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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
October 31, 2000
For the fiscal year ended
Commission File Number 1-8100
EATON VANCE CORP.
(Exact name of registrant as specified in its charter)
Maryland 04-2718215
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
255 State Street, Boston, Massachusetts 02109
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(Address of principal executive offices) (Zip Code)
(617) 482-8260
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(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 Non-Voting Common Stock on which registered
($0.0078125 par value) New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
Non-Voting Common Stock par value $0.0078125 per share
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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. [x]
Aggregate market value of Non-Voting Common Stock held by non-affiliates of the
Registrant, based on the closing price of $32.25 on December 31, 2000 on the New
York Stock Exchange was $1,758,115,877. 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, 2000
Non-Voting Common Stock, $0.0078125 par value 69,409,496
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Common Stock, $0.0078125 par value 154,880
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Portions of Registrant's Annual Report to Stockholders for the fiscal year ended
October 31, 2000 (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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1
PART I
ITEM 1. BUSINESS
The Company's principal business is creating, marketing and managing investment
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, 2000, the Company managed $49.2
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, 2000, 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
assets under management of $46.0 billion and the Company's separately managed
accounts had aggregate assets under management of $3.2 billion. The following
table shows assets in the Funds and the separately managed accounts for the
dates indicated:
FUND AND SEPARATELY MANAGED ACCOUNT ASSETS
AT OCTOBER 31,
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2000 1999 1998 1997 1996
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(in millions)
Funds:
Money Market $ 300 $ 200 $ 200 $ 200 $ 200
Equities 25,400 18,000 9,800 5,200 3,100
Bank Loans 10,100 10,000 6,200 3,900 2,800
Taxable Fixed Income 3,600 2,500 2,200 2,100 1,300
Non-Taxable Fixed Income 6,600 7,400 7,500 7,500 8,200
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Total 46,000 38,100 25,900 18,900 15,600
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Separately Managed Accounts 3,200 2,800 2,500 2,400 1,700
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Total $49,200 $40,900 $28,400 $21,300 $17,300
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2
ITEM 1. BUSINESS (CONTINUED)
Equity fund assets represented 52 percent of total assets under management as of
October 31, 2000 compared to 44 percent on October 31, 1999, while taxable and
non-taxable fixed-income fund assets decreased to 21 percent of total assets
under management from 24 percent the year earlier. Bank loan fund assets
decreased to 21 percent of total assets under management as of October 31, 2000,
from 24 percent the year before.
In fiscal 2000, the Company continued to focus on developing products that are
managed to maximize after-tax returns and on broadening its tax-managed equity
product line. Tax-managed investing addresses the roughly 50 percent of
investors who invest in funds outside of qualified retirement plans such as IRAs
and 401(k)s. The Company introduced Eaton Vance Tax-Managed Growth Fund in the
spring of 1996. In fiscal 1997 and 1998, the Company added two new tax-managed
funds, Eaton Vance Tax-Managed Emerging Growth Fund and Eaton Vance Tax-Managed
International Growth Fund, as companion products to its flagship large-cap
growth fund. In fiscal 2000, the Company rounded out its tax-managed product
line with the introduction of Eaton Vance Tax-Managed Value Fund, Eaton Vance
Tax-Managed Capital Appreciation Fund and Eaton Vance Tax-Managed Young
Shareholder Fund, each focusing on the goal of long-term after-tax returns. In
addition to its tax-managed equity funds, the Company offers a family of
open-end and exchange-listed municipal bond funds that continue to be an
important part of the Company's tax-managed product offering. The Company has
also continued to offer private equity funds to qualified high net worth
investors.
The Company extended the scope of its tax-managed products in fiscal 2000 to
encompass "Comprehensive Wealth Management" - the management, on a
multigenerational basis, of a family's investment, tax, and estate planning
needs. In April 2000, the Company introduced The U.S. Charitable Gift Trust and
Pooled Income Funds, designed to address the distribution of wealth in a tax
efficient manner. The U.S. Charitable Gift Trust is one of the first charities
to use professional investment advisers to assist high net worth individuals
with their philanthropic, estate and tax planning needs. The Pooled Income
Funds, sponsored by the Trust, are similar to charitable remainder trusts,
providing donors with income during their lifetimes and leaving the principal to
the Gift Trust and designated charities upon their deaths. The Trust and Pooled
Income Funds encourage long-term philanthropy, while allowing individuals to
avoid the high costs associated with setting up their own charitable foundations
and charitable remainder trusts.
The Company broadened its taxable fixed-income product line in fiscal 2000 with
the completion of two collateralized debt obligation programs ("CDOs"). These
two privately-placed, combination high yield and bank loan CDOs attracted $800
million in assets under management in fiscal 2000.
The Company further broadened its floating-rate bank loan product line in fiscal
2000 with the introduction of Eaton Vance Floating-Rate High Income Fund, a bank
loan fund offering investors daily liquidity in an open-end mutual fund format.
Floating Rate High Income Fund complements the Company's family of
continuously-offered, and exchange-listed closed-end bank loan funds.
The Company has five new funds domiciled in Dublin, Ireland for retail
distribution in Europe. These funds have investment objectives and policies
similar to certain equity and income funds offered domestically by the Company.
These funds have been registered for retail sale in Germany and are also being
registered in Switzerland. The Company has also registered several of its
offshore 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
five of the Eaton Vance Funds in accordance with each Fund's/Trust's investment
objectives and policies. Investment decisions for four international equity
funds are made by Lloyd George Management ("LGM"), an independent investment
management company based in Hong Kong in which the Company owns a 21% equity
position. The portfolio managers of the Company and LGM jointly manage one of
the Company's international equity funds. OrbiMed Advisors, Inc. ("Orbimed"), an
independent investment management company based in New York, makes investment
decisions for Worldwide Health Sciences Portfolio. The Company's portfolio
management staff has, 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 to 100 basis
points of average net assets annually. For Funds that are registered under the
Investment Company Act of 1940, as amended ("Registered Funds"), a majority of
the independent trustees of these Registered Funds, i.e., those unaffiliated
with the management company, must approve the investment advisory agreements
annually. Registered Fund shareholders must approve any material amendments to
the investment advisory agreements. The Funds 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 and institutional clients. The Company's investment advisory
fee agreements for the separately managed accounts provide for fees ranging from
20 to 100 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, 2000:
INVESTMENT ADVISORY AND
ADMINISTRATION FEES*
YEAR ENDED OCTOBER 31,
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2000 1999 1998 1997 1996
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(in thousands)
Investment Advisory
Fees - Funds $204,926 $ 173,079 $127,234 $ 95,531 $81,473
Separately Managed Accounts 12,436 11,169 11,295 9,503 8,865
Administration Fees -
Funds ** 8,017 13,129 12,662 12,071 7,793
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Total 225,379 $197,377 $151,191 $117,105 $98,131
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* 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 2000, 1999 or 1998.
** Administration fees decreased in fiscal 2000 primarily as a result of the
change in fee structure associated with the implementation of Rule 12b-1
equivalent distribution plans on the bank loan interval funds on May 1,
1999. See discussion at Management's Discussion and Analysis of financial
conditions and results of operations appearing on pages 18 to 24 of the
Company's 2000 Annual Report to Shareholders furnished as Exhibit 13.1
hereto, which is incorporated herein by reference.
4
ITEM 1. BUSINESS (CONTINUED)
INVESTMENT ADVISORY AGREEMENTS AND DISTRIBUTION PLANS
Beginning 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"). 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 investment
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.
EVM also serves as administrator or manager under an Administration Service
Agreement or Management Contract (each an "Agreement") to the 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 that may be necessary for managing and
administering the business affairs of the Funds. For the services provided under
the Agreements, certain Funds pay EVM a monthly fee calculated at an annual rate
of up to 0.35% of average daily gross 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 compensation to the Company for the payment of
applicable sales commissions to retail distribution firms and for distribution
services 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.
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,
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.
EVM has entered into an investment advisory and administrative agreement with
The U.S. Charitable Gift Trust. In addition, The U.S. Charitable Gift Trust has
entered into distribution agreements with EVD that provide for reimbursement of
the costs of fundraising and servicing donor accounts. EVD does not profit from
the raising of contributions for the Gift Trust.
5
ITEM 1. BUSINESS (CONTINUED)
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 2000,
1999 and 1998 calendar years, the five dealer firms responsible for the largest
volume of Fund sales accounted for approximately 31%, 28% and 35%, respectively,
of the Company's Fund sales volume. EVD currently maintains a sales force of
more than 46 external wholesalers and 43 internal wholesalers. External and
internal wholesalers work closely with the retail distribution network to assist
in selling shares of Funds.
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 Registered Funds with up to four separate pricing
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 shares sold. The Fund pays a service fee to authorized firms after one
year not to exceed 25 basis points of average net assets and may also pay a Rule
12b-1 fee not to exceed 50 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 after one
year not to exceed 25 basis points of average net assets.
For Class C shares, the shareholder pays no front-end commissions, and no
contingent deferred sales charges on redemptions 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. Offering level-load Class C 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.
6
ITEM 1. BUSINESS (CONTINUED)
The Company also sponsors from time to time unregistered equity funds privately
placed by EVD, as placement agent, and by various sub-agents to whom EVD and the
subscribing shareholders make payments. The private funds are managed by EVM and
BMR.
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 Registered Funds offered in the U.S. 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, 2000 (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 October 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." Accordingly, 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 that did not have both Rule 12b-1 fees and contingent
deferred sales charges. 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 were expensed 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 on November 1, 1998 was a charge to the
Consolidated Statements of Income of $36.6 million, net of income taxes of $23.4
million.
In April of 1999, the Company's 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 paid to
broker-dealers for sales of its bank loan interval funds effective May 1, 1999,
the beginning of the third fiscal quarter of fiscal 1999. Closed-end and bank
loan interval fund sales commissions expensed from November 1, 1998 to April 30,
1999 totaled $71.3 million.
The change in accounting treatment has not had, nor will have, any effect on the
Company's cash flow or cash position.
7
ITEM 1. BUSINESS (CONTINUED)
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
that are not historical facts, but for this purpose are 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 Eaton
Vance Funds compete against an ever increasing number of investment products
sold to the public by investment dealers, banks, insurance companies and others
that sell equity funds, taxable income funds, tax-free investments 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 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, as amended. Except for
privately-offered Funds exempt from registration, each U.S. 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. EVD's regulatory net capital has
consistently exceeded such minimum net capital requirements in fiscal 2000. 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, 2000, the Company and its wholly owned subsidiaries had 438
full-time employees. On October 31, 1999, the comparable figure was 407.
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. 2000 Annual
Report to Shareholders (Exhibit 13.1 hereto), both of which are incorporated
herein by reference. As noted in Note 4 to the Consolidated Financial Statements
contained in the Eaton Vance Corp. 2000 Annual Report to Shareholders, the
Springfield property was sold in November of 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
On October 11, 2000, the holders of all of the outstanding Voting Common Stock,
by unanimous written consent, approved the following matters:
1) The Articles of Amendment to the Company's Charter effecting a two-for-one
stock split.
2) The authorization to repurchase up to 4,000,000 shares of the Company's
Non-voting Common Stock.
3) The 1998 Stock Option Plan - Restatement No. 1.
4) The 1986 Employee Stock Purchase Plan - Restatement No. 8.
5) The 1992 Incentive Plan Stock Alternative - Restatement No. 4.
6) Amendment No. 1 to the Eaton Vance Corp. Executive Performance-Based
Compensation Plan.
7) The restated Eaton Vance Corp. Supplemental Profit Sharing Plan.
8) The renewal of the Voting Trust for an additional three-year term until
October 30, 2003.
On November 1, 2000, the holders of all of the outstanding Voting Common Stock,
by unanimous written consent, approved the 1998 Stock Option Plan - Restatement
No. 2.
Such consents are effective as duly adopted votes of the holders of all Voting
Common Stock as of such dates.
10
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Voting Common Stock, $0.0078125 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, $0.0078125 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, 2000 was 950.
The additional information required to be disclosed in Item 5 is found on page 8
of the Company's 2000 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 Financial
Summary" on page 17 of the Company's 2000 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 7 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 18 through 24 of the Company's 2000 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 24 of the
Company's 2000 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 25 through 44 of the
Company's 2000 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, 2000:
NAME AGE POSITION
----------------------------------------------------------------------------
James B. Hawkes 59 Chairman of the Board, President and
Chief Executive Officer
John G.L. Cabot 66 Director
Leo I. Higdon, Jr. 54 Director
John M. Nelson 68 Director
Vincent M. O'Reilly 62 Director
Ralph Z. Sorenson 67 Director
Thomas E. Faust Jr. 42 Executive Vice President and Chief Equity
Investment Officer
Jeffrey P. Beale 44 Vice President and Chief Administrative Officer
Alan R. Dynner 60 Vice President, Secretary and Chief
Legal Officer
Laurie G. Hylton 34 Vice President and Chief Accounting Officer
William M. Steul 58 Vice President, Treasurer and Chief
Financial Officer
Wharton P. Whitaker 56 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 President and Chief Executive Officer in October 1996 and
Chairman of the Board in October 1997. 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
Nominating and Governance Committees established by the Company's Board of
Directors. He is also Chairman of the Company's Management Committee. 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. Cabot has served as a Director of the Company since March 1989. He is
Chairman of the Nominating Committee and serves as a member of the Audit,
Compensation, Option and Governance Committees established by the Company's
Board of Directors. Mr. Cabot is also a Director of Cabot Corporation and Cabot
Oil and Gas Corporation.
Mr. Higdon has served as Director of the Company since January 2000. Mr. Higdon
has served as the President of Babson College since July 1997. Prior to joining
Babson College, Mr. Higdon served as Dean of Business Administration at the
Darden Graduate School of Business Administration. Mr. Higdon is also a Director
of Crompton Corporation and Newmont Mining.
Mr. Nelson has served as Director of the Company since January 1998. He is
Chairman of the Governance Committee and serves as a member of the Compensation,
Option and Nominating Committees established by the Company's Board of
Directors. Mr. Nelson is Chairman of Brown & Sharpe Manufacturing Company and a
Director of the TJX Companies, Commerce Holdings, Inc. and Stocker and Yale,
Inc.
12
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
Mr. O'Reilly has served as a Director of the Company since April 1998. He is
Chairman of the Audit Committee and serves as a member of the Nominating and
Governance 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. Mr. O'Reilly was formerly a partner of Coopers and Lybrand.
Mr. O'Reilly serves 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 the Audit, Nominating and Governance 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. Faust has been Executive Vice President and Chief Equity Investment Officer
since January 2000. He was a Vice President and Director of Equity Research and
Management of the Company since February 1995. Mr. Faust serves as a member of
the Company's Management Committee.
Mr. Beale has been a Vice President of the Company since June 1998 and the Chief
Administrative Officer of the Company since November 1999. Prior to joining the
Company, he was a Senior Vice President of Putnam Investments from December 1997
to June 1998. Mr. Beale was a Vice President of the Company from May 1992 to
December 1997. Mr. Beale serves as a member of the Company's Management
Committee.
Mr. Dynner has been a Vice President and Chief Legal Officer of the Company
since November 1996 and Secretary of the Company since January 2000. 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. Mr.
Dynner is a member of the Company's Management Committee. He is an officer of
all the registered investment companies for which Eaton Vance Management or
Boston Management and Research acts as investment adviser.
Ms. Hylton has been a Vice President of the Company since June 1994 and Chief
Accounting Officer since October 1997. She was the Internal Auditor of the
Company from June 1994 to October 1997.
Mr. Steul has been the Vice President, Treasurer and Chief Financial Officer of
the Company since December 1994. Mr. Steul is a member of the Company's
Management Committee.
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 Company's Management Committee.
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 best of Company's knowledge, based solely on a review of the copies
of such reports furnished to the Company, during fiscal 2000 all Section 16(a)
filing requirements applicable to such individuals were complied with for fiscal
2000.
13
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
--------------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
YEAR SALARY BONUS COMPENSATION(1) AWARD(2) OPTIONS COMPENSATION(3)
- ----------------------------------------------------------------------------------------------------------------------------
NAME AND PRINCIPAL ($) ($) ($) ($) (#) ($)
POSITION
- ----------------------------------------------------------------------------------------------------------------------------
James B. Hawkes
President and Chief 2000 450,000 2,500,000 4,345 -- 100,000 30,000
Executive Officer
1999 430,000 1,750,000 4,894 -- 140,000 30,000
1998 415,000 1,410,000 4,038 -- 140,000 30,000
- ----------------------------------------------------------------------------------------------------------------------------
Thomas E. Faust Jr.
Executive Vice President
and Chief Equity 2000 330,000 2,250,000 58,241 1,000,000 60,000 30,000
Investment Officer
1999 315,000 1,535,000 51,941 -- 80,000 30,000
1998 300,000 1,250,000 56,709 -- 79,200 30,000
- ----------------------------------------------------------------------------------------------------------------------------
Alan R. Dynner
Vice President and Chief 2000 272,000 435,000 8,347 -- 30,000 30,000
Legal Officer
1999 265,000 350,000 9,414 -- 40,000 30,000
1998 260,000 300,000 8,095 -- 30,000 30,000
- ----------------------------------------------------------------------------------------------------------------------------
William M. Steul
Vice President and Chief 2000 275,000 435,000 6,952 -- 30,000 30,000
Financial Officer
1999 270,000 350,000 9,399 -- 40,000 30,000
1998 266,000 300,000 4,865 -- 30,000 30,000
- ----------------------------------------------------------------------------------------------------------------------------
Wharton P. Whitaker 2000 255,000 1,182,208 8,335 -- 30,000 30,000
President, EVD
1999 249,000 1,340,819 9,425 -- 40,000 30,000
1998 245,000 977,417 8,108 -- 30,000 30,000
- ----------------------------------------------------------------------------------------------------------------------------
14
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 restricted stock award of 58,182 shares to Mr. Faust had a market
value of $1,448,641 at October 31, 2000. Shares vest over five to
seven years. The Company expects 26,181 to vest over the next three
years. Dividends are paid on restricted stock awards.
(3) The amounts appearing under "All Other Compensation" represent
contributions by the Company to the Company's profit sharing,
supplemental profit sharing and 401(k) Plans.
(B) OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes stock option grants during 2000 to the named
executive officers:
PERCENTAGE
OF TOTAL
NUMBER OF OPTIONS POTENTIAL REALIZABLE VALUE
SECURITIES GRANTED TO AT ASSUMED ANNUAL RATES OF
UNDERLYING EMPLOYEES IN EXERCISE STOCK PRICE APPRECIATION
OPTIONS FISCAL YEAR PRICE EXPIRATION FOR OPTION TERM(1)
NAME GRANTED ($/SHARE) DATE 5% ($) 10% ($)
- --------------------------- --------------- --------------- ------------- -------------- ----------------------------
James B. Hawkes 94,200 7.6% $17.188 11/01/09 2,066,380 2,607,516
5,800 0.5% $18.906 11/01/04 139,953 176,603
Thomas E. Faust Jr. 54,200 4.4% $17.188 11/01/09 1,188,936 1,500,291
5,800 0.5% $18.906 11/01/04 139,953 176,603
Alan R. Dynner 30,000 2.4% $17.188 11/01/09 658,083 830,419
William M. Steul 30,000 2.4% $17.188 11/01/09 658,083 830,419
Wharton P. Whitaker 30,000 2.4% $17.188 11/01/09 658,083 830,419
(1) Amounts calculated using 5% and 10% assumed annual rates of stock price appreciation represent hypothetical gains
that could be achieved for the respective options if exercised at the end of the option term. Actual gains, if
any, on stock option exercises will depend on the future performance of the Company's stock and the dates on which
the options are exercised.
15
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
(C) AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table summarizes stock options exercised during 2000 and stock
options held as of October 31, 2000 by the named executive officers.
NUMBER OF
SHARES SECURITIES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNEXERCISED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT FISCAL
EXERCISE REALIZED YEAR END YEAR END (1)
------------- ------------- ------------------------------- ---------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- ------------------------- ------------- ------------- ---------------- -------------- ---------------- ----------------
James B. Hawkes 15,000 209,391 776,622 418,378 14,616,274 6,288,535
Thomas E. Faust Jr. -- -- 208,622 163,378 3,795,022 2,038,295
Alan R. Dynner -- -- 245,789 94,211 4,702,877 1,236,873
William M. Steul 11,200 91,875 92,945 83,855 1,866,421 1,003,097
Wharton P. Whitaker 11,200 90,125 40,929 83,855 774,871 1,003,097
(1) Based on the fair market value of the Company's Non-Voting Common stock on October 31, 2000 ($24.906) 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, 2000,
John G.L. Cabot and Ralph Z. Sorenson each received $29,000; in addition, each
was granted options for 3,374 shares. During the fiscal year ended October 31,
2000, John M. Nelson and Vincent M. O'Reilly received $25,000 and $28,000,
respectively; in addition, each was granted options for 3,374 shares. During the
fiscal year ended October 31, 2000, Leo I. Higdon, Jr. received $23,000; in
addition, he was granted options for 2,836 shares.
(E) COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Not applicable.
16
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) COMMON STOCK
All outstanding shares of the Company's Voting Common Stock, $0.0078125 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, 2000), 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 was renewed for an additional three-year term until October 30, 2003. The
Voting Trustees have unrestricted voting rights to elect the Company's
directors. At December 31, 2000, the Company had outstanding 154,880 shares of
Voting Common Stock. Inasmuch as the eleven Voting Trustees of the Voting Trust
have unrestricted voting rights with respect to the Voting 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
Voting 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 six 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, 2000, of
the Voting Trust Receipts issued under said Voting Trust Agreement, which
Receipts cover the aggregate of 154,880 shares of the Voting 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 37,120 24%
Voting Common Stock Thomas E. Faust Jr. 27,906 18%
Voting Common Stock Alan R. Dynner 18,558 12%
Voting Common Stock William M. Steul 18,558 12%
Voting Common Stock Wharton P. Whitaker 18,558 12%
Voting Common Stock Thomas J. Fetter 7,746 5%
Voting Common Stock Duncan W. Richardson 7,746 5%
Voting Common Stock Jeffrey P. Beale 4,672 3%
Voting Common Stock Scott H. Page 4,672 3%
Voting Common Stock Payson F. Swaffield 4,672 3%
Voting Common Stock Michael W. Weilheimer 4,672 3%
17
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, $0.0078125 par value, shall have no voting rights under any circumstances
whatsoever. As of December 31, 2000, the officers and Directors of the Company,
as a group, beneficially owned 5,409,885 shares of such Non-Voting Common Stock
(including, as noted, unexercised options to purchase such stock) or 7.61% of
the 69,409,496 shares then outstanding plus 1,723,498 shares subject to options
exercisable within 60 days 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 (including, as noted unexercised options to purchase
such 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, 2000 (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 11,207,488 (d) 16.15
Non-Voting Common Stock James B. Hawkes 2,877,137 (c) (e) 4.09
Non-Voting Common Stock Thomas E. Faust Jr. 853,079 (c) 1.23
Non-Voting Common Stock Wharton P. Whitaker 680,764 (c) 0.98
Non-Voting Common Stock William M. Steul 285,837 (c) 0.41
Non-Voting Common Stock Alan R. Dynner 282,762 (c) 0.41
Non-Voting Common Stock John G.L. Cabot 216,272 (c) (f) 0.31
Non-Voting Common Stock Ralph Z. Sorenson 93,096 (c) 0.13
Non-Voting Common Stock John M. Nelson 15,152 (c) 0.02
Non-Voting Common Stock Vincent M. O'Reilly 5,030 (c) 0.01
Non-Voting Common Stock Leo I. Higdon 2,000 (c) 0.00
18
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(CONTINUED)
(a) Based solely upon information furnished by the individuals.
(b) Based on 69,409,496 outstanding shares plus options exercisable within
60 days of 1,013,285 for Mr. Hawkes, 229,103 for Mr. Faust, 63,074 for
Mr. Whitaker, 63,890 for Mr. Steul, 276,090 for Mr. Dynner, 10,704 for
Mr. Cabot, 10,704 for Mr. Sorenson, 7,152 for Mr. Nelson and 3,824 for
Mr. O'Reilly.
(c) Includes shares subject to options exercisable within 60 days granted
to, but not exercised by, each named executive officer above.
(d) Includes 20,000 shares held by Mr. Clay's children, 8,360 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 50,840 shares held in trust of a profit sharing retirement
plan for employees of LTC Corp., 60% owned by Mr. Clay.
(e) Includes 93,160 shares owned by Mr. Hawkes' spouse and 60,134 shares
held by Mr. Hawkes' daughter.
(f) Includes 32,000 shares held in a family limited partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(A) Not applicable.
(B) Not applicable.
(C) INDEBTEDNESS OF MANAGEMENT
In 1998, the Company increased to $10,000,000 the amount 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 $2,485,342 at
October 31, 2000.
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, 1999, in an aggregate amount in excess of $60,000:
LARGEST AMOUNT OF LOANS RATE OF INTEREST
LOANS OUTSTANDING OUTSTANDING AS CHARGED ON
SINCE 11/1/99 OF 12/31/00 LOANS AS OF 12/31/00
- ---------------------------------------- ----------------- ---------------------
James B. Hawkes $ 603,278 $ 451,713 4.83% - 7.61%(1)
Wharton P. Whitaker 99,925 - -
(1) 5.74% interest payable on $37,861 principal amount, 7.61% interest payable
on $23,100 principal amount, 6.77% interest payable on $80,000 principal
amount, 4.83% interest payable on $194,220 principal amount, 6.47% interest
payable on $58,266 principal amount, and 6.32% interest payable on $58,266
principal amount.
19
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 25 through 44 of
the Annual Report, are incorporated by reference as a part of this Form
10-K:
SEPARATE
DOCUMENT
EATON VANCE CORP. 2000 ANNUAL REPORT TO SHAREHOLDERS PAGE NUMBER
- --------------------------------------------------------------------------------
Consolidated Statements of Income for each of the three
years in the period ended October 31, 2000 25
Consolidated Balance Sheets as of October 31, 2000 and 1999 26-27
Consolidated Statements of Cash Flows for each of the three
years in the period ended October 31, 2000 28
Consolidated Statements of Shareholders' Equity and
Comprehensive Income for each of the three years in the
period ended October 31, 2000 29
Notes to Consolidated Financial Statements 30-43
Independent Auditors' Report 44
(2) The following consolidated financial statement schedule and independent
auditors' 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 Schedule 21
Schedule III Real Estate and Accumulated Depreciation 22-23
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 25 through 27 and is incorporated
herein by reference.
(B) REPORTS ON FORM 8-K
Not applicable.
20
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, 2000 and 1999, and for each of the three
years in the period ended October 31, 2000, and have issued our report thereon
dated November 21, 2000, (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). Our audits also included
the consolidated financial statement schedule of Eaton Vance Corp. and its
subsidiaries, listed in Item 14(A)(2). This consolidated financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion on the consolidated financial statement schedule based
on our audits. In our opinion, such consolidated financial statement schedule,
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 21, 2000
21
EATON VANCE CORP.
REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III
OCTOBER 31, 2000
- ------------------------------------------------------------------------------------------------------------------------------------
COSTS
SUBSEQUENT TO GROSS CARRYING AMOUNT
INITIAL COST CAPITALIZED OCTOBER 31, 2000 (1) (2)
-----------------------SUBSEQUENT TO--------------------------------
ACQUISITION DATE OF DEPRE
(IMPROVE- ACCUMULATED CON- DATE CIABLE
DESCRIPTION ENCUMBRANCES LAND BUILDINGS MENTS) LAND BUILDINGS DEPRECIATION STRUCTION ACQUIRED LIFE
- ------------------------------------------------------------------------------------------------------------------------------------
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) This property is classified as held for sale at October 31, 2000.
22
EATON VANCE CORP.
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED) SCHEDULE III
YEARS ENDED OCTOBER 31, 2000, 1999 AND 1998
- -------------------------------------------------------------------------------------------------------------------
2000 1999 1998
---------------- ----------------- -----------------
LAND AND BUILDINGS:
Gross carrying amount, beginning of year -- -- $20,532,859
Additions during period:
Improvements -- -- 512,220
Deductions during period:
Reclassification of assets as held for sale (1) (2) -- -- (21,045,079)
================ ================= =================
Gross carrying amount, end of year -- -- --
================ ================= =================
Accumulated depreciation, beginning of year -- -- $4,494,720
Accumulated depreciation, beginning of year
Additions during period:
Depreciation -- -- 395,484
Deductions during period:
Reclassification of assets as held for sale (1) (2) -- -- (4,890,204)
================ ================= =================
Accumulated depreciation, end of year -- -- --
================ ================= =================
(1) 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).
(2) In 1998, the Company committed to a plan to sell all of its remaining properties. See Note 4 of the Notes to the
Consolidated Financial Statements for a discussion of real estate assets.
23
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, 2001
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, 2001
James B. Hawkes Principal Executive Officer
/s/ William M. Steul Chief Financial Officer January 26, 2001
William M. Steul
/s/ Laurie G. Hylton Chief Accounting Officer January 26, 2001
Laurie G. Hylton
/s/ John G.L. Cabot Director January 26, 2001
John G.L. Cabot
/s/ Leo I. Higdon Director January 26, 2001
Leo I. Higdon
/s/ John M. Nelson Director January 26, 2001
John M. Nelson
/s/ Vincent M. O'Reilly Director January 26, 2001
Vincent M. O'Reilly
/s/ Ralph Z. Sorenson Director January 26, 2001
Ralph Z. Sorenson
24
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.
3.6 Copy of the Company's Articles of Amendment effective at the close of
business on October 11, 2000 (filed herewith).
4.1 The rights of the holders of the Company's Common Stock, par value
$0.0078125 per share, and Non-Voting Common Stock, par value $0.0078125
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
through 3.6 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.
25
EXHIBIT NO. DESCRIPTION
10.1 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.
10.2 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.
10.3 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.
10.4 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.
10.5 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.
10.6 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.
10.7 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.
10.8 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.
10.9 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.
10.10 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.
26
EXHIBIT NO. DESCRIPTION
10.11 Copy of 1998 Executive Loan Program relating to financing or refinancing
the exercise of options by key directors, officers, and employees adopted
by the Eaton Vance Corp. Directors on October 15, 1998 has been filed as
Exhibit 10.21 to the Annual Report on Form 10-K of the Company for the
fiscal year ended October 31, 1999 (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.12 Copy of 1999 Restricted Stock Plan as adopted by the Eaton Vance Corp.
Board of Directors on October 13, 1999 has been filed as Exhibit 10.21 to
the Annual Report on Form 10-K of the Company for the fiscal year ended
October 31, 1999 (S.E.C. File No. 1-8100) and is incorporated herein by
reference.
10.13 Copy of 1998 Stock Option Plan - Restatement No.1 as adopted by the Eaton
Vance Corp. Board of Directors on October 11, 2000 (filed herewith).
10.14 Copy of 1986 Employee Stock Purchase Plan - Restatement No.8 as adopted by
the Eaton Vance Corp. Board of Directors on October 11, 2000 (filed
herewith).
10.15 Copy of 1992 Incentive Plan - Stock Alternative - Restatement No.4 as
adopted by the Eaton Vance Corp. Board of Directors on October 11, 2000
(filed herewith).
10.16 Copy of Amendment No. 1 to the Eaton Vance Corp. Executive
Performance-Based Compensation Plan as adopted by the Eaton Vance Corp.
Board of Directors on October 11, 2000 (filed herewith).
10.17 Copy of the restated Eaton Vance Corp. Supplemental Profit Sharing Plan as
adopted by the Eaton Vance Corp. Board of Directors on October 11, 2000
(filed herewith).
10.18 Copy of 1998 Stock Option Plan - Restatement No.2 as adopted by the Eaton
Vance Corp. Board of Directors on November 1, 2000 (filed herewith).
13.1 Copy of the Company's Annual Report to Shareholders for the fiscal year
ended October 31, 2000 (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, 2000 (filed
herewith).
23.1 Independent Auditors' Consent (filed herewith).
99.2 List of Eaton Vance Corp. Open Registration Statements (filed herewith).