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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
For the fiscal year ended October 31, 2001
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
(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 ($0.0078125 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 $35.55 on December 31, 2001 on the New
York Stock Exchange was $1,941,336,027. Calculation of holdings by
non-affiliates is based upon the assumption, for these purposes only, that
executive officers, directors, and persons holding 5 percent 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, 2001
Non-Voting Common Stock, $0.0078125 par value 69,544,076
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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, 2001 (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
THIS ITEM INCLUDES STATEMENTS THAT ARE "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, INCLUDING STATEMENTS
REGARDING OUR EXPECTATIONS, INTENTIONS OR STRATEGIES REGARDING THE FUTURE. ALL
STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS FORM 10-K
REGARDING OUR FINANCIAL POSITION, BUSINESS STRATEGY AND OTHER PLANS AND
OBJECTIVES FOR FUTURE OPERATIONS, ARE FORWARD-LOOKING STATEMENTS. ALTHOUGH WE
BELIEVE THAT THE ASSUMPTIONS AND EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING
STATEMENTS ARE REASONABLE, WE CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS
REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS WILL PROVE TO HAVE BEEN CORRECT OR
THAT WE WILL TAKE ANY ACTIONS THAT MAY PRESENTLY BE PLANNED. CERTAIN IMPORTANT
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM OUR
EXPECTATIONS ARE DISCLOSED IN THE "COMPETITIVE CONDITIONS AND RISK FACTORS"
SECTION OF THIS FORM 10-K. ALL SUBSEQUENT WRITTEN OR ORAL FORWARD-LOOKING
STATEMENTS ATTRIBUTABLE TO US OR PERSONS ACTING ON OUR BEHALF ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY SUCH FACTORS.
ITEM 1. BUSINESS
Eaton Vance Corp. (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. The Company's principal business is creating, marketing and
managing investment funds and providing investment management services to
institutions and individuals. As of October 31, 2001, the Company managed $56.6
billion in portfolios with investment objectives ranging from high current
income to maximum capital gain.
The Company conducts its investment management business through two wholly-owned
subsidiaries, Eaton Vance Management ("EVM") and Boston Management and Research
("BMR"), and two majority-owned subsidiaries, Atlanta Capital Management
Company, LLC ("Atlanta Capital") and Fox Asset Management, LLC ("Fox Asset
Management"). All four entities are registered with the Securities and Exchange
Commission ("SEC") as investment advisers 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 Eaton Vance Funds (the "Funds").
GENERAL DEVELOPMENT OF BUSINESS
Over the past five years, the Company has expanded the range of investment
management services and products it offers to meet the needs of high-net-worth
investors. The Company has developed a position as the leading provider of
equity funds that are managed with an objective of maximizing after-tax returns.
Tax-managed investing addresses the roughly 50 percent of equity fund assets
held by taxpaying investors outside of qualified retirement plans such as IRAs
and 401(k)s. The Company introduced Eaton Vance Tax-Managed Growth Fund 1.1 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 1.1 and Eaton
Vance Tax-Managed International Growth Fund, as companion products to its
flagship large-cap growth fund. In fiscal 2000, the Company further expanded 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 maximizing long-term
after-tax returns. In fiscal 2001, Eaton Vance Tax-Managed Growth Fund 1.2 and
Eaton Vance Tax Managed Emerging Growth Fund 1.2 were introduced, making use of
an innovative structure to invest in the same portfolios as their respective
predecessor funds while shielding new investors from potential tax liability for
historical portfolio gains. The Company plans to introduce more tax-managed
equity funds in fiscal 2002. 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, on a private basis, funds
2
ITEM 1. BUSINESS (CONTINUED)
to meet the diversification and tax-managment needs of qualifying high net worth
investors.
The Company extended the scope of its high net worth investment 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
its Pooled Income Funds, designed to address the distribution of wealth in a
convenient, 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 its 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 floating-rate bank loan product line in fiscal 2000
with the introduction of Eaton Vance Floating-Rate High Income Fund and Eaton
Vance Floating Rate Fund, two bank loan funds offering investors daily liquidity
in an open-end mutual fund format.
In fiscal 2001, the Company expanded its investment management industry focus
beyond mutual funds. The Company targeted two major potential growth areas:
managing assets for institutions, including pension plans and endowments; and
managing individual portfolios for higher-net-worth clients who want a more
customized form of asset management than provided by mutual funds. In an effort
to build a leadership position in the institutional and separately managed
account business, the Company acquired 70 percent of Atlanta Capital and 80
percent of Fox Asset Management, two institutional investment management firms
focusing, respectively, on growth and value investment styles. These strategic
acquisitions, completed on September 30, 2001, complement the strengths of the
Company and provide new opportunities to broaden the Company's mix of asset
management disciplines, clients and distribution channels.
Taking into account the Company's recent acquisitions, the Company provided
investment advisory or administration services to 157 Funds, 1,193 separately
managed individual and institutional accounts, and separately managed accounts
in 21 broker/dealer programs on October 31, 2001. At that date, there were $46.1
billion of fund assets and $10.5 billion of separate account assets. The
following table shows fund and the separate account assets for the dates
indicated:
3
ITEM 1. BUSINESS (CONTINUED)
FUND AND SEPARATELY MANAGED ACCOUNT ASSETS
AT OCTOBER 31,
----------------------------------------------------
2001 2000 1999 1998 1997
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(in millions)
Funds:
Equities $25,200 $25,400 $18,000 $ 9,800 $ 5,200
Floating-Rate Income 9,600 10,100 10,000 6,200 3,900
Fixed Income 10,200 9,500 9,600 9,100 9,100
Money Market 1,100 1,000 500 800 700
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Total 46,100 46,000 38,100 25,900 18,900
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Separately Managed Accounts 10,500 3,200 2,800 2,500 2,400
----------------------------------------------------
Total $56,600 $49,200 $40,900 $28,400 $21,300
====================================================
Total equity assets under management (including Funds and separately managed
accounts) comprised 57 percent of total assets under management on October 31,
2001 compared to 55 percent on October 31, 2000. Fixed income assets under
management increased to 26 percent of total assets under management from 24
percent a year ago and floating-rate income assets decreased to 17 percent from
21 percent a year ago. The change in the composition of total assets under
management is primarily due to the inclusion of Atlanta Capital and Fox Asset
Management assets as a result of the September 30, 2001 acquisitions.
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 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 percent
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 18 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 (i.e., those
unaffiliated with the management company) of these Registered Funds must approve
the investment advisory agreements annually. The Fund trustees generally may
terminate these agreements upon 30 to 60 days notice without penalty. Registered
Fund shareholders must approve any material amendments to the investment
advisory agreements.
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 separately managed accounts provide for fees ranging from
20 to 100 basis points of average net assets annually. These agreements are
generally terminable upon 30 to 60 days notice without penalty.
4
ITEM 1. BUSINESS (CONTINUED)
The following table shows investment advisory and administration fees earned for
the past five years ended October 31, 2001:
INVESTMENT ADVISORY AND
ADMINISTRATION FEES*
YEAR ENDED OCTOBER 31,
----------------------------------------------------
2001 2000 1999 1998 1997
----------------------------------------------------
(in thousands)
Investment Advisory
Fees - Funds $226,249 $204,926 $173,079 $127,234 $ 95,531
Separately Managed Accounts 14,700 12,436 11,169 11,295 9,503
Administration Fees -
Funds ** 10,807 8,017 13,129 12,662 12,071
----------------------------------------------------
Total $251,756 225,379 $197,377 $151,191 $117,105
====================================================
* Excludes gold mining investment management fees and administration fees
received from funds other than Eaton Vance Funds. The Company did not
receive any management or administration fees from gold mining investments
from 1998 through 2001.
** 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 by 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 26 of the
Company's 2001 Annual Report to Shareholders (furnished as Exhibit 13.1
hereto) which is incorporated herein by reference.
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.
5
ITEM 1. BUSINESS (CONTINUED)
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, BMR, Atlanta Capital and Fox Asset Management have entered into an
investment advisory agreement for each separately managed account, which sets
forth the account's investment objectives and fee schedule, and provides for
management of assets in the account 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 and its Pooled Income Funds 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.
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 2001,
2000 and 1999 calendar years, the five dealer firms responsible for the largest
volume of Fund sales accounted for approximately 34 percent, 31 percent, and 28
percent, respectively, of the Company's Fund sales volume. EVD currently
maintains a sales force of more than 53 external wholesalers and 53 internal
wholesalers. External and internal wholesalers work closely with investment
professionals in the retail distribution network to assist in selling shares of
Funds.
In 1997, the Company began offering its Funds to investors without charging
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 five separate pricing
structures: 1) front-end load commission (Class A); 2) spread-load commission
(Class B); 3) level-load commission (Class C); 4) modified spread-load
commission (Class D); and 5) institutional (no-load) (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. EVD 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.
6
ITEM 1. BUSINESS (CONTINUED)
For Class B and D 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 fund 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, EVD 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.
EVD pays a service fee to authorized firms after one year 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 (Class
I) shares has made a number of funds available to a broader group of financial
intermediaries.
From time to time the Company sponsors unregistered equity funds that are
privately placed by EVD, as placement agent, and by various sub-agents to whom
EVD and the subscribing shareholders make payments. The privately placed equity
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 15 of the Notes to Consolidated Financial Statements
contained in the Eaton Vance Corp. Annual Report to Shareholders for the fiscal
year ended October 31, 2001 (which report is furnished as Exhibit 13.1 hereto)
for a description of the major customers that provided over 10 percent of the
total revenue of the Company.
7
ITEM 1. BUSINESS (CONTINUED)
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 offering costs should be
expensed as incurred under the provisions of SOP 98-5. 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.
As a result, closed-end, interval and private fund sales commissions paid and
capitalized prior to the Company's adoption of SOP 98-5 were expensed as a
cumulative effect of a change in accounting principle, as described in APB
Opinion No. 20, "Accounting Changes." The cumulative effect of the change in
accounting principle upon adoption on November 1, 1998 was a charge to the
Consolidated Statement of Income of $36.6 million, net of income taxes of $23.4
million.
In April of 1999, the bank loan interval funds received the necessary approvals
to implement Rule 12b-1 equivalent distribution plans. Beginning May 1, 1999,
with the implementation of these plans, the Company resumed capitalizing and
amortizing sales commissions paid to broker/dealers for sales of these funds
effective May 1, 1999, the beginning of the third fiscal quarter of 1999.
Closed-end and bank loan interval fund sales commissions expensed from November
1, 1998 to April 30, 1999 totaled $71.3 million.
COMPETITIVE CONDITIONS AND RISK FACTORS
From time to time, information provided by the Company or information included
in its filings with the Securities and Exchange Commission ("SEC") (including
this Annual Report on 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 below.
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 various 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 and separately managed accounts 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 or tax
advantaged investments, taxable income funds, equity funds and other investment
products. Many institutions competing with the Company have greater resources
than the Company. The Company competes with other providers of investment
products on the basis of the products offered, the investment performance of
such products, quality of service, fees charged, the level and type of financial
intermediary compensation, the manner in which such products are marketed and
distributed and the services provided to investors.
8
ITEM 1. BUSINESS (CONTINUED)
The Company derives almost all of its revenue from investment adviser and
administration fees and distribution income received from the Eaton Vance funds,
other pooled investment vehicles and separately managed accounts. As a result,
the Company is dependent upon management contracts, administration contracts,
underwriting contracts or service contracts under which these fees and income
are paid. If any of these contracts are not renewed or are amended to reduce
fees, the Company's financial results may be adversely affected.
The major sources of revenue for the Company (i.e., investment adviser,
administration, distribution and service fees) are calculated as percentages of
assets under management. A decline in securities prices or an increase in fund
redemptions generally would reduce fee income. Also, financial market declines
or adverse changes in interest rates would generally negatively impact the level
of 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 generally reduce or
eliminate profits. If expenses rise and/or assets rise, bringing increased fees
to offset the increased expenses, profits may not be affected by inflation.
There is no predictable relationship between changes in financial assets under
management and the rate of inflation. A recession could also adversely impact
the Company's revenues if it led to a decreased demand for products, a higher
redemption rate, or a decline in securities prices. Like other businesses, the
Company's actual results could be affected by the loss of key managerial
personnel through competition or retirement.
REGULATION
EVM, BMR, Atlanta Capital and Fox Asset Management 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, BMR, Atlanta Capital or Fox Asset
Management engaging in the investment management business for specified periods
of time, the revocation of any such Company'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, Inc. ("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 2001. 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.
9
ITEM 1. BUSINESS (CONTINUED)
EMPLOYEES
On October 31, 2001, the Company and its subsidiaries had 562 full-time
employees. On October 31, 2000, the comparable figure was 438.
ITEM 2. PROPERTIES
In November of 2000, Northeast Properties, LLC, a wholly-owned subsidiary of the
Company, sold its last remaining property. For information with respect to this
property, reference is made to Note 6 of the Notes to Consolidated Financial
Statements contained in the Eaton Vance Corp. 2001 Annual Report to Shareholders
(Exhibit 13.1 hereto), both of which are incorporated herein by reference.
The Company conducts its principal operations through leased offices located in
Boston, Massachusetts, Atlanta, Georgia and Little Silver, New Jersey.
Management believes that the Company's facilities are adequate to serve its
currently anticipated business needs.
ITEM 3. LEGAL PROCEEDINGS
On October 15, 2001, a consolidated complaint was filed in the United States
District Court for the District of Massachusetts against Eaton Vance Classic
Senior Floating-Rate Fund, Eaton Vance Prime Rate Reserves, Eaton Vance
Institutional Senior Floating-Rate Fund, Eaton Vance Advisers Senior
Floating-Rate Fund (collectively, the "Funds"), their trustees and certain
officers of the Funds; EVM, the Funds' administrator; BMR, the Funds' investment
adviser; and the Company, the parent of EVM and BMR. The complaint, framed as a
class action, alleges that for the period between May 25, 1998 and March 5,
2001, the Funds' assets were incorrectly valued and certain matters were not
properly disclosed, in violation of the federal securities laws. The complaint
seeks unspecified damages. The Company and the other named defendants believe
that the complaint is without merit and are vigorously contesting the lawsuit.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No items were submitted to a vote in the fourth quarter of fiscal 2001.
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, 2001 was
approximately 970. The additional information required to be disclosed in Item 5
is found on page 10 of the Company's 2001 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 2001 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 8 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 25 of the Company's 2001 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 25 through 26 of
the Company's 2001 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 27 through 50 of the
Company's 2001 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 January 16, 2002:
NAME AGE POSITION
-----------------------------------------------------------------------------
James B. Hawkes 60 Chairman of the Board, President and Chief
Executive Officer
John G.L. Cabot 67 Director
Leo I. Higdon, Jr. 55 Director
John M. Nelson 69 Director
Vincent M. O'Reilly 63 Director
Ralph Z. Sorenson 68 Director
Thomas E. Faust Jr. 43 Director, Executive Vice President and Chief
Investment Officer
Jeffrey P. Beale 45 Vice President and Chief Administrative Officer
Alan R. Dynner 61 Vice President, Secretary and Chief Legal Officer
Laurie G. Hylton 35 Vice President and Chief Accounting Officer
William M. Steul 59 Vice President, Treasurer and Chief Financial
Officer
Wharton P. Whitaker 57 Vice President and Chief Sales and Marketing
Officer
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 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 a Director of the Company since January 2000. He serves
as a member of the Compensation, Option, and Governance Committees established
by the Company's Board of Directors. Mr. Higdon has served as the President of
the College of Charleston since September of 2001. Prior to joining the College
of Charleston, he served as the President of Babson College and as Dean of
Business Administration at the Darden Graduate School of Business Administration
at the University of Virginia. Mr. Higdon is also a Director of Crompton
Corporation and Newmont Mining.
12
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
Mr. Nelson has served as a 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 Commonwealth National Bank and BNS
Corporation.
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 Executive,
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. He was formerly a partner of Coopers and
Lybrand. Mr. O'Reilly serves as a Director of the Neiman Marcus Group and
Teradyne, Inc.
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 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 was elected a Director of the Company and Chief Investment Officer in
January 2002 and has been the Executive Vice President since January 2000. He
served as head of the Company's equity investment group from February 1995 to
October 2001 and was a Vice President of the Company from December 1987 to
January 2000. Mr. Faust serves as a member of the Executive and Governance
Committees established by the Company's Board of Directors and 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 is a member of the Company's Management Committee.
Mr. Dynner has been 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 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 Vice President and Chief Sales and Marketing Officer of
the Company since January 2002, and has been the 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.
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 best of Company's knowledge, based solely on a review of the copies
of such reports furnished to the Company, during fiscal 2001 all Section 16(a)
filing requirements applicable to such individuals were complied with for fiscal
2001 except for a report covering one transaction filed late by Ralph Z.
Sorenson.
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
---------------------------
RESTRICTED SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(1) AWARD (2) OPTIONS COMPENSATION(3)
- ----------------------------------------------------------------------------------------------------------------------------
($) ($) ($) ($) (#) ($)
- ----------------------------------------------------------------------------------------------------------------------------
James B. Hawkes President 2001 602,000 3,125,000 4,090 - 160,000 30,000
and Chief Executive 2000 450,000 2,500,000 4,345 - 100,000 30,000
Officer 1999 430,000 1,750,000 4,894 - 140,000 30,000
- ----------------------------------------------------------------------------------------------------------------------------
Thomas E. Faust Jr. 2001 407,000 2,812,500 38,348 - 125,000 30,000
Executive Vice President 2000 330,000 2,250,000 58,241 1,000,000 60,000 30,000
and Chief Investment 1999 315,000 1,535,000 51,941 - 80,000 30,000
Officer
- ----------------------------------------------------------------------------------------------------------------------------
Alan R. Dynner 2001 280,000 610,000 7,174 - 30,000 30,000
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
- ----------------------------------------------------------------------------------------------------------------------------
William M. Steul 2001 280,000 610,000 6,203 - 30,000 30,000
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
- ----------------------------------------------------------------------------------------------------------------------------
Wharton P. Whitaker 2001 263,000 1,161,104 7,184 - 30,000 30,000
Vice President and Chief 2000 255,000 1,182,208 8,335 - 30,000 30,000
Sales and Marketing 1999 249,000 1,340,819 9,425 - 40,000 30,000
Officer
- ----------------------------------------------------------------------------------------------------------------------------
(1) The amounts appearing under "Other Annual Compensation" represent the discount on the purchase of the Company's stock
under the Company's Employee Stock Purchase Plan and Incentive Plan - Stock Alternative.
(2) Mr. Faust had aggregate restricted stock holdings of 52,364 shares with a market value of $1,471,428 at October 31, 2001.
Shares vest over five to seven years from the date of grant. The Company expects 34,909 shares to vest over the next
three years. Dividends are paid on restricted stock awards.
(3) The amounts appearing under "All Other Compensation" represent contributions by the Company to the Company's profit
sharing plans, supplemental profit sharing and 401(k) Plans.
15
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
(B) OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes stock option grants during 2001 to the named executive officers:
PERCENTAGE
NUMBER OF OF TOTAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS AT ASSUMED ANNUAL RATES OF
UNDERLYING GRANTED TO EXERCISE STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES IN PRICE EXPIRATION FOR OPTION TERM(1)
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- ---------------------------------------------------------------------------------------------------------------------
James B. Hawkes 155,924 7.8% $24.531 11/01/10 2,405,534 6,096,094
4,076 0.2% $26.984 11/01/05 17,626 51,046
Thomas E. Faust Jr. 120,924 6.0% $24.531 11/01/10 1,865,567 4,727,714
4,076 0.2% $26.984 11/01/05 17,626 51,046
Alan R. Dynner 25,924 1.3% $24.531 11/01/10 399,945 1,013,540
4,076 0.2% $26.984 11/01/05 17,626 51,046
William M. Steul 25,924 1.3% $24.531 11/01/10 399,945 1,013,540
4,076 0.2% $26.984 11/01/05 17,626 51,046
Wharton P. Whitaker 25,924 1.3% $24.531 11/01/10 399,945 1,013,540
4,076 0.2% $26.984 11/01/05 17,626 51,046
(1) Amounts calculated using 5 percent and 10 percent assumed annual rates of stock price appreciation represent
hypothetical gains that could be achieved for the respective options if exercised at the end of the option term.
Actual gains, if any, on stock option exercises will depend on the future performance of the Company's stock and the
dates on which the options are exercised.
16
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
(C) AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
The following table summarizes stock options exercised during 2001 and stock
options held as of October 31, 2001 by the named executive officers.
NUMBER OF
SHARES SECURITIES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
EXERCISE REALIZED FISCAL YEAR END FISCAL YEAR END (1)
---------------------------------------------------------------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- -----------------------------------------------------------------------------------------------------------------------
James B. Hawkes 15,000 344,859 1,013,285 326,715 22,051,290 2,868,108
Thomas E. Faust Jr. 76,504 1,771,607 190,781 229,715 3,758,003 1,895,068
Alan R. Dynner 165,098 3,966,978 110,992 93,910 2,317,106 1,051,239
William M. Steul 51,200 1,064,548 10,704 35,818 212,029 189,300
Wharton P. Whitaker - - 63,074 91,710 1,268,109 1,005,481
(1) Based on the fair market value of the Company's Non-Voting Common stock on October 31, 2001 ($28.10) 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, 2001,
Leo Higdon and John M. Nelson, Jr. each received $25,000; John G.L. Cabot,
Vincent M. O'Reilly and Ralph Z. Sorenson received $28,000, $26,000, and
$29,000, respectively. In addition, each Director was granted options for 3,686
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, $0.0078125 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, 2001), 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, 2001, 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, 2001, 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%
18
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(CONTINUED)
Messrs. Hawkes and Faust are officers and Directors of the Company and Voting
Trustees of the Voting Trust; Messrs. Beale, Dynner, Steul and Whitaker are all
officers of the Company and Voting Trustees of the Voting Trust; Messrs. Fetter,
Richardson, 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, 2001, the officers and Directors of the Company,
as a group, beneficially owned 5,541,709 shares of such Non-Voting Common Stock
(including, as noted, unexercised options to purchase such stock and any shares
held in the trust of the Stock Option Income Deferral Plan) or 7.86 percent of
the 69,544,076 shares then outstanding plus 937,883 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 percent 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,
2001 (such investment power being sole unless otherwise indicated):
AMOUNT OF
BENEFICIAL PERCENTAGE
TITLE OF CLASS BENEFICIAL OWNERS OWNERSHIP (A) OF CLASS (B)
- --------------------------------------------------------------------------------
Non-Voting Common Stock Landon T. Clay 10,940,988 (d) 15.73
Non-Voting Common Stock James B. Hawkes 2,952,134 (c) (e) (g) 4.21
Non-Voting Common Stock Thomas E. Faust Jr. 909,514 (c) (g) 1.30
Non-Voting Common Stock Wharton P. Whitaker 703,692 (c) (g) 1.01
Non-Voting Common Stock William M. Steul 298,727 (c) (g) 0.43
Non-Voting Common Stock Alan R. Dynner 234,363 (c) 0.34
Non-Voting Common Stock John G.L. Cabot 220,223 (c) (f) 0.32
Non-Voting Common Stock Ralph Z. Sorenson 82,255 (c) 0.12
Non-Voting Common Stock John M. Nelson 21,735 (c) 0.03
Non-Voting Common Stock Vincent M. O'Reilly 9,594 (c) 0.01
Non-Voting Common Stock Leo I. Higdon 4,339 (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 69,544,076 outstanding shares plus options exercisable within
60 days of 498,011 for Mr. Hawkes, 180,147 for Mr. Faust, 64,935 for Mr.
Dynner, 54,435 for Mr. Whitaker, 32,835 for Mr. Steul, 13,735 for Mr.
Nelson, 9,863 for Mr. Cabot, 9,863 for Mr. Sorenson, 8,376 for Mr.
O'Reilly, and 2,339 for Mr. Higdon.
(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 percent owned by Mr. Clay.
(e) Includes 93,160 shares owned by Mr. Hawkes' spouse and 60,682 shares
held by Mr. Hawkes' daughter.
(f) Includes 32,000 shares held in a family limited partnership.
(g) Includes shares held in the trust of the Stock Option Income Deferral
Plan of 474,611 for Mr. Hawkes, 63,833 for Mr. Faust, 40,396 for Mr.
Steul, and 30,506 for Mr. Whitaker.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(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 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 $2,641,074 at October 31, 2001.
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, 2000, in an aggregate amount in excess of $60,000:
RATE OF INTEREST
LARGEST AMOUNT OF LOANS CHARGED ON
LOANS OUTSTANDING OUTSTANDING AS LOANS AS OF
SINCE 11/1/2000 OF 12/31/2001 12/31/2001
- --------------------------------------------------------------------------------
James B. Hawkes $ 559,695 $ 413,852 4.83% - 7.61% (1)
Alan Dynner $ 399,940 $ 399,940 4.96%
Jeffrey P. Beale $ 86,016 $ 86,016 4.30%
(1) 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.
20
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
independent auditors' report, included on pages 27 through 50 of the
Annual Report, are incorporated by reference as a part of this Form
10-K:
SEPARATE
DOCUMENT
EATON VANCE CORP. 2001 ANNUAL REPORT TO SHAREHOLDERS PAGE NUMBER
- --------------------------------------------------------------------------------
Consolidated Statements of Income for each of the three
years in the period ended October 31, 2001 27
Consolidated Balance Sheets as of October 31, 2001 and 2000 28-29
Consolidated Statements of Shareholders' Equity and
Comprehensive Income for each of the three years in the
period ended October 31, 2001 30-31
Consolidated Statements of Cash Flows for each of the three
years in the period ended October 31, 2001 32
Notes to Consolidated Financial Statements 33-49
Independent Auditors' Report 50
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.
(2) The list of exhibits required by Item 601 of Regulation S-K is set forth
in the Exhibit Index on pages 24 through 27 and is incorporated herein
by reference.
21
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED)
(B) REPORTS ON FORM 8-K
The Company filed a Form 8-K with the SEC on July 26, 2001 regarding the
agreement to acquire 80 percent of Fox Asset Management LLC.
The Company filed a Form 8-K with the SEC on August 2, 2001 regarding the
agreement to acquire 70 percent of Atlanta Capital Management Company, LLC.
The Company filed a Form 8-K with the SEC on August 6, 2001 and August 7, 2001
regarding the issuance of Eaton Vance Management's zero-coupon exchangeable
senior notes due in 2031.
The Company filed a Form 8-K with the SEC on October 2, 2001 regarding the
closing of the acquisitions of Atlanta Capital Management Company, LLC and Fox
Asset Management LLC.
The Company filed a Form 8-K/A with the SEC on October 19, 2001 regarding the
closing of the acquisitions of Atlanta Capital Management Company, LLC and Fox
Asset Management LLC and their related unit purchase agreements.
22
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 29, 2002
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 29, 2002
James B. Hawkes Principal Executive Officer
/s/ William M. Steul Chief Financial Officer January 29, 2002
William M. Steul
/s/ Laurie G. Hylton Chief Accounting Officer January 29, 2002
Laurie G. Hylton
/s/ John G.L. Cabot Director January 29, 2002
John G.L. Cabot
/s/ Thomas E. Faust Jr. Director January 29, 2002
Thomas E. Faust Jr.
/s/ Leo I. Higdon Director January 29, 2002
Leo I. Higdon
/s/ John M. Nelson Director January 29, 2002
John M. Nelson
/s/ Vincent M. O'Reilly Director January 29, 2002
Vincent M. O'Reilly
/s/ Ralph Z. Sorenson Director January 29, 2002
Ralph Z. Sorenson
23
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
2.1 Copy of the Unit Purchase Agreement, dated as of July 25, 2001, among
Eaton Vance Acquisitions, a Massachusetts Business Trust, and Fox Asset
Management, Inc., a New Jersey corporation, and Messrs. J. Peter
Skirkanich, James P. O'Mealia, George C. Pierdes, John R. Sampson and
Phillip R. Sloan has been filed as Exhibit 2.1 to the Quarterly Report on
Form 10-Q for the fiscal quarter ended July 31, 2001, (S.E.C. File No.
1-8100) and is incorporated herein by reference.
2.2 Copy of Amendment No. 1 of the Unit Purchase Agreement, dated as of July
25, 2001, among Eaton Vance Acquisitions, a Massachusetts Business Trust,
Saucon I, Inc., a New Jersey corporation formerly named Fox Asset
Management, Inc., Saucon III, a Delaware limited liability company, Saucon
IV, a Delaware limited liability company, and Messrs. J. Peter Skirkanich,
James P. O'Mealia, George C. Pierdes, John R. Sampson and Phillip R. Sloan
has been filed as Exhibit 2.2 to the Form 8-K A filed on October 19, 2001,
(S.E.C. File No. 1-8100) and is incorporated herein by reference.
2.3 Copy of the Unit Purchase Agreement, dated as of August 2, 2001, among
Eaton Vance Acquisitions, a Massachusetts Business Trust, Atlanta Capital
Management Company LLC, and each of Daniel W. Boone III, Gregory L.
Coleman, Jerry D. Devore, William Hackney, III, Marilyn Robinson Irvin,
Dallas L. Lundy, Walter F. Reames, Jr. and Christopher A. Reynolds has
been filed as Exhibit 2.3 to the Form 8-K A filed on October 19, 2001,
(S.E.C. File No. 1-8100) and is incorporated herein by reference.
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.
24
EXHIBIT NO. DESCRIPTION
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 has been filed as Exhibit 3.6 to the Annual
Report on Form 10-K of the Company for the fiscal year ended October 31,
2000 (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
$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.
4.2 Copy of the Indenture between Eaton Vance Management and The Chase
Manhattan Bank, as Trustee, dated as of August 13, 2001 has been filed as
Exhibit 4.1 to the Form S-3 filed on November 9, 2001, (S.E.C. File No.
1-8100) and is 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 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.
25
EXHIBIT NO. DESCRIPTION
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.
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 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, 2000 (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
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 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, 2000 (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
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
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, 2000 (S.E.C. File No.
1-8100) and is incorporated herein by reference.
26
EXHIBIT NO. DESCRIPTION
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 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, 2000 (S.E.C. File No. 1-8100) and is incorporated herein by
reference.
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
has been filed as Exhibit 10.17 to the Annual Report on Form 10-K of the
Company for the fiscal year ended October 31, 2000 (S.E.C. File No.
1-8100) and is incorporated herein by reference.
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 has been filed as
Exhibit 10.18 to the Annual Report on Form 10-K of the Company for the
fiscal year ended October 31, 2000 (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.19 Copy of Stock Option Income Deferral Plan as adopted by the Eaton Vance
Corp. Board of Directors on April 18, 2001 has been filed as Exhibit 10.1
to the Quarterly Report on Form 10-Q of the Company for the fiscal quarter
ended April 30, 2001, (S.E.C. File No. 1-8100) and is incorporated herein
by reference.
10.20 Copy of 1986 Employee Stock Purchase Plan - Restatement No. 9 as adopted
by the Eaton Vance Corp. Board of Directors on July 11, 2001 has been
filed as Exhibit 10.19 to the Quarterly Report on Form 10-Q of the Company
for the fiscal quarter ended July 31, 2001, (S.E.C. File No. 1-8100) and
is incorporated herein by reference.
10.21 Copy of 1992 Incentive Plan - Stock Alternative - Restatement No. 5 as
adopted by the Eaton Vance Corp. Board of Directors on July 11, 2001 has
been filed as Exhibit 10.19 to the Quarterly Report on Form 10-Q of the
Company for the fiscal quarter ended July 31, 2001, (S.E.C. File No.
1-8100) and is incorporated herein by reference.
10.22 Copy of 1998 Stock Option Plan - Restatement No. 3 as adopted by the Eaton
Vance Corp. Board of Directors on December 12, 2001 (S.E.C. File No.
1-8100) (filed herewith).
10.23 Copy of the Credit Agreement, dated December 21, 2001, between Eaton Vance
Management as borrower, Citicorp USA, Inc. as syndication agent and JP
Morgan Chase Bank, as administrative agent (S.E.C. File No. 1-8100) (filed
herewith).
13.1 Copy of the Company's Annual Report to Shareholders for the fiscal year
ended October 31, 2001 (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, 2001 (filed
herewith).
23.1 Independent Auditors' Consent (filed herewith).
99.2 List of Eaton Vance Corp. Open Registration Statements (filed herewith).