Back to GetFilings.com
================================================================================
UNITED STATES
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, 1999
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)
255 State Street, Boston, Massachusetts 02109
- --------------------------------------- ---------
(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 ($0.015625 par value) New York Stock Exchange
- --------------------------------------------- -----------------------
Securities registered pursuant to Section 12(g) of the Act:
Non-Voting Common Stock par value $0.015625 per share
-----------------------------------------------------
Title of Class
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 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. [ ]
Aggregate market value of Non-Voting Common Stock held by non-affiliates of the
Registrant, based on the closing price of $38.00 on December 31, 1999 on the New
York Stock Exchange was $1,023,895,978. Calculation of holdings by
non-affiliates is based upon the assumption, for these purposes only, that
executive officers, directors, and persons holding 5% or more of the
registrant's Non-Voting Common Stock are affiliates.
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, 1999
Non-Voting Common Stock,
$0.015625 par value 35,411,631
Common Stock, $0.015625 par value 77,440
Portions of registrant's Annual Report to Stockholders for the fiscal year ended
October 31, 1999 (Exhibit 13.1 hereto) have been incorporated by reference into
the following Parts of this report: Part I, Part II and Part IV.
===============================================================================
1
PART I
ITEM 1. BUSINESS
The Company's principal business is creating, marketing and managing mutual
funds and providing investment management and counseling services to
institutions and individuals. The Company has been in the investment management
business for over seventy-five 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, 1999, the Company managed $40.9
billion in portfolios with investment objectives ranging from high current
income to maximum capital gain.
GENERAL DEVELOPMENT OF BUSINESS
The Company's growth has resulted from its ability to develop, offer
successfully and manage effectively new funds and to increase the assets of
existing Eaton Vance Funds ("Funds"). The Company's strategy is to develop and
manage products with clearly understood and clearly presented investment
characteristics coupled with distribution arrangements that are attractive to
third-party distributors of the Funds.
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 "SEC") as an
investment adviser under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"). Eaton Vance Distributors, Inc. ("EVD"), a wholly owned
broker/dealer registered under the Securities Exchange Act of 1934 (the
"Exchange Act"), markets and sells the Funds.
As of October 31, 1999, the Company provided investment advisory or
administration services to over 70 Funds and to over 800 separately managed
individual and institutional accounts. At that date, the Funds had aggregate net
assets of $38.1 billion and the Company's separately managed accounts had
aggregate net assets of $2.8 billion. The following table shows net assets in
the Funds and the separately managed accounts for the dates indicated:
FUND AND SEPARATELY MANAGED ACCOUNT ASSETS
AT OCTOBER 31,
-----------------------------------------------
1999 1998 1997 1996 1995
-----------------------------------------------
(in millions)
Funds:
Money Market $ 200 $ 200 $ 200 $ 200 $ 200
Equities 18,000 9,800 5,200 3,100 2,400
Bank Loans 10,000 6,200 3,900 2,800 1,400
Taxable Fixed Income 2,500 2,200 2,100 1,300 1,300
Non-Taxable Fixed Income 7,400 7,500 7,500 8,200 8,900
-----------------------------------------------
Total 38,100 25,900 18,900 15,600 14,200
-----------------------------------------------
Separately Managed Accounts 2,800 2,500 2,400 1,700 1,800
-----------------------------------------------
Total $40,900 $28,400 $21,300 $17,300 $16,000
===============================================
2
ITEM 1. BUSINESS (CONTINUED)
On October 31, 1999, equity fund assets increased to 44 percent of total assets
under management from 34 percent on October 31, 1998, while taxable and
non-taxable fixed-income fund assets decreased to 24 percent of total assets
under management from 34 percent a year ago. Bank loan fund assets increased to
24 percent of total assets under management on October 31, 1999 from 22 percent
a year ago.
In 1995, the Company increased its ownership interest in Lloyd George Management
(BVI) Limited ("LGM"), an independent investment management company based in
Hong Kong. The two firms became affiliated in 1992 with the introduction of the
Eaton Vance Greater China Funds, which are advised by LGM from its headquarters
in Hong Kong. The investment management capabilities of LGM, with offices in
Hong Kong, London and Mumbai, India coupled with the introduction of the Eaton
Vance Medallion family of offshore funds, allow Eaton Vance to both manage and
distribute mutual funds globally.
In 1996, the directors of the Medical Research Investment Fund, Inc. engaged EVM
as administrator and EVD as distributor. The fund changed its name to EV
Traditional Worldwide Health Sciences Fund and became a member of the Eaton
Vance Family of Funds. The Fund, which concentrates investments in equity
securities of domestic and foreign companies engaged in research and the health
care industry, is managed by OrbiMed Advisors Inc. ("OrbiMed") (formerly named
Mehta and Isaly Asset Management), the Fund's advisor since inception. In 1998,
the fund converted to a multiple class structure and changed its name to Eaton
Vance Worldwide Health Sciences Fund.
In 1997, the Company focused on developing products that are managed to maximize
after-tax returns and on broadening its existing tax-efficient equity product
line. In May and June of 1997, the Company introduced Belvedere Equity Fund LLC,
a private fund for investors seeking to diversify concentrated positions in
common stocks with substantial market appreciation. In September 1997, the
Company introduced Eaton Vance Tax-Managed Emerging Growth Fund, a companion
product to Eaton Vance Tax-Managed Growth Fund which was introduced in the
spring of 1996.
In 1998, the Company continued developing products that are managed to maximize
after-tax returns by broadening its existing tax-efficient equity product line
while maintaining a balanced asset mix with fixed income and bank loan funds.
The Company launched Eaton Vance Tax-Managed International Growth Fund, a tax
efficient equity fund, in April 1998. In 1998, the Company introduced Belair
Capital Fund LLC, a privately placed fund for high net worth investors. In
October 1998, the Company completed a successful offering of Eaton Vance Senior
Income Trust, a New York Stock Exchange-listed, closed-end fund, investing
primarily in bank loans. This Fund provides investors with liquidity through
exchange listed trading and enhanced yields through the use of leverage.
The Company continued to expand its bank loan product-line in 1999 with the
introduction of two institutional senior loan funds, making bank loan funds
available through a broader group of financial intermediaries. In addition, the
Company raised $4.7 billion (including leverage) in equity private placements
for high net worth investors and $1.1 billion (including leverage) in 9
exchange-listed municipal bond fund public offerings. In an effort to expand its
overseas fund business, the Company organized four new funds in Dublin, Ireland,
for distribution in Europe and registered two additional funds in Hong Kong for
sale in Hong Kong.
3
ITEM 1. BUSINESS (CONTINUED)
INVESTMENT MANAGEMENT AND ADMINISTRATIVE ACTIVITIES
Portfolio managers employed by the Company make investment decisions for all but
six of the Eaton Vance Funds in accordance with each Fund's investment
objectives and policies. Investment decisions for five international equity
Funds are made by Lloyd George Management, an independent investment management
company based in Hong Kong in which the Company owns a minority equity position.
OrbiMed Advisors, Inc., an independent investment management company based in
New York, makes investment decisions for Eaton Vance Worldwide Health Sciences
Fund. The Company's portfolio management staff have, on average, more than 20
years of experience in the securities industry. The Company's investment
advisory agreements for management services with each of the Funds provide for
fees ranging from 10 basis points of average net assets annually to 85 basis
points of average net assets annually. The trustees of the respective Funds, a
majority of the independent trustees, i.e., those unaffiliated with the
management company must approve the investment advisory agreements annually.
Fund shareholders must approve any amendments to the investment advisory
agreements. The fund generally may terminate these agreements upon 30 to 60 days
notice without penalty.
Investment counselors employed by the Company make decisions for the separately
managed accounts. 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 20 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, 1999:
INVESTMENT ADVISORY AND
ADMINISTRATION FEES*
YEAR ENDED OCTOBER 31,
---------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------
(in thousands)
Investment Advisory
Fees - Funds $174,027 $127,234 $ 95,531 $81,473 $69,094
Separately Managed Accounts 11,169 11,295 9,503 8,865 8,712
Administration Fees - Funds 12,181 12,662 12,071 7,793 4,631
==================================================
Total $197,377 $151,191 $117,105 $98,131 $82,437
==================================================
* Excludes gold mining investment management fees and administration
fees received from funds other than Eaton Vance Funds. The Company
did not receive any management and administration fees from gold
mining investments in 1999 or 1998.
4
ITEM 1. BUSINESS (CONTINUED)
INVESTMENT ADVISORY AGREEMENTS AND DISTRIBUTION PLANS
In 1993, the Company introduced the Master/Feeder structure for most of its
Funds. Master/Feeder is a two-tiered arrangement in which Funds ("Feeder Funds")
with substantially identical investment objectives pool their assets by
investing in a common portfolio ("Master Fund"). Eaton Vance used Master/Feeder
to introduce four distinct mutual fund families, with each family having its own
prospectus, sales literature, product design and distribution structure (see
Marketing and Distribution of Fund Shares below). The structure was intended to
benefit fund shareholders through lower operating costs, while allowing the
Company to offer cost-effective distribution alternatives to the investment
professionals and their clients. In 1997, under revised SEC guidelines, the
Company began to modify the Master/Feeder structure to reduce the number of
Feeder Funds by merging some Feeder Funds into a single Fund with multiple
classes. This modification has reduced operating costs by reducing prospectus
and sales literature requirements, while continuing to offer a variety of
distribution alternatives to investors and maintaining the ability to attract
unaffiliated Feeder Funds.
Each Eaton Vance Master Fund (except funds managed by LGM or OrbiMed) has
entered into an investment advisory agreement with either EVM or BMR. Although
the specific terms of each such agreement vary, the basic terms of the
agreements are similar. Pursuant to the agreements, either EVM or BMR, as
applicable, provides overall management services to each of the Master Funds,
subject to the supervision of each Fund's Board of Trustees in accordance with
each Fund's fundamental investment objectives and policies. The investment
advisory agreements are approved by Fund shareholders and their continuance must
be approved annually by the trustees of the respective Funds, including a
majority of the independent trustees. Fund shareholders must approve any
material amendments to the investment advisory agreements.
EVM also serves as administrator or manager under an Administration Service
Agreement or Management Contract (each an "Agreement") to most Funds (including
those managed by LGM and OrbiMed). Under such Agreements EVM is responsible for
managing the business affairs of these Funds, subject to the supervision of each
Fund's Board of Trustees. EVM's services include recordkeeping, preparing and
filing documents required to comply with federal and state securities laws,
supervising the activities of the Funds' custodian and transfer agent, providing
assistance in connection with the Funds' shareholder meetings, and other
administrative services, including furnishing office space and office
facilities, equipment and personnel which may be necessary for managing and
administering the business affairs of the Funds. EVM (or an affiliate) provides
investment management or advisory services to most of these Funds. For the
services provided under the Agreements, each Fund is required, in some cases, to
pay EVM a monthly fee calculated at an annual rate not to exceed 0.35% of
average daily net assets. Each Agreement remains in full force and effect
indefinitely, but only to the extent that the continuance of such Agreement is
specifically approved at least annually by the Fund's Board of Trustees.
In addition, certain Funds have adopted distribution plans which, subject to
applicable law, provide for the reimbursement to the Company for the payment of
applicable sales commissions to the retail distribution firms through the
payment of an ongoing distribution fee (i.e., a Rule 12b-1 fee). These
distribution plans are implemented through distribution agreements between EVD
and the Funds. Although the specific terms of each such agreement vary, the
basic terms of the agreements are similar. Pursuant to the agreements, EVD acts
as underwriter for the Fund and distributes shares of the Fund through
unaffiliated dealers. Each distribution plan and agreement is initially approved
and its subsequent continuance must be approved annually by the trustees of the
respective Funds, including a majority of the independent trustees.
5
ITEM 1. BUSINESS (CONTINUED)
Each Fund bears all expenses associated with its operation and the issuance and
redemption or repurchase of its securities, except for the compensation of
trustees and officers of the Fund who are employed by the Company. Under some
circumstances, particularly in connection with the introduction of new funds and
special promotions, EVM or BMR may waive a portion of its fee and pay for some
expenses of the Fund.
EVM has entered into an investment advisory agreement for each separately
managed account, which sets forth the account's investment objectives and fee
schedule. EVM invests the assets of the accounts in accordance with the stated
investment objectives. The Company's investment counselors may assist clients in
formulating investment strategies.
MARKETING AND DISTRIBUTION OF FUND SHARES
The Company markets and distributes continuously-offered shares of Funds through
EVD. EVD sells Fund shares through a retail network of national and regional
broker/dealers, banks, insurance companies and financial planning firms.
Although the firms in the Company's retail distribution network have each
entered into selling agreements 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 1999,
1998 and 1997 calendar years, the five dealer firms responsible for the largest
volume of Fund sales accounted for approximately 28%, 35% and 36%, respectively,
of the Company's Fund sales volume. EVD currently maintains a sales force of
more than 38 wholesalers and 37 sales assistants. Wholesalers and their
assistants work closely with the retail distribution network to assist in
selling shares of Funds.
While a substantial majority of fund 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 the Independent Financial Institutions
sales force, a separate wholesaling force focusing on banks and financial
planners. In an additional distribution initiative in 1997, the Company began
offering its Funds to investors, without sales commissions or other transaction
fees, through fee-based registered investment advisors via various institutional
programs both domestically and internationally.
EVD currently sells its U.S. registered Funds with up to four separate
commission structures: 1) front-end load commission (Class A); 2) spread-load
commission (Class B); 3) level-load commission (Class C); and 4) institutional
(Class I). For Class A shares, the shareholder pays the broker's commission and
EVD receives an underwriting commission of up to 75 basis points of the dollar
value of the Fund or Class shares sold. The Fund pays a service fee to
authorized firms not to exceed 25 basis points of average net assets and may
also pay a Rule 12b-1 fee not to exceed 25 basis points of average daily net
assets.
For Class B shares, 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 pays a contingent
deferred sales charge to EVD if he or she redeems shares 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 or Class in
accordance with a distribution plan adopted by the Fund pursuant to Rule 12b-1
under the Investment Company Act of 1940. Like the investment advisory
agreement, the distribution plan and related payments must be approved annually
by a vote of the trustees, including a majority of the independent trustees. The
SEC 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
addition, the Fund or Class pays a service fee to authorized firms not to exceed
25 basis points of average net assets.
6
ITEM 1. BUSINESS (CONTINUED)
For Class C shares, the shareholder pays no front-end commissions or contingent
deferred sales charges after the first year. EVD pays a commission and the first
year's service fees to the dealer at the time of sale. The Fund makes monthly
distribution plan payments to EVD similar to those for Class B shares, equal to
75 basis points of average net assets of the Class. The Fund pays service fees
at an annual rate not to exceed 25 basis points of average net assets. 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.
For Class I shares, a minimum investment of $250,000 or higher is required and
the shareholder pays no sales charges. The introduction of institutional shares
has made a number of funds available to a broader group of financial
intermediaries.
In addition to its U.S. registered Funds, the Company also sponsors a family of
Cayman Island domiciled offshore funds known as the Eaton Vance Medallion family
of funds. The Medallion Funds are sold by certain dealer firms through EVD to
non-U.S. persons, with commission structures similar to those of the U.S.
registered Funds. The Company earns distribution, administration and advisory
fees directly or indirectly from the Medallion Funds.
Reference is made to Note 14 of the Notes to Consolidated Financial Statements
contained in the Eaton Vance Corp. Annual Report to Shareholders for the fiscal
year ended October 31, 1999 (which report is furnished as Exhibit 13.1 hereto)
for a description of the major customers that provided over 10% of the total
revenue of the Company.
SIGNIFICANT ACCOUNTING CHANGE
In September 1998, the Financial Accounting Standards Board ("FASB") staff
addressed the accounting for offering costs incurred in connection with the
distribution of funds when the adviser does not receive both Rule 12b-1 fees and
contingent deferred sales charges. In its announcement, the FASB staff concluded
that such offering costs, including sales commissions paid, were to be
considered start-up costs in accordance with American Institute of Certified
Public Accountants, Statement of Position ("SOP") 98-5, "Reporting on the Costs
of Start-Up Activities." The FASB staff concluded that subsequent to July 23,
1998, the effective date of the announcement, these offering costs should be
expensed as incurred. Prior to the FASB staff announcement, it had been the
Company's policy to capitalize and amortize these costs over a period not to
exceed five years.
In order to comply with the requirements of both the FASB staff announcement and
SOP 98-5, the Company expensed all offering costs incurred subsequent to July
23, 1998 in connection with the distribution of its closed-end funds and bank
loan interval funds which did not have both Rule12b-1 fees and contingent
deferred sales charges. The Company also expensed closed-end, interval and
private fund sales commissions paid and capitalized prior to and including the
July 23, 1998 effective date of the FASB staff announcement as a cumulative
effect of change in accounting principle, as described in APB Opinion No. 20,
"Accounting Changes," upon adoption of SOP 98-5 by the Company effective
November 1, 1998. The cumulative effect of the adoption in the first fiscal
quarter of 1999 was $36.6 million, net of income taxes of $23.4 million.
In April 1999, the bank loan interval funds received shareholder approval and a
Securities and Exchange Commission ("SEC") exemptive order permitting them,
beginning May 1, 1999, to implement Rule 12b-1 equivalent distribution plans.
With the implementation of these distribution plans, the Company resumed
capitalizing and amortizing sales commissions associated with the distribution
of these funds effective May 1, 1999, the beginning of the third fiscal quarter.
Closed-end and bank loan interval fund sales commissions expensed from November
1, 1998 to April 30, 1999 totaled $71.3 million.
7
ITEM 1. BUSINESS (CONTINUED)
The change in accounting treatment has not had, nor will have, any effect on the
Company's cash flow or cash position.
FORWARD-LOOKING STATEMENTS
From time to time, information provided by the Company or information included
in its filings with the SEC (including this Form 10-K) may contain statements,
which are not historical facts, for this purpose referred to as "forward-looking
statements." The Company's actual future results may differ significantly from
those stated in any forward-looking statements. Important factors that could
cause actual results to differ materially from those indicated by such
forward-looking statements include, but are not limited to, the factors
discussed in "Competitive Conditions and Risk Factors" below.
COMPETITIVE CONDITIONS AND RISK FACTORS
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.
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 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.
The Company derives almost all of its revenue from investment adviser and
administration fees and distribution income received from the Eaton Vance Funds
and separately managed accounts. As a result, the Company is dependent upon the
contractual relationships it maintains with these funds and separately managed
accounts. In the event that any of the management contracts, administration
contracts, underwriting contracts or service agreements are not renewed pursuant
to the terms of these contracts or agreements, the Company's financial results
may be adversely affected.
The major sources of revenue for the Company (i.e., investment adviser fees and
distribution income) are calculated as percentages of assets under management. A
decline in securities prices in general would reduce fee income. Also, financial
market declines or adverse changes in interest rates would negatively impact the
Company's assets under management and consequently, its revenue and net income.
If, as a result of inflation, expenses rise and assets under management decline,
lower fee income and higher expenses would reduce or eliminate profits. If
expenses rise and assets rise, bringing increased fees to offset the increased
expenses, profits might not be affected by inflation. There is no predictable
relationship between changes in financial assets under management and the rate
of inflation.
8
ITEM 1. BUSINESS (CONTINUED)
REGULATION
EVM and BMR are each registered with the SEC under the Advisers Act. The
Advisers Act imposes numerous obligations on registered investment advisers,
including fiduciary duties, recordkeeping requirements, operational requirements
and disclosure obligations. Most Eaton Vance Funds are registered with the SEC
under the Investment Company Act of 1940. Except for private Funds exempt from
registration, each Fund is also required to make notice filings with all states
where it is offered for sale. 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 or BMR 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 SEC, the National Association of Securities
Dealers ("NASD") and other federal and state agencies. EVD is subject to the
SEC'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. On February 18, 1999, the Company
identified that EVD was in violation of its net capital requirements since
January 31, 1999. Upon identification of the violation, the Company notified the
SEC and NASD and immediately remedied the violation. Net capital subsequent to
the remedy exceeded EVD's net capital requirement. 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.
The Company's officers, directors and employees may from time to time own
securities that are held by one or more of the Funds. The Company's internal
policies with respect to individual investments by investment professionals
require prior clearance of most types of transactions and reporting of all
securities transactions, and restrict certain transactions to avoid the
possibility of conflicts of interest.
EMPLOYEES
On October 31, 1999, the Company and its wholly owned subsidiaries had 395
full-time employees. On October 31, 1998, the comparable figure was 367.
9
ITEM 2. PROPERTIES
Northeast Properties, LLC, a wholly owned subsidiary of the Company, owns an
investment property in Springfield, Massachusetts. For information with respect
to this property, reference is made to Schedule III and Note 4 of the Notes to
Consolidated Financial Statements contained in the Eaton Vance Corp. 1999 Annual
Report to Shareholders (Exhibit 13.1 hereto), both of which are incorporated
herein by reference.
As noted in Schedule III and Note 4 to Consolidated Financial Statements
contained in the Eaton Vance Corp. 1999 Annual Report to Shareholders, in 1999
the Company sold a warehouse in Colonie, New York , a shopping center and office
building in Troy, New York and two office buildings in Boston, Massachusetts.
The Company expects the sale of the remaining property in Springfield,
Massachusetts to be completed in fiscal 2000.
The Company conducts its principal operations through leased offices located in
Boston, Massachusetts. Management believes that the Company's facilities are
adequate to serve its currently anticipated business needs.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is currently subject to any
material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of holders of Voting Common Stock ("Stockholders") of Eaton
Vance Corp. was held at the principal office of the Company on October 13, 1999.
All of the outstanding Voting Common Stock, namely 77,440 shares, was
represented in person at the meeting.
The following matters received the affirmative vote of the outstanding Voting
Common Stock and were approved:
1) The authorization to repurchase 2,000,000 shares of the Company's Non-voting
Common Stock.
2) The Restricted Stock Plan, adopted by the Board of Directors on October 13,
1999.
3) The revisions to the 1998 Executive Loan Program, adopted by the Board of
Directors on October 15, 1998.
10
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Voting Common Stock, $0.015625 par value, is not publicly traded
and is held by 11 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, $0.015625 par value, is traded on the New
York Stock Exchange under the symbol EV. The approximate number of holders of
record of the Company's Non-Voting Common Stock at October 31, 1999, was 950.
The additional information required to be disclosed in Item 5 is found on page 7
of the Company's 1999 Annual Report to Shareholders (furnished as Exhibit 13.1
hereto), under the caption "Price and Dividend Information" and is incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data appearing under the caption "Five Year Summary" on page
13 of the Company's 1999 Annual Report to Shareholders, furnished as Exhibit
13.1 hereto, is incorporated by reference. A reference is also made to the
discussion of the significant accounting change on page 6 of Item 1 of this
document.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's Discussion and Analysis of financial condition and results of
operations appearing on pages 14 through 22 of the Company's 1999 Annual Report
to Shareholders, furnished as Exhibit 13.1 hereto, is incorporated herein by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosures about Market Risk appearing under the
caption of "Market Risk" within Management's Discussion and Analysis of
financial condition and results of operations appearing on page 22 of the
Company's 1999 Annual Report to Shareholders, furnished as Exhibit 13.1 hereto,
is incorporated herein by reference.
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 23 through 41 of the
Company's 1999 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.
11
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name, age and positions of each of the
Company's directors and executive officers at December 31, 1999:
NAME AGE POSITION
- -------------------------------------------------------------------------------
James B. Hawkes 58 Chairman of the Board, President,
Chief Executive Officer
Benjamin A. Rowland, Jr. 64 Vice President and Director
John G. L. Cabot 65 Director
John M. Nelson 67 Director
Vincent M. O'Reilly 61 Director
Ralph Z. Sorenson 66 Director
Alan R. Dynner 59 Vice President and Chief Legal Officer
Thomas E. Faust, Jr. 41 Vice President and Director of Equity
Research and Management
Thomas Otis 68 Vice President and Secretary
Laurie G. Russell 33 Vice President and Chief Accounting Officer
William M. Steul 57 Vice President, Treasurer and Chief
Financial Officer
Peter D. Stokinger 35 Vice President and Internal Auditor
Wharton P. Whitaker 55 President, Eaton Vance Distributors, Inc.
Eaton Vance Corp. was founded as a holding company by Eaton & Howard, Vance
Sanders, Inc. in February 1981. Eaton & Howard, Vance Sanders, Inc. (renamed
Eaton Vance Management, Inc. in June, 1984 and reorganized as Eaton Vance
Management in October, 1990) was formed at the time of the acquisition of Eaton
& Howard, Incorporated by Vance, Sanders & Company, Inc. on May 1, 1979. In this
Item 10, the absence of a corporate name indicates that, depending on the dates
involved, the executive held the indicated titles in a firm in the chain of
Vance, Sanders & Company, Inc., Eaton & Howard, Vance Sanders Inc., or Eaton
Vance Corp. In general, the following officers hold their positions for a period
of one year or until their successors are duly chosen or elected.
Mr. Hawkes was elected Chairman of the Board in October, 1997 and President and
Chief Executive Officer in October, 1996. He was Executive Vice President of the
Company from January, 1990 to October, 1996 and a Vice President of the Company
from June, 1975 to January, 1990. He has been a Director since January, 1982.
Mr. Hawkes serves as Chairman of the Executive Committee and as a member of the
Management and Nominating Committees established by the Company's Board of
Directors. Mr. Hawkes is an officer, trustee or director of all the registered
investment companies for which Eaton Vance Management or Boston Management and
Research acts as investment adviser.
Mr. Rowland has been a Vice President of the Company since April, 1969 and a
Director since January, 1982. He serves as a member of the Management Committee
established by the Company's Board of Directors.
Mr. Cabot has served as a Director of the Company since March, 1989. He is
Chairman of the Audit and Nominating Committees and serves as a member of the
Compensation and Option Committees established by the Company's Board of
Directors. Mr. Cabot is also a Director of Cabot Corporation and Cabot Oil and
Gas Corporation.
12
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
Mr. Nelson has served as Director of the Company since January, 1998. He serves
as a member of the Compensation, Option and Nominating Committees established by
the Company's Board of Directors. Mr. Nelson is a Director of the TJX Companies,
Brown & Sharpe Manufacturing Company, Commerce Holdings, Inc. and Stocker and
Yale, Inc.
Mr. O'Reilly has served as a Director of the Company since April, 1998. He
serves as a member of the Audit and Nominating Committees established by the
Company's Board of Directors. Mr. O'Reilly serves as a faculty member at the
Carroll Graduate School of Management at Boston College and as a Director of the
Neiman Marcus Group and Teradyne, Inc. Mr. O'Reilly is also Vice-Chairman of the
Board of the New England Independent System Operator.
Mr. Sorenson has served as a Director of the Company since March, 1989. He is
Chairman of both the Compensation and Option Committees and serves as a member
of both the Audit and Nominating Committees established by the Company's Board
of Directors. Mr. Sorenson also serves as a Director of Houghton Mifflin
Company, Polaroid Corporation, Northern Trust Bank of Colorado, Exabyte Corp.
and Whole Foods Market.
Mr. Dynner has been a Vice President and Chief Legal Officer of the Company
since November, 1996. Prior to joining the Company, Mr. Dynner was a senior
partner with the law firm of Kirkpatrick & Lockhart LLP in its New York and
Washington, D.C. offices. From February, 1994 to September, 1995 he was
Executive Vice President of Newberger & Berman Management, Inc., a mutual fund
management company. Mr. Dynner is a member of the Management Committee
established by the Company's Board of Directors. He is an officer of all the
registered investment companies for which Eaton Vance Management and Boston
Management and Research acts as investment adviser.
Mr. Faust has been a Vice President and Director of Equity Research and
Management of the Company since February, 1995. He has been Portfolio Manager
and Vice President of Investors Portfolio since July, 1993 and Portfolio Manager
and Vice President of Eaton Vance Growth Portfolio since April, 1996. Mr. Faust
joined Eaton Vance as a Research Associate in June, 1985. Mr. Faust serves as a
member of the Management Committee established by the Company's Board of
Directors.
Mr. Otis has been Secretary since October, 1969 and a Vice President of the
Company since April, 1973. He has been the Company's counsel since 1966.
Ms. Russell has been Chief Accounting Officer since October, 1997 and a Vice
President since June, 1994. She was the Internal Auditor of the Company from
June, 1994 to October, 1997. Prior to joining the Company, Ms. Russell was a
Senior Accountant with Deloitte & Touche LLP.
Mr. Steul has been a Vice President and Chief Financial Officer of the Company
since December, 1994. Prior to joining the Company, Mr. Steul was Vice
President, Finance and Chief Financial Officer of Digital Equipment Corporation.
Mr. Steul is a member of the Management Committee established by the Company's
Board of Directors.
Mr. Stokinger has been the Internal Auditor since October, 1997 and a Vice
President since January, 1996. He was the Company's Tax Accountant from
September, 1992 to October, 1997.
Mr. Whitaker has been President, Eaton Vance Distributors, Inc., since November,
1991. He was Executive Vice President and National Sales Director of Eaton Vance
Distributors, Inc., from June, 1987 to October, 1991. Mr. Whitaker is a member
of the Management Committee established by the Company's Board of Directors.
13
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and Directors and persons who own more than ten percent of a registered
class of the Company's equity securities to file forms reporting their
affiliation with the Company and reports of ownership and changes in ownership
of the Company's equity securities with the Securities and Exchange Commission
and the New York Stock Exchange. These persons and entities are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company, during fiscal 1999 all Section 16(a) filing
requirements applicable to such individuals were complied with except for a
report covering one transaction filed late by each of Benjamin A. Rowland, John
Cabot and Peter Stokinger. Also, Landon Clay, a beneficial owner of greater than
10 percent of the Company's Non-Voting Common Stock, did not file his Form 5 on
a timely basis.
14
ITEM 11. EXECUTIVE COMPENSATION
(A) SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the compensation
for each of the last three fiscal years of the Chief Executive Officer of the
Company and the four other most highly compensated executive officers of the
Company (hereafter referred to in this document as the "named executive
officers").
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
-------------------------------------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION(2)
- --------------------------------------------------------------------------------------------------------------------------
NAME AND PRINCIPAL POSITION ($) ($) ($) (#) ($)
- --------------------------------------------------------------------------------------------------------------------------
James B. Hawkes 1999 430,000 1,750,000 4,894 70,000 30,000
Chief Executive Officer
1998 415,000 1,410,000 4,038 70,000 30,000
1997 400,000 755,000 1,350 400,000 30,000
- --------------------------------------------------------------------------------------------------------------------------
Alan R. Dynner 1999 265,000 350,000 9,414 20,000 30,000
Vice President
1998 260,000 300,000 8,095 15,000 30,000
1997 250,000 260,000 - 120,000 30,000
- --------------------------------------------------------------------------------------------------------------------------
Thomas E. Faust, Jr. 1999 315,000 1,535,000 51,941 40,000 30,000
Vice President
1998 300,000 1,250,000 56,709 39,600 30,000
1997 250,000 1,060,000 6,968 60,000 30,000
- --------------------------------------------------------------------------------------------------------------------------
William M. Steul 1999 270,000 350,000 9,399 20,000 30,000
Vice President
1998 266,000 300,000 4,865 15,000 30,000
1997 260,000 240,000 4,509 24,000 30,000
- --------------------------------------------------------------------------------------------------------------------------
Wharton P. Whitaker 1999 249,000 1,340,819 9,425 20,000 30,000
President, EVD
1998 245,000 977,417 8,108 15,000 30,000
1997 235,000 588,814 1,252 24,000 30,000
- --------------------------------------------------------------------------------------------------------------------------
15
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
(1) 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 Incentive Plan - Stock
Alternative.
(2) The amounts appearing under "All Other Compensation" represent
contributions by the Company to the Company's Profit Sharing Plans,
Supplemental Profit Sharing and 401(k) Plans.
(B) OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes stock option grants during 1999 to the named
executive officers:
PERCENTAGE POTENTIAL REALIZABLE
OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION
UNDERLYING EMPLOYEES IN PRICE EXPIRATION FOR OPTION TERM(1)
NAME OPTIONS GRANTED FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- ----------------------------------------------------------------------------------------------------------------------
James B. Hawkes 65,645 9% 22.9375 11/02/06 416,006 919,265
4,355 1% 25.2313 11/02/03 30,358 67,084
Alan R. Dynner 20,000 3% 22.9375 11/02/06 126,744 280,071
Thomas E. Faust, Jr. 35,645 5% 22.9375 11/02/06 225,890 499,157
4,355 1% 25.2313 11/02/03 30,358 67,084
William M. Steul 20,000 3% 22.9375 11/02/06 126,744 280,071
Wharton P. Whitaker 20,000 3% 22.9375 11/02/06 126,744 280,071
(1) Amounts calculated using 5% and 10% assumed annual rates of stock price appreciation represent hypothetical gains that
could be achieved for the respective options if exercised at the end of the option term. Actual gains, if any, on stock
option exercises will depend on the future performance of the Company's stock and the dates on which the options are exercised.
16
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
(C) AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table summarizes stock options exercised during 1999 and stock
options held as of October 31, 1999 by the named executive officers.
NUMBER OF
SHARES SECURITIES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNEXERCISED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT FISCAL
EXERCISE REALIZED YEAR END YEAR END (1)
------------- ------------- ------------------------------- ---------------------------------
EXERCISABLE UN-EXERCISABLE EXERCISABLE UN-EXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- ------------------------- ------------- ------------- ---------------- -------------- ---------------- ----------------
James B. Hawkes 25,000 310,468 247,200 307,800 5,671,511 6,115,465
Thomas E. Faust, Jr. 45,000 970,671 63,200 92,800 1,427,643 1,515,201
Alan R. Dynner - - 84,700 70,300 1,954,354 1,332,123
William M. Steul 96,460 2,438,220 44,000 35,000 1,112,522 470,173
Wharton P. Whitaker 11,288 127,878 17,992 35,000 427,319 470,173
(1) Based on the fair market value of the Company's common stock on October 31, 1999 ($34.188) as reported on the New York
Stock Exchange, less the option exercise price.
(D) COMPENSATION OF DIRECTORS
Directors not otherwise employed by the Company receive a retainer of $5,000 per
quarter and $1,000 per meeting. During the fiscal year ended October 31, 1999,
John G.L. Cabot and Ralph Z. Sorenson each received $31,000; in addition, each
was granted options for 2,981 shares. During the fiscal year ended October 31,
1999, John M. Nelson and Vincent M. O'Reilly each received $28,000; in addition,
each was granted options for 2,981 shares.
(E) COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Not applicable.
17
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) COMMON STOCK
All outstanding shares of the Company's Voting Common Stock, $0.015625 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
31, 1999), James B. Hawkes, Thomas E. Faust, Jr., Alan R. Dynner, William M.
Steul, Wharton P. Whitaker, Thomas J. Fetter, Duncan W. Richardson, Jeffery P.
Beale, Scott H. Page, Payson F. Swaffield, and Michael W. Weilheimer. The Voting
Trust expires October 30, 2000. The Voting Trustees have unrestricted voting
rights to elect the Company's directors. At December 31, 1999, the Company had
outstanding 77,440 shares of Common Stock. Inasmuch as the eleven Voting
Trustees of the Voting Trust have unrestricted voting rights with respect to the
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 or the termination
of the Voting Trust or the addition of a Voting Trustee or of the removal of a
Voting Trustee by the other Voting Trustees or the renewal of the term of the
Voting Trust 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 are five or more Voting
Trustees; otherwise they shall act unanimously except as otherwise provided in
the Voting Trust Agreement. The address of the Voting Trustees is 255 State
Street, Boston, Massachusetts 02109.
The following table sets forth the beneficial owners at December 31, 1999, of
the Voting Trust Receipts issued under said Voting Trust Agreement, which
Receipts cover the aggregate of 77,440 shares of the Common Stock then
outstanding:
NUMBER OF SHARES OF
VOTING COMMON STOCK
TITLE OF CLASS NAME COVERED BY RECEIPTS % OF CLASS
- -------------------------------------------------------------------------------
Voting Common Stock James B. Hawkes 18,560 24%
Voting Common Stock Thomas E. Faust, Jr. 13,953 18%
Voting Common Stock Alan R. Dynner 9,279 12%
Voting Common Stock William M. Steul 9,279 12%
Voting Common Stock Wharton P. Whitaker 9,279 12%
Voting Common Stock Thomas J. Fetter 3,873 5%
Voting Common Stock Duncan W. Richardson 3,873 5%
Voting Common Stock Jeffrey P. Beale 2,336 3%
Voting Common Stock Scott H. Page 2,336 3%
Voting Common Stock Payson F. Swaffield 2,336 3%
Voting Common Stock Michael W. Weilheimer 2,336 3%
18
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT (CONTINUED)
Mr. Hawkes is an officer and Director of the Company and Voting Trustee of the
Voting Trust; Messrs. Dynner, Faust and Steul are all officers of the Company
and Voting Trustees of the Voting Trust; Mr. Whitaker is President of Eaton
Vance Distributors, Inc. and a Voting Trustee of the Voting Trust; Messrs.
Fetter, Richardson, Beale, Page Swaffield and Weilheimer are officers of Eaton
Vance Management 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 with the Company or a
subsidiary of a holder of the Voting Trust Receipts, the shares represented by
such Voting Trust Receipts must be offered to the Company at book value. Similar
restrictions exist with respect to the Voting Common Stock, all shares of which
are deposited and held of record in the Voting Trust.
(B) NON-VOTING COMMON STOCK
The Articles of Incorporation of the Company provide that its Non-Voting Common
Stock, $0.015625 par value, shall have no voting rights under any circumstances
whatsoever. As of December 31, 1999, the officers and Directors of the Company,
as a group, beneficially owned 3,418,764 shares of such Non-Voting Common Stock
or 10% of the 35,411,631 shares then outstanding. (Such figures include 735,648
shares subject to options exercisable within 60 days and are based solely upon
information furnished by the officers and Directors.)
The following table sets forth the beneficial ownership of the Company's
Non-Voting Common Stock by (i) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Non-Voting Common Stock,
(ii) each Director of the Company, and (iii) each of the named executive
officers of the Company (as defined in Item 11, "Executive Compensation") as of
December 31, 1999 (such investment power being sole unless otherwise indicated):
AMOUNT OF PERCENTAGE
BENEFICIAL OF
TITLE OF CLASS BENEFICIAL OWNERS OWNERSHIP (A) CLASS (B)
- -------------------------- ----------------------------------------------------
Non-Voting Common Stock Landon T. Clay 5,783,844 (d) 16.33
Non-Voting Common Stock James B. Hawkes 1,312,045 (c)(f) 3.63
Non-Voting Common Stock Benjamin A. Rowland,Jr. 798,002 (c)(e) 2.21
Non-Voting Common Stock Thomas E. Faust, Jr. 383,635 (c) 1.06
Non-Voting Common Stock Wharton P. Whitaker 328,821 (c) 0.91
Non-Voting Common Stock William M. Steul 155,281 (c) 0.43
Non-Voting Common Stock Alan R. Dynner 125,500 (c) 0.35
Non-Voting Common Stock John G. L. Cabot 101,021 (c)(g) 0.29
Non-Voting Common Stock Ralph Z. Sorenson 44,433 (c) 0.12
Non-Voting Common Stock John M. Nelson 5,577 (c) 0.02
Non-Voting Common Stock Vincent M. O'Reilly 1,993 (c) 0.01
19
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(CONTINUED)
(a) Based solely upon information furnished by the individuals.
(b) Based on 35,411,631 outstanding shares plus options exercisable within
60 days of 388,311 for Mr. Hawkes, 12,422 for Mr. Rowland, 104,311 for
Mr. Faust, 20,464 for Mr. Whitaker, 46,472 for Mr. Steul, 122,894 for
Mr. Dynner, 6,777 for Mr. Cabot, 6,777 for Mr. Sorenson, 1,577 for Mr.
Nelson and 1,393 for Mr. O'Reilly.
(c) Includes shares subject to options exercisable within 60 days granted
to, but not exercised by, each named executive officer and directors as
listed in Note (b) above.
(d) Includes 10,000 shares held by Mr. Clay's children, 4,180 shares held
in the trust of a profit sharing retirement plan for employees of
Flowers Antigua, of which the sole beneficiary is the spouse of Mr.
Clay and 25,420 shares held in trust of a profit sharing retirement
plan for employees of LTC Corp., wholly owned by Mr. Clay.
(e) Includes 4,800 shares owned by Mr. Rowland's spouse as to which Mr.
Rowland disclaims beneficial ownership.
(f) Includes 46,580 shares owned by Mr. Hawkes' spouse and 29,721 shares
held by Mr. Hawkes' daughter.
(g) Includes 16,000 shares held in a family limited partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(A) Not applicable.
(B) CERTAIN BUSINESS RELATIONSHIPS
James B. Hawkes, a Director and chief executive officer of the Company, is an
officer and director, trustee or general partner of various investment companies
for which either EVM or BMR serves as investment adviser and for which EVD acts
as principal underwriter; such investment companies make substantial payments to
these subsidiaries for advisory and management services or under their
distribution plans.
(C) INDEBTEDNESS OF MANAGEMENT
In 1998, the Company increased to $10,000,000 the amount of money in the
Executive Loan Program, which is available for loans to certain key employees
for the purpose of financing the exercise of stock options for shares of the
Company's Non-Voting Common Stock. 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 $2,231,000
at October 31, 1999.
20
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED)
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, 1998, in an aggregate amount in excess of $60,000:
LARGEST AMOUNT OF LOANS RATE OF INTEREST
LOANS OUTSTANDING OUTSTANDING AS CHARGED ON LOANS
SINCE 11/1/98 OF 12/31/99 AS OF 12/31/99
- ------------------------------------------------------------------------------
James B. Hawkes $ 545,012 $ 545,012 4.83% - 7.61% (1)
Thomas E. Faust 81,758 - n/a
Benjamin A. Rowland, Jr. 186,620 152,620 5.63%
Wharton P. Whitaker 99,998 99,925 6.43%
(1) 6.11% interest payable on $66,000 principal amount of loan, 5.31% interest
payable on $109,821 principal amount, 5.74% interest payable on $44,171
principal amount, 7.61% interest payable on $30,800 principal amount, 6.77%
interest payable on $100,000 principal amount and 4.83% interest payable on
$194,220 principal amount.
21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(1) The following consolidated financial statements of Eaton Vance Corp.
and report of independent accountants, included on pages 23 through 40
of the Annual Report, are incorporated by reference as a part of this
Form 10-K:
SEPARATE
DOCUMENT
EATON VANCE CORP. 1999 ANNUAL REPORT TO SHAREHOLDERS PAGE NUMBER
- -------------------------------------------------------------------------------
Consolidated Statements of Income for each of the three
years in the period ended October 31, 1999 23
Consolidated Balance Sheets as of October 31, 1999 and 1998 24-25
Consolidated Statements of Cash Flows for each of the three
years in the period ended October 31, 1999 26
Consolidated Statements of Shareholders' Equity and
Comprehensive Income for each of the three years in the period
ended October 31, 1999 27
Notes to Consolidated Financial Statements 28-40
Independent Auditors' Report 41
(2) The following consolidated financial statement schedules and
independent accountants' report are filed as part of this Form 10-K and
are located on the following pages:
DESCRIPTION PAGE NUMBER
- -------------------------------------------------------------------------------
Independent Auditors' Report on Financial Statement Schedules 22
Schedule II Valuation and Qualifying Accounts 23
Schedule III Real Estate and Accumulated Depreciation 24-25
All other schedules have been omitted because they are not required, are
not applicable or the information is otherwise shown in the consolidated
financial statements or notes thereto.
(3) The list of exhibits required by Item 601 of Regulation S-K is set
forth in the Exhibit Index on pages 28 through 31 and is incorporated
herein by reference.
(B) REPORTS ON FORM 8-K
The Company filed a Form 8-K with the SEC on May 3, 1999 regarding the impact of
a significant accounting change.
22
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, 1999 and 1998, and for each of the three
years in the period ended October 31, 1999, and have issued our report thereon
dated November 30, 1999, which report includes an explanatory paragraph relating
to changes in the method of accounting for offering costs incurred in connection
with the distribution of closed-end funds; such consolidated financial
statements and report are included in your 1999 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
November 30, 1999
23
EATON VANCE CORP.
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- ------------------------------------------------------------------------------
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS OF YEAR
- -------------------------------------------------------------------------------
Valuation accounts deducted
from assets to which they
apply:
Allowance for doubtful
accounts on notes
receivable and
receivables from
affiliates:
Year ended October 31:
1999 - - - -
1998 - - - -
1997 $ 775,000 - $775,000 -
24
EATON VANCE CORP.
REAL ESTATE AND ACCUMULATED DEPRECIATION
OCTOBER 31, 1999
- -----------------------------------------------------------------------------------------------------------------------------------
COSTS
CAPITALIZED GROSS CARRYING AMOUNT
INITIAL COST SUBSEQUENT OCTOBER 31, 1998(1)(2)
-------------------- TO ----------------------
ACQUISITION DATE OF DEPRE-
(IMPROVE- ACCUMULATED CONSTRUC- DATE CIABLE
DESCRIPTION ENCUMBRANCES LAND BUILDINGS MENTS) LAND BUILDINGS DEPRECIATION TION ACQUIRED TION
- --------------------------------------------------------------------------------------------------------------------------------
Warehouse -
Springfield, MA - 145,833 1,967,684 193,338 145,833 2,161,022 855,716 1974 11/02/84 30 yrs
================================================================================================================================
(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.
(2) All real estate is classified as available for sale at October 31, 1999.
25
EATON VANCE CORP.
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED) SCHEDULE III
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- -------------------------------------------------------------------------------------------------------------------
1999 1998 1997
----------------- ----------------- ------------------
LAND AND BUILDINGS:
Gross carrying amount, beginning of year - $20,532,859 $26,353,167
Additions during period:
Acquisition (1) - - 5,855,284
Improvements - 512,220 833,184
Deductions during period:
Cost of real estate sold - - (78,203)
Reclassification of assets held for sale (2) (3) - (21,045,079) (12,430,573)
======================================================
Gross carrying amount, end of year - - $20,532,859
======================================================
Accumulated depreciation, beginning of year - $4,494,720 $7,534,281
Additions during period:
Depreciation - 395,484 852,435
Deductions during period:
Reclassification of assets held for sale (2) (3) - (4,890,204) (3,891,996)
======================================================
Accumulated depreciation, end of year - - $4,494,720
======================================================
(1) In 1997, the Company acquired the remaining 50 percent interest in a partnership which owns an office building
in Boston, Massachusetts for $0.6 million in cash. The acquisition was accounted for using the purchase method
of accounting and, accordingly, the purchase price was allocated to the assets acquired and the liabilities
assumed based on their estimated fair values at the date of acquisition.
(2) In the first quarter of 1998, the Company committed to a plan to sell an office building and shopping center
located in Troy, New York and recognized a pre-tax impairment loss of $2.6 million based on the estimated net
realizable value of the property (estimated fair value less estimated selling costs). In the fourth quarter of
1996, the Company committed to a plan to sell an office building located in Boston, Massachusetts and recognized
a pre-tax impairment loss of $1.3 million based on the estimated net realizable value of the property. Estimated
fair value of the property was calculated using market appraisals and other available valuation techniques. At
October 31, 1996, the property was classified as a current asset held for sale for financial reporting purposes.
(3) In 1998, the Company committed to a plan to sell all of its remaining properties. The Company had committed to a
plan to sell two warehouse buildings located in Springfield, Massachusetts and Colonie, New York and a shopping
center in Goffstown, New Hampshire in 1997. See Note 4 of the Notes to the Consolidated Financial Statements for
a discussion of real estate assets.
26
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/ James B. Hawkes
James B. Hawkes
Chairman, Director and Principal
Executive Officer
January 26, 2000
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/ James B. Hawkes Chairman, Director and January 26, 2000
James B. Hawkes Principal Executive Officer
/s/ William M. Steul Chief Financial Officer January 26, 2000
William M. Steul
/s/ Laurie G. Russell Chief Accounting Officer January 26, 2000
Laurie G. Russell
/s/ John G.L. Cabot Director January 26, 2000
John G.L. Cabot
/s/ John M. Nelson Director January 26, 2000
John M. Nelson
/s/ Vincent M. O'Reilly Director January 26, 2000
Vincent M. O'Reilly
/s/ Ralph Z. Sorenson Director January 26, 2000
Ralph Z. Sorenson
27
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:
EXHIBIT NO. DESCRIPTION
3.1 The Company's Amended Articles of Incorporation are 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 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 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 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.
3.5 Copy of the Company's Articles of Amendment effective at the close of
business on July 7, 1998 has been filed as Exhibit 3.1 to the Quarterly
Report on Form 10-Q for the fiscal quarter ended July 31, 1998, (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
$.015625 per share, and Non-Voting Common Stock, par value $.015625 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, 3.3, 3.4
and 3.5 above as incorporated herein by reference.
9.1 Copy of the Voting Trust Agreement made as of October 30, 1997. has been
filed as Exhibit 9.1 to the Annual Report on Form 10-K of the Company for
the fiscal year ended October 31, 1997, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.1 Description of Performance Bonus Arrangement for Members of Investment
Division of Eaton Vance Management has been filed as Exhibit 10.1 to the
Annual Report on Form 10-K of the Company for the fiscal year ended
October 31, 1995, (S.E.C. File No. 1-8100) and is incorporated herein by
reference.
28
EXHIBIT NO. DESCRIPTION
10.2 Description of Incentive Bonus Arrangement for Marketing Personnel of
Eaton Vance Distributors, Inc. has been filed as Exhibit 10.2 to the
Annual Report on Form 10-K of the Company for the fiscal year ended
October 31, 1995, (S.E.C. File No. 1-8100) and is incorporated herein by
reference.
10.3 Copy of 1988 Profit Improvement Bonus Plan of Eaton Vance 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.
10.4 Description of 1990 Performance and Retention of Officers 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 10.5 to
the Annual Report on Form 10-K of the Company for the fiscal year ended
October 31, 1995, (S.E.C. File No. 1-8100) and is incorporated herein by
reference.
10.5 Copy of 1992 Stock Option Plan as adopted by the Eaton Vance 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.
10.6 Copy of 1986 Employee Stock Purchase Plan as amended and 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.
10.7 Copy of 1992 Incentive Plan - Stock Alternative as 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.
10.8 Copy of 1995 Stock Option Plan as adopted by the Eaton Vance Corp. Board
of Directors on October 12, 1995, has been filed as Exhibit 10.9 to the
Annual Report on Form 10-K of the Company for the fiscal year ended
October 31, 1995, (S.E.C. File No. 1-8100) and is incorporated herein by
reference.
10.9 Copy of 1986 Employee Stock Purchase Plan as amended and restated by the
Eaton Vance Corp. Board of Directors on October 12, 1995, 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, 1995, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.10 Copy of 1995 Executive Loan Program relating to financing or refinancing
the exercise of options by key directors, officers, and employees adopted
by the Company's Directors on October 12, 1995, has been filed as Exhibit
10.2 to the Annual Report on Form 10-K of the Company for the fiscal year
ended October 31, 1995, (S.E.C. File No. 1-8100) and is incorporated
herein by reference.
10.11 Copy of the Eaton Vance Corp. Supplemental Profit Sharing Plan adopted by
the Company's Directors on October 9, 1996, 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, 1996, (S.E.C. File No. 1-8100) and is incorporated
herein by reference.
29
EXHIBIT NO. DESCRIPTION
10.12 Copy of 1992 Stock Option Plan - Restatement No. 1 as adopted by the Eaton
Vance Corp. Board of Directors on April 9, 1997, has been filed as Exhibit
10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended
April 30, 1997, (S.E.C. File No. 1-8100) and is incorporated herein by
reference.
10.13 Copy of 1995 Stock Option Plan - Restatement No. 1 as adopted by the Eaton
Vance Corp. Board of Directors on April 9, 1997, has been filed as Exhibit
10.2 to the Quarterly Report on Form 10-Q for the fiscal quarter ended
April 30, 1997, (S.E.C. File No. 1-8100) and is incorporated herein by
reference.
10.14 Copy of 1992 Incentive Plan - Stock Alternative - Restatement No. 2 as
adopted by the Eaton Vance Corp. Board of Directors on April 9, 1997, has
been filed as Exhibit 10.3 to the Quarterly Report on Form 10-Q for the
fiscal quarter ended April 30, 1997, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.15 Copy of 1992 Stock Option Plan - Restatement No. 2 as adopted by the Eaton
Vance Corp. Board of Directors on October 30, 1997 has been filed as
Exhibit 10.15 to the Annual Report on Form 10-K of the Company for the
fiscal year ended October 31, 1997, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.16 Copy of 1995 Stock Option Plan - Restatement No. 2 as adopted by the Eaton
Vance Corp. Board of Directors on October 30, 1997 has been filed as
Exhibit 10.16 to the Annual Report on Form 10-K of the Company for the
fiscal year ended October 31, 1997, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.17 Copy of 1992 Incentive Plan - Stock Alternative - Restatement No. 3 as
adopted by the Eaton Vance Corp. Board of Directors on July 7, 1998, has
been filed as Exhibit 10.3 to the Quarterly Report on Form 10-Q for the
fiscal quarter ended July 31, 1998, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.18 Copy of 1986 Employee Stock Purchase Plan - Restatement No. 7 adopted by
the Eaton Vance Corp. Board of Directors on July 9, 1998, has been filed
as Exhibit 10.2 to the Quarterly Report on Form 10-Q of the Company for
the fiscal quarter ended July 31, 1998, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.19 Copy of 1998 Stock Option Plan as adopted by the Eaton Vance Corp. Board
of Directors on July 9, 1998 has been filed as Exhibit 10.1 to the
Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended
July 31, 1998 (S.E.C. File No. 1-8100) and is incorporated herein by
reference.
10.20 Copy of Eaton Vance Corp. Executive Performance-Based Compensation Plan as
adopted by the Eaton Vance Corp. Board of Directors on July 9, 1998 has
been filed as Exhibit 10.4 to the Quarterly Report on Form 10-Q of the
Company for the fiscal quarter ended July 31, 1998 (S.E.C. File No.
1-8100), and is incorporated herein by reference.
10.21 Copy of 1998 Executive Loan Program relating to financing or refinancing
the exercise of options by key directors, officers, and employees adopted
by the Company's Directors on October 15, 1998 (filed herewith).
30
EXHIBIT NO. DESCRIPTION
10.22 Copy of 1999 Restricted Stock Plan as adopted by the Eaton Vance Corp.
Board of Directors on October 13, 1999 (filed herewith).
13.1 Copy of the Company's Annual Report to Shareholders for the fiscal year
ended October 31, 1999 (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, 1999 (filed
herewith).
23.1 Independent Auditors' Consent (filed herewith).
27.1 Financial Data Schedule as of October 31, 1999 (filed herewith -
electronic filing only).
99.2 List of Eaton Vance Corp. Open Registration Statements (filed herewith).