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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, 1998
Commission File Number 1-8100
EATON VANCE CORP.
(Exact name of registrant as specified in its charter)
Maryland 04-2718215
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
24 Federal Street, Boston, Massachusetts 02110
- ---------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(617) 482-8260
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Non-Voting Common Stock
($0.015625 par value) New York Stock Exchange
----------------------- -----------------------
Securities registered pursuant to Section 12(g) of the Act:
Non-Voting Common Stock par value $0.015625 per share
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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 ]
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, 1998
Non-Voting Common Stock,
$0.015625 par value 35,910,617
Common Stock, $0.015625 par value 77,440
Aggregate market value of Non-Voting Common Stock held by non-affiliates of the
Registrant, based on the closing price of $20.875 on December 31, 1998 on the
New York Stock Exchange was $576,310,341. 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, 1998 (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 investment 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, 1998, the Company managed $28.4
billion in portfolios with investment objectives ranging from high current
income to maximum capital gain.
GENERAL DEVELOPMENT OF BUSINESS
The Company's growth has resulted from its ability to develop, offer
successfully and manage effectively new funds and to increase the assets of
existing Eaton Vance Funds ("Funds"). The Company's strategy is to develop and
manage products with clearly understood and clearly presented investment
characteristics coupled with distribution arrangements that are attractive to
third-party distributors of the Funds.
The Company conducts its investment management and counseling business through
two wholly-owned subsidiaries, Eaton Vance Management ("EVM") and Boston
Management and Research ("BMR"), each of which is a Massachusetts business trust
registered with the Securities and Exchange Commission (the "SEC") as an
investment adviser under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"). Eaton Vance Distributors, Inc. ("EVD"), a wholly owned
broker/dealer registered under the Securities Exchange Act of 1934 (the
"Exchange Act"), markets and sells the Funds.
As of October 31, 1998, the Company provided investment advisory or
administration services to over 70 Funds and to over 800 separately managed
individual and institutional accounts. At that date, the Funds had aggregate net
assets of $25.9 billion and the Company's separately managed accounts had
aggregate net assets of $2.5 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,
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1998 1997 1996 1995 1994
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(in millions)
Funds:
Money Market $ 200 $ 200 $ 200 $ 200 $ 200
Equities 9,800 5,200 3,100 2,400 2,300
Bank Loans 6,200 3,900 2,800 1,400 600
Taxable Fixed Income 2,200 2,100 1,300 1,300 1,300
Non-Taxable Fixed Income 7,500 7,500 8,200 8,900 9,000
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Total 25,900 18,900 15,600 14,200 13,400
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Separately Managed Accounts 2,500 2,400 1,700 1,800 1,600
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Total $28,400 $21,300 $17,300 $16,000 $15,000
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ITEM 1. BUSINESS (CONTINUED)
On October 31, 1998, equity fund assets increased to 34 percent of total assets
under management from 24 percent on October 31, 1997, while taxable and
non-taxable fixed-income fund assets decreased to 34 percent of total assets
under management from 46 percent a year ago. Bank loan fund assets increased to
22 percent of total assets under management on October 31, 1998 from 18 percent
a year ago.
In 1995, the Company increased its ownership interest in Lloyd George Management
(BVI) Limited ("LGM"), an independent investment management company based in
Hong Kong. The two firms became affiliated in 1992 with the introduction of the
Eaton Vance Greater China Funds, which are advised by LGM from its headquarters
in Hong Kong. The investment management capabilities of LGM, with offices in
Hong Kong, London and Mumbai, India coupled with the introduction of the EV
Medallion family of offshore funds, allows Eaton Vance to both manage and
distribute mutual funds globally.
In 1996, the directors of the Medical Research Investment Fund, Inc., engaged
EVM as administrator and EVD as distributor. The fund changed its name to EV
Traditional Worldwide Health Sciences Fund and became a member of the Eaton
Vance Family of Funds. The Fund, which concentrates investments in equity
securities of domestic and foreign companies engaged in research and the health
care industry, is managed by OrbiMed Advisors Inc. ("OrbiMed") (formerly named
Mehta and Isaly Asset Management), the Fund's advisor since inception. In 1998,
the fund converted to a multiple class structure and changed its name to Eaton
Vance Worldwide Health Sciences Fund.
In 1997, the Company focused on developing products that are managed to maximize
after-tax returns and on broadening its existing tax-efficient equity product
line. In May and June of 1997, the Company introduced Belvedere Equity Fund LLC,
a private fund for investors seeking to diversify concentrated positions in
common stocks with substantial market appreciation. In September 1997, the
Company introduced Eaton Vance Tax-Managed Emerging Growth Fund, a companion
product to Eaton Vance Tax-Managed Growth Fund which was introduced in the
spring of 1996.
In 1998, the Company continued to focus on developing products that are managed
to maximize after-tax returns by broadening its existing tax-efficient equity
product line while maintaining a balanced asset mix with fixed income and bank
loan funds. Eaton Vance Tax-Managed International Growth Fund, a tax efficient
equity fund, was launched in April 1998. In a private placement in 1998, the
Company introduced Belair Capital Fund LLC, a fund for high net worth investors.
In October 1998, the Company closed a successful offering of Eaton Vance Senior
Income Trust, a New York Stock Exchange-listed, closed-end fund, investing
primarily in bank loans. This Fund was intended to provide investors with
liquidity through exchange listed trading and strong yields through the use of
leverage. Shortly after the close of the fiscal year the Company filed
registration statements with the SEC for nine new closed-end municipal bond
funds, with target offering dates in January 1999.
INVESTMENT MANAGEMENT AND ADMINISTRATIVE ACTIVITIES
Investment decisions for all but five of the over 70 Eaton Vance 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 four
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., 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 the aggregate of 10 basis points of
average net assets annually 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.
ITEM 1. BUSINESS (CONTINUED)
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
20 to 80 basis points of average net assets on an annual basis. These agreements
are generally terminable upon 30 to 60 days notice without penalty.
The following table shows investment advisory and administration fees received
for the past five years ended October 31, 1998.
INVESTMENT ADVISORY AND
ADMINISTRATION FEES*
YEAR ENDED OCTOBER 31,
--------------------------------------------------
1998 1997 1996 1995 1994
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(in thousands)
Investment Advisory
Fees - Funds $127,234 $ 95,531 $81,473 $69,094 $68,284
Separately Managed Accounts 11,295 9,503 8,865 8,712 9,807
Administration Fees - Funds 12,662 12,071 7,793 4,631 4,257
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Total $151,191 $117,105 $98,131 $82,437 $82,348
==================================================
* Excludes gold mining investment management fees and administration
fees received from funds other than Eaton Vance Funds. There were no
management and administration fees received from gold mining
investments in 1998.
INVESTMENT ADVISORY AGREEMENTS AND DISTRIBUTION PLANS
In 1993, the Company introduced the Master/Feeder structure for most of its
Funds. Master/Feeder is a two-tiered arrangement in which Funds (Feeder Funds)
with substantially identical investment objectives pool their assets by
investing in a common portfolio (Master Fund). Eaton Vance used Master/Feeder to
introduce four distinct mutual fund families, with each family having its own
prospectus, sales literature, product design and distribution structure (see
Marketing and Distribution of Fund Shares below). The structure was intended to
benefit fund shareholders through lower operating costs, while allowing the
Company to offer cost-effective distribution alternatives to the 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. This modification has and will further
reduce operating costs by reducing prospectus and sales literature requirements,
while continuing to offer a variety of distribution alternatives to investors
while maintaining the ability to attract unaffiliated Feeder Funds.
ITEM 1. BUSINESS (CONTINUED)
Each Eaton Vance Master Fund (excluding those managed by LGM or OrbiMed) has
entered into an investment advisory agreement with either EVM or BMR. Although
the specific terms of each such agreement vary, the basic terms of the
agreements are similar. Pursuant to the agreements, either EVM or BMR, as
applicable, provides overall management services to each of the Master Funds,
subject to the supervision of each Fund's Board of Trustees in accordance with
each Fund's fundamental investment objectives and policies. The investment
advisory agreements are approved by Fund shareholders and their continuance must
be approved annually by the trustees of the respective Funds, including a
majority of the independent trustees. Amendments to the investment advisory
agreements must be approved by Fund shareholders.
EVM also serves as administrator or manager under an Administration Service
Agreement or Management Contract (each an "Agreement") to most Funds (including
those managed by LGM and OrbiMed). Under such Agreements EVM is responsible for
managing the business affairs of these Funds, subject to the supervision of each
Fund's Board of Trustees. EVM's services include recordkeeping, preparing and
filing documents required to comply with federal and state securities laws,
supervising the activities of the Funds' custodian and transfer agent, providing
assistance in connection with the Funds' shareholder meetings, and other
administrative services, including furnishing office space and office
facilities, equipment and personnel which may be necessary for managing and
administering the business affairs of the Funds. EVM (or an affiliate) provides
investment management or advisory services to most of these Funds. For the
services provided under the Agreements, each Fund is required, in some cases, to
pay EVM a monthly fee calculated at an annual rate not to exceed 0.25% 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 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. 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 an investment advisory agreement for each separately
managed account, which sets forth the account's investment objectives and fee
schedule. EVM invests the assets of the accounts in accordance with the stated
investment objectives. The Company's investment counselors may assist clients in
formulating investment strategies.
ITEM 1. BUSINESS (CONTINUED)
MARKETING AND DISTRIBUTION OF FUND SHARES
The Company markets and distributes continuously-offered shares of Funds through
EVD. EVD sells Fund shares through a retail network of national and regional
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 1998, 1997 and 1996 calendar years, the five dealer firms
responsible for the largest volume of Fund sales accounted for approximately
35%, 36% and 37%, respectively, of the Company's Fund sales volume. EVD
currently maintains a sales force of more than 40 wholesalers and 35 sales
assistants. Wholesalers and their assistants work closely with the retail
distribution network to assist in selling shares of Funds.
While a substantial majority of 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 (Class A); 2) spread-load commission
(Class B) and 3) level-load commission (Class C). For Class A shares, the
shareholder pays the broker's commission and EVD receives an underwriting
commission of up to 75 basis points of the dollar value of the Fund or Class
shares sold. The Fund pays a service fee to authorized firms not to exceed 25
basis points of average net assets and may also pay a Rule 12b-1 fee not to
exceed 25 basis points of average daily net assets.
For Class B shares, EVD pays a commission to the dealer at the time of sale and
such payments are capitalized and amortized in the Company's financial
statements over a four to six year period. The shareholder pays a contingent
deferred sales charge to EVD 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 of 1940. Like the investment advisory
agreement, the distribution plan and related payments must be approved annually
by a vote of the trustees, including a majority of the independent trustees. The
SEC has taken the position that Rule 12b-1 would not permit a Fund to continue
making compensation payments to EVD after termination of the plan and that any
continuance of such payments may subject the Fund to legal action. These
distribution plans are terminable at any time without notice or penalty. In
addition, the Fund pays a service fee to authorized firms not to exceed 25 basis
points of average net assets.
For Class C shares, the shareholder pays no front-end commissions or contingent
deferred sales charges after the first year. EVD pays a commission and the first
year's service fees to the dealer at the time of sale. The Fund makes monthly
distribution plan payments to EVD similar to those for Class B shares, equal to
75 basis points of average net assets of the Class. The Fund pays service fees
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.
ITEM 1. BUSINESS (CONTINUED)
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.
Reference is made to Note 14 of the Notes to Consolidated Financial Statements
contained in the Eaton Vance Corp. Annual Report to Shareholders for the fiscal
year ended October 31, 1998 (which report is furnished as Exhibit 13.1 hereto)
for a description of the major customers that provided over 10% of the total
revenue of the Company.
SIGNIFICANT ACCOUNTING CHANGE
In September 1998, the Financial Accounting Standards Board (FASB) staff
addressed the accounting for offering costs incurred in connection with the
distribution of closed-end funds. The FASB staff concluded that such offering
costs, including sales commissions paid, are to be considered start-up costs.
Accordingly, sales commissions paid in connection with the distribution of
shares of the Company's closed-end funds subsequent to the effective date of the
FASB staff announcement (July 23, 1998) have been expensed as incurred in the
Company's consolidated statement of income for the fiscal year ended October 31,
1998. Closed-end fund sales commissions paid and capitalized prior to and
including the July 23, 1998 effective date of the FASB staff announcement will
be recorded as a cumulative effect of a change in accounting principle in the
first quarter of fiscal year 1999.
The change in accounting treatment has not had, nor will have, any effect on the
Company's cash flow or cash position.
FORWARD-LOOKING STATEMENTS
From time to time, information provided by the Company or information included
in its filings with the 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 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.
ITEM 1. BUSINESS (CONTINUED)
There are few barriers to entry by new investment management firms. The
Company's funds compete against an ever increasing number of investment products
sold to the public by investment dealers, banks, insurance companies and others
that sell tax-free investments, taxable income funds, equity funds and other
investment products. Many institutions competing with the Company have greater
resources than the Company. The Company competes with other providers of
investment products on the basis of the range of products offered, the
investment performance of such products, quality of service, fees charged, the
level and type of sales representative compensation, the manner in which such
products are marketed and distributed and the services provided to investors.
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.
REGULATION
EVM and BMR are each registered with the SEC under the Advisers Act. The
Advisers Act imposes numerous obligations on registered investment advisers,
including fiduciary duties, recordkeeping requirements, operational requirements
and disclosure obligations. Each Eaton Vance Fund, other than the Medallion
Funds, is registered with the SEC under the Investment Company Act of 1940.
Except for private Funds exempt from registration, each Fund is also required to
make notice filings with all states where it is offered for sale. Virtually all
aspects of the Company's investment management business are subject to various
federal and state laws and regulations. These laws and regulations are primarily
intended to benefit shareholders of the Funds and investment counseling clients
and generally grant supervisory agencies and bodies broad administrative powers,
including the power to limit or restrict the Company from carrying on its
investment management business in the event that it fails to comply with such
laws and regulations. In such event, the possible sanctions which may be imposed
include the suspension of individual employees, limitations on EVM or BMR
engaging in the investment management business for specified periods of time,
the revocation of EVM's or BMR's registration as an investment adviser and other
censures or fines.
EVD is registered as a broker/dealer under the Securities Exchange Act of 1934
and is subject to regulation by the SEC, the National Association of Securities
Dealers 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. 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.
ITEM 1. BUSINESS (CONTINUED)
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 by investment professionals
require prior clearance of most types of transactions and reporting of all
securities transactions, and restrict certain transactions to avoid the
possibility of conflicts of interest.
EMPLOYEES
On October 31, 1998, the Company and its wholly owned subsidiaries had 367
full-time employees. On October 31, 1997, the comparable figure was 359.
ITEM 2. PROPERTIES
Northeast Properties, LLC, a wholly owned subsidiary of the Company, owns
various investment properties, including office buildings located at 24 Federal
Street and 79 Milk Street in Boston (the Company's principal offices). 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. 1998 Annual Report to Shareholders (Exhibit 13.1 hereto), both
of which are incorporated herein by reference.
In 1998, the Company committed to a plan to sell all of the remaining investment
properties owned by Eaton Vance Corp. and its subsidiaries. As noted in Schedule
III and Note 4 to Consolidated Financial Statements contained in the Eaton Vance
Corp. 1998 Annual Report to Shareholders, all of the properties identified for
sale were evaluated to ensure that the estimated net realizable values of the
properties exceed their respective carrying values. In conjunction with this
evaluation, the Company recognized a pre-tax impairment loss of $2.6 million in
1998 based on the estimated fair market value less cost to sell of the shopping
center and office building located in Troy, New York. The Company expects the
sales of all remaining properties to be completed in fiscal 1999. The estimated
fair value less cost to sell of the remaining properties equaled or exceeded
their respective carrying values at October 31, 1998.
In anticipation of the sale of the two office buildings in Boston that house the
Company's principal offices, the Company has entered into a ten-year lease
agreement for new principal office space in Boston. The Company expects to
occupy the newly leased space in the second half of fiscal 1999.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is currently subject to any
material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of holders of Voting Common Stock ("Stockholders") of Eaton
Vance Corp. was held at the principal office of the Company on October 15, 1998.
All of the outstanding Voting Common Stock, namely 77,440 shares, was
represented in person at the meeting. At the meeting the 1998 Executive Loan
Program, adopted by the Board of Directors on October 15, 1998, was approved by
the affirmative vote of all of the outstanding Voting Common Stock.
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Voting Common Stock, $0.015625 par value, is not traded and is
held by eight Voting Trustees pursuant to the Voting Trust described in
paragraph (A) of Item 12 hereof, which paragraph (A) is incorporated herein by
reference.
The Company's Non-Voting Common Stock, $0.015625 par value, is traded on the New
York Stock Exchange under the symbol EV. The approximate number of holders of
record of the Company's Non-Voting Common Stock at October 31, 1998, was 951.
The additional information required to be disclosed in Item 5 is found on page 7
of the Company's 1998 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
YEARS ENDED OCTOBER 31,
- -------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT DATA:
Total revenue $249,987 $200,910 $181,989 $167,917 $171,216
Income from continuing operations
before extraordinary item and
cumulative effect of change in
accounting for income taxes $ 30,523 $ 40,234 $ 35,834 $ 26,968 $ 25,810
Earnings per share from continuing
operations before extraordinary item and
cumulative effect of change in accounting
for income taxes:
Basic $ 0.84 $ 1.08 $ 0.95 $ 0.73 $ 0.70
Diluted $ 0.81 $ 1.04 $ 0.94 $ 0.73 $ 0.68
Dividends declared, per share $ 0.26 $ 0.21 $ 0.17 $ 0.16 $ 0.15
BALANCE SHEET DATA:
Total assets $380,260 $387,375 $360,552 $357,586 $455,506
Long-term debt $ 35,714 $ 50,964 $ 54,549 $ 56,102 $ 60,311
Reference is made to the discussion of the significant accounting change on page
6 of Item 1 of this document.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's Discussion and Analysis of financial condition and results of
operations appearing on pages 16 through 22 of the Company's 1998 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 19 of the
Company's 1998 Annual Report to Shareholders, furnished as Exhibit 13.1 hereto,
is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements and related notes thereto and
the independent auditors' report appearing on pages 23 through 41 of the
Company's 1998 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, 1998.
NAME AGE POSITION
- --------------------------------------------------------------------------------
James B. Hawkes 57 Chairman of the Board, President, Chief
Executive Officer
Benjamin A. Rowland, Jr. 63 Vice President and Director
John G. L. Cabot 64 Director
John M. Nelson 66 Director
Vincent M. O'Reilly 60 Director
Ralph Z. Sorenson 65 Director
Alan R. Dynner 58 Vice President and Chief Legal Officer
Thomas E. Faust, Jr. 40 Vice President and Director of Equity Research
and Management
Thomas Otis 67 Vice President and Secretary
Laurie G. Russell 32 Vice President and Chief Accounting Officer
William M. Steul 56 Vice President, Treasurer and Chief Financial
Officer
Peter D. Stokinger 34 Vice President and Internal Auditor
Wharton P. Whitaker 54 President, Eaton Vance Distributors, Inc.
Eaton Vance Corp. was founded as a holding company by Eaton & Howard, Vance
Sanders, Inc., in February 1981. Eaton & Howard, Vance Sanders, Inc. (renamed
Eaton Vance Management, Inc. in June, 1984 and reorganized as Eaton Vance
Management in October, 1990) was formed at the time of the acquisition of Eaton
& Howard, Incorporated by Vance, Sanders & Company, Inc. on May 1, 1979. In this
Item 10, the absence of a corporate name indicates that, depending on the dates
involved, the executive held the indicated titles in a firm in the chain of
Vance, Sanders & Company, Inc., Eaton & Howard, Vance Sanders Inc., or Eaton
Vance Corp. In general, the following officers hold their positions for a period
of one year or until their successors are duly chosen or elected.
Mr. Hawkes was elected Chairman of the Board in October, 1997 and President and
Chief Executive Officer in October, 1996. He was Executive Vice President of the
Company from January, 1990 to October, 1996 and a Vice President of the Company
from June, 1975 to January, 1990. He has been a Director since January, 1982.
Mr. Hawkes serves as Chairman of the Executive Committee and as a member of the
Management and Nominating Committees established by the Company's Board of
Directors. Mr. Hawkes is an officer, trustee or director of 75 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 the President and Manager of MinVen, LLC and Northeast Properties, LLC,
each a wholly owned subsidiary of Eaton Vance Management.
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 and
Treasurer of Eaton Vance Distributors, Inc., a wholly owned subsidiary of Eaton
Vance Management. Mr. Rowland is also a Vice President and Manager of Northeast
Properties, LLC, a wholly owned subsidiary of Eaton Vance Management.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
Mr. Cabot has served as a Director of the Company since March, 1989. He is
Chairman of the Audit and Nominating Committees and serves as a member of the
Compensation and Option Committees established by the Company's Board of
Directors. Mr. Cabot is also the Director of Cabot Corporation and Cabot Oil and
Gas Corporation.
Mr. Nelson has served as Director of the Company since January, 1998. He serves
as a member of the Compensation, Option and Nominating Committees established by
the Company's Board of Directors. Mr. Nelson is the Chairman of the Board of the
TJX Companies and is the Director of Brown & Sharpe Manufacturing Company,
Aquila Biopharmaceuticals, Inc., Commerce Holdings, Inc. and Stocker and Yale,
Inc.
Mr. O'Reilly has served as Director of the Company since April, 1998. He serves
as a member of the Audit Committee established by the Company's Board of
Directors. Mr. O'Reilly serves on the Boards of Directors of the Neiman Marcus
Group and Teradyne, Inc. He is Vice-Chairman of the Boards of the New England
Independent System Operator and the Dana-Farber Cancer Institute.
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. Sorenson also serves as Director of Houghton Mifflin Company,
Polaroid Corporation, Trust Bank of Colorado, Exabyte Corp., Whole Foods Market,
Inc., Sweetwater Inc., Xenometrix and Audio Ventures, Inc.
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 adviser. He is also a Vice President,
Secretary and Manager of MinVen, LLC and Northeast Properties, LLC, each a
wholly owned subsidiary of Eaton Vance Management.
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. He is also the Treasurer and Manager of MinVen, LLC and
Northeast Properties, LLC, each a wholly owned subsidiary of Eaton Vance
Management.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
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.
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 1998 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
-----------------------------------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
YEAR SALARY BONUS (1) COMPENSATION(2) OPTIONS COMPENSATION(3)
- -------------------------------------------------------------------------------------------------------------------------
NAME AND PRINCIPAL POSITION ($) ($) ($) (#) ($)
- -------------------------------------------------------------------------------------------------------------------------
James B. Hawkes 1998 415,000 1,410,000 4,038 70,000 30,000
Chief Executive Officer
1997 400,000 755,000 1,350 400,000 30,000
1996 375,000 520,000 4,703 20,000 30,000
- -------------------------------------------------------------------------------------------------------------------------
Benjamin A. Rowland, Jr. 1998 266,000 325,000 - 15,000 30,000
Vice President
1997 260,000 275,000 - - 30,000
1996 250,000 429,380 - - 30,000
- -------------------------------------------------------------------------------------------------------------------------
Thomas E. Faust, Jr. 1998 300,000 1,250,000 56,709 39,600 30,000
Vice President
1997 250,000 1,060,000 6,968 60,000 30,000
1996 200,000 225,000 7,891 60,000 31,040
- -------------------------------------------------------------------------------------------------------------------------
William M. Steul 1998 266,000 300,000 4,865 15,000 30,000
Vice President
1997 260,000 240,000 4,509 24,000 30,000
1996 250,000 250,000 1,025 20,000 30,000
- -------------------------------------------------------------------------------------------------------------------------
Wharton P. Whitaker 1998 245,000 977,417 8,108 15,000 30,000
President, EVD
1997 235,000 588,814 1,252 24,000 30,000
1996 225,000 428,557 9,034 12,000 30,000
- -------------------------------------------------------------------------------------------------------------------------
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
(1) Bonuses include payments in lieu of option grants to Mr. Rowland of
$25,000 and $29,380 in 1997 and 1996, respectively.
(2) The amounts appearing under "Other Annual Compensation" represent the
10% discount on the purchase of the Company's stock under the
Company's Employee Stock Purchase Plan and Incentive Plan - Stock
Alternative.
(3) The amounts appearing under "All Other Compensation" represent
contributions by the Company to the Company's Profit Sharing,
Supplemental Profit Sharing and 401(k) Plans.
(B) OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes stock option grants during 1998 to the named
executive officers.
PERCENTAGE POTENTIAL REALIZABLE
OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION
UNDERLYING EMPLOYEES IN PRICE EXPIRATION FOR OPTION TERM(1)
NAME OPTIONS GRANTED FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------------
James B. Hawkes 64,400 10% 17.844 11/03/02 317,490 701,570
5,600 1% 19.628 11/03/02 30,368 67,105
Benjamin A. Rowland, Jr. 15,000 2% 19.628 11/03/02 81,343 179,746
Thomas E. Faust, Jr. 34,000 5% 17.844 11/03/02 167,619 370,394
5,600 1% 19.628 11/03/02 30,368 67,105
William M. Steul 15,000 2% 17.844 11/03/02 73,950 163,409
Wharton P. Whitaker 15,000 2% 17.844 11/03/02 73,950 163,409
(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 1998 and stock
options held as of October 31, 1998 by the named executive officers.
NUMBER OF
SHARES SECURITIES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNEXERCISED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT FISCAL
EXERCISE REALIZED YEAR END YEAR END (1)
--------------------------------------------------------------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- ----------------------------------------------------------------------------------------------------------------------
James B. Hawkes 181,234 2,257,314 126,664 383,336 1,582,630 4,062,652
Benjamin A. Rowland, Jr.
10,000 155,900 33,496 15,000 531,203 41,203
Thomas E. Faust 14,500 159,758 66,416 94,584 985,915 855,199
William M. Steul 16,180 186,674 128,460 27,000 2,011,525 211,218
Wharton P. Whitaker
18,720 274,365 12,000 32,280 143,250 292,067
(1) Based on the fair market value of the Company's common stock on October 31, 1998 ($22.375) 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, 1998,
John G.L. Cabot, and Ralph Z. Sorenson each received $32,000; in addition, each
was granted options for 1,392 shares. During the fiscal year ended October 31,
1998, John M. Nelson, and Vincent M. O'Reilly received $28,000 and $22,000
respectively; in addition, they were granted options for 3,328 and 2,594 shares,
respectively.
(E) COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Not applicable.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) COMMON STOCK
All outstanding shares of the Company's Voting Common Stock, $0.015625 par
value, (which is the only class of the Company's stock having voting rights) are
deposited in a Voting Trust, of which the Voting Trustees were (as of December
31, 1998), James B. Hawkes (Chairman of the Board of Directors, President and
Chief Executive Officer 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), William M. Steul (a Vice President
of the Company), Thomas J. Fetter (a Vice President of Eaton Vance Management),
and Duncan W. Richardson (a Vice President of Eaton Vance Management ). The
Voting Trust expires October 30, 2000. The Voting Trustees have unrestricted
voting rights for the election of the Company's directors. At December 31, 1998,
the Company had outstanding 77,440 shares of Common Stock. Inasmuch as the eight
Voting Trustees of the Voting Trust have unrestricted voting rights with respect
to the Common Stock (except that the Voting Trust Agreement provides that the
Voting Trustees shall not vote such Stock in favor of the sale, mortgage or
pledge of all or substantially all of the Company's assets or for any change in
the capital structure or powers of the Company or in connection with a merger,
consolidation, reorganization or dissolution of the Company or the termination
of the Voting Trust or the addition of a Voting Trustee or of the removal of a
Voting Trustee by the other Voting Trustees or the renewal of the term of the
Voting Trust without the written consent of the holders of Voting Trust Receipts
representing at least a majority of such Stock subject at the time to the Voting
Trust Agreement), they may be deemed to be the beneficial owners of all of the
Company's outstanding Common Stock by virtue of Rule 13d-3(a)(1) under the
Securities Exchange Act of 1934. The Voting Trust Agreement provides that the
Voting Trustees shall act by a majority if there are five or more Voting
Trustees; otherwise they shall act unanimously except as otherwise provided in
the Voting Trust Agreement. The address of the Voting Trustees is 24 Federal
Street, Boston, Massachusetts 02110.
The following table sets forth the beneficial owners at December 31, 1998, of
the Voting Trust Receipts issued under said Voting Trust Agreement, which
Receipts cover the aggregate of 77,440 shares of the Common Stock then
outstanding:
NUMBER OF SHARES
OF VOTING COMMON
STOCK COVERED BY
TITLE OF CLASS NAME RECEIPTS % OF CLASS
- --------------------------------------------------------------------------------
Voting Common Stock James B. Hawkes 18,560 24%
Voting Common Stock Thomas E. Faust, Jr. 13,173 17%
Voting Common Stock Benjamin A. Rowland, Jr. 11,680 15%
Voting Common Stock Alan R. Dynner 9,279 12%
Voting Common Stock William M. Steul 9,279 12%
Voting Common Stock Wharton P. Whitaker 9,279 12%
Voting Common Stock Thomas J. Fetter 3,095 4%
Voting Common Stock Duncan W. Richardson 3,095 4%
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(CONTINUED)
Messrs. Hawkes, and Rowland are officers and Directors of the Company and Voting
Trustees of the Voting Trust; Messrs. Dynner, Faust and Steul are all officers
of the Company and Voting Trustees of the Voting Trust. Mr. Whitaker is
President of Eaton Vance Distributors, Inc. and a Voting Trustee of the Voting
Trust. Messrs. Fetter and Richardson are officers of Eaton Vance Management and
Voting Trustees of the Voting Trust. No transfer of any kind of the Voting Trust
Receipts issued under the Voting Trust may be made at any time unless they have
first been offered to the Company at book value. In the event of the death or
termination of employment with the Company or a subsidiary of a holder of the
Voting Trust Receipts, the shares represented by such Voting Trust Receipts must
be offered to the Company at book value. Similar restrictions exist with respect
to the Voting Common Stock, all shares of which are deposited and held of record
in the Voting Trust.
(B) NON-VOTING COMMON STOCK
The Articles of Incorporation of the Company provide that its Non-Voting Common
Stock, $0.015625 par value, shall have no voting rights under any circumstances
whatsoever. As of December 31, 1998, the officers and Directors of the Company,
as a group, beneficially owned 3,160,400 shares of such Non-Voting Common Stock
or 8.6% of the 36,551,965 shares then outstanding. (Such figures include 641,348
shares subject to options exercisable within 60 days and are based solely upon
information furnished by the officers and Directors.)
The following table sets forth the beneficial ownership of the Company's
Non-Voting Common Stock by (i) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Non-Voting Common Stock,
(ii) each Director of the Company, and (iii) each of the named executive
officers of the Company (as defined in Item 11, "Executive Compensation") as of
December 31, 1998 (such investment power being sole unless otherwise indicated):
AMOUNT OF PERCENTAGE
BENEFICIAL OF CLASS
TITLE OF CLASS BENEFICIAL OWNERS OWNERSHIP (a) (b)
- --------------------------------------------------------------------------------
Non-Voting Common Stock Landon T. Clay 5,783,884 (d)(h) 16.11
Non-Voting Common Stock James B. Hawkes 1,163,118 (c)(f) 3.19
Non-Voting Common Stock Benjamin A. Rowland,Jr. 800,512 (c)(e) 2.20
Non-Voting Common Stock Wharton P. Whitaker 319,540 (c) 0.88
Non-Voting Common Stock Thomas E. Faust, Jr. 301,593 (c) 0.83
Non-Voting Common Stock William M. Steul 201,178 (c) 0.55
Non-Voting Common Stock John G. L. Cabot 97,400 (c)(g) 0.27
Non-Voting Common Stock Ralph Z. Sorenson 38,300 (c) 0.11
Non-Voting Common Stock John M. Nelson 4,000 (c) 0.01
Non-Voting Common Stock Vincent M. O'Reilly 600 (c) 0.00
(a) Based solely upon information furnished by the individuals.
(b) Based on 35,910,617 outstanding shares plus options exercisable within 60
days of 247,200 for Mr. Hawkes, 29,764 for Mr. Rowland, 29,280 for Mr.
Whitaker, 84,700 for Mr. Faust, 124,284 for Mr. Steul, 8,544 for Mr. Cabot
and 8,544 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 10,000 shares held by Mr. Clay's children.
(e) Includes 4,800 shares owned by Mr. Rowland's spouse as to which Mr.
Rowland disclaims beneficial ownership.
(f) Includes 46,580 shares owned by Mr. Hawkes' spouse and 29,152 shares
held by Mr. Hawkes' daughter.
(g) Includes 16,000 shares held in a family limited partnership.
(h) Includes 4,180 shares held in the trust of a profit sharing retirement
plan for employees of Flowers Antigua, of which the sole beneficiary is
the spouse of Mr. Clay. Also includes 25,420 shares held in trust of a
profit sharing retirement plan for employees of LTC Corp., wholly owned
by Mr. Clay.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
(B) CERTAIN BUSINESS RELATIONSHIPS
James B. Hawkes, a Director and chief executive officer of the Company, is an
officer and director, trustee or general partner of various investment companies
for which either Eaton Vance Management or Boston Management and Research serves
as investment adviser and for which Eaton Vance Distributors, Inc. acts as
principal underwriter; such investment companies make substantial payments to
these subsidiaries for advisory and management services or under their
distribution plans.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED)
(C) INDEBTEDNESS OF MANAGEMENT
In 1998, the Company increased to $10,000,000 the amount of money in the
Executive Loan Program, which is available for loans to certain key employees
for the purpose of financing the exercise of stock options for shares of the
Company's Non-Voting Common Stock. Such loans are written for a seven-year
period, at varying fixed interest rates, and notes evidencing them require
repayment in annual installments commencing with the third year in which the
loan is outstanding. Loans outstanding under this program amounted to $2,957,000
at October 31, 1998.
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, 1997, in an aggregate amount in excess of $60,000:
LARGEST AMOUNT
OF LOANS LOANS RATE OF INTEREST
OUTSTANDING SINCE OUTSTANDING AS CHARGED ON LOANS
11/1/97 OF 12/31/98 AS OF 12/31/98
- -------------------------------------------------------------------------------
James B. Hawkes $ 551,322 $ 551,322 4.83% - 7.61% (1)
Thomas E. Faust, Jr. 81,758 - n/a
Wharton P. Whitaker 224,796 - n/a
(1) 6.11% interest payable on $66,000 principal amount of loan, 5.31% interest
payable on $109,821 principal amount, 5.74% interest payable on $50,481
principal amount, 7.61% interest payable on $30,800 principal amount, 6.77%
interest payable on $100,000 principal amount and 4.83% interest payable on
$194,220 principal amount.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(1) The following consolidated financial statements of Eaton Vance Corp. and
report of independent accountants, included on pages 23 through 41 of
the Annual Report, are incorporated by reference as a part of this Form
10-K:
SEPARATE
DOCUMENT
EATON VANCE CORP. 1998 ANNUAL REPORT TO SHAREHOLDERS PAGE NUMBER
- -------------------------------------------------------------------------------
Consolidated Statements of Income for each of the three years
in the period ended October 31, 1998 23
Consolidated Balance Sheets as of October 31, 1998 and 1997 24-25
Consolidated Statements of Cash Flows for each of the three
years in the period ended October 31, 1998 26
Consolidated Statements of Shareholders' Equity for each of
the three years in the period ended October 31, 1998 27
Notes to Consolidated Financial Statements 28-40
Independent Auditors' Report 41
(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 PAGE NUMBER
- -------------------------------------------------------------------------------
Independent Auditors' Report on Financial Statement Schedules 23
Schedule II Valuation and Qualifying Accounts 24
Schedule III Real Estate and Accumulated Depreciation 25-26
All other schedules have been omitted because they are not required, are
not applicable or the information is otherwise shown in the consolidated
financial statements or notes thereto.
(3) The list of exhibits required by Item 601 of Regulation S-K is set forth
in the Exhibit Index on pages 28 through 31 and is incorporated herein
by reference.
(B) REPORTS ON FORM 8-K
The Company filed a Form 8-K with the SEC on October 20, 1998 regarding
the impact of Financial Accounting Standards Board staff announcement
(Topic No. D-76).
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, 1998 and 1997, and for each of the three
years in the period ended October 31, 1998, and have issued our report thereon
dated November 24, 1998 (included elsewhere in this Registration Statement). Our
audits also included the consolidated financial statement schedules of Eaton
Vance Corp. and its subsidiaries, listed in Item 14 of the Registration
Statement. 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 24, 1998
EATON VANCE CORP.
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II
YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996
- -------------------------------------------------------------------------------
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END OF
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS 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:
1998 - - - -
1997 $ 775,000 - $775,000 -
1996 $1,200,000 $300,000 $725,000 $ 775,000
EATON VANCE CORP.
REAL ESTATE AND ACCUMULATED DEPRECIATION SCHEDULE III
OCTOBER 31, 1998
- -------------------------------------------------------------------------------------------------------------------
COSTS
CAPITALIZED GROSS CARRYING AMOUNT
INITIAL COST SUBSEQUENT OCTOBER 31, 1998 (1) (2)
-------------------- TO -------------------------
ACQUISITION DATE OF DEPRE-
(IMPROVE- ACCUMULATED CONSTRUC- DATE CIABLE
DESCRIPTION ENCUMBRANCES LAND BUILDINGS MENTS) LAND BUILDINGS DEPRECIATION TION ACQUIRED LIFE
- ------------------------------------------------------------------------------------------------------------------------------------
Shopping mall and
office building -
Troy, NY $2,283,144 $ 834,100 $ 4,033,921 $3,229,405 $ 834,100 $4,627,783 $1,866,968 1978 05/01/87 31.5yrs.
Warehouses -
Colonie, NY 2,064,143 137,966 1,596,385 611,947 137,966 2,208,332 766,813 1964 11/13/84 30yrs.
Springfield, MA - 145,833 1,967,684 193,338 145,833 2,161,022 855,716 1974 11/02/84 30yrs.
Office building -
Boston, MA - 280,800 4,009,836 2,281,561 280,800 6,291,397 2,797,124 1920 10/31/90 20yrs.
Boston, MA 5,823,969 1,164,113 4,651,554 559,796 1,164,113 5,211,350 225,834 1883 03/03/97 39yrs.
========================================================================================================
TOTAL $10,171,256 $2,562,812 $16,259,380 $6,876,047 $2,562,812 $20,499,884 $6,512,455
========================================================================================================
(1) The aggregate cost of real estate for federal income tax purposes is approximately the same as the gross carrying amount
recorded for book purposes.
(2) All real estate is classified as available for sale at October 31, 1998.
EATON VANCE CORP.
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED) SCHEDULE III
YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996
- --------------------------------------------------------------------------------
1998 1997 1996
--------------------------- -------------
LAND AND BUILDINGS:
Gross carrying amount, beginning
of year $20,532,859 $26,353,167 $30,288,033
Additions during period:
Acquisition (1) - 5,855,284 -
Improvements 512,220 833,184 1,650,801
Deductions during period:
Cost of real estate sold - (78,203) -
Reclassification of assets
held for sale (2) (3) (21,045,079) (12,430,573) (5,585,667)
----------------------------------------
Gross carrying amount, end of year - $20,532,859 $26,353,167
========================================
Accumulated depreciation, beginning
of year $4,494,720 $7,534,281 $8,424,489
Additions during period:
Depreciation 395,484 852,435 918,105
Deductions during period:
Reclassification of assets
held for sale (2) (3) (4,890,204) (3,891,996) (1,808,313)
----------------------------------------
Accumulated depreciation, end of year - $4,494,720 $7,534,281
========================================
(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 first quarter of 1998, the Company committed to a plan to sell an
office building and shopping center located in Troy, New York and recognized
a pre-tax impairment loss of $2.6 million based on the estimated net
realizable value of the property (estimated fair value less estimated
selling costs). In the fourth quarter of 1996, the Company committed to a
plan to sell an office building located in Boston, Massachusetts and
recognized a pre-tax impairment loss of $1.3 million based on the estimated
net realizable value of the property. Estimated fair value of the property
was calculated using market appraisals and other available valuation
techniques. At October 31, 1996, the property was classified as a current
asset held for sale for financial reporting purposes.
(3) In 1998, the Company committed to a plan to sell all of its remaining
properties. The Company had committed to a plan to sell two warehouse
buildings located in Springfield, Massachusetts and Colonie, New York and a
shopping center in Goffstown, New Hampshire in 1997.
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, 1999
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, 1999
James B. Hawkes Principal Executive Officer
/s/ William M. Steul Chief Financial Officer January 28, 1999
William M. Steul
/s/ Laurie G. Russell Chief Accounting Officer January 28, 1999
Laurie G. Russell
/s/ Benjamin A. Rowland, Jr. Director January 28, 1999
Benjamin A. Rowland, Jr.
/s/ John G.L. Cabot Director January 28, 1999
John G.L. Cabot
/s/ John M. Nelson Director January 28, 1999
John M. Nelson
/s/ Vincent M. O'Reilly Director January 28, 1999
Vincent M. O'Reilly
/s/ Ralph Z. Sorenson Director January 28, 1999
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.
3.5 Copy of the Company's Articles of Amendment effective at the close of
business on July 7, 1998 has been filed as Exhibit 3.1 to the Quarterly
Report on Form 10-Q for the fiscal quarter ended July 31, 1998, (S.E.C.
File No. 1-8100) and is incorporated herein by reference.
4.1 The rights of the holders of the Company's Common Stock, par value
$.015625 per share, and Non-Voting Common Stock, par value $.015625 per
share, are described in the Company's Amended Articles of Incorporation
(particularly Articles Sixth, Seventh and Ninth thereof) and the
Company's By-Laws (particularly Article II thereof). See Exhibits 3.1,
3.2, 3.3, 3.4 and 3.5 above as incorporated herein by reference.
9.1 Copy of the Voting Trust Agreement made as of October 30, 1997. has
been filed as Exhibit 9.1 to the Annual Report on Form 10-K of the
Company for the fiscal year ended October 31, 1997, (S.E.C. File No.
I-8100) and is incorporated herein by reference.
10.1 Description of Performance Bonus Arrangement for Members of Investment
Division of Eaton Vance Management has been filed as Exhibit 10.1 to
the Annual Report on Form 10-K of the Company for the fiscal year ended
October 31, 1995, (S.E.C. File No. 1-8100) and is incorporated herein
by reference.
EXHIBIT NO. DESCRIPTION
10.2 Description of Incentive Bonus Arrangement for Marketing Personnel of
Eaton Vance Distributors, Inc. has been filed as Exhibit 10.2 to the
Annual Report on Form 10-K of the Company for the fiscal year ended
October 31, 1995, (S.E.C. File No. 1-8100) and is incorporated herein
by reference.
10.3 Copy of 1988 Profit Improvement Bonus Plan of Eaton Vance Management,
Inc. has been filed as Exhibit 10.9 of the Annual Report on Form 10-K
of the Company for the fiscal year ended October 31, 1987 (S.E.C. File
No 1-8100) and is incorporated herein by reference.
10.4 Description of 1990 Performance and Retention of Officers Pool (bonus
plan to reward key officers of Eaton Vance Management and Eaton Vance
Distributors, Inc.) of Eaton Vance Corp. has been filed as Exhibit 10.5
to the Annual Report on Form 10-K of the Company for the fiscal year
ended October 31, 1995, (S.E.C. File No. 1-8100) and is incorporated
herein by reference.
10.5 Copy of 1992 Stock Option Plan as adopted by the Eaton Vance Corp.
Board of Directors on April 8, 1992 has been filed as Exhibit 10. 12 to
the Annual Report on Form 10-K of the Company for the fiscal year ended
October 31, 1992 (S.E.C. File No. 1-8100), and is incorporated herein
by reference.
10.6 Copy of 1986 Employee Stock Purchase Plan as amended and restated by
the Eaton Vance Corp. Board of Directors on April 8, 1992 has been
filed as Exhibit 10.13 to the Annual Report on Form 10-K of the Company
for the fiscal year ended October 31, 1992 (S.E.C. File No. 1-81 00),
and is incorporated herein by reference.
10.7 Copy of 1992 Incentive Plan - Stock Alternative as adopted by the Eaton
Vance Corp. Board of Directors on July 17, 1992 has been filed as
Exhibit 10. 14 to the Annual Report on Form 10-K of the Company for the
fiscal year ended October 31, 1992 (S.E.C. File No. 1-8100), and is
incorporated herein by reference.
10.8 Copy of 1995 Stock Option Plan as adopted by the Eaton Vance Corp.
Board of Directors on October 12, 1995, has been filed as Exhibit 10.9
to the Annual Report on Form 10-K of the Company for the fiscal year
ended October 31, 1995, (S.E.C. File No. 1-8100) and is incorporated
herein by reference.
10.9 Copy of 1986 Employee Stock Purchase Plan as amended and restated by
the Eaton Vance Corp. Board of Directors on October 12, 1995, has been
filed as Exhibit 10.10 to the Annual Report on Form 10-K of the Company
for the fiscal year ended October 31, 1995, (S.E.C. File No. 1-8100)
and is incorporated herein by reference.
10.10 Copy of 1995 Executive Loan Program relating to financing or
refinancing the exercise of options by key directors, officers, and
employees adopted by the Company's Directors on October 12, 1995, has
been filed as Exhibit 10.2 to the Annual Report on Form 10-K of the
Company for the fiscal year ended October 31, 1995, (S.E.C. File No.
1-8100) and is incorporated herein by reference.
10.11 Copy of the Eaton Vance Corp. Supplemental Profit Sharing Plan adopted
by the Company's Directors on October 9, 1996, has been filed as
Exhibit 10. 12 to the Annual Report on Form 10-K of the Company for the
fiscal year ended October 31, 1996, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
EXHIBIT NO. DESCRIPTION
10.12 Copy of 1992 Stock Option Plan - Restatement No. 1 as adopted by the
Eaton Vance Corp. Board of Directors on April 9, 1997, has been filed
as Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal
quarter ended April 30, 1997, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.13 Copy of 1995 Stock Option Plan - Restatement No. 1 as adopted by the
Eaton Vance Corp. Board of Directors on April 9, 1997, has been filed
as Exhibit 10.2 to the Quarterly Report on Form 10-Q for the fiscal
quarter ended April 30, 1997, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.14 Copy of 1992 Incentive Plan - Stock Alternative - Restatement No. 2 as
adopted by the Eaton Vance Corp. Board of Directors on April 9, 1997,
has been filed as Exhibit 10.3 to the Quarterly Report on Form 10-Q for
the fiscal quarter ended April 30, 1997, (S.E.C. File No. 1-8100) and
is incorporated herein by reference.
10.15 Copy of 1992 Stock Option Plan - Restatement No. 2 as adopted by the
Eaton Vance Corp. Board of Directors on October 30, 1997 has been filed
as Exhibit 10.15 to the Annual Report on Form 10-K of the Company for
the fiscal year ended October 31, 1997, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.16 Copy of 1995 Stock Option Plan - Restatement No. 2 as adopted by the
Eaton Vance Corp. Board of Directors on October 30, 1997 has been filed
as Exhibit 10.16 to the Annual Report on Form 10-K of the Company for
the fiscal year ended October 31, 1997, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.17 Copy of 1992 Incentive Plan - Stock Alternative - Restatement No. 3 as
adopted by the Eaton Vance Corp. Board of Directors on July 7, 1998,
has been filed as Exhibit 10.3 to the Quarterly Report on Form 10-Q for
the fiscal quarter ended July 31, 1998, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.18 Copy of 1986 Employee Stock Purchase Plan - Restatement No. 7 adopted
by the Eaton Vance Corp. Board of Directors on July 9, 1998, has been
filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q of the
Company for the fiscal quarter ended July 31, 1998, (S.E.C. File No.
1-8100) and is incorporated herein by reference.
10.19 Copy of 1998 Stock Option Plan as adopted by the Eaton Vance Corp.
Board of Directors on July 9, 1998 has been filed as Exhibit 10.1 to
the Quarterly Report on Form 10-Q of the Company for the fiscal quarter
ended July 31, 1998 (S.E.C. File No. 1-8100), and is incorporated
herein by reference.
10.20 Copy of Eaton Vance Corp. Executive Performance-Based Compensation Plan
as adopted by the Eaton Vance Corp. Board of Directors on July 9, 1998
has been filed as Exhibit 10.4 to the Quarterly Report on Form 10-Q of
the Company for the fiscal quarter ended July 31, 1998 (S.E.C. File No.
1-8100), and is incorporated herein by reference.
10.21 Copy of 1998 Executive Loan Program relating to financing or
refinancing the exercise of options by key directors, officers, and
employees adopted by the Company's Directors on October 15, 1998 (filed
herewith).
EXHIBIT NO. DESCRIPTION
13.1 Copy of the Company's Annual Report to Shareholders for the fiscal year
ended October 31, 1998 (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, 1998 (filed
herewith).
23.1 Independent Auditors' Consent (filed herewith).
27.1 Financial Data Schedule as of October 31, 1998 (filed herewith -
electronic filing only).
99.2 List of Eaton Vance Corp. Open Registration Statements (filed
herewith).