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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year
ended October 31, 1997
Commission File Number 1-8100
EATON VANCE CORP.
(Exact name of registrant as specified in its charter)
Maryland 04-2718215
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
24 Federal Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
(617) 482-8260
--------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Non-Voting Common Stock
($0.03125 par value) New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Non-Voting Common Stock par value $0.03125 per share
Title of Class
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the close of the latest practicable date.
Class Outstanding at December 31, 1997
Non-Voting Common Stock,
$0.03125 par value 18,545,360
Common Stock, $0.03125 par value 38,720
Aggregate market value of Non-Voting Common Stock held by non-affiliates of the
Registrant, based on the closing price of $37.75 on December 31, 1997 on the New
York Stock Exchange was $493,605,259. 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.
Portions of registrant's Annual Report to Stockholders for the fiscal year ended
October 31, 1997, (Exhibit 13.1 hereto) have been incorporated by reference into
the following Parts of this report: Part I, Part II and Part IV.
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PART I
ITEM 1. BUSINESS
The Company's principal business is creating, marketing and managing mutual
funds and providing management and counseling services to institutions and
individuals. The Company has been in the investment management business for over
seventy years, tracing its history to two Boston-based investment managers:
Eaton & Howard, formed in 1924, and Vance, Sanders & Company, organized in 1934.
As of October 31, 1997, the Company managed $21.3 billion in portfolios with
investment objectives ranging from high current income to maximum capital gain.
INVESTMENT MANAGEMENT AND ADMINISTRATIVE ACTIVITIES
The Company conducts its investment management and counseling business through
two wholly-owned subsidiaries, Eaton Vance Management ("EVM") and Boston
Management and Research ("BMR"), each of which is a Massachusetts business trust
registered with the Securities and Exchange Commission ("the Commission") as an
investment adviser under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"). Eaton Vance Distributors, 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.
As of October 31, 1997, the Company provided investment advisory or
administration services to over 70 Funds ("Funds") and to over 800 separately
managed individual and institutional accounts. At that date, the Funds had
aggregate net assets of $18.9 billion and the Company's separately managed
accounts had aggregate net assets of $2.4 billion. The following table shows net
assets in the Funds and the separately managed accounts for the dates indicated:
FUND AND SEPARATELY MANAGED ACCOUNT ASSETS
AT OCTOBER 31,
------------------------------------------------
1997 1996 1995 1994 1993
------------------------------------------------
Funds: (in millions)
Money Market $ 200 $ 200 $ 200 $ 200 $ 200
Equities 5,200 3,100 2,400 2,300 2,200
Bank Loans 3,900 2,800 1,400 600 800
Taxable Fixed Income 2,100 1,300 1,300 1,300 1,100
Non-Taxable Fixed Income 7,500 8,200 8,900 9,000 8,900
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Total 18,900 15,600 14,200 13,400 13,200
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Separately Managed Accounts 2,400 1,700 1,800 1,600 2,200
-------------------------------------------------
Total $21,300 $17,300 $16,000 $15,000 $15,400
=================================================
On October 31, 1997, equity fund assets increased to 24 percent of total assets
under management from 18 percent on October 31, 1996, while taxable and
non-taxable fixed-income funds decreased to 45 percent of total assets under
management from 55 percent a year ago. Floating-rate bank loan funds increased
to 18 percent of total assets under management on October 31, 1997 from 16
percent a year ago.
ITEM 1. BUSINESS (CONTINUED)
Investment decisions for all but four of the over 70 Funds are made by portfolio
managers employed by the Company and are made in accordance with each Fund's
investment objectives and policies. Investment decisions for ten of the
Company's international equity funds are made by Lloyd George Management, an
independent investment management company based in Hong Kong in which the
Company owns a minority equity position. Investment decisions for the Eaton
Vance Worldwide Health Sciences Fund are made by OrbiMed Advisors, Inc.
(formerly named Mehta and Isaly Asset Management, Inc.), an independent
investment management company based in New York. The Company's portfolio
management staff have, on average, more than 20 years of experience in the
securities industry. The Company's investment advisory agreements with each of
the Funds provide for fees ranging from 45 to 95 basis points of average net
assets annually for management services provided. The investment advisory
agreements must be approved annually by the trustees of the respective Funds,
including a majority of the independent trustees, i.e., those unaffiliated with
the management company. Amendments to the investment advisory agreements must be
approved by Fund shareholders. These agreements are generally terminable by the
Fund upon 30 to 60 days notice without penalty.
Investment decisions for the separately managed accounts are made by investment
counselors employed by the Company. The Company's investment counselors use the
same sources of information as Fund portfolio managers, but tailor investment
decisions to the needs of individual clients. The Company's investment advisory
fee agreements for the separately managed accounts provide for fees ranging from
30 to 80 basis points of average net assets on an annual basis. These agreements
are generally terminable upon 30 to 60 days notice without penalty.
The following table shows investment advisory and administration fees received
for the past five years ended October 31, 1997.
INVESTMENT ADVISORY AND
ADMINISTRATION FEES*
YEAR ENDED OCTOBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
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(in thousands)
Investment Advisory Fees -
Funds $ 95,531 $ 81,473 $ 69,094 $ 68,284 $ 59,322
Separately Managed Accounts 9,503 8,865 8,712 9,807 8,949
Administration Fees - Funds 12,071 7,793 4,631 4,257 3,295
====================================================
Total $ 117,105 $ 98,131 $ 82,437 $ 82,348 $ 71,551
====================================================
* Excludes gold mining investment management fees and administration fees
received from funds other than Eaton Vance Funds.
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 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.
ITEM 1. BUSINESS (CONTINUED)
In 1993, the Company introduced the Master/Feeder structure. Master/Feeder is a
two-tiered arrangement in which Funds (Feeder Funds) with substantially
identical investment objectives pool their assets by investing in a common
portfolio (Master Fund). Eaton Vance used Master/Feeder to introduce four
distinct mutual fund families (Traditional, Marathon, Classic and Medallion),
with each family having its own prospectus, sales literature, product design and
distribution structure (see Marketing and Distribution of Fund Shares below).
The structure was intended to benefit fund shareholders through lower operating
costs, while allowing the Company to offer cost-effective distribution
alternatives to the broker/dealers and their clients. In 1997, the Company began
to modify the Master/Feeder structure to reduce the number of Feeder Funds by
merging some Feeder Funds into a single Fund with multiple Classes. It is
anticipated that this modification will further reduce operating costs in the
future by reducing existing prospectus and sales literature requirements, while
continuing to offer a variety of distribution alternatives to investors and
maintaining the ability to attract unaffiliated Feeder Funds.
In 1995, the Company increased its ownership interest in Lloyd George Management
(BVI) Limited ("LGM"), an independent investment management company based in
Hong Kong. The two firms became affiliated in 1992 with the introduction of the
Eaton Vance Greater China Funds, which are advised by LGM from its headquarters
in Hong Kong. The investment management capabilities of LGM, with offices in
Hong Kong, London and Mumbai, coupled with the introduction of the EV Medallion
family of offshore funds, allows Eaton Vance both to manage and to distribute
mutual funds globally.
In 1996, the directors of the Medical Research Investment Fund, Inc., approved
the conversion of the Fund to the Master/Feeder structure and engaged EVM as
administrator and EVD as distributor. As part of the conversion, the fund
changed its name to EV Traditional Worldwide Health Sciences Fund and became a
member of the Eaton Vance Family of Funds. The Fund, which concentrates
investments in equity securities of domestic and foreign companies engaged in
research and the health care industry, is managed by OrbiMed Advisors Inc.
("OrbiMed") (formerly named Mehta and Isaly Asset Management), the Fund's
advisor since inception.
In 1997, the Company focused on developing products that are managed to maximize
after-tax returns and on broadening its existing tax-efficient equity product
line. In May and June of 1997, the Company introduced Belvedere Equity Fund LLC,
a private fund for investors seeking to diversify concentrated positions in
common stocks with substantial market appreciation. In September of 1997, the
Company introduced Eaton Vance Tax-Managed Emerging Growth Fund, a companion
product to Eaton Vance Tax-Managed Growth Fund which was introduced in the
spring of 1996. A tax-managed international fund is planned for 1998.
INVESTMENT ADVISORY AGREEMENTS AND DISTRIBUTION PLANS
Each Eaton Vance Master Fund (excluding those managed by LGM and OrbiMed) has
entered into an investment advisory agreement with either EVM or BMR. Although
the specific terms of each such agreement vary, the basic terms of the
agreements are similar. Pursuant to the agreements, either EVM or BMR, as
applicable, provides overall management services to each of the Master Funds,
subject to the supervision of each Fund's Board of Trustees in accordance with
each Fund's fundamental investment objectives and policies. The investment
advisory agreements are approved by Fund shareholders and their continuance must
be approved annually by the trustees of the respective Funds, including a
majority of the independent trustees. Amendments to the investment advisory
agreements must be approved by Fund shareholders.
ITEM 1. BUSINESS (CONTINUED)
EVM also serves as administrator or manager under an Administration Agreement or
Management Contract (each an "Agreement") to most Funds (including those managed
by LGM and OrbiMed). Under such Agreement(s) 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' shareholders meetings and other administrative
services, including furnishing office space and office facilities, equipment and
personnel which may be necessary for managing and administering the business
affairs of the Funds. EVM (or an affiliate) provides investment management or
advisory services to most of these Funds. For the services provided under the
Agreement(s), each Fund is required, in some cases, to pay EVM a monthly fee
calculated at an annual rate not to exceed 0.25% of average daily net assets.
Each Agreement remains in full force and effect indefinitely, but only to the
extent that the continuance of such Agreement is specifically approved at least
annually by the Fund's Board of Trustees.
In addition, certain of the Feeder Funds have adopted distribution plans which,
subject to applicable law, provide for the reimbursement to the Company for the
payment of applicable sales commissions to the retail distribution firms through
the payment of an ongoing distribution fee (i.e., a 12b-1 fee). These
distribution plans are implemented through a distribution agreement between EVD
and the Fund. 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. Pursuant to the terms of the distribution plans and agreements and the
Investment Company Act, 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 and
special promotions, EVM or BMR may waive a portion of its fee and pay for some
expenses of the Fund.
EVM has entered into investment advisory agreements which set forth investment
objectives and fee schedules with respect to each separately managed account.
Pursuant to the agreements, 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 strategy.
MARKETING AND DISTRIBUTION OF FUND SHARES
The Company markets and distributes shares of the Feeder Funds through EVD. EVD
sells Fund shares through a retail network of national and regional dealers,
including those affiliated with banks, insurance companies and financial
planners. 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 1997,
1996 and 1995 calendar years, the five dealer firms responsible for the largest
volume of Fund sales accounted for approximately 36%, 37% and 42%, respectively,
of the Company's Fund sales volume. EVD currently maintains a sales force of
more than 30 wholesalers and 30 sales assistants. Wholesalers and their
assistants work closely with the retail distribution network to assist in
selling shares of Eaton Vance Funds.
ITEM 1. BUSINESS (CONTINUED)
While a substantial majority of sales are made through national and large
regional firms, in 1990 the Company embarked on a program to broaden its
channels of distribution by establishing the Independent Financial Institutions
sales force, a separate wholesaling force focusing on banks and financial
planners. In an additional distribution initiative in 1997, the Company began
offering its Funds to investors, without sales commissions or other transaction
fees, through fee-based registered investment advisors via various institutional
programs both domestically and internationally.
EVD currently sells its U.S. registered Funds under three separate commission
structures: 1) front-end load commission (Traditional or Class A); 2)
spread-load commission (Marathon or Class B); and 3) level-load commission
(Classic or Class C). For Traditional or Class A shares, the shareholder pays
the broker's commission and EVD receives an underwriting commission of up to 75
basis points of the dollar value of the Fund or Class shares sold. The Fund pays
a service fee to authorized firms not to exceed 25 basis points of average net
assets and may also pay a Rule 12b-1 fee not to exceed 25 basis points of
average daily net assets.
For Marathon or 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 in the event shares are redeemed within
a four, five or six year period from the date of purchase. EVD uses its own
funds (which may be borrowed) to pay such commissions. EVD recovers the dealer
commissions paid on behalf of the shareholder through distribution plan payments
limited to an annual rate of 75 basis points of the average net assets of the
Fund or Class in accordance with a distribution plan adopted by the Fund
pursuant to Rule 12b-1 under the Investment Company Act. Like the investment
advisory agreement, the distribution plan and related payments must be approved
annually by a vote of the trustees, including a majority of the independent
trustees. The Commission has taken the position that Rule 12b-1 would not permit
a Fund to continue making compensation payments to EVD after termination of the
plan and that any continuance of such payments may subject the Fund to legal
action. These distribution plans are terminable at any time without notice or
penalty. In addition, the Fund pays a service fee to authorized firms not to
exceed 25 basis points of average net assets.
For Classic or Class C shares, the shareholder pays no front-end commissions or
contingent deferred sales charges after the first year. EVD pays a commission
and the first year's service fees to the dealer at the time of sale. The Fund
makes monthly distribution plan payments to EVD similar to those for Marathon or
Class B shares, equal to 75 basis points of average net assets of the Fund or
Class. Service fees are paid by the Fund to EVD in the first year and generally
to authorized firms in subsequent years, at an annual rate not to exceed 25
basis points of average net assets. The introduction of level-load shares is
consistent with the efforts of many broker/dealers to rely less on transaction
fees and more on continuing fees for servicing assets.
In addition to its U.S. registered Funds, the Company also sponsors a family of
Cayman Island domiciled off-shore funds known as the EV Medallion family of
funds. The Medallion Funds are sold by certain dealer firms through EVD to
non-U.S. persons, with commission structures similar to those of the U.S.
registered Funds. The Company earns distribution, administration and advisory
fees directly or indirectly from the Medallion Funds.
ITEM 1. BUSINESS (CONTINUED)
Reference is made to Note 12 of the Notes to Consolidated Financial Statements
contained in the Eaton Vance Corp. Annual Report to Shareholders for the fiscal
year ended October 31, 1997 (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.
FORWARD-LOOKING STATEMENTS
From time to time, information provided by the Company or information included
in its filings with the Commission (including this Form 10-K) may contain
statements which are not historical facts, for this purpose referred to as
"forward-looking statements." The Company's actual future results may differ
significantly from those stated in any forward-looking statements. Important
factors that could cause actual results to differ materially from those
indicated by such forward-looking statements include, but are not limited to,
the factors discussed in "Competitive Conditions and Risk Factors" below.
COMPETITIVE CONDITIONS AND RISK FACTORS
The Company is subject to substantial competition in all aspects of its
business. The Company's ability to market investment products is highly
dependent on access to the retail distribution systems of national and regional
securities dealer firms, banks and independent financial planners which
generally offer competing internally and externally managed investment products.
Although the Company has historically been successful in gaining access to these
channels, there can be no assurance that it will continue to do so. The
inability to have such access could have a material adverse effect on the
Company's business.
There are few barriers to entry by new investment management firms. The
Company's funds compete against an ever increasing number of investment products
sold to the public by investment dealers, banks, insurance companies and others
that sell tax-free investments, taxable income funds, equity funds and other
investment products. Many institutions competing with the Company have greater
resources than the Company. The Company competes with other providers of
investment products on the basis of the range of products offered, the
investment performance of such products, quality of service, fees charged, the
level and type of sales representative compensation, the manner in which such
products are marketed and distributed and the services provided to investors.
The Company derives almost all of its revenues from investment advisory and
administration fees and distribution income received from the Funds and
separately managed accounts. As a result, the Company is dependent upon the
contractual relationships its maintains with these Funds and separately managed
accounts. In the event that any of the management contracts, administration
contracts, underwriting contracts or service agreements is 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 advisory fees -
are calculated as a percentage of assets under management. A decline in
securities prices in general would reduce fee income. If, as a result of
inflation, expenses rise and assets under management decline, lower fee income
and higher expenses will reduce or eliminate profits. If expenses rise and
assets rise, bringing increased fees to offset the increased expenses, profits
may not be affected by inflation. There is no predictable relationship between
changes in financial assets under management and the rate of inflation.
ITEM 1. BUSINESS (CONTINUED)
TECHNOLOGY
In 1996, management initiated a program to prepare the Company's computer
systems and applications for the year 2000 and is currently in the process of
modifying or replacing all non-compliant systems. Although the Company expects
to incur additional internal staff costs as well as other expenses necessary to
prepare its systems for the year 2000, it anticipates that the majority of these
costs will likely represent the redeployment of existing information technology
resources and will not represent significant incremental costs to the Company.
The Company is also monitoring the progress its major service providers are
making to prepare their systems for operations for the year 2000. The Company
does not anticipate that it or its major service providers will be unable to
meet year 2000 operation commitments.
REGULATION
EVM and BMR are each registered with the Commission under the Advisers Act. The
Advisers Act imposes numerous obligations on registered investment advisers,
including fiduciary duties, recordkeeping requirements, operational requirements
and disclosure obligations. Each Eaton Vance Fund is registered with the
Commission under the Investment Company Act of 1940. Except for private Funds
exempt from registration, each Fund is also required to make notice filings with
all states where it is offered for sale. Virtually all aspects of the Company's
investment management business are subject to various federal and state laws and
regulations. These laws and regulations are primarily intended to benefit
shareholders of the Funds and investment counseling clients and generally grant
supervisory agencies and bodies broad administrative powers, including the power
to limit or restrict the Company from carrying on its investment management
business in the event that it fails to comply with such laws and regulations. In
such event, the possible sanctions which may be imposed include the suspension
of individual employees, limitations on EVM's or BMR's engaging in the
investment management business for specified periods of time, the revocation of
EVM's or BMR's registration as an investment adviser and other censures or
fines.
EVD is registered as a broker/dealer under the Securities Exchange Act of 1934
and is subject to regulation by the Commission, the National Association of
Securities Dealers ("NASD") and other federal and state agencies. EVD is subject
to the Commission's net capital rule designed to enforce minimum standards
regarding the general financial condition and liquidity of a broker/dealer.
Under certain circumstances, this rule limits the ability of the Company to make
withdrawals of capital and receive dividends from EVD. EVD's regulatory net
capital has consistently exceeded such minimum net capital requirements. The
securities industry is one of the most highly regulated in the United States,
and failure to comply with related laws and regulations can result in the
revocation of broker/dealer licenses, the imposition of censures or fines and
the suspension or expulsion from the securities business of a firm, its officers
or employees.
The Company's officers, directors and employees may from time to time own
securities which are held by one or more of the Funds. The Company's internal
policies with respect to individual investments require prior clearance of most
types of transactions and reporting of all securities transactions, and restrict
certain transactions so as to avoid the possibility of conflicts of interest.
EMPLOYEES
On October 31, 1997, the Company and its wholly-owned subsidiaries had 359
full-time employees. On October 31, 1996, the comparable figure was 362.
ITEM 2. PROPERTIES
Northeast Properties, Inc., a wholly-owned subsidiary of the Company, owns
various investment properties, including office buildings located at 24 Federal
Street (in which the Company is the primary tenant) and 79 Milk Street in
Boston. For information with respect to the properties, reference is made to
Schedule III and Note 4 of the Notes to Consolidated Financial Statements
contained in the Eaton Vance Corp. 1997 Annual Report to Shareholders (Exhibit
13.1 hereto), which are incorporated herein by reference.
In 1997, the Company committed to a plan to sell the majority of investment
properties not occupied by Eaton Vance Corp. and its subsidiaries. As noted in
Schedule III and Notes 4 and 5 of the Notes to Consolidated Financial Statements
contained in the Eaton Vance Corp. 1997 Annual Report to Shareholders, three of
these properties were identified in 1997 for sale and evaluated to ensure that
the estimated net realizable values of the properties exceeded their respective
carrying values at October 31, 1997. In conjunction with this continuing
commitment, the Board of Directors of Northeast Properties, Inc. voted in
January 1998 to authorize management to obtain an independent appraisal of the
value of a fourth property in Troy, New York in order to determine whether it
will be feasible for the Company to offer such property for sale. If the
property is offered for sale, it is unclear what impact the potential sale will
have on the financial statements of the Company.
ITEM 3. LEGAL PROCEEDINGS
Certain of the Company's subsidiaries are subject to legal proceedings arising
in the ordinary course of business. On the basis of information presently
available and advice received from counsel, it is the opinion of management that
the disposition or ultimate determination of such legal proceedings will not
have a material adverse effect on the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of holders of Voting Common Stock ("Stockholders") of Eaton
Vance Corp. was held at the principal office of the Company on October 24, 1997.
All of the outstanding Voting Common Stock, namely 38,720 shares, was
represented in person at the meeting.
The following matters received the affirmative vote of all of the outstanding
Voting Common stock:
1) The acts of the Board of Directors since the special meeting in lieu of
the annual meeting of Stockholders held on January 8, 1997 were ratified.
2) Landon T. Clay was removed as a Director of the Company.
3) The written consents of the Company, each dated October 14, 1997, as sole
shareholder of Eaton Vance, Inc., of EV Gold, Inc., of Fulcrum Management,
Inc., and of MinVen, Inc. were ratified.
4) The actions of the Company relating to the purchase of the shares of
Voting Common Stock from Landon T. Clay, the purchase of such shares, and
all other actions of the Corporation in connection therewith were
ratified.
5) The Amendment to the Voting Trust Agreement dated October 22, 1997 was
ratified.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (CONTINUED)
A special meeting in lieu of the annual meeting of Stockholders of Eaton Vance
Corp. was held at the principal office of the Company on January 14, 1998. All
of the outstanding Voting Common Stock, namely 38,720 shares, was represented in
person at the meeting.
The following matters received the affirmative vote of all of the outstanding
Voting Common Stock:
1) The Annual Report to Shareholders of the Company for the fiscal year ended
October 31, 1997 was received and approved.
2) The following individuals were elected as Directors for the ensuing
corporate year to hold office until the next annual meeting and until
their successors are elected and qualify:
John G. L. Cabot
M. Dozier Gardner
James B. Hawkes
John M. Nelson
Benjamin A. Rowland, Jr.
Ralph Z. Sorenson
3) The firm of Deloitte & Touche LLP was selected as the auditors to audit
the books of the Company for its fiscal year ended October 31, 1998.
4) The 1995 Stock Option Plan, Restatement No. 2, adopted by the Board of
Directors on October 8 , 1997, providing for a one-time option for each
new independent Director and an increase in the annual option award for
each independent Director, was approved.
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Voting Common Stock, $0.03125 par value, is not traded and is held
by seven 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, $0.03125 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, 1997, was 949.
The additional information required to be disclosed in Item 5 is found on page 5
of the Company's 1997 Annual Report to Shareholders (furnished as Exhibit 13.1
hereto), under the caption "Eaton Vance Corp.," and is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data appearing under the caption "Five Year Summary" on page
13 of the Company's 1997 Annual Report to Shareholders, furnished as Exhibit
13.1 hereto, is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's discussion and analysis of financial condition and results of
operations appearing on pages 12 through 16 of the Company's 1997 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 19 through 37 of the
Company's 1997 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.
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, 1997.
NAME AGE POSITION
- ------------------------------------------------------------------------------
James B. Hawkes 56 Chairman of the Board, President, Chief
Executive Officer
M. Dozier Gardner 64 Vice Chairman of the Board of Directors
Benjamin A. Rowland, Jr. 62 Vice President and Director
John G. L. Cabot 63 Director
Ralph Z. Sorenson 64 Director
Alan R. Dynner 57 Vice President and Chief Legal Officer
Thomas E. Faust, Jr. 39 Vice President and Director of Equity Research
and Management
Thomas Otis 66 Vice President and Secretary
Laurie G. Russell 31 Vice President and Chief Accounting Officer
William M. Steul 55 Vice President, Treasurer and Chief Financial
Officer
Peter D. Stokinger 33 Vice President and Internal Auditor
Wharton P. Whitaker 53 President, Eaton Vance Distributors, Inc.
Eaton Vance Corp. was formed as a holding company by its subsidiary, Eaton &
Howard, Vance Sanders, Inc., in February, 1981. Eaton & Howard, Vance Sanders,
Inc. (renamed Eaton Vance Management, Inc. in June, 1984 and reorganized as
Eaton Vance Management in October, 1990) was formed at the time of the
acquisition of Eaton & Howard, Incorporated by Vance, Sanders & Company, Inc. on
May 1, 1979. In this Item 10, the absence of a corporate name indicates that,
depending on the dates involved, the executive held the indicated titles in a
firm in the chain of Vance, Sanders & Company, Inc., Eaton & Howard, Vance
Sanders Inc., or Eaton Vance Corp. In general, the following officers hold their
positions for a period of one year or until their successors are duly chosen or
elected.
Mr. Hawkes was elected Chairman of the Board in October, 1997 and President and
Chief Executive Officer in October, 1996. He was Executive Vice President of the
Company from January, 1990 to October, 1996 and a Vice President of the Company
from June, 1975 to January, 1990. He has been a Director since January, 1982.
Mr. Hawkes serves as Chairman of the Executive Committee and as a member of the
Compensation, Management and Nominating Committees established by the Company's
Board of Directors. Mr. Hawkes is an officer, trustee or director of 74
registered investment companies for which Eaton Vance Management or Boston
Management and Research acts as investment adviser. He is a Director of Eaton
Vance Distributors, Inc., a wholly-owned subsidiary of Eaton Vance Management.
He is also a Director of Fulcrum Management, Inc., MinVen, Inc., and EV Gold,
Inc., each a wholly-owned subsidiary of Eaton Vance Corp.
Mr. Gardner was elected Vice Chairman of the Board of Directors in October,
1996. He was Chief Executive Officer of the Company from October, 1990 to
October, 1996 and President of the Company from October 1979 to October,
1996. He has been a Director since July, 1970. Mr. Gardner serves as a
member of the Management and Executive Committees established by the
Company's Board of Directors. Mr. Gardner is an officer or trustee of 13
registered investment companies for which Eaton Vance Management or Boston
Management and Research acts as investment adviser.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
Mr. Rowland has been a Vice President of the Company since April, 1969 and a
Director since January, 1982. He serves as a member of the Management
Committee established by the Company's Board of Directors. Mr. Rowland is a
Director of Northeast Properties, Inc., a wholly-owned subsidiary of Eaton
Vance Management, and Eaton Vance Distributors, Inc.
Mr. Cabot has served as a Director of the Company since March, 1989. He is
Chairman of the Audit and Nominating Committees and serves as a member of the
Compensation and Option Committees established by the Company's Board of
Directors.
Mr. Sorenson has served as a Director of the Company since March, 1989. He is
Chairman of the Compensation Committee and serves as a member of the Audit,
Option and Nominating Committees established by the Company's Board of
Directors.
Mr. Dynner has been a Vice President and Chief Legal Officer of the Company
since November, 1996. Prior to joining the Company, Mr. Dynner was a senior
partner with the law firm of Kirkpatrick & Lockhart LLP in its New York and
Washington, D.C. offices. From February, 1994 to September, 1995 he was
Executive Vice President of Newberger & Berman Management, Inc., a mutual fund
management company. Mr. Dynner is a member of the Management Committee
established by the Company's Board of Directors. He is an officer of all of the
registered investment companies for which Eaton Vance Management or Boston
Management and Research acts as investment advisor.
Mr. Faust has been a Vice President and Director of Equity Research and
Management of the Company since February, 1995. He has been Portfolio Manager
and Vice President of Investors Portfolio since July, 1993 and Portfolio Manager
and Vice President of Eaton Vance Growth Portfolio since April, 1996. Mr. Faust
joined Eaton Vance as a Research Associate in June, 1985. Mr. Faust serves as a
member of the Management Committee established by the Company's Board of
Directors.
Mr. Otis has been Secretary since October, 1969 and a Vice President of the
Company since April, 1973. He has been the Company's counsel since 1966.
Ms. Russell has been Chief Accounting Officer since October, 1997 and a Vice
President since June, 1994. She was Internal Auditor of the Company from June,
1994 to October, 1997. Prior to joining the Company, Ms. Russell was a Senior
Accountant with Deloitte & Touche LLP.
Mr. Steul has been a Vice President and Chief Financial Officer of the
Company since December, 1994. Prior to joining the Company, Mr. Steul was
Vice President, Finance and Chief Financial Officer of Digital Equipment
Corporation. Mr. Steul is a member of the Management Committee established
by the Company's Board of Directors. Mr. Steul is also a Director of Eaton
Vance Distributors, Inc. and Northeast Properties, Inc.
Mr. Stokinger has been the Internal Auditor since October, 1997 and a Vice
President since January, 1996. He was the Company's Tax Accountant from
September, 1992 to October, 1997.
Mr. Whitaker has been President, Eaton Vance Distributors, Inc., since November,
1991. He was Executive Vice President and National Sales Director of Eaton Vance
Distributors, Inc. from June, 1987 to October, 1991. Mr. Whitaker is a member of
the Management Committee established by the Company's Board of Directors.
NEW POLICIES AFFECTING DIRECTORS AND OFFICERS
After completing a review of the Company's corporate governance policies, the
Board of Directors voted in October 1997 to adopt new guidelines. These include
policies requiring each senior officer to retire as an employee and Director at
age 65 and each independent Director to retire at the annual meeting of
stockholders nearest his or her 72nd birthday. In addition, the Board determined
as a matter of policy that independent Directors should constitute a majority of
the Board as soon as practicable. Toward this goal, Mr. John M. Nelson was
elected an independent director in January 1998.
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 the Company's knowledge, all Section 16(a) filing
requirements applicable to the Company's officers and directors were complied
with for the 1997 fiscal year.
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
------------------------------------------------------------------------------
OTHER SECURITIES ALL
ANNUAL UNDERLYING OTHER
YEAR SALARY BONUS(1) COMPENSATION(2) OPTIONS COMPENSATION(3)
-------------------------------------------------------------------------------
NAME AND PRINCIPAL POSITION ($) ($) ($) (#) ($)
- ---------------------------------------------------------------------------------------------------------------
James B. Hawkes 1997 400,000 755,000 1,350 200,000 30,000
Chief Executive Officer
1996 375,000 520,000 4,703 10,000 30,000
1995 350,000 391,460 4,488 - 23,783
- ---------------------------------------------------------------------------------------------------------------
M. Dozier Gardner 1997 350,000 292,591 2,475 - 30,000
Vice Chairman of the Board
1996 360,577 444,891 9,034 - 30,000
1995 385,000 333,014 8,618 - 23,783
- ---------------------------------------------------------------------------------------------------------------
Benjamin A. Rowland, Jr. 1997 260,000 275,000 - - 30,000
Vice President
1996 250,000 429,380 - - 30,000
1995 225,000 181,460 - 5,000 23,255
- ---------------------------------------------------------------------------------------------------------------
Thomas E. Faust, Jr. 1997 250,000 1,060,000 6,968 30,000 31,160
Vice President
1996 200,000 225,000 7,891 30,000 31,040
1995 175,000 150,000 8,935 16,000 23,540
- ---------------------------------------------------------------------------------------------------------------
Wharton P. Whitaker 1997 235,000 588,814 1,252 12,000 30,000
President, EVD
1996 225,000 428,557 9,034 6,000 30,000
1995 220,000 277,409 8,618 - 23,871
- ---------------------------------------------------------------------------------------------------------------
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
(1) Bonuses include payments in lieu of option grants to Mr. Gardner $40,000
and $44,070 in 1997 and 1996, respectively. Mr. Rowland also received
bonuses in lieu of option grants of $25,000 and $29,380 in 1997 and
1996, respectively.
(2) The amounts appearing under "Other Annual Compensation" represent the
10% discount on the purchase of the Company's stock under the Company's
Employee Stock Purchase Plan and Incentive Plan - Stock
Alternative.
(3) The amounts appearing under "All Other Compensation" represent
contributions by the Company to the Company's Profit Sharing,
Supplemental Profit Sharing and 401(k) Plans.
(B) OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes stock option grants during 1997 to the named
executive officers.
POTENTIAL
REALIZABLE VALUE
PERCENTAGE AT ASSUMED ANNUAL
NUMBER OF OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR
OPTIONS EMPLOYEES IN PRICE EXPIRATION OPTION TERM(1)
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 5%($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------
James B. Hawkes 10,136 2% 22.962 12/20/01 64,303 142,092
189,864 38% 20.875 12/20/01 1,095,017 2,419,702
M. Dozier Gardner None (Cash - - - - -
bonus in
lieu of
options)
Benjamin A. Rowland, Jr. None (Cash - - - - -
bonus in
lieu of
options)
Thomas E. Faust, Jr. 30,000 6% 20.875 12/20/01 173,021 382,332
Wharton P. Whitaker 12,000 2% 28.875 12/20/01 69,209 152,933
(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.
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 1997 and stock
options held as of October 31, 1997 by the named executive officers.
NUMBER OF VALUE OF
SHARES SECURITIES UNDERLYING UNEXERCISED
ACQUIRED ON VALUE UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
EXERCISE REALIZED AT FISCAL YEAR END AT FISCAL YEAR END(1)
---------------------------------------------------------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- ---------------------------------------------------------------------------------------------------------------------
James B. Hawkes 187,275 3,892,744 97,283 213,334 2,388,824 3,303,354
M. Dozier Gardner 48,328 1,243,142 - - - -
Benjamin A. Rowland, Jr. 28,998 568,463 21,748 - 497,025 -
Thomas E. Faust, Jr. - - 25,880 41,870 609,555 718,641
Wharton P. Whitaker 60,410 1,290,531 2,280 21,720 50,160 396,840
(1) Based on the fair market value of the Company's common stock on October 31, 1997 ($36.125) 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 $4,000 per
quarter and $750 per meeting. During the fiscal year ended October 31, 1997,
John G.L. Cabot and Ralph Z. Sorenson each received $23,000; in addition, each
was granted options for 1,198 shares.
(E) COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
James B. Hawkes, Chairman of the Board, is a member of the Compensation
Committee of the Board of Directors of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) COMMON STOCK
All outstanding shares of the Company's Voting Common Stock, $0.03125 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 October
30, 1997), James B. Hawkes (Chairman of the Board of Directors, President and
Chief Executive Officer of the Company), M. Dozier Gardner (Vice Chairman of the
Board of Directors of the Company), Benjamin A. Rowland, Jr. (a Vice President
and a Director of the Company), Thomas E. Faust, Jr., (a Vice President of the
Company), Wharton P. Whitaker (President of Eaton Vance Distributors, Inc., a
wholly owned subsidiary of Eaton Vance Management), Alan R. Dynner (a Vice
President of the Company), and William M. Steul (a Vice President of the
Company). The Voting Trust (a copy of which is filed herewith as Exhibit 9.1)
expires October 30, 2000. The Voting Trustees have unrestricted voting rights
for the election of the Company's directors. At December 31, 1997, the Company
had outstanding 38,720 shares of Common Stock. Inasmuch as the seven Voting
Trustees of said Voting Trust have unrestricted voting rights with respect to
said Common Stock (except that the Voting Trust Agreement provides that the
Voting Trustees shall not vote such Stock in favor of the sale, mortgage or
pledge of all or substantially all of the Company's assets or for any change in
the capital structure or powers of the Company or in connection with a merger,
consolidation, reorganization or dissolution of the Company without the written
consent of the holders of Voting Trust Receipts representing at least a majority
of such Stock subject at the time to the Voting Trust Agreement), they may be
deemed to be the beneficial owners of all of the Company's outstanding Common
Stock by virtue of Rule 13d-3(a)(1) under the Securities Exchange Act of 1934.
The Voting Trust Agreement provides that the Voting Trustees shall act by a
majority if there be four or more Voting Trustees; otherwise they shall act
unanimously except as otherwise provided in the Voting Trust Agreement. The
address of said Voting Trustees is 24 Federal Street, Boston, Massachusetts
02110.
The following table sets forth the beneficial owners at December 31, 1997, of
the Voting Trust Receipts issued under said Voting Trust Agreement, which
Receipts cover the aggregate of 38,720 shares of the Common Stock then
outstanding:
NUMBER OF SHARES
OF VOTING COMMON
STOCK COVERED BY
TITLE OF CLASS NAME RECEIPTS % OF CLASS
- -------------------------------------------------------------------------------
Voting Common Stock James B. Hawkes 9,280 24%
Voting Common Stock M. Dozier Gardner 9,280 24%
Voting Common Stock Benjamin A. Rowland, Jr. 5,840 15%
Voting Common Stock Thomas E. Faust, Jr., Jr. 5,040 13%
Voting Common Stock Wharton P. Whitaker 3,094 8%
Voting Common Stock Alan R. Dynner 3,093 8%
Voting Common Stock William M. Steul 3,093 8%
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(CONTINUED)
Messrs. Hawkes, Gardner, and Rowland are all officers and Directors of the
Company and Voting Trustees of the Voting Trust; Messrs. Faust, Dynner 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. 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, $0.03125 par value, shall have no voting rights under any circumstances
whatsoever. As of December 31, 1997, the officers and Directors of the Company,
as a group, beneficially owned 2,025,672 shares of such Non-Voting Common Stock
or 10.49% of the 19,319,097 shares then outstanding. (Such figures include
773,737 shares subject to options exercisable within 60 days and is based solely
upon information furnished by the officers and Directors.)
The following table sets forth the beneficial ownership of the Company's
Non-Voting Common Stock by (i) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Non-Voting Common Stock,
(ii) each Director of the Company, and (iii) each of the named executive
officers of the Company (as defined in Item 11, "Executive Compensation") as of
December 31, 1997 (such investment power being sole unless otherwise indicated):
AMOUNT OF PERCENTAGE
TITLE OF CLASS BENEFICIAL OWNERS BENEFICIAL OF CLASS
OWNERSHIP (A) (B)
- -------------------------------------------------------------------------------
Non-Voting Common Stock Landon T. Clay 3,580,207(d)(g) 19.31
Non-Voting Common Stock M. Dozier Gardner 651,164(c)(f) 3.51
Non-Voting Common Stock James B. Hawkes 508,430(c)(d)(f) 2.73
Non-Voting Common Stock Benjamin A. Rowland,Jr. 396,708(c)(e) 2.14
Non-Voting Common Stock Wharton P. Whitaker 150,431(c) 0.81
Non-Voting Common Stock Thomas E. Faust, Jr. 118,422(c) 0.64
Non-Voting Common Stock John G. L. Cabot 46,078(c)(h) 0.25
Non-Voting Common Stock Ralph Z. Sorenson 18,284(c) 0.10
(a) Based solely upon information furnished by the individuals.
(b) Based on 18,545,360 outstanding shares plus options exercisable within 60
days of 63,332 for Mr. Hawkes, 15,360 for Mr. Whitaker, 33,208 for Mr.
Faust, 3,406 for Mr. Cabot and 3,406 for Mr. Sorenson.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(CONTINUED)
(c) Includes shares subject to options Exercisable within 60 days granted to,
but not exercised by, each named executive officer and director as listed in
Note (b) above.
(d) Includes 14,076 shares held by Mr. Hawkes' daughter and 5,000 shares held by
Mr. Clay's children.
(e) Includes 2,400 shares owned by Mr. Rowland's spouse as to which Mr. Rowland
disclaims beneficial ownership.
(f) Includes 23,290 shares owned by Mr. Hawkes' spouse, and 75,218 shares owned
by Mr. Gardner's spouse.
(g) Includes 2,090 shares held in the trust of Profit Sharing Retirement Plan
for employees of Flowers Antigua, of which the sole beneficiary is the
spouse of Mr. Clay. Also includes 12,710 shares held in trust of Profit
Sharing Retirement Plan for employees of LTC Corp., wholly owned by Mr.
Clay.
(h) Includes 8,000 shares held in a Family Limited Partnership and 2,000 shares
held in a Grantor Retained Annuity Trust.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 4, 1987, the Company became a limited partner in VenturesTrident II,
L.P. ("VenturesTrident II"), a Delaware Limited Partnership formed to invest in
equity securities of public and private mining ventures, principally in precious
metals. As a limited partner, the Company has invested $3,000,000 in cash in
VenturesTrident II. The investment by the Company was made entirely from
internally generated funds. The Company, through its ownership of such limited
partnership interest, currently owns a 3.042% interest in VenturesTrident II.
In addition to the above, MinVen, Inc. ("MinVen"), a wholly-owned subsidiary of
the Company, has a general partnership interest in the general partner of
VenturesTrident II. This acquisition required MinVen to pay $748,235 to such
general partner.
The general partner of VenturesTrident II is Fulcrum Management Partners II,
L.P. ("Fulcrum Partners II"), a Delaware Limited Partnership of which MinVen,
Inc. is one of the general partners. MinVen owns a 82.13% interest in Fulcrum
Partners II. The Company, by reason of MinVen's 82.13% interest in Fulcrum
Partners II, indirectly owns an additional 16.43% interest in VenturesTrident
II.
Two directors of the Company, M. Dozier Gardner and Benjamin A. Rowland, Jr.,
have limited partnership interests in VenturesTrident II; each invested $50,000
and owns a .05% interest in VenturesTrident II. Messrs. Gardner and Rowland, by
reason of their positions with and ownership of stock of the Company, have an
indirect interest in the aggregate 19.47% interest in VenturesTrident II
directly and indirectly owned by the Company.
Fulcrum Partners II terminated the VenturesTrident II effective December 31,
1997. Fulcrum Partners II acts as liquidator to wind up the affairs of the
Partnership in an orderly manner. Substantially all of the Partnership's assets
were distributed to the limited partners prior to October 31, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED)
(B) CERTAIN BUSINESS RELATIONSHIPS
M. Dozier Gardner and James B. Hawkes, each a Director and executive officer of
the Company, are officers and directors, trustees or general partners of various
investment companies for which either Eaton Vance Management or Boston
Management and Research serves as investment adviser and for which EVD acts as
principal underwriter; such investment companies make substantial payments to
these subsidiaries for advisory and management services or under their
distribution plans.
(C) INDEBTEDNESS OF MANAGEMENT
In 1995, the Company increased to $10,000,000 the amount of money in the
Executive Loan Program which is available for loans to certain key employees for
the purpose of financing the exercise of stock options for shares of the
Company's Non-Voting Common Stock. Such loans are written for a seven-year
period, at varying fixed interest rates, and notes evidencing them require
repayment in annual installments commencing with the third year in which the
loan is outstanding. Loans outstanding under this program amounted to $3,168,000
at October 31, 1997.
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, 1996, in an aggregate amount in excess of $60,000:
LARGEST AMOUNT LOANS
OF LOANS OUTSTANDING
OUTSTANDING AS OF RATE OF INTEREST CHARGED
SINCE 11/1/96 12/31/97 ON LOANS AS OF 12/31/97
- -------------------------------------------------------------------------------
M. Dozier Gardner $ 656,184 $ 620,329 6.22%- 8.06% (1)
James B. Hawkes 527,461 484,466 5.31%- 8.06% (2)
Wharton P. Whitaker 224,796 224,796 6.69% (3)
Thomas E. Faust, Jr. 81,758 81,758 6.56% (4)
(1) 8.06% interest payable on $65,973 principal amount of loan, 6.22% interest
payable on $77,000 principal amount, 7.55% interest payable on $124,740
principal amount, 6.36% interest payable on $250,244 principal amount, and
7.07% interest payable on $102,372 principal amount.
(2) 8.06% interest payable on $59,976 principal amount, 6.11% interest payable
on $88,000 principal amount, 5.31% interest payable on $2,599 principal
amount, 5.31% interest payable on $138,600 principal amount, 5.74% interest
payable on $56,791 principal amount and 7.61% interest payable on $38,500,
and 6.77% interest payable on $100,000 principal amount.
(3) 6.69% interest payable on $224,796 principal amount.
(4) 6.56% interest payable on $81,758 principal amount of loan.
PART IV
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(1) The following consolidated financial statements of Eaton Vance Corp. and
report of independent accountants, included on pages 19 through 37 of the
Annual Report, are incorporated by reference as a part of this Form 10-K:
SEPARATE
EATON VANCE CORP. 1997 ANNUAL REPORT TO DOCUMENT
SHAREHOLDERS PAGE NUMBER
- -------------------------------------------------------------------------------
Consolidated Statements of Income for each of the three
years in the period ended October 31, 1997 19
Consolidated Balance Sheets as of October 31, 1997 and 1996 20-21
Consolidated Statements of Cash Flows for each of the three
years in the period ended October 31, 1997 ` 22
Consolidated Statements of Shareholders' Equity for each of
the three years in the period ended October 31, 1997 23
Notes to Consolidated Financial Statements 24-36
Independent Auditors' Report 37
(2) The following financial statement schedules and independent accountants'
report are filed as part of this Form 10-K and are located on the following
pages:
DESCRIPTION
NUMBER PAGE
-----------------------------------------------------------------------------
Independent Auditors' Report on Financial Statement
Schedules 21
Schedule II Valuation and Qualifying Accounts 22
Schedule III Real Estate and Accumulated Depreciation 23-24
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 and is incorporated herein by reference.
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, 1997 and 1996, and for each of the three
years in the period ended October 31, 1997, and have issued our report thereon
dated November 25, 1997; such consolidated financial statements and report are
included in your 1997 Annual Report to Shareholders and are incorporated herein
by reference. Our audits also included the consolidated financial statement
schedules of Eaton Vance Corp. and its subsidiaries, listed in Item 14. These
consolidated financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such consolidated financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 25, 1997
EATON VANCE CORP.
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II
YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
- ---------------------------------------------------------------------------------------------------------------
ADDITIONS
BALANCE AT CHARGED TO
BEGINNING COSTS AND BALANCE AT
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS END OF YEAR
- ---------------------------------------------------------------------------------------------------------------
Valuation accounts deducted from
assets to which they apply:
Allowance for doubtful accounts on
notes receivable and receivables from
affiliates:
Year ended October 31:
1997 $ 775,000 - $775,000 -
1996 $1,200,000 $300,000 $725,000 $ 775,000
1995 $ 800,000 $400,000 - $1,200,000
EATON VANCE CORP.
REAL ESTATE AND ACCUMULATED DEPRECIATION SCHEDULE III
OCTOBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
COSTS
CAPITALIZED GROSS CARRYING AMOUNT
INITIAL COST SUBSEQUENT OCTOBER 31, 1997 (1)
--------------------- TO --------------------
ACQUISITION DATE OF DEPRE-
(IMPROVE- ACCUMULATED CONSTRUC- DATE CIABLE
DESCRIPTION ENCUMBRANCES LAND BUILDINGS MENTS) LAND BUILDINGS DEPRECIATION TION ACQUIRED LIFE
- ------------------------------------------------------------------------------------------------------------------------------------
Shopping mall
and office
building -
Troy, NY $2,424,185 $ 834,100 $4,033,921 $3,387,803 $ 834,100 $7,421,724 $1,818,550 1978 05/01/87 31.5yrs.
Office
building -
Boston, MA - 280,800 4,009,836 2,017,501 280,800 6,027,337 2,595,443 1920 10/31/90 20 yrs.
Boston, MA 5,872,149 1,164,113 4,651,554 153,231 1,164,113 4,804,785 80,727 1883 03/03/97 39 yrs.
----------------------------------------------------------------------------------------
TOTAL $8,296,334 $2,279,013 $12,695,311 $5,558,535 $2,279,013 $18,253,846 $4,494,720
========================================================================================
(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.
EATON VANCE CORP.
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED) SCHEDULE III
YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
- -------------------------------------------------------------------------------
1997 1996 1995
-------------------------------------
LAND AND BUILDINGS:
Gross carrying amount, beginning
of year $26,353,167 $30,288,033 $29,812,704
Additions during period:
Acquisition (1) 5,855,284 - -
Improvements 833,184 1,650,801 475,329
Deductions during period:
Cost of real estate sold (78,203) - -
Reclassification of assets
held for sale (2) (3) (12,430,573) (5,585,667) -
-------------------------------------------
Gross carrying amount, end of year $20,532,859 $26,353,167 $30,288,033
===========================================
Accumulated depreciation,
beginning of year $ 7,534,281 $8,424,489 $ 7,510,277
Additions during period:
Depreciation 852,435 914,212 918,105
Deductions during period:
Reclassification of assets
held for sale (2) (3) (3,891,996) (1,808,313) -
-------------------------------------------
Accumulated depreciation, end
of year $ 4,494,720 7,534,281 $ 8,424,489
===========================================
(1) In 1997, the Company acquired the remaining fifty percent interest in a
partnership which owns an office building in Boston, Massachusetts for $0.6
million in cash. The acquisition was accounted for using the purchase method
of accounting and, accordingly, the purchase price was allocated to the
assets acquired and the liabilities assumed based on their estimated fair
values at the date of acquisition.
(2) In the fourth quarter of 1996, the Company committed to a plan to sell an
office building located in Boston, Massachusetts and recognized a pre-tax
impairment loss of $1.3 million based on the estimated net realizable value
of the property (estimated fair value less estimated selling costs).
Estimated fair value of the property was calculated using market appraisals
and other available valuation techniques. At October 31, 1996, the property
was classified as a current asset held for sale for financial reporting
purposes.
(3) In 1997, the Company committed to a plan to sell two industrial warehouse
buildings located in Springfield, Massachusetts and Colonie, New York and a
shopping center in Goffstown, New Hampshire. At October 31, 1997, the
properties were classified as current assets held for sale for financial
reporting purposes.
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 28, 1998
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 28, 1998
James B. Hawkes Principal Executive Officer
/s/ M. Dozier Gardner Vice Chairman and Director January 28, 1998
M. Dozier Gardner
/s/ William M. Steul Chief Financial Officer January 28, 1998
William M. Steul
/s/ Laurie G. Russell Chief Accounting Officer January 28, 1998
Laurie G. Russell
/s/ Benjamin A. Rowland, Jr. Director January 28, 1998
Benjamin A. Rowland, Jr.
/s/ John G.L. Cabot Director January 28, 1998
John G.L. Cabot
/s/ Ralph Z. Sorenson Director January 28, 1998
Ralph Z. Sorenson
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.
4.1 The rights of the holders of the Company's Common Stock, par value
$.03125 per share, and Non-Voting Common Stock, par value $.03125
per share, are described in the Company's Amended Articles of
Incorporation (particularly Articles Sixth, Seventh and Ninth
thereof) and the Company's By-Laws (particularly Article II
thereof). See Exhibits 3.1, 3.2, 3.3 and 3.4 above as incorporated
herein by reference.
9.1 Copy of the Voting Trust Agreement made as of October 30, 1997
(filed herewith).
10.1 Description of Performance Bonus Arrangement for Members of
Investment Division of Eaton Vance Management has been filed as
Exhibit 10.1 to the Annual Report on Form 10-K of the Company for
the fiscal year ended October 31, 1995, (S.E.C. File No. 1-8100) and
is incorporated herein by reference.
10.2 Description of Incentive Bonus Arrangement for Marketing Personnel
of Eaton Vance Distributors, Inc. has been filed as Exhibit 10.2 to
the Annual Report on Form 10-K of the Company for the fiscal year
ended October 31, 1995, (S.E.C. File No. 1-8100) and is incorporated
herein by reference.
EXHIBIT INDEX (CONTINUED)
EXHIBIT NO. DESCRIPTION
10.3 Copy of 1988 Profit Improvement Bonus Plan of Eaton Vance
Management, Inc. has been filed as Exhibit 10.9 of the Annual Report
on Form 10-K of the Company for the fiscal year ended October 31,
1987 (S.E.C. File No 1-8100) and is incorporated herein by
reference.
10.4 Description of 1990 Performance and Retention of Officers Pool
(bonus plan to reward key officers of Eaton Vance Management and
Eaton Vance Distributors, Inc.) of Eaton Vance Corp. has been filed
as Exhibit 10.5 to the Annual Report on Form 10-K of the Company for
the fiscal year ended October 31, 1995, (S.E.C. File No. 1-8100) and
is incorporated herein by reference.
10.5 Copy of 1992 Stock Option Plan as adopted by the Eaton Vance Corp.
Board of Directors on April 8, 1992 has been filed as Exhibit 10.12
to the Annual Report on Form 10-K of the Company for the fiscal year
ended October 31, 1992 S.E.C. File No. 1-8100), and is incorporated
herein by reference.
10.6 Copy of 1986 Employee Stock Purchase Plan as amended and restated by
the Eaton Vance Corp. Board of Directors on April 8, 1992 has been
filed as Exhibit 10.13 to the Annual Report on Form 10-K of the
Company for the fiscal year ended October 31, 1992 (S.E.C. File No.
1-8100), and is incorporated herein by reference.
10.7 Copy of 1992 Incentive Plan - Stock Alternative as adopted by the
Eaton Vance Corp. Board of Directors on July 17, 1992 has been filed
as Exhibit 10.14 to the Annual Report on Form 10-K of the Company
for the fiscal year ended October 31, 1992 (S.E.C. File No. 1-8100),
and is incorporated herein by reference.
10.8 Copy of 1995 Stock Option Plan as adopted by the Eaton Vance Corp.
Board of Directors on October 12, 1995, has been filed as Exhibit
10.9 to the Annual Report on Form 10-K of the Company for the fiscal
year ended October 31, 1995, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.9 Copy of 1986 Employee Stock Purchase Plan as amended and restated by
the Eaton Vance Corp. Board of Directors on October 12, 1995, has
been filed as Exhibit 10.10 to the Annual Report on Form 10-K of the
Company for the fiscal year ended October 31, 1995, (S.E.C. File No.
1-8100) and is incorporated herein by reference.
EXHIBIT INDEX (CONTINUED)
EXHIBIT NO. DESCRIPTION
10.10 Copy of 1995 Executive Loan Program relating to financing or
refinancing the exercise of options by key directors, officers, and
employees adopted by the Company's Directors on October 12, 1995,
has been filed as Exhibit 10.2 to the Annual Report on Form 10-K of
the Company for the fiscal year ended October 31, 1995, (S.E.C. File
No. 1-8100) and is incorporated herein by reference.
10.11 Copy of the Eaton Vance Corp. Supplemental Profit Sharing Plan
adopted by the Company's Directors on October 9, 1996, has been
filed as Exhibit 10.12 to the Annual Report on Form 10-K of the
Company for the fiscal year ended October 31, 1996, (S.E.C. File No.
1-8100) and is incorporated herein by reference.
10.12 Copy of 1992 Stock Option Plan - Restatement No. 1 as adopted by the
Eaton Vance Corp. Board of Directors on April 9, 1997, has been
filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q for the
fiscal quarter ended April 30, 1997, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.13 Copy of 1995 Stock Option Plan - Restatement No. 1 as adopted by the
Eaton Vance Corp. Board of Directors on April 9, 1997, has been
filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q for the
fiscal quarter ended April 30, 1997, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.14 Copy of 1992 Incentive Plan - Stock Alternative - Restatement No. 2
as adopted by the Eaton Vance Corp. Board of Directors on April 9,
1997, has been filed as Exhibit 10.3 to the Quarterly Report on Form
10-Q for the fiscal quarter ended April 30, 1997, (S.E.C. File No.
1-8100) and is incorporated herein by reference.
10.15 Copy of 1992 Stock Option Plan - Restatement No. 2 as adopted by the
Eaton Vance Corp. Board of Directors on October 30, 1997 (filed
herewith).
10.16 Copy of 1995 Stock Option Plan - Restatement No. 2 as adopted by the
Eaton Vance Corp. Board of Directors on October 30, 1997 (filed
herewith).
11.1 Statement of Computation of average number of Shares outstanding
(filed herewith).
13.1 Copy of the Company's Annual Report to Shareholders for the fiscal
year ended October 31, 1997 (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, 1997 (filed
herewith).
23.1 Independent Auditors' Consent (filed herewith).
EXHIBIT INDEX (CONTINUED)
EXHIBIT NO. DESCRIPTION
27.1 Financial Data Schedule as of October 31, 1997 (filed herewith -
electronic filing only).
99.2 List of Eaton Vance Corp. Open Registration Statements (filed
herewith).