the Company, have an indirect interest in the aggregate 27.988%
interest in VenturesTrident directly and indirectly owned by the Company.
All net operating income and losses and all net realized capital gains and
losses of VenturesTrident with respect to each of its fiscal years will
generally be allocated 80% to the limited partners (which include the
Company, Mr. and Mrs. Clay and the other two directors of the Company who
own limited partnership interests) of VenturesTrident and 20% to Fulcrum
Partners (of which Mr. Clay owns a 16.093% interest and the Company owns
through MinVen a 79.24% interest). Mr. Clay is an officer and director of
MinVen and Fulcrum Management.
On November 4, 1987, the Company became a limited partner in
VenturesTrident II, L.P. ("VenturesTrident II"), a Delaware Limited Partner-
ship formed to invest in equity securities of public and private mining
ventures, principally in precious metals. As a limited partner, the Company
has invested $3,000,000 in cash in VenturesTrident II. The investment by
the Company was made entirely from internally generated funds. The Company,
through its ownership of such limited partnership interest, currently owns
a 3.042% interest in VenturesTrident II.
In addition to the above, MinVen, Inc. ("MinVen"), a wholly owned
subsidiary of the Company, has acquired a general partnership interest in
the general partner of VenturesTrident II. This acquisition required
MinVen to pay $748,235 to such general partner.
The general partner of VenturesTrident II is Fulcrum Management Partners
II, L.P. ("Fulcrum Partners II"), a Delaware Limited Partnership of which
Landon T. Clay (the Company's Chairman of the Board and principal
stockholder) and MinVen are the general partners. MinVen owns a 82.13%
interest in Fulcrum Partners II, and Mr. Clay owns a 3.87% interest
therein. The Company, by reason of MinVen's 82.13% interest in Fulcrum
Partners II, indirectly owns an additional 16.43% interest in
VenturesTrident II.
-21-
(a) TRANSACTIONS WITH MANAGEMENT AND OTHERS (continued)
VenturesTrident II has entered into a service agreement with Fulcrum
Management, Inc. ("Fulcrum Management"), a Denver based wholly-owned
subsidiary of the Company, whereby Fulcrum Management will provide manage-
ment and administration services to VenturesTrident II for a quarterly fee
equal to .675% of VenturesTrident II's aggregate committed capital. Fulcrum
Management has entered into a separate agreement with Castle Group, Inc.,
a Colorado corporation, pursuant to which Castle will provide such services
to VenturesTrident II.
Mr. Clay and entities controlled by Mr. Clay, other than the Company,
acquired limited partnership interests in VenturesTrident II for cash
investments aggregating $2,650,000. Mr. Clay and such entities, solely
through their ownership of such limited partnership interest, in the
aggregate currently own a 2.69% interest in VenturesTrident II; Mr. Clay,
by reason of his 3.87% interest in Fulcrum Partners II, indirectly owns an
additional .77% interest in VenturesTrident II. Investors Bank & Trust
Company, as custodian for the benefit of Thomas M. Clay and Richard T. Clay
(both of whom are minor children of Landon T. Clay), acquired limited
partnership interests in VenturesTrident II for investments of $100,000 for
each such child; each such child currently owns a .10% interest in
VenturesTrident II. Certain institutions and other investors have also
acquired limited partnership interests in VenturesTrident II.
Two other directors of the Company, M. Dozier Gardner and Benjamin A.
Rowland, Jr., have acquired limited partnership interests in
VenturesTrident II; each of such investments amounts to $50,000, and
each such director currently owns a .05% interest in VenturesTrident II.
Mr. Clay and the other directors of the Company, by reason of their
positions with and ownership of stock of the Company, have an indirect
interest in the aggregate 19.47% interest in VenturesTrident II directly
and indirectly owned by the Company.
All net operating income and losses and all net realized capital gains and
losses of VenturesTrident II with respect to each of its fiscal years will
generally be allocated 80% to the limited partners (which include the
Company, Mr. Clay, Mr. Clay's minor children and the other two directors of
the Company who own limited partnership interests) of VenturesTrident II
and 20% to Fulcrum Partners II (of which Mr. Clay owns a 3.87% interest and
the Company owns through MinVen a 82.13% interest). Mr. Clay is an officer
and director of MinVen and Fulcrum Management.
(b) CERTAIN BUSINESS RELATIONSHIPS
Landon T. Clay, M. Dozier Gardner, James B. Hawkes and H. Day Brigham, Jr.,
each of whom is a director and executive officer of the Company, are
officers and directors, trustees or general partners of various investment
companies for which the Company's wholly owned subsidiary, Eaton Vance
Management or Boston Management and Research, serves as investment adviser,
for which Eaton Vance Distributors, Inc. (a wholly-owned subsidiary of
Eaton Vance Management) acts as principal underwriter, and for which
Investors Bank & Trust Company (a 77.3% owned subsidiary of Eaton Vance
Corp.) serves as custodian; such investment companies make substantial
payments to Eaton Vance Management or Boston Management and Research for
advisory and management services, substantial payments to Eaton Vance
Distributors, Inc. under their distribution plans, and substantial payments
to Investors Bank & Trust Company for custodial services.
-22-
(c) INDEBTEDNESS OF MANAGEMENT
In 1993, the Company increased to $6,100,000 the amount of money in the
Executive Loan Program which is available for loans to certain key
employees for the purpose of financing or refinancing the exercise of stock
options for shares of the Company's Non-Voting Common Stock, other
purchases of the Company's Non-Voting Common Stock, and any tax obligations
arising from such transactions. Such loans are written for a seven-year
period, at varying fixed interest rates, and notes evidencing them require
repayment in annual installments commencing with the third year in which
the loan is outstanding. Loans outstanding under this program amounted to
$2,511,000 at October 31, 1994.
The following table sets forth the executive officers and Directors of the
Company who were indebted to the Company under the foregoing loan programs
at any time since November 1, 1993, in an aggregate amount in excess of
$60,000:
Largest Amount of Loans Rate of Interest
Loans Outstanding Outstanding Charged on Loans
Since 11/1/93 as of as of 12/12/94
12/12/94
Landon T. Clay $210,216 $176,940 8.06%- 8.58% (1)
M. Dozier Gardner 401,580 347,560 6.22%- 8.06% (2)
James B. Hawkes 590,152 508,066 5.31%- 8.58% (3)
H. Day Brigham, Jr. 400,759 364,295 5.31%- 8.57% (4)
Curtis H. Jones 217,000 157,000 5.47%- 8.06% (5)
Benjamin A. Rowland Jr. 92,500 42,500 5.31% (6)
(1) 8.06% interest payable on $98,960 principal amount of loan, and
8.58% interest payable on $77,980 principal amount.
(2) 6.22% interest payable on $110,000 principal amount of loan, 7.55%
interest payable on $138,600 principal amount, and 8.06% interest
payable on $98,960 principal amount.
(3) 5.31% interest payable on $156,888 principal amount, 5.74% interest
payable on $63,102 principal amount, 6.11% interest payable on $110,000
principal amount, 7.61% interest payable on $38,500 principal amount,
8.06% interest payable on $89,963 principal amount and 8.58% interest
payable on $49,613 principal amount.
(4) 5.31% interest payable on $177,100 principal amount of loan, 6.11%
interest payable on $88,000 principal amount, 8.06% interest payable on
$75,600 principal amount and 8.57% interest payable on $23,595 principal
amount.
(5) 5.47% interest payable on $133,000 principal amount and 8.06% interest
payable on $24,000 principal amount.
(6) 5.31% interest payable on $42,500 principal amount of loan.
(d) TRANSACTIONS WITH PROMOTERS
Not applicable.
-23-
PART IV
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) (1) The following financial statements of Eaton Vance Corp. and the
independent auditors' report relating thereto, are incorporated herein by
reference into Item 8 hereto:
Separate
Document
Eaton Vance Corp. 1994 Annual Report to Shareholders P a g e
Number
Independent Auditor's Report 42
Consolidated Balance Sheets as of October 31, 1994 and 1993 20-21
Consolidated Statements of Income for each of the three
years in the period ended October 31, 1994 22
Consolidated Statements of Shareholders' Equity for each of
the three years in the period ended October 31, 1994 23
Consolidated Statements of Cash Flows for each of the three
years in the period ended October 31, 1994 24
Notes to Consolidated Financial Statements 25-41
The following auditors' report relating to the consolidated financial
statement schedules of Eaton Vance Corp. is filed herewith and included in
Item 14(a)(1):
Independent Auditors' Report 25
(a) (2) The following financial statement schedules are included herein:
Schedule Number Description P a g e
Number
VIII Valuation and Qualifying Accounts 26
XI Real Estate and Accumulated Depreciation 27-29
XII Mortgage Notes Receivable on Real Estate 30-31
All Schedules not listed above are omitted because they are not applicable,
or the required information is shown in the financial statements or in the
notes thereto, or there have been no changes in the information required to
be filed from that last previously reported.
(b) The list of exhibits required by Item 601 of Regulation S-K is set
forth in the Exhibit Index and is incorporated herein by reference.
-24-
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Eaton Vance Corp.:
We have audited the consolidated financial statements of Eaton
Vance Corp. and its subsidiaries as of October 31, 1994 and 1993,
and for each of the three years in the period ended October 31,
1994, and have issued our report thereon dated December 13, 1994;
such consolidated financial statements and report are included
in your 1994 Annual Report to Shareholders and are incorporated
herein by reference. Our audits also included the consolidated
financial statement schedules of Eaton Vance Corp. and its
subsidiaries, listed in Item 14. These consolidated financial
statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on
our audits. In our opinion, such consolidated financial
statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present
fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 13, 1994
-25-
EATON VANCE CORP.
VALUATION AND QUALIFYING ACCOUNTS Schedule VIII
Years ended October 31, 1994, 1993 and 1992
Additions
Balance at Charged to
Beginning Costs and Balance at
Description of Year Expenses Deductions End of Year
Valuation accounts
deducted from assets
to which they apply:
Allowance for doubtful
accounts on notes
receivable and receivable
from affiliates:
Year ended October 31:
1994 $800,000 $ - $ - $800,000
1993 $ - $800,000 $ - $800,000
1992 $ - $ - $ - $ -
- 26 -
EATON VANCE CORP.
REAL ESTATE AND ACCUMULATED DEPRECIATION Schedule XI
October 31, 1994
Costs Capitalized
Initial Cost Subsequent to Acquisition
Carrying
Description Encumbrances Land Buildings Improvements Costs
Income producing:
Shopping center-
Goffstown, NH $ 6,199,743 $ 244,532 $ 1,373,276 $5,610,691 $ -
Shopping mall and
office building-
Troy, NY 2,844,663 834,100 4,033,921 1,750,182 -
Office Buildings-
Boston, MA 4,008,470 495,000 4,447,898 516,868 -
Boston, MA - 280,800 4,009,836 1,267,351 -
Warehouses-
Colonie, NY 2,270,088 137,966 1,596,385 586,493 -
Springfield, MA 1,437,046 145,833 1,967,684 187,078 -
Total 16,760,010 2,138,231 17,429,000 9,918,663 -
Commercial land:
Bedford, NH - 137,773 - - 72,431
Boston, MA - 78,203 - - -
Residential land-
Canton, OH - 38,403 - - -
Total - 254,379 - - 72,431
TOTAL $16,760,010 $2,392,610 $17,429,000 $9,918,664 $72,431
- 27 -
EATON VANCE CORP.
REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) Schedule XI
October 31, 1994
Gross Carrying Amount
October 31, 1994 (1)
Accumulated Date of Date Depreciable
Description Land Buildings Depreciation Construction Acquired Life
Income producing:
Shopping center-
Goffstown, NH $ 244,532 $ 6,983,967 $1,555,354 1973 10/17/83 30 yrs.
Shopping mall and
office building-
Troy, NY 834,100 5,784,103 1,209,598 1978 05/01/87 31.5 yrs.
Office buildings-
Boston, MA 495,000 4,964,766 1,476,080 1888 08/15/85 30 yrs.
Boston, MA 280,800 5,277,187 2,005,474 1920 10/31/90 20 yrs.
Warehouses-
Colonie, NY 137,966 2,182,878 587,170 1964 11/13/84 30 yrs.
Springfield, MA 145,833 2,154,762 676,601 1974 11/02/84 30 yrs.
Total 2,138,231 27,347,663 7,510,277
Commercial land:
Bedford, NH 210,204 - - N/A 05/13/85 N/A
Boston, MA 78,203 - - N/A 01/08/88 N/A
Residential land-
Canton, OH 38,403 - - N/A 10/17/83 N/A
Total 326,810 - -
TOTAL $2,465,041 $27,347,663 $7,510,277
(1) The aggregate cost of real estate for federal income tax purposes is approximately the same as the
gross carrying amount recorded for book purposes.
- 28 -
EATON VANCE CORP.
REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) Schedule XI
October 31,
1994 1993 1992
LAND AND BUILDINGS
Gross carrying amount:
Balance, beginning of year $29,447,609 $28,949,047 $28,303,498
Additions - improvements, etc. 365,095 528,562 645,549
Balance, end of year $29,812,704 $29,477,609 $28,949,047
Accumulated depreciation:
Balance, beginning of year $ 6,594,381 $ 5,691,142 $ 4,811,298
Depreciation 915,896 903,239 879,844
Balance, end of year $ 7,510,277 $ 6,594,381 $ 5,691,142
- 29 -
EATON VANCE CORP.
MORTGAGE NOTES RECEIVABLE ON REAL ESTATE Schedule XII
October 31, 1994
Principal
Amount of
Notes
Number Original Carrying Subject to
of Final Periodic Face Amount of Delinquent
Mortgage Interest Maturity Payment Prior Amount of Mortgages Principal
Description Notes Rate Dates Terms Liens Mortgages (B) (C) or Interest
FIRST MORTGAGE NOTES:
Residential
permanent notes:
FHA - Original
note amounts
under $30,000 15 5.25% 1995-2000 (A) None $277,400 $ 50,091 $ -
VA - Original
note amounts
under $30,000 2 5.25% 1995 (A) None 35,100 2,342 -
Conventional -
Original note
amounts under
$225,000 2 8-9.75% 1997-2005 (A) None 259,600 248,978 -
TOTAL 19 $572,100 $301,411 $ -
NOTES:
(A) Periodic payment terms -
FHA and VA Notes - Interest and principal payments are made at variable amounts over life to
maturity, no prepayment penalty.
Conventional Notes - $225,000 Note with interest payable at level amounts over life to maturity.
Balloon payment of $225,000 due in 1997, no prepayment penalty.
$34,600 Note with interest and principal payments made at level amounts, no
prepayment penalty.
- 30 -
EATON VANCE CORP.
MORTGAGE NOTES RECEIVABLE ON REAL ESTATE (Continued) Schedule XII
October 31, 1994
(B) Reconciliation of the Carrying Amount of Mortgage Notes -
1994 1993 1992
Balance, beginning of year $330,654 $360,906 $169,045
Issuance of mortgage notes receivable - - 225,000
Collections on principal (29,243) (30,252) (33,139)
Write-off of note - - -
Balance, end of year $301,411 $330,654 $360,906
(C) The aggregate cost for federal income tax purposes is equal to the
carrying amount of the mortgages.
- 31 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Eaton Vance Corp. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
EATON VANCE CORP.
/s/M. Dozier Gardner
M. Dozier Gardner
President,
Director and
Principal Executive
Officer
January 18, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Eaton
Vance Corp. and in the capacities and on the dates indicated:
/s/Landon T. Clay Chairman and Director January 18, 1995
/s/M. Dozier Gardner President, Director and January 18, 1995
Principal Executive Officer
/s/William M. Steul Chief Financial Officer January 18, 1995
/s/John P. Rynne Corporate Controller January 18, 1995
/s/James B. Hawkes Director January 18, 1995
/s/H. Day Brigham, Jr. Director January 18, 1995
/s/Benjamin A. Rowland, Jr. Director January 18, 1995
/s/John G.L. Cabot Director January 18, 1995
/s/Ralph Z. Sorenson Director January 18, 1995
- 32 -
EXHIBIT INDEX
Each Exhibit is listed in this index according to the number assigned to it
in the exhibit table set forth in Item 601 of Regulation S-K. The following
Exhibits are filed as a part of this Report or incorporated herein by
reference pursuant to Rule 12b-32 under the Securities Exchange Act of
1934:
Page in Sequential
Exhibit No. Description Numbering System
3.1 The Company's Amended Articles of Incorporation are 21
filed as Exhibit 3.1 to the Company's registration
statement on Form 8-B dated February 4, 1981, filed
pursuant to Section 12(b) or (g) of the Securities
Exchange Act of 1934 (S.E.C. File No. 1-8100) and are
incorporated herein by reference.
3.2 The Company's By-Laws are filed as Exhibit 3.2 to 28
the Company's registration statement of Form 8-B dated
February 4, 1981, filed pursuant to Section 12(b)
or (g) of the Securities Exchange Act of 1934 (S.E.C.
File No. 1-8100) and are incorporated herein by reference.
3.3 Copy of the Company's Articles of Amendment effective at 50-52
the close of business on November 22, 1983, has been filed
as Exhibit 3.3 to the Annual Report on Form 10-K of the
Company for the fiscal year ended October 31, 1983,
(S.E.C. File No. 1-8100) and is incorporated herein by
reference.
3.4 Copy of the Company's Articles of Amendment effective at 54-55
the close of business on February 25, 1986 has been filed
as Exhibit 3.4 to the Annual Report on Form 10-K of the
Company for the fiscal year ended October 31, 1986,
(S.E.C. File No. 1-8100) and is incorporated herein by
reference.
4.1 The rights of the holders of the Company's Common Stock,
par value $.0625 per share, and Non-Voting Common Stock,
par value $.0625 per share, are described in the Company's
Amended Articles of Incorporation (particularly Articles
Sixth, Seventh and Ninth thereof) and the Company's By-Laws
(particularly Article II thereof)--See Exhibits 3.1, 3.2
and 3.3 above as incorporated herein by reference.
4.2 The rights of the holders of the Company's 10% Subordinated 65-97
Debentures due April 1, 1998 are set forth in the Indenture
dated as of April 1, 1988 between the Company and the First
National Bank of Boston, a copy of which Indenture has been
filed as Exhibit 4.2 to the Annual Report on Form 10-K of
the Company for the fiscal year ended October 31, 1987
(S.E.C. File No. 1-8100) and is incorporated herein by
reference.
- 33 -
EXHIBIT INDEX (Continued)
Page in Sequential
Exhibit No. Description Numbering System
9.1 Copy of the Voting Trust Agreement made as of December 39-47
22, 1993 is filed as Exhibit 9.1 to the Annual Report
on Form 10-K of the Company for the fiscal year
ended October 31, 1993, (SEC File No. 1-8100) and is
incorporated herein by reference.
10.1 Description of Performance Bonus Arrangement for Members 54
of Investment Division of Eaton Vance Management, Inc. is
filed as Exhibit 10.3 to the Annual Report on Form 10-K of
the Company for the fiscal year ended October 31, 1985,
(S.E.C. File No. 1-8100) and is incorporated herein
by reference.
10.2 Description of Incentive Bonus Arrangement for Marketing 55
Personnel of Eaton Vance Distributors, Inc. is filed as
Exhibit 10.4 to the Annual Report on Form 10-K of the
Company for the fiscal year ended October 31, 1985,
(S.E.C. File No. 1-8100) and is incorporated herein by
reference.
10.3 Copy of 1984 Executive Loan Program relating to financing 65-69
or refinancing the exercise of options, the purchase of
stock, the tax obligations associated with such exercise
or purchase and similar undertakings by key directors,
officers, and employees adopted by the Company's Directors
on October 19, 1984, has been filed as Exhibit 10.8 to the
Annual Report on Form 10-K of the Company for the fiscal
year ended October 31, 1984, (S.E.C. File No. 1-8100) and
is incorporated herein by reference.
10.4 Copy of 1988 Profit Improvement Bonus Plan of Eaton Vance 61
Management, Inc. has been filed as Exhibit 10.9 of the
Annual Report on Form 10-K of the Company for the
fiscal year ended October 31, 1987 (S.E.C. File No 1-8100)
and is incorporated herein by reference.
10.5 Copy of 1989 Stock Option Plan adopted by the Company's 40-45
Directors on July 21, 1989 has been filed as Exhibit 10.10
to the Annual Report on Form 10-K of the Company for
the fiscal year ended October 31, 1989, (S.E.C. File
No. 1-8100) and is incorporated herein by reference.
10.6 Description of 1990 Performance and Retention of Officers 42
Pool (bonus plan to reward key officers of Eaton Vance
Management and Eaton Vance Distributors, Inc.) of Eaton
Vance Corp. has been filed as Exhibit 10.11 to the Annual
Report on Form 10-K of the Company for the fiscal year
ended October 31, 1990 (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
- 34 -
EXHIBIT INDEX (Continued)
Page in Sequential
Exhibit No. Description Numbering System
10.7 Copy of 1992 Stock Option Plan as adopted by the Eaton 36-43
Corp. Board of Directors on April 8, 1992 has been filed
as Exhibit 10.12 to the Annual Report on Form 10-K of the
Company for the fiscal year ended October 31, 1992
(S.E.C. File No. 1-8100), and is incorporated herein
by reference.
10.8 Copy of 1986 Employee Stock Purchase Plan as amended and 44-54
restated by the Eaton Vance Corp. Board of Directors
on April 8, 1992 has been filed as Exhibit 10.13 to the
Annual Report on Form 10-K of the Company for the
fiscal year ended October 31, 1992 (S.E.C. File No.
1-8100), and is incorporated herein by reference.
10.9 Copy of 1992 Incentive Plan - Stock Alternative as 55-58
adopted by the Eaton Vance Corp. Board of Directors
on July 17, 1992 has been filed as Exhibit 10.14 to
the Annual Report on Form 10-K of the Company for
the fiscal year ended October 31, 1992 (S.E.C. File
No. 1-8100), and is incorporated herein by reference.
11.1 Statement of Computation of average number of Shares 36
outstanding (filed herewith).
13.1 Copy of the Company's Annual Report to Stockholders 37-84
for the fiscal year ended October 31, 1994 (furnished
herewith--such Annual Report, except for those portions
thereof which are expressly incorporated by reference in
this report on Form 10-K, is furnished solely for the
information of the Securities and Exchange Commission
and is not to be deemed "filed" as a part of this report
on Form 10-K).
21.1 List of the Company's Subsidiaries as of October 31, 1994 85
(filed herewith).
23.1 Independent Auditors' Consent (filed herewith). 86
27.1 Financial Data Schedule as of October 31, 1994 87-89
(filed herewith - electronic filing only).
- 35 -