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, 1994
Commission File Number 1-8100
EATON VANCE CORP.
(Exact name of registrant as specified in its charter)
Maryland 04-2718215
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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:
Name of each exchange
Title of each class on which registered
Non-Voting Common Stock par value $0.0625 per share Boston Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
Non-Voting Common Stock par value $0.0625 per share
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 (229.405 of this chapter) 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, 1994
Non-Voting Common Stock, $0.0625 par value 9,103,142
Common Stock, $0.0625 par value 19,360
Portions of registrant's Annual Report to Stockholders for the fiscal year
ended October 31, 1994, (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, 1994, the Company managed $15.0
billion in portfolios with investment objectives ranging from high
current income to maximum capital gain.
In addition to its investment management activities, the Company has three
additional lines of business: 1) fiduciary and related banking services; 2)
real estate; and 3) precious metal mining.
On October 31, 1994, the Company and its wholly owned subsidiaries had 385
full-time employees. Investors Bank & Trust Company (IB&T), a 77.3% owned
subsidiary, had an additional 632 employees. On October 31, 1993, the
comparable figures were 356 and 517.
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, 1994 (which report is furnished as
Exhibit 13.1 hereto) for financial information including total income,
operating profit or loss and identifiable assets attributable to each of
the Company's business segments.
INVESTMENT MANAGEMENT
OVERVIEW
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 ("EVD"), a
wholly owned broker/dealer registered under the Exchange Act, markets and
sells the Eaton Vance Funds.
As of October 31, 1994, the Company provided investment advisory and
administration services to 147 Funds ("Funds") and to over 1,000 separately
managed accounts. At that date the Funds had aggregate net assets of $13.4
billion and the Company's separately managed accounts had aggregate net
assets of $1.6 billion. The following table shows net assets in the Funds
and the separately managed accounts for the dates indicated:
<TABLE>
Fund And Separate Account Assets
(in millions)
At October 31,
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Funds $13,400 $13,100 $ 9,200 $7,400 $5,900
Separately Managed Accounts 1,600 2,200 2,100 2,000 1,300
Total $15,000 $15,400 $11,300 $9,400 $7,200
</TABLE>
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ITEM 1. BUSINESS (Continued)
Investment decisions for all but ten of the 147 Funds are made by portfolio
managers employed by the Company and are made in accordance with each
Fund's fundamental investment objectives. The Company's portfolio
management staff consists of 58 portfolio managers and analysts who 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
upon 30 to 60 days notice without penalty.
Investment decisions for the separately managed accounts are made by the
eighteen investment counselors employed by the Company. The investment
counselors are assisted by an additional twelve financial analysts and
managers with part-time counseling responsibilities. 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, 1994:
<TABLE>
Investment Advisory And Administration Fees*
(in thousands)
Year ended October 31,
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees -
Funds $68,284 $59,322 $50,776 $44,550 $40,366
Separately Managed Accounts 9,807 8,934 8,949 6,957 5,922
Administration Fees - Funds 4,257 3,295 4,685 5,388 4,529
Total $82,348 $71,551 $64,410 $56,895 $50,817
* Excludes gold mining investment management fees and administration fees
received from funds other than Eaton Vance Funds.
</TABLE>
The Company's growth has resulted from its ability to develop and offer
successfully new funds and to increase the assets of existing Funds. The
Company's strategy is to develop products with clearly understood and
clearly presented investment characteristics coupled with distribution
arrangements that are attractive to third-party distributors of the Funds.
In 1985 the Company was a leader in the introduction of spread commission
funds with self-liquidating distribution payment plans. The Company has
built on this concept by creating state specific double-tax-free mutual
funds which utilize this distribution method.
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ITEM 1. BUSINESS (Continued)
In 1990, the Company introduced the first of its single-state tax-exempt
Funds. In 1991, it introduced nine additional single-state tax-exempt
Funds, a short-term treasury Fund and Eaton Vance Short-Term Global Income
Fund, which invests in domestic and foreign fixed income securities. In
1992, the Company introduced 21 new Funds, including 13 long maturity
single-state tax-free Funds, seven limited maturity single-state tax-free
Funds, and the Eaton Vance Greater China Funds, which seek long-term
capital appreciation through investments in equity securities of companies
which will benefit from the economic development and growth of Southeast
Asia.
In 1993, the Company introduced the Hub and Spoke structure. "Hub and
Spoke" is a two-tiered arrangement in which mutual substantially identical
investment objectives pool their assets by investing in a common portfolio
(Hub). The structure benefits fund shareholder through lower operating
costs, while allowing the Company to offer cost-effective distribution
alternatives to the broker/dealer community and its clients. In 1994, the
Company converted most of its continuously off Funds to a Hub and Spoke
structure and plans to utilize this structure for future funds.
The Company also used the Hub and Spoke structure in 1994 to create five
private-label tax-free funds for G.R. Phelps & Co., a subsidiary of
Connecticut Mutual Life Insurance Company. G.R. Phelps manages and
distributes a growing family of funds through its own 2,000-member sales
force as well as through other distribution channels. By offering spokes
into mature Eaton Vance tax-free hubs, G.R. Phelps was able to broaden its
product line to include one national and four state tax-free funds without
the delays and business risks typically associated with starting new mutual
funds. The Company continues to pursue similar opportunities with other
mutual fund sponsors.
In April of 1994 the EV Greater India Funds were introduced. The Greater
India Funds were the first United States open-end investment companies with
an investment focus on India and the surrounding countries of the Indian
sub-continent and complement the Eaton Vance Greater China Funds. In
addition, the Company entered the offshore fund market with five new "EV
Medallion" funds sold to non-U.S. investors. Each fund is a spoke
investing in an existing hub which also serves U.S. investors by way of a
domestic spoke. The Medallion family consists of a Greater China Growth
Fund, a Greater India Fund, a new Emerging Markets Fund, a High Yield Fund,
and a U.S. Government Income Fund. Additional spokes for the Medallion
family are planned for 1995. The Medallion funds will be sold by U.S.
broker/dealers to non-U.S. clients as well as by broker/dealers operating
offshore.
The Company markets and distributes the Funds through EVD. EVD sells the
Funds through a retail network of national and regional dealers, including
those affiliated with banks and insurance companies. Although the firms in
the Company's retail distribution network have entered into a selling
agreement 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 1994 and 1993
calendar years, the five dealer firms responsible for the largest volume of
fund sales accounted for approximately 56% and 59%, respectively, of the
Company's fund sales volume.
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 a separate wholesaling force
focusing on banks and financial planners. EVD currently maintains a
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ITEM 1. BUSINESS (Continued)
sales force of more than 30 wholesalers and 30 sales assistants. Whole-
salers and their assistants work closely with the retail distribution
network to assist in selling Eaton Vance Funds.
EVD currently sells the Funds under three separate commission structures:
1) front-end load commission; 2) spread-load commission; and 3) level-load
commission.
In the front-end load commission structure, the shareholder pays the
broker's commission and EVD receives an underwriting commission equal to 0
to 75 basis points of the dollar value of the Fund shares sold.
In the spread-load commission structure, 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 then pays a contingent 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 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 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 the level-load commission structure, the shareholder pays no front-end
commissions, contingent deferred sales charges or underwriting commissions.
The Fund does, however, make monthly distribution plan payments similar to
the spread-load Funds, equal to 75 basis points of average net assets and
service fees equal to 25 basis points of average net assets on an annual
basis to the broker/dealer. 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.
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, 1994 (which report is furnished as
Exhibit 13.1 hereto) for a description of the major customers that provided
over 10% of the total income of the Company.
COMPETITIVE CONDITIONS
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.
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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.
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 and each
nationally offered Fund is qualified for sale (or is exempt) in all states
in the United States and District of Columbia; and each single-state Fund
is qualified for sale (or is exempt) in the state for which it is named and
other designated states. 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 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.
IB&T and, to a lesser extent, the other lines of business of the Company
are also subject to state and federal regulation.
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 certain types of transactions and reporting of all securities
transactions, and restrict certain transactions so as to avoid the
possibility of conflicts of interest.
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FIDUCIARY AND RELATED BANKING SERVICES
Through its 77.3% owned subsidiary Investors Bank & Trust Company (IB&T),
the Company provides domestic and foreign securities processing for pooled
investment vehicles, including investment companies, unit investment trusts
and common trust funds. IB&T also offers a full range of private banking,
custody and trustee services to individuals, investment advisers, attorneys
and private trustees. IB&T opened an office in Toronto, Canada in 1993, and
in Dublin, Ireland in 1994, allowing the Bank to better serve the growing
offshore mutual fund market.
Eaton & Howard, one of the Company's two predecessors, formed IB&T in 1969.
IB&T was the first "non-bank bank" in the country to obtain FDIC insurance.
While it has a charter with full banking powers from the Commonwealth of
Massachusetts, IB&T has elected not to make commercial loans. As a result
of enactment of the Competitive Equality Banking Act of 1987 ("CEBA"),
IB&T, as an FDIC-insured depository institution, became a "bank" for
purposes of the Bank Holding Company Act of 1956 (the "BHC Act"). Pursuant
to CEBA, the Company is permitted to retain its ownership of IB&T without
being treated as a bank holding company for purposes of the BHC Act
provided that, among other requirements, (a) neither the Company nor any of
its affiliates acquires control of an additional insured depository
institution, (b) IB&T does not engage in any activity in which it was not
lawfully engaged as of March 5, 1987, (c) IB&T limits the increase in its
assets to no more than 7% during any 12-month period beginning after August
10, 1988 (this limitation does not apply to assets under custody) and
(d) IB&T does not engage in certain cross-marketing activities with
affiliates. The Company currently is not considered to be a bank holding
company under the BHC Act.
REAL ESTATE
Through Northeast Properties, Inc., a wholly owned subsidiary of the
Company, the Company owns and operates retail, industrial and office rental
properties located in New England and New York State. The book value of
such real estate on October 31, 1994 was $22.2 million, with non-recourse
mortgages of $15.4 million and recourse mortgages of $1.4 million on the
properties. The Company believes the value of its real estate to be higher
than the book value.
PRECIOUS METAL MINING
The Company sponsored and is a limited and general partner in two gold
mining partnerships which invest in the equity and debt securities of
developers of gold mines in North America and Australia. The Company has a
28% net profits interest in one partnership and a 19% net profits interest
in the other. In addition, the Company owns directly 615,000 shares
(approximately 4% of the total outstanding shares) of Dakota Mining
Corporation, an important holding of both partnerships. One partnership
terminates in 1995 and the other in 1997. The Company has marked to market
its investments in equity and debt securities of companies engaged in gold
mining operations held directly by the Company and through the two gold
mining partnerships. This practice is not expected to have a material
effect on the Company's net income in the future.
ITEM 2. PROPERTIES
(a) Northeast Properties, Inc., a wholly owned subsidiary of the Company,
owns various investment properties including an office building located at
24 Federal Street in Boston in which the Company is the primary tenant.
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ITEM 2. PROPERTIES (Continued)
For information with respect to the properties, reference is made to
Schedule XI and Notes 4 and 6 of the Notes to Consolidated Financial
Statements contained in the Eaton Vance Corp. 1994 Annual Report to
Shareholders (Exhibit 13.1 hereto), which are incorporated herein by
reference.
(b) The Company presently owns 100% of the capital stock of Marblehead
Energy Corp. and Energex Corporation, which own interests in certain oil
and gas properties. For further information with respect to such
properties, reference is made to Note 12 of the Notes to Consolidated
Financial Statements contained in the Eaton Vance Corp. Annual Report to
Shareholders (Exhibit 13.1 hereto), which is incorporated herein by
reference.
ITEM 3. LEGAL PROCEEDINGS
At October 31, 1994, there were no material pending legal proceedings to
which the Company or any of its subsidiaries was a party or of which any
of its property was the subject.
The Company was informed on January 13, 1995, however, that a National
Association of Securities Dealers (NASD) arbitration panel in Tampa,
Florida awarded a former wholesaler for the firm $625,000 in damages and an
additional $1,250,000 as punitive damages in response to his claim for
wrongful termination of employment. One member of the three-person panel
dissented as to the award of punitive damages. The Company had requested
dismissal of the wholesaler's claim and counterclaimed for damages of
$435,000. It believes that the wholesaler's termination was fully
justified and even compelled by the facts, and that there is no basis for
the award of actual or punitive damages. As a result, the Company is
examining all possible legal steps to overturn what it regards as a most
inequitable decision, and affirms that it will pursue the matter to the
fullest.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Voting Common Stock, $0.0625 par value, is not traded and, as
of October 31, 1994, was held by five 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, $0.0625 par value, is traded on the
Boston Stock Exchange and in the Over-the-Counter market on the NASDAQ
National Market System under the symbol EAVN. The approximate number of
holders of record of the Company's Non-Voting Common Stock at October 31,
1994, was 1,109. The additional information required to be disclosed in
Item 5 is found on page 4 of the Company's 1994 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
<TABLE>
Eaton Vance Corp.
Selected Financial Data (Unaudited)
(in thousands, except per share figures)
Year Ended October 31,
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Total income $218,006 $189,145 $153,153 $121,464 $ 95,808
Net income 29,786 27,341 19,307 12,718 7,674
Total assets 455,506 425,547 318,199 273,713 222,494
Long-term obligations 60,311 73,228 78,358 63,961 50,633
Per common share-
Net Income $3.14 $3.09 $2.49 $1.74 $1.02
Cash dividends
declared 0.60 0.49 0.36 0.29 0.24
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company's largest sources of revenues are investment adviser fees and
distribution fees received from the Eaton Vance funds and investment
counsel fees from the separately managed accounts. Such fees and payments
are generally based on the net asset value of the investment portfolios
managed by the Company and fluctuate with changes in the total value of the
assets under management. Bank fee income, also a significant source of
revenue, is dependent upon assets custodied and administered by IB&T. The
Company's expenses other than the amortization of deferred sales
commissions include primarily employee compensation, occupancy costs,
service fees and other marketing costs.
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RESULTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 1994 COMPARED TO YEAR ENDED OCTOBER 31, 1993
Total revenues rose $28.9 million to $218.0 million from $189.1 million in
1993. This increase can be attributed primarily to increases in investment
adviser fees and distribution income which increased $10.6 million and $8.4
million, respectively, in 1994. Both investment adviser fees and
distribution income are based on the average net asset values of portfolios
managed by the Company, which increased significantly to $15.5 billion for
the year ended October 31, 1994, from $13.1 billion for the year ended
October 31, 1993. Fund assets under management were increased by net sales
of mutual funds of $2.0 billion in 1994 and were reduced, primarily, by
depreciation in the market value of managed assets of $1.8 billion.
Separately managed accounts, in contrast, decreased to $1.6 billion in 1994
from $2.2 billion in 1993. This decrease was primarily due to the
withdrawal of one large public retirement client. Gross sales of mutual
funds of $3.4 billion for 1994 were down 21% from 1993 when the Company
achieved record sales of $4.3 billion. Consistent with the experience of
other mutual fund sponsors, 1994 redemptions rose 38 percent to $1.8
billion from 1993's redemptions of $1.3 billion.
Bank fee income was also a significant contributor to overall revenue
growth in 1994, increasing 31% to $42.5 million from $32.5 million a year
earlier. Like investment adviser and distribution fees, bank fee income is
based on assets custodied and administered by IB&T. The Company experienced
significant growth in these assets in 1994. The Company was advised in
November, however, that a large client intended to terminate its custodial
relationship with IB&T for unit investment trusts for reasons not related
to performance and withdraw such accounts, which amounted to 16.3% of
IB&T's bank fee income in 1994. Such termination is not anticipated to
have a material adverse effect on IB&T's revenues and income, as successful
efforts are being made to replace revenues attributable to this client.
The two major components of total expenses are compensation of officers and
employees and amortization of deferred sales commissions. In 1994, total
operating expenses increased $24.1 million to $165.8 million. The increase
in compensation expense resulted from the hiring of additional personnel at
IB&T to service the additional assets under custody. Larger average dollar
value of assets in spread commission funds increased the amortization of
deferred sales commissions by $11.9 million. Other expenses rose a total of
$7.4 million to $46.4 million in 1994 from $39.0 million in 1993. This
increase was primarily due to an increase in IB&T's equipment leasing costs
of $1.2 million, $1.4 million in development costs associated with two fund
products that were not launched in 1994, and higher marketing and
administrative costs incurred to increase the distribution of the Company's
funds.
The Company sponsored and is a limited and a general partner in two gold
mining partnerships which invest in the equity and debt securities of
developers of gold mines in North America and Australia. Portfolio
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valuations of these gold mining investment partnerships contributed net
partnership losses of $0.3 million in 1994, in comparison with net
partnership gains of $3.9 million in 1993.
Net income of the Company amounted to $29.8 million in 1994 compared to
$27.3 million in 1993. Earnings per share were $3.14 and $3.09,
respectively.
During 1994 the Company's total assets increased significantly due to the
increase in deferred sales commissions to $256.3 million from $240.0
million in 1993 resulting from substantial sales of shares in the Company's
spread-commission funds. Payment of these commissions was funded primarily
by cash flows from operating activities. The difference between the book
and tax accounting treatment for these commissions caused deferred income
taxes to increase by $13.7 million. The increase in deferred income taxes
was partially offset by the cumulative effect of the change in accounting
for income taxes of $1.3 million resulting from the Company's
implementation of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", on November 1, 1993.
YEAR ENDED OCTOBER 31, 1993 COMPARED TO YEAR ENDED OCTOBER 31, 1992
Total revenues rose $36.0 million to $189.1 million from $153.1 million in
1992. This increase can be primarily attributed to increases in investment
advisory fees and distribution income, which increased $6.7 million and
$24.6 million, respectively, in 1993. Investment advisory fees rose less
than distribution income because fund sales were concentrated in spread
commission municipal bond funds, which pay distribution plan fees, while
redemptions were largely from the Eaton Vance Prime Rate Reserves Fund,
which pays an adviser fee incorporating the equivalent of distribution
payments. Both investment adviser fees and distribution income are based on
the average net asset value of portfolios managed by the Company. Ending
assets under management increased significantly in 1993 to $15.4 billion
from $11.3 billion in 1992. Total assets under management were increased by
net sales of mutual funds of $3.0 billion, market appreciation and growth of
separately managed accounts.
Gross sales of mutual funds rose 46% to $4.3 billion from $2.9 billion a
year earlier. Redemptions of the Company's fund shares fell 13% to $1.3
billion from $1.5 billion a year earlier.
The increase in distribution fee income in comparison with the prior year
was restricted by the implementation on July 7, 1993 of an NASD rule
limiting distribution plan payments to 75 basis points per year. At the
time of the implementation, the rule affected approximately $6.8 billion in
assets from which the Company was receiving distribution plan payments at
an annual rate of 1 percent. Although the rule allows the Company to
receive the same present value of distribution plan payments, it requires
the payments to be spread over a longer time period.
Bank fee income was also a significant contributor to overall revenue
growth in 1993, increasing 12% to $32.5 million from $29.0 million a year
earlier. Like investment adviser and distribution fees, bank fee income is
based on assets custodied and administered by IB&T. The assets for which
IB&T provides custody and related services increased 41% to $61.2 billion
in 1993 from $43.3 billion in 1992.
The two major components of total expenses are compensation of officers and
employees and amortization of deferred sales commissions. In 1993, total
operating expenses increased $26.1 million to $141.7 million. Higher
salaries and benefits, marketing incentives and expenses associated with
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the higher level of fund sales caused compensation to increase. Larger
average dollar value of assets in spread commission funds increased the
amortization of deferred sales commissions by $12.9 million. Other
expenses rose a total of $6.7 million to $39.0 million in 1993 from $32.3
million in 1992, primarily due to increases in marketing costs associated
with the higher level of sales, expenses from the Bank's custody activities
and expenses associated with the Company's gold mining activities.
The Company sponsored and is a limited and a general partner in two gold
mining partnerships which invest in the equity and debt securities of
developers of gold mines in North America and Australia. Portfolio
valuations of these gold mining investment partnerships contributed net
partnership gains of $3.9 million in 1993, in comparison with net
partnership losses of $0.2 million in 1992.
Net income of the Company amounted to $27.3 million in 1993 compared to
$19.3 million in 1992. Earnings per share were $3.09 and $2.49,
respectively. During 1993, the Company's total assets increased
significantly due to the increase in deferred sales commissions to $240.0
million from $159.8 million in 1992 resulting from substantial sales of
shares in the Company's spread-commission funds. Payment of these
commissions was funded by cash flows from operating activities and
borrowings. The difference between the book and tax accounting treatment
for these commissions caused deferred income taxes to increase by $17.1
million.
LIQUIDITY AND CAPITAL RESOURCES
In 1994, retained earnings of $24.3 million and net proceeds of $2.4
million from the issuance of new stock to employees under stock purchase
and stock option plans, less $6.4 million used to repurchase outstanding
shares of the Company's stock, increased the Company's consolidated net
worth from $145.3 million at the end of 1993 to $165.6 million on October
31, 1994.
The Company's primary sources of cash flow from operating activities were
net income of $29.8 million, amortization of deferred sales commissions of
$52.8 million, capitalized sales charges received on early redemption of
spread-commission funds of $24.8 million and deferred income taxes of $13.7
million. In 1994, the primary use of capital was for commission payments
associated with sales of spread-commission mutual funds, which were
primarily financed by cash flows from operating activities of $32.9
million. The Company anticipates that the primary use of cash will continue
to be the payment of sales commissions on sales of the Company's spread-
commission funds. The Company anticipates funding the payment of these
commissions through cash flows generated from operating activities and, if
necessary, through borrowings.
On March 18, 1994, the Company privately placed, with three insurance
companies, a $50 million 6.22% Senior note due March, 2004. Principal
payments on the note are due in equal annual installments beginning March
18, 1998. The note may be prepaid in part or in whole on or after March 16,
1996. The proceeds were used to call the Company's outstanding $14 million
of 10% Subordinated Debentures and to reduce the borrowings under a $75
million revolving line of credit with two unaffiliated banks. Certain
covenants in the Senior Note Purchase Agreement and the bank credit
agreement require specific levels of cash flow and net income and others
restrict additional investment and indebtedness. At year end, the Company
had no borrowings under its $75 million bank credit facility. The Company
expects a small continuing cash flow from its real estate activities. The
Company has no present plans for significant investments in new real estate
properties.
-12-
EFFECTS OF INFLATION
The major sources of revenue for the Company, i.e., adviser fees,
administrative fees and distribution plan payments, are calculated as
percentages of assets under management. 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 relation-
ship between changes in financial assets under management and the rate of
inflation. If inflation leads to increases in the price of gold or in the
price of real estate, the value of the Company's investments in precious
metal properties or real estate may be increased.
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 20 through 42 of
the Company's 1994 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.
-13-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The names of all directors and executive officers of Eaton Vance Corp. as
of October 31, 1994, as well as their ages, family relationships between
them, and offices with The Company held by each of them, are as follows:
Family
Name Age Relationship Office
Landon T. Clay (1)(2) 68 None Chairman of the Board of
Directors
M. Dozier Gardner (1)(2) 61 None President, Chief Executive
Officer and Director
James B. Hawkes (1)(2) 53 None Executive Vice President
and Director
H. Day Brigham, Jr. (1)(2) 68 None Vice President, Director
and Chairman of Management
Committee
John G. L. Cabot 60 None Director
Curtis H. Jones (1) 65 None Vice President, Treasurer
and Director
Benjamin A. Rowland, Jr. (1)(2) 59 None Vice President and Director
Ralph Z. Sorenson 61 None Director
Thomas Otis 63 None Vice President and
Secretary
Laurie G. Russell 28 None Vice President and
Internal Auditor
John P. Rynne 52 None Vice President and
Corporate Controller
(1) Member of Management Committee of the Company's Board of Directors
(2) Voting Trustee. See Item 12(a) hereof.
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 re-
organized as Eaton Vance Management in October, 1990) was formed at the
acquisition of Eaton & Howard, Incorporated by Vance, Sanders & Company,
Inc. on May 1, 1979. In this paragraph, the absence of a corporate name
indicates that, depending on the dates involved, the executive held the
indicated titlesin a firm in the chain of Vance, Sanders & Company, Inc.,
Eaton & Howard, Vance Sanders Inc., or Eaton Vance Corp. Mr. Clay has been
Chairman of the Board of Directors and was Chief Executive Officer from
October, 1971 until October, 1990; he has been a Director of the Company
since January, 1970, and was a Vice President from November, 1968, until
October, 1971. Mr. Gardner was elected President effective October, 1979;
he has been a Director since July, 1970 and the Chief Executive Officer
-14-
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)
since October, 1990. Mr. Brigham has been a Director since April, 1979;
from 1967 through 1973 he was Vice President and General Counsel of Eaton &
Howard, Incorporated, and from 1973 until April, 1979, he was President of
Eaton & Howard. Mr. Cabot, Vice Chairman of Cabot Corporation, became a
Director of Eaton Vance Corp. in March, 1989. Mr. Hawkes has been Executive
Vice President since January, 1990, a Vice President since June, 1975, and
a Director since January, 1982. Mr. Jones was a Vice President of Eaton
Vance Corp. since March, 1982, and Treasurer and a Director from January,
1984. Mr. Jones retired as Vice President, Treasurer and a Director in
November, 1994, and was succeeded by William M. Steul, who most recently
was Vice President, Finance and Chief Financial Officer of Digital
Equipment Corporation. Mr. Rowland has been a Vice President since April,
1969, and a Director since January, 1973. Mr. Sorenson became a Director
of Eaton Vance Corp. in March, 1989. Ms. Russell joined Eaton Vance Corp.
in August, 1994. Ms. Russell was most recently a Senior Accountant with
Deloitte & Touche LLP. Mr. Otis has been Secretary since October, 1969, a
Vice President since April, 1973, and has been the Company's counsel since
1966. Mr. Rynne has been Corporate Controller of Eaton Vance Corp. since
January, 1984.
In general, the foregoing officers hold their positions for a period of one
year or until their successors are duly chosen or elected. Mr. Clay is an
officer, trustee, director or general partner of a number of investment
companies of which Eaton Vance Management or Boston Management and Research
acts as investment adviser. He is Vice President and a Director of Fulcrum
Management, Inc., MinVen, Inc., Vector Mining, Inc., and Compass Mining,
Inc. Mr. Clay is also a Director of Energex Corporation and ADE Corp. (a
manufacturer of non-contact measuring devices).
Mr. Gardner is an officer or trustee of a number of investment companies
for which Eaton Vance Management or Boston Management and Research acts as
investment adviser.
Mr. Brigham is an officer or trustee of a number of investment companies
for which Eaton Vance Management or Boston Management and Research acts as
investment adviser, and Vice President, Secretary and Trustee of EquiFund-
Wright National Fiduciary Equity Funds, The Wright Managed Equity Trust,
The Wright Managed Income Trust and The Wright Managed Money Market Trust.
He is a Director and Secretary of Investors Bank & Trust Company and a
Director of Northeast Properties, Inc.
Mr. Hawkes is an officer, trustee or director of a number of investment
companies for which Eaton Vance Management or Boston Management and
Research acts as investment adviser. He is also a Director of Investors
Bank & Trust Company.
Mr. Rowland is a Director of Investors Bank & Trust Company, Marblehead
Energy Corp., and Energex Corporation.
-15-
ITEM 11. EXECUTIVE COMPENSATION
(a) SUMMARY COMPENSATION TABLE
<TABLE>
Other All
Annual Compensation Annual Options Other
Year Salary Bonus Comp. Granted Comp.
<CAPTION>
Name ($) ($)* ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C>
M. Dozier Gardner 1994 365,000 344,046 3,346 0 30,000
Chief Executive 1993 350,000 302,179 13,326 20,000 30,000
Officer 1992 332,000 254,138 9,468 13,000 30,000
Landon T. Clay 1994 350,000 273,648 15,291 0 30,000
Chairman of 1993 335,000 269,500 11,939 0 30,000
the Board 1992 318,000 224,100 9,459 0 30,000
James B. Hawkes 1994 330,000 550,413 723 0 30,000
Executive 1993 315,000 500,997 6,202 75,000 30,000
Vice President 1992 300,000 400,720 4,922 40,000 30,000
Curtis H. Jones 1994 240,000 234,816 1,387 0 30,000
Vice President 1993 229,000 223,600 11,939 0 30,000
& Treasurer 1992 218,000 187,800 9,468 0 30,000
Wharton P. Whitaker 1994 198,000 411,245 3,346 0 30,000
President, EVD 1993 189,000 640,654 11,939 15,000 28,838
1992 180,000 481,012 9,468 10,000 26,896
* Bonuses include payments in lieu of option grants to Mr. Clay in 1994 of
$43,520, in 1993 of $54,500 and in 1992 of $44,100, and to Mr. Jones in
1994 of $34,816, in 1993 of $43,600 and in 1992 of $37,800.
</TABLE>
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 Stock Alternative Plan.
The amounts appearing under "All Other Compensation" represent the
Company's contribution to its Profit Sharing and 401(k) Plans. The
Company's contribution to the Profit Sharing Plan is 15% of the base
compensation of all eligible employees, is allocated based on the
employee's salary and years of service, and is vested at the rate of 20%
for each year of employment. The Company's contribution to the 401(k)
plan, which is presently known as the Savings Plan and Trust, is a 100%
matching of the first $20.00 of the participant's weekly contribution.
Vesting in the Savings Plan and Trust is 100%. The overall contribution to
the employee benefit plans may not exceed the statutory limitation of
$30,000 per year.
-16-
ITEM 11. EXECUTIVE COMPENSATION (Continued)
(b) OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of Percentage of Exercise Expiration Potential Realized
Securities Options Granted Price Date Value at Assumed
Underlying to Employees ($/Sh) Annual Rates of
Options in Fiscal Year Stock Price
Granted Appreciation
Name (#) 5%($) 10%($)
<S> <C> <C> <C> <C> <C>
M. Dozier Gardner None
Landon T. Clay None (Cash bonus in lieu of options)
James B. Hawkes None
Curtis H. Jones None (Cash bonus in lieu of options)
Wharton P. Whitaker None
</TABLE>
(c) AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES
<TABLE>
Number of
Securities
Underlying Number of Unexercised Value of Unexercised
Options Value Options at Fiscal In-the-Money Options
Exercised Realized Year End (#) at Fiscal Year End ($)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
M. Dozier Gardner 3,000 59,550 33,917 27,583 595,642 313,070
Landon T. Clay 0 0 25,000 0 515,350 0
James B. Hawkes 16,856 303,835 63,928 70,216 928,604 443,190
Curtis H. Jones 12,200 294,000 0 0 0 0
Wharton P. Whitaker 5,000 135,000 20,752 15,248 346,188 98,312
</TABLE>
-17-
(d) COMPENSATION OF DIRECTORS
Directors not otherwise employed by the Company receive a retainer of
$3,500 per quarter and $750 per meeting. During the fiscal year ended
October 31, 1994, John G.L. Cabot received $20,750 and Ralph Z. Sorenson
received $20,000; in addition, each was granted options for 735 shares.
(e) COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
M. Dozier Gardner, President of the Company, is a member of the Compensa-
tion Committee of the Board of Directors of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
All outstanding shares of the Company's Common Stock, $0.0625 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 14, 1994), Landon T. Clay (Chairman of the Board of Directors of
the Company), M. Dozier Gardner (President and a Director of the Company),
Benjamin A. Rowland, Jr. (a Vice President and a Director of the Company),
H. Day Brigham, Jr. (a Vice President and a Director of the Company) and
James B. Hawkes (Executive Vice President and a Director of the Company).
The Voting Trust (a copy of which is incorporated by reference as Exhibit
9.1 hereto) expires December 31, 1996. The Voting Trustees have
unrestricted voting rights for the election of the Company's directors. At
December 14, 1994, the Company had outstanding 19,360 shares of Common
Stock. Inasmuch as the five 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 three or more Voting Trustees; other-
wise 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 14, 1994, of the Voting Trust Receipts issued under said
Voting Trust Agreement, which Receipts cover the aggregate of 19,360 shares
of the Common Stock then outstanding:
<TABLE>
<CAPTION>
Title of Class Name Number of Shares of %
Voting Common Stock of
Covered by Receipts Class
<S> <C> <C> <C>
Voting Common Stock Landon T. Clay 4,640 24%
Voting Common Stock M. Dozier Gardner 4,640 24%
Voting Common Stock James B. Hawkes 4,640 24%
Voting Common Stock Benjamin A. Rowland, Jr. 2,920 15%
Voting Common Stock H. Day Brigham, Jr. 2,520 13%
</TABLE>
-18-
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS (Continued)
Messrs. Clay, Gardner, Rowland, Brigham, and Hawkes are all officers and
Directors of the Company 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 by the Company of a holder of the Voting Trust Receipts, they
must be offered to the Company at book value. Similar restrictions exist
with respect to the Common Stock, all shares of which are deposited and
held of record in the Voting Trust.
(b) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(1) The Articles of Incorporation of Eaton Vance Corp. ("EVC") provide that
EVC's Non-Voting Common Stock, $0.0625 par value, shall have no voting
rights under any circumstances whatsoever. As of December 14, 1994, the
officers and directors of EVC, as a group, beneficially owned 2,955,135
shares of such Non-Voting Common Stock or 31.71% of the 9,318,094 shares
then outstanding. (Such figures include 241,278 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 (i.e., investment
power within the meaning of Rule 13d-3(a)(2) under the Securities Exchange
Act of 1934) of EVC's Directors and named executive officers of such Non-
Voting Common Stock as at December 14, 1994 (such investment power being
sole unless otherwise indicated):
<TABLE>
<CAPTION>
Title of Class Beneficial Owners Amount of %
Beneficial of
Ownership (1) Class
(2)
<S> <C> <C> <C>
Non-Voting Common Stock Landon T. Clay 1,811,419 (3)(4)(7) 19.90
Non-Voting Common Stock M. Dozier Gardner 330,225 (3)(6) 3.62
Non-Voting Common Stock James B. Hawkes 259,530 (3)(4)(6) 2.83
Non-Voting Common Stock Benjamin A. Rowland Jr. 207,404 (3)(5) 2.28
Non-Voting Common Stock H. Day Brigham, Jr. 137,900 1.52
Non-Voting Common Stock Curtis H. Jones 75,175 (6) .83
Non-Voting Common Stock Wharton P. Whitaker 58,500 (3) .64
Non-Voting Common Stock John G. L. Cabot 20,142 (3) .22
Non-Voting Common Stock Ralph Z. Sorenson 8,142 (3) .09
(1) Based solely upon information furnished by the officers and directors.
(2) Based on 9,076,816 outstanding shares plus options exercisable within 60
days of 25,000 for Mr. Clay, 42,500 for Mr. Gardner, 92,644 for Mr.
Hawkes, 24,000 for Mr. Rowland, 28,500 for Mr. Whitaker, 6,142 for Mr.
Cabot and 4,142 for Mr. Sorenson.
(3) Includes shares subject to options exercisable within 60 days granted
to, but not exercised by, each officer and director as listed in Note
(2) above.
-19-
(b) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(Continued)
(4) Includes 4,800 shares held by Mr. Hawkes as custodian for a minor child,
635 shares held by Mr. Hawkes' daughter and 2,500 shares held by Mr.
Clay's children.
(5) Includes 1,200 shares owned by Mr. Rowland's spouse as to which Mr.
Rowland disclaims beneficial ownership.
(6) Includes 36,073 shares owned by Mr. Jones' spouse, 37,609 shares owned
by Mr. Gardner's spouse, and 10,300 shares owned by Mr. Hawkes' spouse.
(7) Includes 1,045 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 6,355 shares held in trust of
Profit Sharing Retirement Plan for employees of LTC Corp., wholly owned
by Mr. Clay.
</TABLE>
(2) As of October 31, 1994, certain directors and officers of EVC held
various partnership interests in VenturesTrident, L.P., VenturesTrident II,
L.P., Fulcrum Management Partners, L.P. and Fulcrum Management Partners II,
L.P. (limited partnerships described in Item 13(a) below), each of which
may be deemed to be an "affiliate" of MinVen, Inc. (see Item 13 below) and
EVC as that term is defined in Rule 12b-2 under the Securities Exchange Act
of 1934. These partnership interests are described in Item 13(a) below,
which description is incorporated in this Item by reference.
(3) Landon T. Clay (a director and officer of EVC) owned 15 shares of
common stock of Investors Bank & Trust Company (a 77.3% owned subsidiary)
as at October 31, 1994. As at such date Messrs. Brigham, Hawkes, Jones and
Rowland (directors and officers of EVC) each owned qualifying shares (10
shares) of common stock of Investors Bank & Trust Company, enabling them to
serve as directors of said bank. All officers and directors of the Company,
as a group, beneficially owned in the aggregate 55 shares of such common
stock (or 0.55% of the outstanding common stock of Investors Bank & Trust
Company).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) TRANSACTIONS WITH MANAGEMENT AND OTHERS
On February 28, 1985, the Company became a limited partner in
VenturesTrident, L.P. ("VenturesTrident"), 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 an aggregate of $5,000,000 in cash in VenturesTrident.
The investment by the Company was made entirely from internally generated
funds.
The general partner of VenturesTrident is Fulcrum Management Partners, L.P.
("Fulcrum Partners"), a Delaware Limited Partnership of which Landon T.
Clay (the Company's Chairman of the Board and principal stockholder) and
MinVen are the general partners. MinVen owns a 79.24% interest in Fulcrum
Partners, and Mr. Clay owns a 16.09% interest therein. The Company, by
reason of MinVen's 79.24% interest in Fulcrum Partners, indirectly owns an
additional 15.85% interest in VenturesTrident.
VenturesTrident has entered into a service agreement with Fulcrum
Management, Inc. ("Fulcrum Management"), a Denver based wholly-owned
subsidiary of the Company, whereby Fulcrum Management provides management
-20-
(a) TRANSACTIONS WITH MANAGEMENT AND OTHERS (Continued)
and administration services to VenturesTrident for a quarterly fee of
$50,000. Such fee will not be paid to Fulcrum Management by VenturesTrident
during the calendar year ending December 31, 1995, and it is currently
anticipated that VenturesTrident may be liquidated during 1995 or shortly
thereafter. Fulcrum Management has entered into a separate agreement with
Castle Group, Inc., a Colorado corporation, pursuant to which Castle will
provide such services to VenturesTrident.
Mr. Clay and entities controlled by Mr. Clay, other than the Company, have
acquired limited partnership interests in VenturesTrident for cash
investments aggregating $5,550,000. Mr. Clay and such entities, solely
through their ownership of such limited partnership interests, in the
aggregate currently own a 13.48% interest in VenturesTrident; Mr. Clay, by
reason of his 16.093% interest in Fulcrum Partners, indirectly owns an
additional 3.219% interest in VenturesTrident. Mr. Clay's wife, Lavinia D.
Clay, acquired a limited partnership interest in VenturesTrident for an
investment of $100,000; she currently owns a .24% interest in
VenturesTrident. Certain institutions and other investors have also
acquired limited partnership interests in VenturesTrident.
Two other directors of the Company, M. Dozier Gardner and Benjamin A.
Rowland, Jr., have acquired limited partnership interests in
VenturesTrident; each of such investments amounts to $50,000, and each such
director owns a .12% interest in VenturesTrident. Mr. Clay and the other
directors of the Company, by reason of their positions with and ownership
of stock of the Company, have an indirect interest in the aggregate 27.988%
interest in VenturesTrident directly and indirectly owned by the Company.
All net operating income and losses and all net realized capital gains and
losses of VenturesTrident with respect to each of its fiscal years will
generally be allocated 80% to the limited partners (which include the
Company, Mr. and Mrs. Clay and the other two directors of the Company who
own limited partnership interests) of VenturesTrident and 20% to Fulcrum
Partners (of which Mr. Clay owns a 16.093% interest and the Company owns
through MinVen a 79.24% interest). Mr. Clay is an officer and director of
MinVen and Fulcrum Management.
On November 4, 1987, the Company became a limited partner in
VenturesTrident II, L.P. ("VenturesTrident II"), a Delaware Limited Partner-
ship 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 acquired 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
Landon T. Clay (the Company's Chairman of the Board and principal
stockholder) and MinVen are the general partners. MinVen owns a 82.13%
interest in Fulcrum Partners II, and Mr. Clay owns a 3.87% interest
therein. The Company, by reason of MinVen's 82.13% interest in Fulcrum
Partners II, indirectly owns an additional 16.43% interest in
VenturesTrident II.
-21-
(a) TRANSACTIONS WITH MANAGEMENT AND OTHERS (continued)
VenturesTrident II has entered into a service agreement with Fulcrum
Management, Inc. ("Fulcrum Management"), a Denver based wholly-owned
subsidiary of the Company, whereby Fulcrum Management will provide manage-
ment and administration services to VenturesTrident II for a quarterly fee
equal to .675% of VenturesTrident II's aggregate committed capital. Fulcrum
Management has entered into a separate agreement with Castle Group, Inc.,
a Colorado corporation, pursuant to which Castle will provide such services
to VenturesTrident II.
Mr. Clay and entities controlled by Mr. Clay, other than the Company,
acquired limited partnership interests in VenturesTrident II for cash
investments aggregating $2,650,000. Mr. Clay and such entities, solely
through their ownership of such limited partnership interest, in the
aggregate currently own a 2.69% interest in VenturesTrident II; Mr. Clay,
by reason of his 3.87% interest in Fulcrum Partners II, indirectly owns an
additional .77% interest in VenturesTrident II. Investors Bank & Trust
Company, as custodian for the benefit of Thomas M. Clay and Richard T. Clay
(both of whom are minor children of Landon T. Clay), acquired limited
partnership interests in VenturesTrident II for investments of $100,000 for
each such child; each such child currently owns a .10% interest in
VenturesTrident II. Certain institutions and other investors have also
acquired limited partnership interests in VenturesTrident II.
Two other directors of the Company, M. Dozier Gardner and Benjamin A.
Rowland, Jr., have acquired limited partnership interests in
VenturesTrident II; each of such investments amounts to $50,000, and
each such director currently owns a .05% interest in VenturesTrident II.
Mr. Clay and the other directors of the Company, 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.
All net operating income and losses and all net realized capital gains and
losses of VenturesTrident II with respect to each of its fiscal years will
generally be allocated 80% to the limited partners (which include the
Company, Mr. Clay, Mr. Clay's minor children and the other two directors of
the Company who own limited partnership interests) of VenturesTrident II
and 20% to Fulcrum Partners II (of which Mr. Clay owns a 3.87% interest and
the Company owns through MinVen a 82.13% interest). Mr. Clay is an officer
and director of MinVen and Fulcrum Management.
(b) CERTAIN BUSINESS RELATIONSHIPS
Landon T. Clay, M. Dozier Gardner, James B. Hawkes and H. Day Brigham, Jr.,
each of whom is a director and executive officer of the Company, are
officers and directors, trustees or general partners of various investment
companies for which the Company's wholly owned subsidiary, Eaton Vance
Management or Boston Management and Research, serves as investment adviser,
for which Eaton Vance Distributors, Inc. (a wholly-owned subsidiary of
Eaton Vance Management) acts as principal underwriter, and for which
Investors Bank & Trust Company (a 77.3% owned subsidiary of Eaton Vance
Corp.) serves as custodian; such investment companies make substantial
payments to Eaton Vance Management or Boston Management and Research for
advisory and management services, substantial payments to Eaton Vance
Distributors, Inc. under their distribution plans, and substantial payments
to Investors Bank & Trust Company for custodial services.
-22-
(c) INDEBTEDNESS OF MANAGEMENT
In 1993, the Company increased to $6,100,000 the amount of money in the
Executive Loan Program which is available for loans to certain key
employees for the purpose of financing or refinancing the exercise of stock
options for shares of the Company's Non-Voting Common Stock, other
purchases of the Company's Non-Voting Common Stock, and any tax obligations
arising from such transactions. 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
$2,511,000 at October 31, 1994.
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, 1993, in an aggregate amount in excess of
$60,000:
<TABLE>
<CAPTION>
Largest Amount of Loans Rate of Interest
Loans Outstanding Outstanding Charged on Loans
Since 11/1/93 as of as of 12/12/94
12/12/94
<S> <C> <C> <C>
Landon T. Clay $210,216 $176,940 8.06%- 8.58% (1)
M. Dozier Gardner 401,580 347,560 6.22%- 8.06% (2)
James B. Hawkes 590,152 508,066 5.31%- 8.58% (3)
H. Day Brigham, Jr. 400,759 364,295 5.31%- 8.57% (4)
Curtis H. Jones 217,000 157,000 5.47%- 8.06% (5)
Benjamin A. Rowland Jr. 92,500 42,500 5.31% (6)
(1) 8.06% interest payable on $98,960 principal amount of loan, and
8.58% interest payable on $77,980 principal amount.
(2) 6.22% interest payable on $110,000 principal amount of loan, 7.55%
interest payable on $138,600 principal amount, and 8.06% interest
payable on $98,960 principal amount.
(3) 5.31% interest payable on $156,888 principal amount, 5.74% interest
payable on $63,102 principal amount, 6.11% interest payable on $110,000
principal amount, 7.61% interest payable on $38,500 principal amount,
8.06% interest payable on $89,963 principal amount and 8.58% interest
payable on $49,613 principal amount.
(4) 5.31% interest payable on $177,100 principal amount of loan, 6.11%
interest payable on $88,000 principal amount, 8.06% interest payable on
$75,600 principal amount and 8.57% interest payable on $23,595 principal
amount.
(5) 5.47% interest payable on $133,000 principal amount and 8.06% interest
payable on $24,000 principal amount.
(6) 5.31% interest payable on $42,500 principal amount of loan.
</TABLE>
(d) TRANSACTIONS WITH PROMOTERS
Not applicable.
-23-
PART IV
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) (1) The following financial statements of Eaton Vance Corp. and the
independent auditors' report relating thereto, are incorporated herein by
reference into Item 8 hereto:
Separate
Document
Eaton Vance Corp. 1994 Annual Report to Shareholders P a g e
Number
Independent Auditor's Report 42
Consolidated Balance Sheets as of October 31, 1994 and 1993 20-21
Consolidated Statements of Income for each of the three
years in the period ended October 31, 1994 22
Consolidated Statements of Shareholders' Equity for each of
the three years in the period ended October 31, 1994 23
Consolidated Statements of Cash Flows for each of the three
years in the period ended October 31, 1994 24
Notes to Consolidated Financial Statements 25-41
The following auditors' report relating to the consolidated financial
statement schedules of Eaton Vance Corp. is filed herewith and included in
Item 14(a)(1):
Independent Auditors' Report 25
(a) (2) The following financial statement schedules are included herein:
Schedule Number Description P a g e
Number
VIII Valuation and Qualifying Accounts 26
XI Real Estate and Accumulated Depreciation 27-29
XII Mortgage Notes Receivable on Real Estate 30-31
All Schedules not listed above are omitted because they are not applicable,
or the required information is shown in the financial statements or in the
notes thereto, or there have been no changes in the information required to
be filed from that last previously reported.
(b) 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.
-24-
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, 1994 and 1993,
and for each of the three years in the period ended October 31,
1994, and have issued our report thereon dated December 13, 1994;
such consolidated financial statements and report are included
in your 1994 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
December 13, 1994
-25-
EATON VANCE CORP.
VALUATION AND QUALIFYING ACCOUNTS Schedule VIII
<TABLE>
Years ended October 31, 1994, 1993 and 1992
<CAPTION>
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 receivable
from affiliates:
Year ended October 31:
<C> <C> <C> <C> <C>
1994 $800,000 $ - $ - $800,000
1993 $ - $800,000 $ - $800,000
1992 $ - $ - $ - $ -
</TABLE>
- 26 -
<TABLE>
EATON VANCE CORP.
REAL ESTATE AND ACCUMULATED DEPRECIATION Schedule XI
October 31, 1994
<CAPTION>
Costs Capitalized
Initial Cost Subsequent to Acquisition
Carrying
Description Encumbrances Land Buildings Improvements Costs
<S> <C> <C> <C> <C> <C> <C>
Income producing:
Shopping center-
Goffstown, NH $ 6,199,743 $ 244,532 $ 1,373,276 $5,610,691 $ -
Shopping mall and
office building-
Troy, NY 2,844,663 834,100 4,033,921 1,750,182 -
Office Buildings-
Boston, MA 4,008,470 495,000 4,447,898 516,868 -
Boston, MA - 280,800 4,009,836 1,267,351 -
Warehouses-
Colonie, NY 2,270,088 137,966 1,596,385 586,493 -
Springfield, MA 1,437,046 145,833 1,967,684 187,078 -
Total 16,760,010 2,138,231 17,429,000 9,918,663 -
Commercial land:
Bedford, NH - 137,773 - - 72,431
Boston, MA - 78,203 - - -
Residential land-
Canton, OH - 38,403 - - -
Total - 254,379 - - 72,431
TOTAL $16,760,010 $2,392,610 $17,429,000 $9,918,664 $72,431
</TABLE>
- 27 -
<TABLE>
EATON VANCE CORP.
REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) Schedule XI
October 31, 1994
<CAPTION>
Gross Carrying Amount
October 31, 1994 (1)
Accumulated Date of Date Depreciable
Description Land Buildings Depreciation Construction Acquired Life
<S> <C> <C> <C> <C> <C> <C>
Income producing:
Shopping center-
Goffstown, NH $ 244,532 $ 6,983,967 $1,555,354 1973 10/17/83 30 yrs.
Shopping mall and
office building-
Troy, NY 834,100 5,784,103 1,209,598 1978 05/01/87 31.5 yrs.
Office buildings-
Boston, MA 495,000 4,964,766 1,476,080 1888 08/15/85 30 yrs.
Boston, MA 280,800 5,277,187 2,005,474 1920 10/31/90 20 yrs.
Warehouses-
Colonie, NY 137,966 2,182,878 587,170 1964 11/13/84 30 yrs.
Springfield, MA 145,833 2,154,762 676,601 1974 11/02/84 30 yrs.
Total 2,138,231 27,347,663 7,510,277
Commercial land:
Bedford, NH 210,204 - - N/A 05/13/85 N/A
Boston, MA 78,203 - - N/A 01/08/88 N/A
Residential land-
Canton, OH 38,403 - - N/A 10/17/83 N/A
Total 326,810 - -
TOTAL $2,465,041 $27,347,663 $7,510,277
(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.
</TABLE>
- 28 -
<TABLE>
EATON VANCE CORP.
REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) Schedule XI
<CAPTION>
October 31,
1994 1993 1992
LAND AND BUILDINGS
<S> <C> <C> <C>
Gross carrying amount:
Balance, beginning of year $29,447,609 $28,949,047 $28,303,498
Additions - improvements, etc. 365,095 528,562 645,549
Balance, end of year $29,812,704 $29,477,609 $28,949,047
Accumulated depreciation:
Balance, beginning of year $ 6,594,381 $ 5,691,142 $ 4,811,298
Depreciation 915,896 903,239 879,844
Balance, end of year $ 7,510,277 $ 6,594,381 $ 5,691,142
</TABLE>
- 29 -
<TABLE>
EATON VANCE CORP.
MORTGAGE NOTES RECEIVABLE ON REAL ESTATE Schedule XII
October 31, 1994
<CAPTION>
Principal
Amount of
Notes
Number Original Carrying Subject to
of Final Periodic Face Amount of Delinquent
Mortgage Interest Maturity Payment Prior Amount of Mortgages Principal
Description Notes Rate Dates Terms Liens Mortgages (B) (C) or Interest
FIRST MORTGAGE NOTES:
<S> <C> <C> <C> <C> <S> <C> <C> <C>
Residential
permanent notes:
FHA - Original
note amounts
under $30,000 15 5.25% 1995-2000 (A) None $277,400 $ 50,091 $ -
VA - Original
note amounts
under $30,000 2 5.25% 1995 (A) None 35,100 2,342 -
Conventional -
Original note
amounts under
$225,000 2 8-9.75% 1997-2005 (A) None 259,600 248,978 -
TOTAL 19 $572,100 $301,411 $ -
NOTES:
(A) Periodic payment terms -
FHA and VA Notes - Interest and principal payments are made at variable amounts over life to
maturity, no prepayment penalty.
Conventional Notes - $225,000 Note with interest payable at level amounts over life to maturity.
Balloon payment of $225,000 due in 1997, no prepayment penalty.
$34,600 Note with interest and principal payments made at level amounts, no
prepayment penalty.
</TABLE>
- 30 -
EATON VANCE CORP.
MORTGAGE NOTES RECEIVABLE ON REAL ESTATE (Continued) Schedule XII
October 31, 1994
<TABLE>
(B) Reconciliation of the Carrying Amount of Mortgage Notes -
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Balance, beginning of year $330,654 $360,906 $169,045
Issuance of mortgage notes receivable - - 225,000
Collections on principal (29,243) (30,252) (33,139)
Write-off of note - - -
Balance, end of year $301,411 $330,654 $360,906
</TABLE>
(C) The aggregate cost for federal income tax purposes is equal to the
carrying amount of the mortgages.
- 31 -
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/M. Dozier Gardner
M. Dozier Gardner
President,
Director and
Principal Executive
Officer
January 18, 1995
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/Landon T. Clay Chairman and Director January 18, 1995
/s/M. Dozier Gardner President, Director and January 18, 1995
Principal Executive Officer
/s/William M. Steul Chief Financial Officer January 18, 1995
/s/John P. Rynne Corporate Controller January 18, 1995
/s/James B. Hawkes Director January 18, 1995
/s/H. Day Brigham, Jr. Director January 18, 1995
/s/Benjamin A. Rowland, Jr. Director January 18, 1995
/s/John G.L. Cabot Director January 18, 1995
/s/Ralph Z. Sorenson Director January 18, 1995
- 32 -
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:
Page in Sequential
Exhibit No. Description Numbering System
3.1 The Company's Amended Articles of Incorporation are 21
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 28
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 50-52
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 54-55
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 $.0625 per share, and Non-Voting Common Stock,
par value $.0625 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
and 3.3 above as incorporated herein by reference.
4.2 The rights of the holders of the Company's 10% Subordinated 65-97
Debentures due April 1, 1998 are set forth in the Indenture
dated as of April 1, 1988 between the Company and the First
National Bank of Boston, a copy of which Indenture has been
filed as Exhibit 4.2 to 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.
- 33 -
EXHIBIT INDEX (Continued)
Page in Sequential
Exhibit No. Description Numbering System
9.1 Copy of the Voting Trust Agreement made as of December 39-47
22, 1993 is filed as Exhibit 9.1 to the Annual Report
on Form 10-K of the Company for the fiscal year
ended October 31, 1993, (SEC File No. 1-8100) and is
incorporated herein by reference.
10.1 Description of Performance Bonus Arrangement for Members 54
of Investment Division of Eaton Vance Management, Inc. is
filed as Exhibit 10.3 to the Annual Report on Form 10-K of
the Company for the fiscal year ended October 31, 1985,
(S.E.C. File No. 1-8100) and is incorporated herein
by reference.
10.2 Description of Incentive Bonus Arrangement for Marketing 55
Personnel of Eaton Vance Distributors, Inc. is filed as
Exhibit 10.4 to the Annual Report on Form 10-K of the
Company for the fiscal year ended October 31, 1985,
(S.E.C. File No. 1-8100) and is incorporated herein by
reference.
10.3 Copy of 1984 Executive Loan Program relating to financing 65-69
or refinancing the exercise of options, the purchase of
stock, the tax obligations associated with such exercise
or purchase and similar undertakings by key directors,
officers, and employees adopted by the Company's Directors
on October 19, 1984, has been filed as Exhibit 10.8 to the
Annual Report on Form 10-K of the Company for the fiscal
year ended October 31, 1984, (S.E.C. File No. 1-8100) and
is incorporated herein by reference.
10.4 Copy of 1988 Profit Improvement Bonus Plan of Eaton Vance 61
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.
10.5 Copy of 1989 Stock Option Plan adopted by the Company's 40-45
Directors on July 21, 1989 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, 1989, (S.E.C. File
No. 1-8100) and is incorporated herein by reference.
10.6 Description of 1990 Performance and Retention of Officers 42
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 10.11 to the Annual
Report on Form 10-K of the Company for the fiscal year
ended October 31, 1990 (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
- 34 -
EXHIBIT INDEX (Continued)
Page in Sequential
Exhibit No. Description Numbering System
10.7 Copy of 1992 Stock Option Plan as adopted by the Eaton 36-43
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.
10.8 Copy of 1986 Employee Stock Purchase Plan as amended and 44-54
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.
10.9 Copy of 1992 Incentive Plan - Stock Alternative as 55-58
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.
11.1 Statement of Computation of average number of Shares 36
outstanding (filed herewith).
13.1 Copy of the Company's Annual Report to Stockholders 37-84
for the fiscal year ended October 31, 1994 (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, 1994 85
(filed herewith).
23.1 Independent Auditors' Consent (filed herewith). 86
27.1 Financial Data Schedule as of October 31, 1994 87-89
(filed herewith - electronic filing only).
- 35 -
EXHIBIT 11.1
Computation of average number of shares outstanding in accordance with
Securities and Exchange Commission Act of 1934, Release No. 9083
<TABLE>
<CAPTION>
October 31, 1994 October 31, 1993 October 31, 1992
<S> <C> <C> <C>
PRIMARY
Weighted average number
of voting and non-voting
common shares outstanding 9,196,888 8,446,448 7,494,910
Assumed exercise of certain
non-voting stock options
based on average market
value and shares reserved
for issuance under employee
stock purchase plan 276,071 401,883 257,036
Weighted average number of
shares used in primary
per share computations 9,472,959 8,848,331 7,751,946
FULLY DILUTED
Weighted average number
of voting and non-voting
common shares outstanding 9,196,888 8,446,448 7,494,910
Assumed exercise of certain
non-voting stock options
based on higher of average
or closing market value
and shares reserved for
issuance under employee
stock purchase plan 283,680 429,169 272,132
Weighted average number
of shares used in fully
diluted per share
computations 9,480,568 (a) 8,875,617 (a) 7,767,132 (a)
(a) In accordance with APB Opinion No. 15, these outstanding share figures
were not used in the fully diluted E.P.S. calculation, as the dilution was
less than 3% of the weighted average shares outstanding.
</TABLE>
37
<PAGE>
- - -------------------------------------------------------------------------------
EATON
VANCE
CORP.
ANNUAL
REPORT
1994
---------
1924 - 94
38
<PAGE>
EATON VANCE CORP. SUBSIDIARIES
- - --------------------------------------------------------------------------------
EATON VANCE MANAGEMENT and its subsidiary, BOSTON MANAGEMENT AND RESEARCH,
act as investment advisers to the Company's 147 mutual funds, as well as to
individual and institutional accounts.
EATON VANCE DISTRIBUTORS, INC. markets the Company's mutual funds.
INVESTORS BANK & TRUST COMPANY provides fiduciary and related banking
services to institutions and individuals.
NORTHEAST PROPERTIES, INC. invests in income-producing
real estate.
FULCRUM MANAGEMENT, INC., MINVEN, INC. and EV GOLD, INC. invest in and manage
precious metal mining properties.
MARBLEHEAD ENERGY CORP. and ENERGEX CORPORATION invest in oil and gas
properties.
Cover: Eaton Vance and its predecessor companies, Eaton & Howard and Vance,
Sanders & Company, have served individual and institutional investors for 70
years. Eaton & Howard was founded by Charles F. Eaton, Jr., and John G.
Howard in December 1924.
39
<PAGE>
Financial Highlights
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1993 1994
- - --------------------------------------------------------------------------------
(in millions of dollars)
<S> <C> <C>
Assets Under Management.......................... $15,400 $15,000
Sales of Mutual Funds............................ 4,300 3,400
Total Income..................................... 189 218
Net Income....................................... 27 30
Shareholders' Equity............................. 145 166
PER COMMON SHARE: (in dollars)
Net Income....................................... $3.09 $3.14
Net Income Excluding
Gold Mining Investments........................ 2.83 3.14
Shareholders' Equity............................. 15.87 18.18
Dividends........................................ 0.49 0.60
- - --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NET INCOME
EXCLUDING GOLD
Fiscal Year MINING INVESTMENTS NET INCOME
<S> <C> <C>
'85 $0.63 $0.64
'86 0.80 0.81
'87 1.25 1.35
'88 1.36 1.37
'89 1.15 0.99
'90 1.42 1.03
'91 1.58 1.75
'92 2.48 2.49
'93 2.83 3.09
'94 3.14 3.14
</TABLE>
<TABLE>
<CAPTION>
Fiscal year DIVIDENDS PER SHARE
<S> <C>
'85 $0.110
'86 $0.125
'87 $0.150
'88 $0.185
'89 $0.205
'90 $0.235
'91 $0.290
'92 $0.360
'93 $0.490
'94 $0.600
</TABLE>
40
<PAGE>
TO SHAREHOLDERS
- - --------------------------------------------------------------------------------
Eaton Vance Corp.'s net income in fiscal 1994 was a record $29.8 million, 9
percent above the $27.3 million reported in 1993. Earnings per share in 1994 of
$3.14 were 2 percent higher than 1993's $3.09. Gold mining activities, which
contributed $0.26 to 1993's results, made no contribution to 1994's. Mandatory
adoption of Statement of Financial Accounting Standards No. 109, changing
the method of accounting for deferred income taxes, increased 1994 earnings by
$0.14 per share. Earnings per share excluding the effect of gold mining
operations and the accounting change were $3.00 in 1994 and $2.83 in 1993.
Average shares outstanding rose from 8.8 million in 1993 to 9.5 million in
1994 primarily as a result of a public offering of 1.4 million shares in
April 1993 at $33.75 per share. During fiscal year 1994, the Company
repurchased 234,000 shares at an average price per share of $27.44.
Dividends per share increased 22 percent from $0.49 in fiscal year 1993 to
$0.60 in fiscal year 1994. The Company's dividend has increased in each of
the last 14 years and has grown at a compound annual rate of 19 percent since
1980.
Assets under management of $15.0 billion on October 31, 1994, were 3 percent
lower than the $15.4 billion reported a year earlier. Sharply rising interest
rates and the consequent fall in bond prices had a negative effect on sales of
bond funds and reduced the market value of fixed-income assets under
management. Nevertheless, fund sales for the year were $3.4 billion, the second
highest in the Company's history, and net sales of mutual funds (sales and
reinvested dividends, less redemptions) of $2.0 billion substantially offset
the depreciation in the market value of managed assets and a net loss of
Investment Counsel assignments.
Total income rose 15 percent in 1994 to $218.0 million in spite of a full year's
reduction in income caused by a National Association of Securities Dealers
(NASD) rule effective July 7, 1993, limiting the amount of annual payments by
spread commission funds to their sponsors. The increase was largely the result
of higher average assets under management in 1994 than in 1993 and a 31 percent
increase in fee income of Investors Bank & Trust (IB&T), 77 percent owned by
Eaton Vance Corp.
Expenses grew 17 percent in 1994 to $165.8 million with a 29 percent increase
in the amortization of deferred sales commissions following the strong growth
in sales reported for 1992 and 1993. Higher marketing and administrative costs
were incurred in 1994 to increase the distribution of the Company's funds.
41
<PAGE>
- - --------------------------------------------------------------------------------
In March 1994, the Company issued $50.0 million of 6.22 percent 10-Year
Senior Notes to three insurance companies. Proceeds were used to call the
remaining $14.2 million of 10 percent subordinated debentures and to pay down
variable rate bank debt. At year end the Company had cash and cash
equivalents of $24.7 million and no borrowings under its $75.0 million bank
credit facility. Shareholders' equity at fiscal year end was $165.6 million,
or $18.18 per common share.
Investment management activities accounted for 76 percent of the Company's
revenues and 93 percent of net income in 1994. IB&T contributed 22 percent of
revenues and the balance of net income. IB&T increased custodied and
administered assets by 18 percent and net profits by 47 percent in 1994. Its
very successful year is reported on pages 11-12.
Growth of the mutual fund industry and of Eaton Vance Corp. decelerated in
1994. Considering difficult bond and stock market conditions and the allure of
cash equivalent investments with competitive yields, this was to be expected.
We are confident that the long-term growth prospects of the industry and of
Eaton Vance Corp. remain outstanding. The industry offers an unmatched array of
investment alternatives, conveniently packaged, efficiently priced, and widely
available to meet investors' needs. Eaton Vance expects to participate fully in
the industry's growth.
The Consolidated Statements of Cash Flows on page 24 illustrate the cash flow
that accompanies a decline in Eaton Vance's mutual fund sales. Net cash
generated in the Company's final quarter alone was $11.2 million. A strong
financial condition and positive cash flow in a period of reduced sales gives
Eaton Vance an opportunity to accelerate new product development, build
through acquisition and repurchase common shares if market conditions
depress the price of the Company's stock. All of these opportunities are
either being pursued or are under careful consideration.
A section of this report, pages 14-15, presents some of the international
dimensions of Eaton Vance's activities. The Company is giving increasing
priority to the investment management and the marketing of assets globally.
At the close of the fiscal year, Curtis H. Jones retired as Vice President,
Treasurer and Director of Eaton Vance Corp. Curt contributed significantly to
the Company's growth from 1982 to 1994. We will miss him.
/s/ Landon T. Clay /s/ M. Dozier Gardner
LANDON T. CLAY M. DOZIER GARDNER
Chairman President
January 12, 1995
42
<PAGE>
EATON VANCE CORP.
- - --------------------------------------------------------------------------------
QUARTERLY HIGH AND LOW STOCK PRICES
Quarter ended High Low
1/85 $5.7500 $4.2500
4/85 6.8750 5.4375
7/85 8.1250 6.2500
10/85 10.2500 7.1250
1/86 12.8750 9.6250
4/86 15.0625 10.5000
7/86 11.0000 8.0000
10/86 10.8750 8.2500
1/87 15.5000 9.3125
4/87 16.3750 12.0000
7/87 14.0000 10.0000
10/87 13.8750 6.4375
1/88 9.5000 6.5000
4/88 11.7500 8.8750
7/88 11.0000 9.6250
10/88 10.3750 9.3750
1/89 11.5000 9.8750
4/89 13.8750 11.5000
7/89 12.1250 11.0000
10/89 14.0000 11.0000
1/90 14.1250 13.2500
4/90 14.0000 11.0000
7/90 11.5000 10.6250
10/90 11.0000 7.6250
1/91 9.0000 7.8125
4/91 11.8750 9.1250
7/91 12.6250 9.7500
10/91 14.5000 11.5000
1/92 18.7500 13.7500
4/92 19.1250 16.0000
7/92 17.6250 15.6250
10/92 23.7500 16.5000
1/93 38.5000 20.5000
4/93 37.5000 29.0000
7/93 36.2500 30.7500
10/93 41.2500 34.2500
1/94 38.0000 30.5000
4/94 37.5000 29.2500
7/94 30.7500 26.5000
10/94 34.2500 25.5000
PRICE AND DIVIDEND INFORMATION
The Company's non-voting common stock is traded on the over-the-counter market,
where it is reported on the NASDAQ National Market system under the symbol
EAVN. The stock is also traded on the Boston Stock Exchange. The range of price
and the dividend declared on these shares during each quarter of the last two
years are as follows:
<TABLE>
<CAPTION>
HIGH LOW DIVIDEND
QUARTER ENDED PRICE PRICE PER SHARE
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
January 31, 1993 $38 1\2 $20 1\2 $0.11
April 30, 1993 37 1\2 29 0.12
July 31, 1993 36 1\4 30 3\4 0.12
October 31, 1993 41 1\4 34 1\4 0.14
January 31, 1994 $38 $30 1\2 $0.14
April 30, 1994 37 1\2 29 1\4 0.15
July 31, 1994 30 3\4 26 1\2 0.15
October 31, 1994 34 1\4 25 1\2 0.16
</TABLE>
43
<PAGE>
EATON VANCE CORP.
- - --------------------------------------------------------------------------------
SOURCES OF REVENUES
[PIE CHART WITH THE FOLLOWING VALUES:]
<TABLE>
<CAPTION>
<S> <C>
SOURCE
INVESTMENT MANAGEMENT:
MUTUAL FUNDS 67%
INVESTMENT COUNSEL 9
FIDUCIARY AND RELATED BANKING SERVICES 22
REAL ESTATE 1
PRECIOUS METAL MINING 1
</TABLE>
Eaton Vance Corp. is a holding company deriving its revenues primarily from
investment advisory fees and distribution fees received from the Eaton Vance
Funds and separately managed accounts. Wholly owned subsidiaries Eaton Vance
Management and Boston Management & Research act as adviser to 147 mutual funds,
various institutions and individuals.
On October 31, 1994, the Company managed $15.0 billion in portfolios with
objectives ranging from high current income to maximum capital gain.
Bank fee income, based on assets custodied and administered by Investors Bank
& Trust, is also a significant contributor. Additional revenues are provided
by the Company's real estate activities and precious metal mining
partnerships.
A detailed discussion of these business sectors appears on pages 6-15.
44
<PAGE>
INVESTMENT MANAGEMENT - MUTUAL FUNDS
- - --------------------------------------------------------------------------------
1994 HIGHLIGHTS
- - - Mutual fund sales were $3.4 billion, below 1993's but the second highest in
the Company's history.
- - - Mutual fund assets increased by 2 percent from $13.1 billion to $13.3
billion.
- - - The Hub and Spoke Registration Mark structure was used to create a new
50-fund Classic family of level-load funds and to expand the existing
Marathon and Traditional families.
- - - Third-party spokes investing in Eaton Vance hubs were established by G.R.
Phelps & Co., Inc., a subsidiary of Connecticut Mutual Life Insurance
Company.
- - - The EV Greater India Funds, the first continuously offered funds sold in
the United States with an investment focus on India and surrounding
countries, were introduced.
- - - A Medallion family of funds was offered to investors in Asia, Latin America
and the Middle East.
EATON VANCE MUTUAL FUND SALES
(in billions)
<TABLE>
<CAPTION>
Fiscal year SALES
<S> <C>
'85 $0.413
'86 1.204
'87 1.062
'88 0.280
'89 2.170
'90 0.941
'91 1.805
'92 2.900
'93 4.300
'94 3.400
</TABLE>
RISING INTEREST RATES PROVIDE A CHALLENGING ENVIRONMENT
Sales of mutual funds, excluding money market funds and reinvested dividends,
were $3.4 billion, below last year's record sales of $4.3 billion but,
nonetheless, the second highest in the Company's history. With reinvested
dividends of $0.4 billion and after redemptions of $1.8 billion, net sales for
the year were $2.0 billion. Total mutual fund assets under management increased
to $13.3 billion from $13.1 billion, as market depreciation of $1.8 billion was
more than offset by net sales increases for the year.
45
<PAGE>
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST RATE: OCTOBER 1992-OCTOBER 1994
(30-year Treasuries)
Date Yield
<S> <C>
10/30/92 7.63%
11/6/92 7.76
11/13/92 7.57
11/20/92 7.54
11/27/92 7.59
12/4/92 7.49
12/11/92 7.44
12/18/92 7.43
12/25/92 7.36
1/1/93 7.40
1/8/93 7.47
1/15/93 7.35
1/22/93 7.29
1/29/93 7.20
2/5/93 7.16
2/12/93 7.13
2/19/93 7.01
2/26/93 6.90
3/5/93 6.74
3/12/93 6.86
3/19/93 6.80
3/26/93 6.94
4/2/93 7.05
4/9/93 6.85
4/16/93 6.76
4/23/93 6.79
4/30/93 6.93
5/7/93 6.84
5/14/93 6.95
5/21/93 7.03
5/28/93 6.98
6/4/93 6.91
6/11/93 6.80
6/18/93 6.81
6/25/93 6.70
7/2/93 6.66
7/9/93 6.64
7/16/93 6.54
7/23/93 6.70
7/30/93 6.57
8/6/93 6.53
8/13/93 6.35
8/20/93 6.22
8/27/93 6.13
9/3/93 5.94
9/10/93 5.88
9/17/93 6.04
9/24/93 6.05
10/1/93 5.99
10/8/93 5.92
10/15/93 5.79
10/22/93 5.98
10/29/93 5.97
11/5/93 6.21
11/12/93 6.15
11/19/93 6.34
11/26/93 6.26
12/3/93 6.25
12/10/93 6.19
12/17/93 6.28
12/24/93 6.21
12/31/93 6.35
1/7/94 6.23
1/14/94 6.30
1/21/94 6.28
1/28/94 6.22
2/4/94 6.36
2/11/94 6.41
2/18/94 6.63
2/25/94 6.71
3/4/94 6.84
3/11/94 6.90
3/18/94 6.92
3/25/94 7.02
4/1/94 7.26
4/8/94 7.27
4/15/94 7.29
4/22/94 7.23
4/29/94 7.31
5/6/94 7.54
5/13/94 7.49
5/20/94 7.30
5/27/94 7.39
6/3/94 7.27
6/10/94 7.31
6/17/94 7.45
6/24/94 7.52
7/1/94 7.62
7/8/94 7.69
7/15/94 7.55
7/22/94 7.56
7/29/94 7.40
8/5/94 7.55
8/12/94 7.48
8/19/94 7.49
8/26/94 7.48
9/2/94 7.49
9/9/94 7.70
9/16/94 7.77
9/23/94 7.79
9/30/94 7.82
10/7/94 7.91
10/14/94 7.83
10/21/94 7.98
10/28/94 7.96
10/31/94 7.97
</TABLE>
Source: Bloomberg, L.P.
Rising interest rates were a negative influence throughout the year on bond
funds, which represent the largest portion of Eaton Vance's mutual fund
assets. As the chart above shows, interest rates bottomed (and bond prices
peaked) in mid-October of 1993, just prior to the beginning of the fiscal
year, and moved steadily higher as the year progressed. As a result, bond
prices (and bond fund net asset values) were in a declining trend throughout
the year.
EV CLASSIC LEVEL-LOAD FUNDS CREATED
Early in the fiscal year a new 50-fund Classic family of level-load funds was
created and offered. Level-load funds replace a commission to selling
broker/dealers at time of sale with a stream of on-going fees. Investors
purchase these funds without initial sales charges and with the acquisition
cost expensed over a period of years. The Hub and Spoke structure allowed the
rapid and effective introduction of the Classic family, which includes spokes
of equity and both taxable and tax-exempt bond funds. Sales of Classic funds,
the largest family of level-load funds offered by any sponsor in the mutual
fund industry, were $519.0 million in fiscal 1994.
Additional funds were added to the Traditional family of front-end sales
charge funds and to the Marathon family of spread-commission funds. The
development of three separate families of funds with different sales charge
structures allows Eaton Vance to meet the disparate needs of both investors and
broker/dealers. For example, the Classic family is well-suited for the
small-plan 401(k) market and helps the established broker "annuitize" his book
of business. The Traditional family is compatible with the growing
46
<PAGE>
- - --------------------------------------------------------------------------------
wrap-fee business; and the Marathon family offers the broker/dealer a full
commission at time of sale without a sales charge being deducted from
client assets at time of purchase. The availability of separate fund families
allows the broker/dealer to select the particular distribution structure
compatible with both the client's requirements and the broker/dealer's
business plan.
FUND ASSETS UNDER MANAGEMENT
(in billions)
<TABLE>
<CAPTION>
Fiscal year end Assets
<S> <C>
'85 $2.18
'86 3.33
'87 3.58
'88 3.58
'89 5.60
'90 5.92
'91 7.43
'92 9.20
'93 13.1
'94 13.3
</TABLE>
FIRST PRIVATE-LABEL SPOKES ESTABLISHED
Eaton Vance also used the Hub and Spoke structure to create five private-label
tax-free funds for G.R. Phelps & Co., Inc., a subsidiary of Connecticut Mutual
Life Insurance Company. G.R. Phelps manages and distributes a growing family of
funds through its own 2,000-member sales force as well as through other
distribution channels. By offering spokes into mature Eaton Vance tax-free
hubs, G.R. Phelps was able to broaden its product line to include one national
and four state tax-free funds without the delays,business risks and level of
expense typically associated with starting new mutual funds. Eaton Vance
continues to pursue similar opportunities with other mutual fund sponsors.
NEW INDIA AND OFFSHORE FUNDS ARE OFFERED
In April, Traditional and Marathon versions of the EV Greater India Fund were
introduced. The Greater India Funds were the first continuously offered
United States funds with an investment focus on India and the surrounding
countries of the Indian sub-continent. They complement the EV Greater China
Funds, which were intro-
47
<PAGE>
- - --------------------------------------------------------------------------------
FUND ASSETS UNDER MANAGEMENT BY DISTRIBUTION METHOD
<TABLE>
<CAPTION>
October 31, 1994
<S> <C>
SPREAD COMMISSION FUNDS 78%
FRONT-END COMMISSION FUNDS 14
EXCHANGE FUNDS 5
LEVEL-LOAD FUNDS 2
MONEY MARKET & OTHER FUNDS 1
</TABLE>
FUND ASSETS UNDER MANAGEMENT BY TYPE OF FUND
<TABLE>
<CAPTION>
October 31, 1994
<S> <C>
NON-TAXABLE FIXED INCOME 61%
EQUITIES 21
TAXABLE FIXED-INCOME 12
BANK LOANS 4
MONEY MARKET 2
</TABLE>
duced in 1992. Like Greater China, the Greater India Funds combine the
management expertise of Hong Kong and Bombay-based Lloyd George Management with
the distribution and administrative capabilities of Eaton Vance. By fiscal
year-end, the Greater India Funds had grown to $58.3 million.
Eaton Vance entered the offshore funds market with a new "EV Medallion" family
of funds. Each fund is a spoke investing in an existing hub which also serves
U.S. investors by way of domestic spokes. The Medallion family consists of a
Greater China Growth Fund, a Greater India Fund, a new Emerging Markets Fund, a
High Yield Fund, and a U.S. Government Income Fund. Additional spokes for the
Medallion family are planned for 1995. The Medallion funds will be sold by U.S.
broker/dealers to non-U.S. clients as well as by broker/dealers operating
offshore. Target markets in 1995 include Asia, Latin America and the Middle
East. Donald Webber, a marketing executive with broad experience in the mutual
fund industry, joined Eaton Vance in mid-year to lead the offshore marketing
effort.
OUTLOOK
The environment at the beginning of fiscal 1995 is much different from that
at the beginning of last year. A flattening of the yield curve, as short-term
rates have moved closer to long-term rates, will likely slow sales of
long-term funds in 1995. Nevertheless, the Company is well-positioned for the
changed environment. Eaton Vance's product line has been substantially
expanded in recent years, both to broaden distribution options and to offer
products with appeal in a rising interest rate environment. In particular,
the introduction of a broad family of limited maturity state and national
tax-free funds has strengthened Eaton Vance's municipal bond fund industry
position. Furthermore, products which were introduced in earlier years, such
as Prime Rate Reserves and Short-Term Strategic Income Fund, provide
alternatives for investors who wish to minimize exposure to interest rate
movements. Eaton Vance's goal in 1995 will be to continue to increase its
mutual fund industry market share with effective sales and service,
competitive investment performance and timely new product introductions.
48
<PAGE>
INVESTMENT MANAGEMENT - INVESTMENT COUNSEL
- - --------------------------------------------------------------------------------
COUNSEL ASSETS BY TYPE OF CLIENT
<TABLE>
<CAPTION>
October 31, 1994
<S> <C>
INDIVIDUALS & TRUSTS 55%
EMPLOYEE BENEFIT PLANS 23
OTHER TAX-EXEMPT INSTUTIONS 20
TAXABLE INSTUTIONS 2
</TABLE>
Through its offices in Boston and San Francisco, Eaton Vance acts as
investment adviser to more than 1,000 individual and institutional clients,
including public and corporate employee benefit plans, Taft-Hartley plans,
endowments, foundations and trusts.
This past year was marked by the contributions of the professionals of the
former Gardner & Preston Moss Division of INVESCO, and those of Winslow
Management, who joined Eaton Vance in late 1993. Their investment experience
and excellent relationships with clients, largely individuals, were important
in the successful introduction of those clients to Eaton Vance's services.
For the Division's institutional clients, where investment returns are
weighed against market benchmarks and often for short periods, results were
mixed. Generally, fixed-income accounts did quite well, adding to a solid
long-term record of above-average returns. Retention was high, and for the
core bond discipline, accounts and assets under management grew. The
Division's institutional equity account base decreased considerably with the
loss of one large public retirement fund client. Additions to the investment
research staff and organizational changes are expected to improve equity
performance in 1995. Overall, the Division finished the year with $1.6
billion of assets under management, significantly lower than the prior year's
total of $2.2 billion.
Marketing efforts are being concentrated on the fixed-income products where,
as noted above, results have been above average. Also, the marketing to
institutional investors of Lloyd George Management's capabilities in managing
equity investments in the Pacific Basin is gaining momentum.
49
<PAGE>
FIDUCIARY AND RELATED BANKING SERVICES
- - --------------------------------------------------------------------------------
1994 HIGHLIGHTS
- - - Custodied and administered assets increased 18 percent to $72.4 billion.
- - - Investors Bank & Trust Company (IB&T) was rated the number one Global Full
Service Custodian and number one Domestic Full Service Custodian in the 1994
Dalbar Custody Ranking Survey.
- - - Revenues increased 27 percent to $47.8 million.
- - - Net income increased 47 percent to $3.5 million.
- - - Return on equity and return on assets achieved new highs.
Assets custodied and administered by IB&T increased 18 percent to $72.4
billion at fiscal 1994 year end. The Bank now has significant relationships
with five of the top 25 U.S. insurance companies and five of the nation's
largest banks.
ASSETS UNDER CUSTODY
(in billions)
<TABLE>
<CAPTION>
Fiscal year end Assets
<S> <C>
'85 $ 3.6
'86 5.6
'87 6.3
'88 6.5
'89 8.8
'90 26.4
'91 37.3
'92 42.8
'93 61.0
'94 72.4
</TABLE>
The success of IB&T's marketing to new clients was complemented by growth in
business from existing clients. Many pooled products offered multiple classes
of shares, each class with its own accounting and pricing requirements. In
addition, the number of clients utilizing ancillary services such as securities
lending increased by 85 percent over the year.
Total revenues reached a new high of $47.8 million in 1994. Fee income totaled
$43.0 million, up from $33.0 million a year ago. Net interest income increased
6 percent to $4.8 million. Net income rose 47 percent to $3.5 million.
50
<PAGE>
- - --------------------------------------------------------------------------------
Return on average equity improved to 29 percent from 26 percent a year ago,
while return on average assets increased to 3 percent in 1994 from 2 percent
in 1993.
DALBAR RANKING
In June 1994, IB&T was rated the number one Global Full Service Custodian and
the number one Domestic Full Service Custodian in the Dalbar Custody Ranking
Survey. This was the third year out of the last five in which IB&T received
Dalbar's number one Domestic rating. Dalbar, a Boston-based mutual fund
research company, derived its rankings from survey results covering 212 mutual
fund company/custodian relationships, constituting 48 percent of all fund
assets under custody in the $2 trillion industry.
REVENUES
(in millions)
<TABLE>
<CAPTION>
Fiscal year FEE INCOME NET INTEREST INCOME
<S> <C> <C>
'85 $ 3.14 $1.41
'86 4.03 1.43
'87 5.37 1.65
'88 6.37 2.00
'89 6.94 2.08
'90 15.75 2.74
'91 25.55 3.73
'92 29.66 3.66
'93 33.02 4.49
'94 43.05 4.78
</TABLE>
OFFSHORE OPERATIONS
IB&T expanded its offshore operations during 1994. In July, the Bank received
authorization from Irish regulatory authorities to open an office in Dublin.
This office qualifies for a number of tax incentives as part of the
International Financial Services Centre (IFSC). Like the Bank's offshore
center in Toronto, Canada, the new Dublin office supports offshore fund
accounting services with IB&T's proprietary Fund Accounting and Custody
Tracking System. The distributed architecture of this system is a critical
advantage in the offshore market, particularly for mutual funds using the Hub
and Spoke structure.
OUTLOOK
The outlook for the coming year is positive. Termination of an important unit
investment trust relationship after the close of the fiscal year will have a
short-term negative influence on revenues. The action was unrelated to
performance, and IB&T expects compensation for lost revenues. Sales consummated
in 1994 will have a positive influence on 1995's revenues, and new business
activity remains high.
51
<PAGE>
REAL ESTATE INVESTMENT
- - --------------------------------------------------------------------------------
RENTAL PROPERTY BY PROPERTY TYPE
<TABLE>
<CAPTION>
October 31, 1994 Sq.ft.(000)
<S> <C>
RETAIL: 66% LEASED 262
INDUSTRIAL: 100% LEASED 224
OFFICE: 93% LEASED 184
</TABLE>
Northeast Properties, Inc. owns and operates 670,000 square feet of
income-producing real estate in Massachusetts, New Hampshire and New York
State. Earnings were $29,000 in 1994, compared to a loss in 1993 of $293,000.
Overall occupancy at 85 percent remained unchanged from the previous year .
There are currently no new real estate investments planned. In 1995, management
will concentrate its efforts on increasing occupancy in properties presently
owned.
PRECIOUS METAL MINING
- - --------------------------------------------------------------------------------
Eaton Vance participates in the development of gold mining properties as a
general and as a limited partner in two gold mining partnerships,
VenturesTrident, L.P. and VenturesTrident II, L.P. Eaton Vance has a 28
percent interest in VenturesTrident, L.P. and a 19 percent interest in
VenturesTrident II, L.P. In addition, Eaton Vance owns 615,000 shares of
Dakota Mining, an important holding of both partnerships.
VenturesTrident, L.P. completed the tenth year of its life in December 1994
and was extended for one year to allow for the orderly liquidation of its
holdings.
VenturesTrident II, L.P. completed its seventh year in December 1994. In
January 1994, the partnership distributed 1,750,000 shares of Pegasus Gold
Corporation having a value of $42.0 million. Distributions to date have been
$48.0 million, or 61 percent of contributed capital.
The earnings contribution of these gold mining partnerships to the Company
was small in fiscal year 1994 and is not expected to be significant in 1995.
52
<PAGE>
INTERNATIONAL FOCUS
- - --------------------------------------------------------------------------------
Because of significant worldwide political change and the reduction or
elimination of barriers to trade and capital flows, more business than ever
is being conducted internationally. During the past several years, Eaton
Vance has expanded its international presence in several areas:
INTERNATIONAL EQUITY FUNDS
[PHOTO] Eaton Vance has created a series of mutual
funds managed by Lloyd George Management,
an independent investment management company
based in Hong Kong, to allow investors to
participate in the expected above-average
growth of emerging markets. These include
the EVGreater China Growth Funds, EVGreater
India Funds and EVEmerging Markets Funds.
Robert Lloyd George, Chairman,
Lloyd George Management.
MEDALLION FUNDS
[PHOTO] Created in November 1994, Eaton Vance
Medallion Funds are available to investors
outside the United States. Under the Hub and
Spoke structure employed by Eaton Vance, each
Medallion fund is a spoke of an existing
Eaton Vance hub portfolio, including Greater
India, Greater China Growth, Emerging
Markets, U.S. Government Income and High
Yield funds. To meet additional investment
needs of offshore investors, a Prime Rate
Reserves spoke is planned for early 1995.
Whit Whitaker (left), President, and Don Webber,
Senior Vice President, Eaton Vance Distributors, Inc.
INTERNATIONAL INCOME FUNDS
[PHOTO] First offered in November 1990, EVMarathon
Short-Term Strategic Income Fund invests in
a portfolio of short- and intermediate-term
debt securities diversified among many
countries. It offers investors the
possibility of higher yields than those
available from money market funds and
certificates of deposit, but with less price
volatility than long-term global bond
funds.As of November 25, 1994, $223.1 million
was invested in this Fund.
From left: Eaton Vance Management's Susan Schiff, Vice President; Mark
Venezia, Vice President and Manager, International Fixed Income; Mary Jo
English, Trading Associate; and Maria Capece, Fixed-Income Analyst.
53
<PAGE>
- - --------------------------------------------------------------------------------
FIDUCIARY AND RELATED
BANKING SERVICES
More than $5.4 billion of Investors Bank [PHOTO]
& Trust Company's $72.4 billion in
custodied assets are in international
portfolios with investments in 58
countries around the world. During 1994,
IB&T was rated the number one Global
Full Service Custodian in the industry
by Dalbar, Inc., an independent research
and publishing firm serving the
financial industry. IB&T opened offices
in Toronto, Canada, in 1993, and Dublin,
Ireland, in 1994, allowing the Bank to
better serve the growing offshore mutual
fund market.
From left: Herb Schofield, Supervisor;
Neal Nenadovic, Account Manager; and
Cathy Ferro, Custody Accountant, of
IB&T's Toronto, Canada, office.
EQUITY INVESTMENTS
Eaton Vance's stock analysts are [PHOTO]
encouraged to examine investment
possibilities around the globe.
Approximately 10 percent of all assets in
Eaton Vance's equity funds and investment
counsel accounts are in non-U.S. based
companies. Another way in which Eaton
Vance's investors participate in the
growth of the world economy is through
the Company's investments in U.S. firms
with a significant overseas presence.
These practices expose funds and individual
clients to growth opportunities in rapidly
growing overseas markets.
From left: Eaton Vance Management's
Peter Kiely, Vice President and
Director of Research; Duncan
Richardson, Vice President; Cliff
Krauss, Vice President; and Tom Faust,
Vice President.
INVESTMENT COUNSEL DIVISION
Eaton Vance's Investment Counsel Division [PHOTO]
acts as investment manager to individuals
and trusts, employee benefit plans, other
tax-exempt institutions and taxable
institutions. During 1994, the Division
began marketing the investment management
services of Lloyd George Management to
institutional investors seeking to invest
in emerging markets in Asia. The primary
clients for these investment services are
expected to be employee benefit plans.
Eaton Vance Management's Craig Leman
(left), Vice President, of the
Company's San Francisco office, and
Laurence Reineman, Vice President
and Director, Investment Counsel
Division.
54
<PAGE>
SUMMARY FINANCIAL AND STATISTICAL DATA
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
- - ------------------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT DATA (in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
INCOME:
Investment adviser and administration fees $ 85,769 $ 75,193 $ 68,493 $ 60,899 $ 54,654
Distribution income 80,069 71,651 47,059 26,529 19,142
Bank fee income 42,501 32,471 29,037 25,055 15,175
Bank net interest income 4,887 4,587 3,660 3,732 2,737
Income from real estate activities 3,626 3,569 3,801 3,731 3,840
Other income 1,154 1,674 1,103 1,518 1,207
- - -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME 218,006 189,145 153,153 121,464 96,755
- - -----------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Compensation of officers and employees 66,564 61,810 55,312 47,264 32,939
Amortization of deferred sales commissions 52,794 40,892 27,965 22,516 18,415
Other expenses 46,442 39,003 32,317 27,119 19,756
- - -----------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 165,800 141,705 115,594 96,899 71,110
- - -----------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 52,206 47,440 37,559 24,565 25,645
- - -----------------------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSES):
Interest income 757 602 697 808 698
Share of partnership income (losses) 115 3,883 (230) 454 (4,835)
Interest expense (5,337) (4,914) (4,893) (4,748) (5,128)
- - -----------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 47,741 47,011 33,133 21,079 16,380
INCOME TAXES 19,255 19,670 13,826 8,361 8,706
- - -----------------------------------------------------------------------------------------------------------------------------------
NET INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING FOR INCOME TAXES 28,486 27,341 19,307 12,718 7,674
Cumulative effect of change in accounting for income taxes 1,300 -- -- -- --
- - -----------------------------------------------------------------------------------------------------------------------------------
NET INCOME $29,786 $27,341 $19,307 $12,718 $7,674
- - -----------------------------------------------------------------------------------------------------------------------------------
Earnings per share before cumulative effect of change
in accounting for income taxes $3.00 $3.09 $2.49 $1.74 $1.02
Cumulative effect of change in accounting for
income taxes per share 0.14 -- -- -- --
- - -----------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE $3.14 $3.09 $2.49 $1.74 $1.02
- - -----------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE EXCLUDING GOLD MINING INVESTMENTS $3.14 $2.83 $2.48 $1.58 $1.41
- - -----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS DECLARED, PER SHARE $0.60 $0.49 $0.36 $0.29 $0.24
- - -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE COMMON SHARES OUTSTANDING 9,473 8,848 7,752 7,290 7,500
- - -----------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Total assets $455,506 $425,547 $318,199 $271,990 $223,256
Total liabilities $289,898 $280,247 $242,398 $214,109 $175,324
Shareholders' equity $165,608 $145,300 $75,801 $57,881 $ 47,932
- - -----------------------------------------------------------------------------------------------------------------------------------
OTHER DATA
Operating margin 23.9% 25.1% 24.5% 20.2% 26.5%
Revenue per employee 214 217 190 167 136
Return on assets 8.0% 8.7% 8.2% 7.1% 5.5%
Return on equity 19.2% 24.7% 28.9% 24.0% 16.7%
Long-term debt to debt and equity 26.7% 33.5% 50.8% 52.5% 51.4%
Shareholders' equity per share $18.18 $15.87 $10.09 $7.81 $6.56
Eaton Vance Corp. employees 385 356 329 271 255
Investors Bank & Trust employees 632 517 475 455 458
Total employees 1,017 873 804 726 713
- - -----------------------------------------------------------------------------------------------------------------------------------
55
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- - --------------------------------------------------------------------------------
The Company's largest sources of revenues are investment adviser fees and
distribution fees received from the Eaton Vance funds and separately managed
accounts. Such fees are generally based on the net asset value of the
investment portfolios managed by the Company and fluctuate with changes in the
total value of the assets under management. Bank fee income, also a
significant source of revenue, is dependent upon assets custodied and
administered by IB&T. The Company's expenses other than the amortization of
deferred sales commissions include primarily employee compensation, occupancy
costs, service fees and other marketing costs.
RESULTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 1994 TO YEAR ENDED OCTOBER 31, 1993
Total revenues rose $28.9 million to $218.0 million from $189.1 million in
1993. This increase can be attributed primarily to increases in investment
adviser fees and distribution income which increased $10.6 million and $8.4
million, respectively, in 1994. Both investment adviser fees and distribution
income are based on the average net asset values of portfolios managed by the
Company, which increased significantly to $15.5 billion for the year ended
October 31, 1994, from $13.1 billion for the year ended October 31, 1993. Fund
assets under management were increased by net sales of mutual funds of $2.0
billion in 1994 and reduced, primarily, by depreciation in the market value of
managed assets of $1.8 billion. Separately managed accounts, in contrast,
decreased to $1.6 billion in 1994 from $2.2 billion in 1993. This decrease was
primarily due to the withdrawal of one large public retirement client.
Gross sales of mutual funds of $3.4 billion for 1994 were down 21 percent from
1993 when the Company achieved record sales of $4.3 billion. Consistent with
the experience of other mutual fund sponsors, 1994 redemptions rose 38 percent
to $1.8 billion from 1993's redemptions of $1.3 billion.
Bank fee income was also a significant contributor to overall revenue growth in
1994, increasing 31 percent to $42.5 million from $32.5 million a year earlier.
Like investment adviser and distribution fees, bank fee income is based on
assets custodied and administered by IB&T. The Company experienced significant
growth in these assets in 1994. The Company was advised in November, however,
that a large client intended to terminate its custodial relationship with IB&T,
for reasons not related to performance, and withdraw its unit investment trust
accounts which accounted for 16.3 percent of IB&T's bank fee income in 1994.
Such termination is not anticipated to have a material adverse effect on IB&T's
future revenues and income, as successful efforts are being made to replace the
revenues attributable to this client.
The two major components of total expenses are compensation of officers and
employees and amortization of deferred sales commissions. In 1994, total
operating expenses increased $24.1 million to $165.8 million. The increase in
compensation expense resulted from the hiring of additional personnel at IB&T
to service the additional assets under custody. Larger average dollar value of
assets in spread commission funds increased the amortization of deferred sales
commissions by $11.9 million. Other expenses rose a total of $7.4 million to
$46.4 million in 1994 from $39.0 million in 1993. This increase was due
primarily to an increase in IB&T's equipment leasing costs of $1.2 million,
$1.4 million in development costs associated with two fund products that were
not launched in 1994, and higher marketing and administrative costs incurred to
increase the distribution of the Company's funds.
56
<PAGE>
- - --------------------------------------------------------------------------------
The Company sponsored and is a limited and a general partner in two gold mining
partnerships which invest in the equity and debt securities of developers of
gold mines in North America and Australia. Portfolio valuations of these gold
mining investment partnerships contributed net partnership losses of $0.3
million in 1994, in comparison with net partnership gains of $3.9 million in
1993.
Net income of the Company amounted to $29.8 million in 1994 compared to $27.3
million in 1993. Earnings per share were $3.14 and $3.09, respectively.
During 1994 the Company's total assets increased significantly due to the
increase in deferred sales commissions to $256.3 million from $240.0 million in
1993 resulting from substantial sales of shares in the Company's spread-
commission funds. Payment of these commissions was funded primarily by cash
flows from operating activities. The difference between the book and tax
accounting treatment for these commissions caused deferred income taxes to
increase by $13.7 million. The increase in deferred income taxes was partially
offset by the cumulative effect of the change in accounting for income taxes of
$1.3 million resulting from the Company's implementation of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," on
November 1, 1993.
YEAR ENDED OCTOBER 31, 1993 TO YEAR ENDED OCTOBER 31, 1992
Total revenues rose $36.0 million to $189.1 million from $153.1 million in
1992. This increase can be attributed primarily to increases in investment
adviser fees and distribution income which increased $6.7 million and $24.6
million, respectively, in 1993. Investment adviser fees rose less than
distribution income because fund sales were concentrated in spread commission
municipal bond funds, which pay distribution plan fees, while redemptions
were largely from the Eaton Vance Prime Rate Reserves Fund, which pays an
adviser fee incorporating the equivalent of distribution payments. Both
investment adviser fees and distribution income are based on the average net
asset value of portfolios managed by the Company. Ending assets under
management increased significantly in 1993 to $15.4 billion from $11.3
billion in 1992. Total assets under management were increased by net sales of
mutual funds of $3.0 billion, market appreciation and growth of separately
managed accounts.
Gross sales of mutual funds rose 48 percent to $4.3 billion from $2.9 billion
a year earlier. Redemptions of the Company's fund shares fell 13 percent to
$1.3 billion from $1.5 billion a year earlier.
The increase in distribution fee income in comparison with the prior year was
restricted by the implementation on July 7, 1993 of an NASD rule limiting
distribution plan payments to 75 basis points per year. At the time of the
implementation, the rule affected approximately $6.8 billion in assets from
which Eaton Vance was receiving distribution plan payments at an annual rate
of 1 percent. Although the rule allows Eaton Vance to receive the same
present value of distribution plan payments, it requires the payments to be
spread over a longer time period.
Bank fee income was also a significant contributor to overall revenue growth in
1993, increasing 12 percent to $32.5 million from $29.0 million a year earlier.
Like investment adviser and distribution fees, bank fee income is based on
assets custodied and administered by IB&T. The assets for which IB&T provides
custody and related services increased 41 percent to $61.2 billion in 1993 from
$43.3 billion in 1992.
57
<PAGE>
- - --------------------------------------------------------------------------------
The two major components of total expenses are compensation of officers and
employees and amortization of deferred sales commissions. In 1993, total
operating expenses increased $26.1 million to $141.7 million. Higher salaries
and benefits, marketing incentives and expenses associated with the higher
level of fund sales caused compensation to increase. A larger average dollar
value of assets in spread commission funds increased the amortization of
deferred sales commissions by $12.9 million. Other expenses rose a total of
$6.7 million to $39.0 million in 1993 from $32.3 million in 1992, due
primarily to increases in marketing costs associated with the higher level of
sales, expenses from the Bank's custody activities and expenses associated
with the Company's gold mining activities.
Portfolio valuations of the gold mining investment partnerships contributed
net partnership gains of $3.9 million in 1993 in comparison with net partnership
losses of $0.2 million in 1992.
Net income of the Company amounted to $27.3 million in 1993 compared to $19.3
million in 1992. Earnings per share were $3.09 and $2.49, respectively.
During 1993, the Company's total assets increased significantly due to the
increase in deferred sales commissions to $240.0 million from $159.8 million
in 1992 resulting from substantial sales of shares in the Company's
spread-commission funds. Payment of these commissions was funded by cash
flows from operating activities and borrowings. The difference between the
book and tax accounting treatment for these commissions caused deferred
income taxes to increase by $17.1 million.
LIQUIDITY AND CAPITAL RESOURCES
In 1994, retained earnings of $24.3 million and net proceeds of $2.4 million
from the issuance of new stock to employees under stock purchase and stock
option plans, less $6.4 million used to repurchase outstanding shares of the
Company's stock, increased the Company's consolidated shareholders' equity
from $145.3 million at the end of 1993 to $165.6 million on October 31, 1994.
The Company's primary sources of cash flow from operating activities were net
income of $29.8 million, amortization of deferred sales commissions of $52.8
million, capitalized sales charges received on early redemption of
spread-commission funds of $24.8 million and deferred income taxes of $13.7
million. In 1994, the primary use of capital was for commission payments
associated with sales of spread-commission mutual funds, which were financed
primarily by cash flows from operating activities of $32.9 million. The
Company anticipates that the primary use of cash will continue to be the
payment of sales commissions on sales of the Company's spread-commission
funds. The Company anticipates funding the payment of these commissions
through cash flows generated from operating activities and, if necessary,
through borrowings.
On March 18, 1994, the Company privately placed, with three insurance companies,
a $50.0 million 6.22 percent Senior Note due March, 2004. The proceeds were used
to call the Company's outstanding $14.2 million of 10 percent Subordinated
Debentures and to reduce the borrowings under a $75.0 million revolving line of
credit with two unaffiliated banks. At year end, the Company had no borrowings
under its $75.0 million bank credit facility.
The Company expects a small continuing cash flow from its real estate
activities. The Company has no present plans for significant investments in
new real estate properties.
58
<PAGE>
CONSOLIDATED BALANCE SHEETS
- - --------------------------------------------------------------------------------
October 31, 1994 and 1993
</TABLE>
<TABLE>
<CAPTION>
ASSETS 1994 1993
- - -------------------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 24,681 $ 12,414
Receivable for investment company shares sold 1,073 3,007
Investment adviser fees and other receivables 2,632 2,923
Other current assets 1,233 1,390
- - -------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 29,619 19,734
- - -------------------------------------------------------------------------------------------------------
INVESTORS BANK & TRUST COMPANY ASSETS:
Cash and equivalents 9,344 16,241
Investment securities (market value $86,172
and $82,404, respectively) 88,278 80,206
Loans, less allowance for loan losses 13,570 10,221
Accrued interest and fees receivable 9,383 5,668
Equipment and leasehold improvements, net 3,251 3,010
Other assets 3,780 4,838
- - -------------------------------------------------------------------------------------------------------
TOTAL BANK ASSETS 127,606 120,184
- - -------------------------------------------------------------------------------------------------------
OTHER ASSETS:
Investments:
Real estate 22,173 22,448
Gold mining partnerships 3,072 6,924
Investment companies (market value $5,702
and $5,025, respectively) 4,088 3,377
Other investments 4,120 4,154
Notes receivable and receivables from affiliates 3,139 3,381
Deferred sales commissions 256,326 240,017
Equipment and leasehold improvements, net 3,477 3,329
Goodwill 1,999 1,886
- - -------------------------------------------------------------------------------------------------------
TOTAL OTHER ASSETS 298,281 285,629
- - -------------------------------------------------------------------------------------------------------
TOTAL ASSETS $455,506 $425,547
- - -------------------------------------------------------------------------------------------------------
</TABLE>
59
<PAGE>
CONSOLIDATED BALANCE SHEETS (CONTINUED)
- - --------------------------------------------------------------------------------
October 31, 1994 and 1993
<TABLE>
<CAPTION>
LIABILITIES & SHAREHOLDERS' EQUITY 1994 1993
- - -------------------------------------------------------------------------------------------------------------
(in thousands, except share figures)
<S> <C> <C>
CURRENT LIABILITIES:
Payable for investment company shares purchased $ 1,096 $ 3,073
Accrued compensation 8,817 8,626
Accounts payable and accrued expenses 4,539 4,046
Accrued income taxes 1,761 1,443
Dividend payable 1,461 1,285
Current portion of mortgage notes payable 6,449 324
Other current liabilities 688 279
- - -------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 24,811 19,076
- - -------------------------------------------------------------------------------------------------------------
INVESTORS BANK & TRUST COMPANY LIABILITIES:
Demand and time deposits 106,909 104,851
Other 5,214 3,624
- - -------------------------------------------------------------------------------------------------------------
TOTAL BANK LIABILITIES 112,123 108,475
- - -------------------------------------------------------------------------------------------------------------
OTHER LIABILITIES:
6.22% Senior Note 50,000 --
Note payable to unaffiliated banks -- 42,300
Mortgage notes payable 10,311 16,759
Subordinated debentures -- 14,169
Minority interest in consolidated subsidiaries 3,113 2,340
- - -------------------------------------------------------------------------------------------------------------
TOTAL OTHER LIABILITIES 63,424 75,568
- - -------------------------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES 89,540 77,128
- - -------------------------------------------------------------------------------------------------------------
Commitments -- --
- - -------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Common stock, par value $.0625 per share:
Authorized, 80,000
Issued, 19,360 shares 1 1
Non-voting common stock, par value $.0625 per share:
Authorized, 11,920,000
Issued, 9,090,394 and 9,134,218 shares, respectively 568 571
Additional paid-in capital 49,595 52,845
Notes receivable from stock option exercises (2,511) (1,804)
Retained earnings 117,955 93,687
- - -------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 165,608 145,300
- - -------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $455,506 $425,547
- - -------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
60
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
- - --------------------------------------------------------------------------------
Years Ended October 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
- - -------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share figures)
<S> <C> <C> <C>
INCOME:
Investment adviser and administration fees $ 85,769 $ 75,193 $ 68,493
Distribution income 80,069 71,651 47,059
Bank fee income 42,501 32,471 29,037
Bank net interest income 4,887 4,587 3,660
Income from real estate activities 3,626 3,569 3,801
Other income 1,154 1,674 1,103
- - -------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME 218,006 189,145 153,153
- - -------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Compensation of officers and employees 66,564 61,810 55,312
Amortization of deferred sales commissions 52,794 40,892 27,965
Other expenses 46,442 39,003 32,317
- - -------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 165,800 141,705 115,594
- - -------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 52,206 47,440 37,559
OTHER INCOME (EXPENSE):
Interest income 757 602 697
Share of partnership income (losses) 115 3,883 (230)
Interest expense (5,337) (4,914) (4,893)
- - -------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 47,741 47,011 33,133
INCOME TAXES 19,255 19,670 13,826
- - -------------------------------------------------------------------------------------------------------------------------
NET INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES 28,486 27,341 19,307
Cumulative effect of change in accounting
for income taxes 1,300 -- --
- - -------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 29,786 $ 27,341 $ 19,307
- - -------------------------------------------------------------------------------------------------------------------------
Earnings per share before cumulative effect of change in
accounting for income taxes $3.00 $3.09 $2.49
Cumulative effect of change in accounting
for income taxes per share 0.14 -- --
- - -------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE $3.14 $3.09 $2.49
- - -------------------------------------------------------------------------------------------------------------------------
DIVIDENDS DECLARED, PER SHARE $0.60 $0.49 $0.36
- - -------------------------------------------------------------------------------------------------------------------------
AVERAGE COMMON SHARES OUTSTANDING 9,473 8,848 7,752
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
61
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- - --------------------------------------------------------------------------------
Years Ended October 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
NON- NOTES
VOTING ADDITIONAL RECEIVABLE TOTAL
COMMON COMMON PAID-IN FROM STOCK RETAINED SHAREHOLDERS'
SHARES STOCK STOCK CAPITAL OPTION EXERCISES EARNINGS EQUITY
- - ----------------------------------------------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 31, 1991 7,410 $1 $463 $ 5,084 $(1,723) $ 54,056 $ 57,881
ADD (DEDUCT):
Net income -- -- -- -- -- 19,307 19,307
Dividends declared ($0.36 per share) -- -- -- -- -- (2,697) (2,697)
Issuance of non-voting
common stock -
On exercise of stock options 39 -- 1 420 (202) -- 219
For employee stock purchase plan 48 -- 3 527 -- -- 530
For purchase of minority interest
of Serio Exploration 19 -- 1 334 -- -- 335
Repurchase of non-voting
common stock (2) -- -- (21) -- -- (21)
Collection of notes receivable -- -- -- -- 247 -- 247
- - ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, OCTOBER 31, 1992 7,514 $1 $468 $ 6,344 $(1,678) $ 70,666 $ 75,801
ADD (DEDUCT):
Net income -- -- -- -- -- 27,341 27,341
Dividends declared ($0.49 per share) -- -- -- -- -- (4,320) (4,320)
Issuance of non-voting
common stock -
On public stock offering 1,380 -- 86 43,810 -- -- 43,896
On exercise of stock options 216 -- 14 2,183 (648) -- 1,549
For employee stock purchase plan 40 -- 3 666 -- -- 669
For employee incentive plan 34 -- 2 768 -- -- 770
Repurchase of non-voting
common stock (30) -- (2) (926) -- -- (928)
Collection of notes receivable -- -- -- -- 522 -- 522
- - ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, OCTOBER 31, 1993 9,154 $1 $571 $52,845 $(1,804) $ 93,687 $145,300
ADD (DEDUCT):
Net income -- -- -- -- -- 29,786 29,786
Dividends declared ($0.60 per share) -- -- -- -- -- (5,518) (5,518)
Issuance of non-voting
common stock -
On exercise of stock options 141 -- 9 1,742 (1,062) -- 689
For employee stock purchase plan 25 -- 2 731 -- -- 733
For employee incentive plan 24 -- 1 684 -- -- 685
Repurchase of non-voting
common stock (234) -- (15) (6,407) -- -- (6,422)
Collection of notes receivable -- -- -- -- 355 -- 355
- - ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, OCTOBER 31, 1994 9,110 $1 $568 $49,595 $(2,511) $117,955 $165,608
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
62
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- - --------------------------------------------------------------------------------
Years Ended October 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
- - ---------------------------------------------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C> <C>
CASH AND EQUIVALENTS
(INCLUDING IB&T), BEGINNING OF YEAR $ 28,655 $ 9,535 $ 13,053
- - ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 29,786 27,341 19,307
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Share of net (income) losses of partnerships (115) (3,883) 230
Deferred income taxes 13,712 17,105 15,633
Cumulative effect of change in accounting
for income taxes (1,300) -- --
Amortization of deferred sales commissions 52,794 40,892 27,965
Amortization of premiums on investments and
investment securities, net of accretion of discounts 1,300 1,469 183
Depreciation and other amortization 3,712 3,561 3,804
Payment of sales commissions (93,663) (139,339) (99,043)
Capitalized sales charges received 24,838 17,681 23,650
Change in refundable income taxes -- 4,030 (605)
Changes in other assets and liabilities 1,881 (843) 3,219
- - ------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES 32,945 (31,986) (5,657)
- - ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from (investment in) partnerships (252) 856 (97)
Additions to real estate, equipment and
leasehold improvements (3,338) (3,625) (3,302)
Net increase in notes and receivables from affiliates (465) (512) (1,464)
Net (increase) decrease in investment companies
and other investments (371) (1,357) 234
Proceeds from sales and maturities of investment securities 19,165 8,081 25,024
Purchases of investment securities (25,636) (25,726) (38,367)
Decrease in federal funds sold -- 16,000 16,000
Net increase in loans (3,349) (4,338) (756)
- - ---------------------------------------------------------------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (14,246) (10,621) (2,728)
- - ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from 6.22% Senior Note 50,000 -- --
Proceeds from note payable to unaffiliated banks 70,950 73,800 60,600
Payments on notes payable (113,573) (78,914) (46,172)
Redemption of subordinated debentures (14,169) -- --
Issuance of non-voting common stock 3,169 47,532 1,286
Dividends paid (5,342) (3,864) (2,461)
Repurchase of non-voting common stock (6,422) (928) (21)
Changes in demand and time deposits 2,058 24,101 (8,365)
- - ---------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (13,329) 61,727 4,867
- - ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 5,370 19,120 (3,518)
- - ---------------------------------------------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS
(INCLUDING IB&T), END OF YEAR $ 34,025 $ 28,655 $ 9,535
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
63
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. The consolidated financial statements include the accounts of
Eaton Vance Corp. (the "Company") and all of its majority owned
subsidiaries. All material intercompany accounts and transactions have
been eliminated.
B. Cash equivalents consist principally of short-term, highly liquid
investments and are recorded at cost, which is equivalent to market
value. Cash equivalents of Investors Bank & Trust Company ("IB&T")
consist of cash due from banks.
C. Investments are accounted for as follows:
Investment securities held by IB&T are carried at cost, adjusted for
amortization of bond premium and accretion of bond discount, and consist
principally of U.S. Government obligations maturing in five years or less
and mortgage-backed securities. At October 31, 1994 and 1993, IB&T's
investment securities had gross unrealized gains of $0 and $2,246,000, and
gross unrealized losses of $2,106,000 and $48,000, respectively. The
carrying value of investment securities pledged to secure public funds
on deposit and for other required purposes amounted to $88,000,000 and
$80,000,000 at October 31, 1994 and 1993, respectively.
Real estate properties are carried at the lower of cost or net realizable
value, with depreciation provided using the straight-line method over the
estimated useful lives of the assets.
Investments in unconsolidated partnership interests are accounted for by
the equity method of accounting. This method requires the Company to
record its share of the unrealized gains and losses in the underlying
marketable securities of its two gold-mining limited partnerships'
portfolios.
Investments in investment companies are carried at the lower of cost or
market. At October 31, 1994 and 1993, the Company had gross unrealized
gains of $1,689,000 and $1,659,000, and gross unrealized losses of
$75,000 and $11,000, respectively. The Company, as a non-managing general
partner of certain investment company partnerships, is required to
maintain a minimum investment in such partnerships. At October 31, 1994,
a minimum investment of $2,837,000 was required under the terms of the
partnership agreements. Investments held in connection with the Company's
activities as principal underwriter are recorded at market value and
consist of Eaton Vance mutual funds.
Other investments are carried at the lower of cost or management's
estimate of net realizable value.
The Company will be required to adopt Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," in fiscal 1995. SFAS No. 115 requires that investments
in debt securities classified as "held to maturity securities" are
recorded at amortized cost, and investments in debt and equity securities
classified as either "available for sale" or "trading" are recorded at
fair value. Management does not believe the adoption of SFAS No. 115
will have a material impact on the consolidated financial statements.
64
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
D. Bank loan losses are provided for under the allowance method. Increases
in the loan loss allowance account are charged to operating expenses
based on a reasonable estimate of foreseeable losses. There have been no
loan charge-offs or recoveries during the periods presented.
E. Property, equipment and leasehold improvements are stated at cost, less
accumulated depreciation and amortization. Depreciation and amortization
are provided principally by the straight-line method over the estimated
useful lives of the related assets, or over the terms of the related
leases, if shorter.
F. Goodwill represents the excess of the cost of the Company's investment in
the net assets or stock of acquired companies over the fair value of
the underlying net assets at dates of acquisition and is being amortized on
the straight-line method over 36 to 40 years.
G. In connection with the Company's activities as principal underwriter, the
sales of shares of investment companies are accounted for on a settlement
date basis with the related commission income and expenses recorded on a
trade date basis.
H. Sales commissions paid to brokers and dealers in connection with sales of
shares of certain investment companies are charged to deferred sales
commissions and amortized over various periods, none of which exceeds six
years. Distribution plan payments received by the Company from investment
companies are recorded in income as earned. Early withdrawal charges
received by the Company from redeeming shareholders reduce unamortized
deferred sales commissions first, with any remaining amount recorded in
income.
I. The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes" effective November 1, 1993. The
impact of the change is discussed in Note 11 to the consolidated financial
statements. Deferred income taxes reflect the impact of temporary
differences between the amount of assets and liabilities recognized for
financial reporting purposes and such amounts recognized for tax
purposes, measured by applying currently enacted tax rates. Such taxes
relate principally to the recording of sales commissions paid to brokers
and dealers, which are deducted currently for tax purposes.
J. Earnings per share are based upon the weighted average number of common,
non-voting common and non-voting common equivalent shares outstanding.
Earnings per common and common equivalent share assuming full dilution
have not been presented because the dilutive effect is immaterial.
K. Certain prior year amounts have been reclassified to conform to the
current year presentation.
65
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
2. INVESTMENT IN GOLD MINING PARTNERSHIPS
The Company has a 79% general partnership interest in Fulcrum Management
Partners, L.P. (F.M.P.) and an 82% general partnership interest in
Fulcrum Management Partners II, L.P. (F.M.P.II), both Delaware limited
partnerships, of which a principal officer of the Company is the other
general partner. F.M.P. and F.M.P.II are 20% general partners of
VenturesTrident, L.P. (V.T.) and VenturesTrident II, L.P. (V.T.II),
respectively, both Delaware limited partnerships formed to invest in
equity securities of public and private gold-mining ventures. The Company
also has a 12% limited partnership interest in V.T. and a 3% limited
partnership interest in V.T.II. The balance sheets of V.T. and V.T.II at
October 31, 1994 and 1993, follow:
<TABLE>
<CAPTION>
1994 1993
------------------------------------------------------------------------------------------------------------
V.T. V.T.II V.T. V.T.II
------------------------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C> <C> <C>
ASSETS:
Cash and short-term investments $ 144 $ 471 $ 280 $ 818
Investments, at fair value 7,437 47,985 6,702 92,279
Other Assets 110 118 80 1,189
------------------------------------------------------------------------------------------------------------
TOTAL $7,691 $48,574 $7,062 $94,286
------------------------------------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities $1,891 $ 1,749 $1,909 $ 1,941
Partners' capital 5,800 46,825 5,153 92,345
------------------------------------------------------------------------------------------------------------
TOTAL $7,691 $48,574 $7,062 $94,286
------------------------------------------------------------------------------------------------------------
</TABLE>
For the years ended October 31, 1994, 1993 and 1992, the operating results
of V.T. reflect net income (losses) of $647,000, ($4,122,000) and
($1,482,000), respectively, including realized and unrealized gains
(losses) on investments of $733,000, ($3,837,000) and ($1,173,000),
respectively.
For the years ended October 31, 1994, 1993 and 1992, the operating results
of V.T.II reflect net income (losses) of ($2,004,000), $29,206,000 and
$1,717,000, respectively, including realized and unrealized gains (losses)
on investments of ($648,000), $29,391,000 and $7,687,000, respectively. In
January 1994, V.T.II distributed 1,750,000 shares of Pegasus Gold
Corporation, with a value of $42 million, to its partners. The Company's
share of this distribution was 159,000 shares with a value of $3.8 million.
The Company's Consolidated Statement of Cash Flows for 1994 excludes the
effect of this non-cash investing activity. At October 31, 1994, all but
14,000 of these shares were sold. In July 1994, V.T.II made a net cash
distribution of $1,516,000 to its limited partners for payment of taxes. The
Company received $75,000 for its limited partnership interest.
For the years ended October 31, 1994, 1993 and 1992, the Company's share
of the net income (losses) of V.T. and V.T.II, as accounted for under the
equity method and allocated pursuant to the terms of the partnerships'
agreements, was ($289,000), $3,894,000 and ($160,000), respectively. At
October 31, 1994 and 1993, the Company's investments in V.T. and V.T.II
approximated its share of the partners' capital of each partnership.
66
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
3. CONSOLIDATING FINANCIAL STATEMENTS
The components of the 1994 Eaton Vance Corp. consolidated balance sheet and
statement of income by major business segment follow:
<TABLE>
<CAPTION>
BALANCE SHEET PRECIOUS METAL OCT. 31, 1994,
INVESTMENT REAL MINING & ELIMI- CONSOLIDATED
ASSETS MANAGEMENT BANKING ESTATE OTHER NATIONS TOTAL
- - ------------------------------------------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 25,685 $ -- $ 372 $ 394 $ (1,770) $ 24,681
Receivable for investment
company shares sold 1,073 -- -- -- -- 1,073
Investment adviser fees and
other receivables 2,244 -- 295 93 -- 2,632
Other current assets 513 -- 443 277 -- 1,233
- - ------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 29,515 -- 1,110 764 (1,770) 29,619
- - ------------------------------------------------------------------------------------------------------------------------------
INVESTORS BANK & TRUST COMPANY ASSETS:
Cash and equivalents -- 9,344 -- -- -- 9,344
Investment securities -- 88,278 -- -- -- 88,278
Loans, less allowance for loan losses -- 13,570 -- -- -- 13,570
Accrued interest and fees receivable -- 9,383 -- -- -- 9,383
Equipment and leasehold
improvements, net -- 3,251 -- -- -- 3,251
Other assets -- 3,780 -- -- -- 3,780
- - ------------------------------------------------------------------------------------------------------------------------------
TOTAL BANK ASSETS -- 127,606 -- -- -- 127,606
- - ------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS:
Investments:
Real estate -- -- 22,173 -- -- 22,173
Gold mining partnerships -- -- -- 3,072 -- 3,072
Northeast Properties, Inc. 8,487 -- -- -- (8,487) --
Investors Bank & Trust Co. 10,600 -- -- -- (10,600) --
Marblehead Energy Corp. 175 -- -- -- (175) --
Energex Corp. 270 -- -- -- (270) --
Mining related subsidiaries 7,659 -- -- -- (7,659) --
Investment companies 4,088 -- -- -- -- 4,088
Other investments 1,800 -- -- 2,320 -- 4,120
Notes receivable and receivables
from affiliates 100 -- 318 2,821 (100) 3,139
Deferred sales commissions 255,898 -- 428 -- -- 256,326
Equipment and leasehold
improvements, net 3,404 -- 1 72 -- 3,477
Goodwill 1,877 -- 9 -- -- 1,886
Intercompany receivables (2,645) -- 2,808 (163) -- --
- - ------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER ASSETS 291,713 -- 25,737 8,122 (27,291) 298,281
- - ------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $321,228 $127,606 $26,847 $8,886 $(29,061) $455,506
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
67
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
3. CONSOLIDATING FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
BALANCE SHEET (continued) PRECIOUS METAL OCT. 31, 1994,
LIABILITIES AND INVESTMENT REAL MINING & ELIMI- CONSOLIDATED
SHAREHOLDERS' EQUITY MANAGEMENT BANKING ESTATE OTHER NATIONS TOTAL
- - --------------------------------------------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C> <C> <C> <C> <C>
CURRENT LIABILITIES:
Payable for investment
company shares purchased $ 1,096 $ -- $ -- $ -- $ -- $ 1,096
Accrued compensation 8,817 -- -- -- -- 8,817
Accounts payable and
accrued expenses 4,212 -- 276 51 -- 4,539
Accrued income taxes 1,805 -- (8) (36) -- 1,761
Dividend payable 1,461 -- -- -- -- 1,461
Current portion of mortgage
notes payable -- -- 6,449 -- -- 6,449
Other current liabilities 688 -- -- -- -- 688
- - ------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 18,079 -- 6,717 15 -- 24,811
- - ------------------------------------------------------------------------------------------------------------------------------
INVESTORS BANK & TRUST
COMPANY LIABILITIES:
Demand and time deposits -- 108,679 -- -- (1,770) 106,909
Other -- 5,214 -- -- -- 5,214
- - ------------------------------------------------------------------------------------------------------------------------------
TOTAL BANK LIABILITIES -- 113,893 -- -- (1,770) 112,123
- - ------------------------------------------------------------------------------------------------------------------------------
OTHER LIABILITIES:
6.22% Senior Note 50,000 -- -- -- -- 50,000
Note payable to affiliate -- -- -- 100 (100) --
Mortgage notes payable -- -- 10,311 -- -- 10,311
Minority interest in
consolidated subsidiaries -- -- -- -- 3,113 3,113
- - ------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER LIABILITIES 50,000 -- 10,311 100 3,013 63,424
- - ------------------------------------------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES 87,368 -- 1,332 840 -- 89,540
- - ------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY 165,781 13,713 8,487 7,931 (30,304) 165,608
- - ------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $321,228 $127,606 $26,847 $8,886 $(29,061) $455,506
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
68
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
3. CONSOLIDATING FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
STATEMENT OF INCOME PRECIOUS METAL OCT. 31, 1994,
INVESTMENT REAL MINING & ELIMI- CONSOLIDATED
MANAGEMENT BANKING ESTATE OTHER NATIONS TOTAL
- - ------------------------------------------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C> <C> <C> <C> <C>
INCOME:
Investment adviser and
administration fees $ 83,682 $ -- $ -- $2,087 $ -- $ 85,769
Distribution income 80,069 -- -- -- -- 80,069
Bank fee income -- 43,049 -- -- (548) 42,501
Bank net interest income -- 4,778 -- -- 109 4,887
Income from real estate activities -- -- 5,154 -- (1,528) 3,626
Other income 948 -- -- 206 -- 1,154
- - ------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME 164,699 47,827 5,154 2,293 (1,967) 218,006
- - ------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Compensation of officers
and employees 38,486 27,299 586 193 -- 66,564
Amortization of deferred
sales commissions 52,794 -- -- -- -- 52,794
Other expenses 26,200 15,205 3,532 2,796 (1,291) 46,442
- - ------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 117,480 42,504 4,118 2,989 (1,291) 165,800
- - ------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) 47,219 5,323 1,036 (696) (676) 52,206
OTHER INCOME (EXPENSE):
Interest income 546 -- 56 264 (109) 757
Share of partnership income (losses) 97 -- 307 (289) -- 115
Interest expense (3,857) -- (1,480) -- (5,337)
- - ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE
INCOME TAXES 44,005 5,323 (81) (721) (785) 47,741
INCOME TAXES 17,821 1,862 19 (447) -- 19,255
- - ------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) BEFORE
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES 26,184 3,461 (100) (274) (785) 28,486
Cumulative effect of change in
accounting for income taxes 1,374 -- 129 (203) -- 1,300
- - ------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 27,558 $ 3,461 $ 29 $ (477) $ (785) $ 29,786
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Additional segment information is presented in Note 12.
69
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
4. REAL ESTATE INVESTMENTS
Real estate investments held at October 31, 1994 and 1993, follow:
<TABLE>
<CAPTION>
1994 1993
----------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C>
Buildings $27,347 $26,999
Land 2,465 2,478
----------------------------------------------------------------------------
TOTAL 29,812 29,477
Less accumulated depreciation 7,510 6,594
----------------------------------------------------------------------------
NET BOOK VALUE 22,302 22,883
Share of accumulated losses in excess
of partnership interest (129) (435)
----------------------------------------------------------------------------
TOTAL $22,173 $22,448
----------------------------------------------------------------------------
</TABLE>
5. EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements (including IB&T) at October 31, 1994
and 1993, follow:
<TABLE>
<CAPTION>
1994 1993
----------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C>
AT COST:
Equipment $13,036 $11,544
Leasehold improvements 815 530
----------------------------------------------------------------------------
TOTAL 13,851 12,074
Less accumulated depreciation 7,123 5,735
----------------------------------------------------------------------------
NET BOOK VALUE $ 6,728 $ 6,339
----------------------------------------------------------------------------
</TABLE>
6. OTHER LIABILITIES
6.22% SENIOR NOTE
In March 1994, the Company privately placed, with three insurance
companies, a $50 million 6.22% Senior Note due March 2004. Principal
payments on the note are due in equal annual installments of
approximately $7.1 million, beginning March 1998. The note may be prepaid
in part or in whole on or after March 1996. Certain covenants in the
Senior Note Purchase Agreement require specific levels of cash flow and
net income and others restrict additional investment and indebtedness.
NOTE PAYABLE TO UNAFFILIATED BANKS
The Company has an unsecured revolving credit and term loan agreement
with two unaffiliated participating banks under which the Company may
borrow up to $75,000,000. Borrowings under the credit agreement are due
in March 1997, and bear interest at a combination of the following rates:
the banks' current money market rate (5.9 percent at October 31, 1994),
or 1 percent per annum above the banks' Eurodollar rate (6.1 percent at
October 31, 1994). In addition, a commitment fee of 0.375 percent per
annum is payable on unborrowed amounts. There were no borrowings under
this agreement at October 31, 1994. The loan agreement contains various
covenants with respect to, among other things, levels of operating cash
flow and net income, and allowable additional indebtedness and investments.
70
<PAGE>
Notes to Consolidated Financial Statements
- - --------------------------------------------------------------------------------
6. OTHER LIABILITIES (CONTINUED)
MORTGAGE NOTES PAYABLE
The balance of mortgage notes payable on October 31, 1994 and 1993, follow:
<TABLE>
<CAPTION>
MATURITY 1994 1993
----------------------------------------------------------------------------------------------------------------------
INTEREST RATE (all figures in thousands)
<S> <C> <C> <C>
10.18% 1995 $ 6,200 $ 6,281
10.75% 1996 2,270 2,290
9.00% 1997 4,008 4,051
Prime +1% (8.75% at October 31, 1994) 1997 1,437 1,477
60% of Prime (4.65% at October 31, 1994) 2015-2016 2,845 2,984
----------------------------------------------------------------------------------------------------------------------
TOTAL $16,760 $17,083
----------------------------------------------------------------------------------------------------------------------
</TABLE>
These mortgage notes are secured by real property and require monthly or
quarterly payments of principal and interest with all unpaid principal due
at maturity. Principal payments due on mortgage notes outstanding at
October 31, 1994, for each of the next five years and in the aggregate
thereafter follow:
<TABLE>
<CAPTION>
YEAR ENDING OCTOBER 31 PAYMENTS DUE
-----------------------------------------------------------
(in thousands)
<S> <C>
1995 $ 6,449
1996 2,485
1997 5,402
1998 141
1999 141
Thereafter 2,142
-----------------------------------------------------------
TOTAL $16,760
-----------------------------------------------------------
</TABLE>
SUBORDINATED DEBENTURES
At October 31, 1993, the Company had outstanding $14,169,000 of 10
percent subordinated debentures. The debentures were subordinated to all
senior debt of the Company and paid interest semi-annually. The Company
redeemed the debentures on April 1, 1994.
INTEREST PAID
Interest paid by the Company for the years ended October 31, 1994, 1993 and
1992 by business segment follows:
<TABLE>
<CAPTION>
1994 1993 1992
------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C> <C>
Banking $ 807 $ 669 $1,075
Real Estate 1,493 1,458 1,567
Other 4,158 3,558 3,691
------------------------------------------------------------------------------------------
TOTAL $6,458 $5,685 $6,333
------------------------------------------------------------------------------------------
</TABLE>
71
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
7. LEASE COMMITMENTS
The Company leases certain equipment and facilities under noncancellable
operating leases. Future minimum lease commitments are as follows:
<TABLE>
<CAPTION>
Year ending October 31 Amount
------------------------------------------------------
(in thousands)
<S> <C>
1995 $ 4,500
199 64,036
1997 3,363
1998 759
1999 715
Thereafter 1,422
------------------------------------------------------
TOTAL $14,795
------------------------------------------------------
</TABLE>
Rent expense under these leases in 1994, 1993 and 1992 amounted to
$4,116,000, $3,219,000 and $2,660,000, respectively.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of Financial
Instruments." The estimated fair value amounts have been determined by the
Company using available market information and appropriate valuation
methodologies. The methodologies require management to develop assumptions on
such items as discount rates and future cash flows. Accordingly, such fair
value estimates are not necessarily indicative of the amounts the Company
would realize upon a current market exchange. The carrying amounts and
estimated fair value at October 31, 1994 and 1993, follow:
<TABLE>
<CAPTION>
1994 1993
- - ---------------------------------------------------------------------------------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
- - ---------------------------------------------------------------------------------------------------------
ASSETS: (all figures in thousands)
<S> <C> <C> <C> <C>
Cash and equivalents $ 34,025 $ 34,025 $ 28,655 $ 28,655
Investments -
Investment securities 88,278 86,172 80,206 82,404
Investment companies 4,088 5,702 3,377 5,025
Other investments 1,607 1,607 1,618 1,618
Loans 13,570 13,570 10,221 10,221
Notes receivable and
receivables from affiliates 5,650 5,650 5,185 5,282
LIABILITIES:
Demand and time deposits $106,909 $106,909 $104,851 $104,851
Senior note 50,000 44,529 -- --
Note payable to unaffiliated banks -- -- 42,300 42,300
Mortgage notes payable 16,760 16,548 17,083 16,993
Subordinated debentures -- -- 14,169 14,299
</TABLE>
72
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
CASH AND EQUIVALENTS - The carrying amounts of cash and equivalents
approximate their fair value.
INVESTMENTS - The estimated fair value of investment securities,
investment companies and common stock is based on quoted market prices.
Management believes it is impracticable to disclose fair values of
certain other investments (carrying amounts of $2,513,000 and $2,536,000
at October 31, 1994 and 1993, respectively) due to the difficulty of
predicting future returns and the period in which those amounts will be
received.
LOANS - Variable interest rate loans are subject to periodic repricing
and the carrying amount is a reasonable estimate of fair value.
NOTES RECEIVABLE AND RECEIVABLES FROM AFFILIATES - The estimated fair
value of notes receivable and receivables from affiliates has been
calculated by discounting expected future cash flows using management's
estimate of current market interest rates for such notes and receivables.
Included in this category are "Notes receivable from stock option
exercises" which are a component of shareholders' equity on the
consolidated balance sheet.
DEMAND AND TIME DEPOSITS - The carrying value of deposit accounts which
are subject to periodic repricing is a reasonable estimate of fair value.
6.22% SENIOR NOTE - The estimated fair value of the Senior Note has been
determined by discounting future cash flows using a market interest rate
calculated in the same manner as the fixed rate of interest applicable to
the note.
NOTE PAYABLE TO UNAFFILIATED BANKS - The note payable to unaffiliated
banks is subject to periodic repricing and the carrying amount
approximates its market value.
MORTGAGE NOTES PAYABLE - The estimated fair value for mortgage notes
payable is based on discounted cash flow analyses using current market
interest rates applicable to mortgaged properties.
SUBORDINATED DEBENTURES - The estimated fair value of the subordinated
debentures is based on the fair value of the debentures as calculated by
an independent valuation source.
9. NON-VOTING COMMON STOCK OPTIONS
Outstanding options to subscribe to shares of non-voting common stock are
summarized as follows:
<TABLE>
<CAPTION>
SHARES OPTION
UNDER OPTION PRICE RANGE
-------------------------------------------------------------------------------------
<S> <C> <C>
Balance, October 31, 1992 740,400 $ 3.95 - 17.00
Exercised (216,200) 3.95 - 15.75
Granted 202,084 27.25 - 33.50
Cancelled/Expired (7,600) 8.75 - 15.75
-------------------------------------------------------------------------------------
Balance, October 31, 1993 718,684 8.75 - 33.50
Exercised (141,181) 8.75 - 27.25
Granted 159,970 27.375 - 34.00
Cancelled/Expired (4,725) 27.25 - 34.00
-------------------------------------------------------------------------------------
BALANCE, OCTOBER 31, 1994 732,748 $ 8.75 - 34.00
-------------------------------------------------------------------------------------
</TABLE>
At October 31, 1994, options for 414,605 shares were exercisable. Options for
318,143 additional shares will become exercisable over the next two years.
In December 1994, the Company granted options for an additional 132,300
shares at a price of $27.75. These options will become exercisable over the
next four years.
73
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
10. EMPLOYEE BENEFIT PLANS
EXECUTIVE LOAN PROGRAM
The Company has established an Executive Loan Program under which a
maximum of $6,100,000 is available for loans to certain key employees for
purposes of financing or refinancing the exercise of stock options for
shares of the Company's non-voting common stock, other purchases of the
Company's non-voting stock, and any tax obligations arising from such
transactions. Such loans are written for a seven-year period, at varying
fixed interest rates (currently ranging from 5.3 percent to 9.5 percent),
and are payable in annual installments commencing with the third year in
which the loan is outstanding. Loans outstanding under this program at
October 31, 1994 and 1993, amounted to $2,511,000 and $1,804,000,
respectively.
PROFIT-SHARING RETIREMENT PLAN
The Company has a discretionary profit-sharing retirement plan for the
benefit of substantially all employees of its wholly owned subsidiaries
whereby up to 15 percent of eligible compensation of participants may be
contributed. The Company has contributed $2,709,000, $2,419,000 and
$2,228,000, the maximum amounts permitted under the plan, for the years
ended October 31, 1994, 1993 and 1992, respectively.
STOCK PURCHASE PLAN
A total of 312,000 shares of the Company's non-voting common stock was
reserved for issuance under an Employee Stock Purchase Plan. The plan
permits all eligible full-time employees to direct up to 15 percent of
their salaries toward the purchase of Eaton Vance Corp. non-voting common
stock at the lower of 90 percent of the fair market value of the
non-voting common stock at the beginning or at the end of each six-month
offering period. Through October 31, 1994, 285,076 shares have been
issued pursuant to this plan.
INCENTIVE PLAN - STOCK ALTERNATIVE
A total of 300,000 shares of the Company's non-voting common stock is
reserved for issuance under the Incentive Plan - Stock Alternative. The
plan permits employees and officers to direct up to half of their monthly
and annual incentive bonuses toward the purchase of non-voting common
stock at 90 percent of the fair market price of the stock. Through
October 31, 1994, 57,022 shares have been issued pursuant to this plan.
BANK PENSION PLAN
IB&T has a trusteed, noncontributory defined benefit pension plan
covering substantially all its employees. The benefits are based on years
of service and the employee's compensation during employment. IB&T's
funding policy is to contribute annually the maximum amount which can be
deducted for Federal income tax purposes. Contributions are intended to
provide not only for benefits attributed to service to date, but also for
benefits expected to be earned in the future.
74
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
10. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table sets forth the plan's funded status and amounts
recognized in IB&T's balance sheet at October 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
--------------------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C>
ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATIONS:
Accumulated benefit obligation, including vested benefits
of $3,440,000 for 1994 and $2,896,000 for 1993 $ 3,689 $ 3,153
--------------------------------------------------------------------------------------------------------
Projected benefit obligations for services rendered to date 5,717 5,352
Plan assets at fair value, primarily listed stocks
and U.S. Government obligations 4,754 4,390
--------------------------------------------------------------------------------------------------------
Funded status (963) (962)
Unrecognized net gain from past experience different
from that assumed and effects of changes in assumptions (397) (120)
Prior service cost not yet recognized in periodic pension cost 301 400
Unrecognized net asset (270) (501)
--------------------------------------------------------------------------------------------------------
Accrued pension cost $(1,329) $(1,183)
--------------------------------------------------------------------------------------------------------
</TABLE>
Net pension costs for 1994, 1993 and 1992 include the following components:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C> <C>
Service cost-benefits earned during the period $618 $497 $461
Interest cost on projected benefit obligations 425 388 349
Actual return on plan assets (420) (373) (300)
Net amortization and deferral (5) 1 (32)
--------------------------------------------------------------------------------------------------------
NET PERIODIC PENSION COST $618 $513 $478
--------------------------------------------------------------------------------------------------------
</TABLE>
The actuarial assumptions used in the above calculations are a weighted
average discount rate of 7.5 percent, a compensation rate of 5.0 percent,
and an expected long-term rate of return on assets of 8.5 percent.
75
<PAGE>
Notes to Consolidated Financial Statements
- - --------------------------------------------------------------------------------
11. INCOME TAXES
Effective November 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," (SFAS)No.
109. This statement requires an asset and liability approach for
financial accounting and reporting for deferred income taxes. The
cumulative effect of the accounting change resulted in a $1.3 million
gain or $0.14 per share. Prior year financial statements have not been
restated to apply the provisions of SFAS No. 109.
Income taxes, as stated as a percentage of income before income taxes, are
composed of the following:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory tax rate 35.0% 34.8% 34.0%
Increases (decreases) in taxes from:
State income tax (net of effect of Federal tax) 4.9 6.6 6.3
Unrealized (gains) losses on mining investments (0.5) 0.4 1.0
Other 0.9 -- 0.4
--------------------------------------------------------------------------------------------------------
EFFECTIVE TAX RATE 40.3% 41.8% 41.7%
--------------------------------------------------------------------------------------------------------
TAXES ON INCOME CONSISTED OF:
Current: (all figures in thousands)
Federal $ 2,429 $ 1,163 $(2,199)
State 3,114 1,402 392
Deferred:
Federal 13,121 13,783 12,860
State 591 3,322 2,773
--------------------------------------------------------------------------------------------------------
INCOME TAXES $19,255 $19,670 $13,826
--------------------------------------------------------------------------------------------------------
</TABLE>
Income taxes paid (refunded) for the years ended October 31, 1994, 1993
and 1992 were $6,116,000, ($3,895,000) and ($1,085,000), respectively.
In 1994, the Company utilized a net operating loss carryforward of
approximately $29 million to offset current taxable income. The Company
has a remaining net operating loss of approximately $25 million that can
be carried forward to offset future taxable income through 2008. For
financial statement purposes, deferred income tax credits have been
reduced by the effect of the tax loss carryforward because such losses
are expected to offset the reversal of timing differences during the
permitted carryforward period.
In years prior to and in 1994, the Company incurred alternative minimum
tax of approximately $2.3 million. Such taxes incurred may be used as a
credit carryover to offset future regular tax liabilities. Accordingly,
at October 31, 1994, the deferred income tax liability account has been
reduced by the cumulative alternative minimum taxes incurred of $2.3
million.
76
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
11. INCOME TAXES (CONTINUED)
Under SFAS No. 109 deferred income taxes reflect the net tax effects of
(a) temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for
income tax purposes, and (b) operating loss and tax credit carryforwards.
The tax effects of significant items comprising the Company's net
deferred tax liability as of October 31, 1994, are as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
DEFERRED TAX LIABILITIES:
Deferred sales commissions $ 99,393
Differences between book and
tax basis of property 1,645
Other 199
------------------------------------------------------
Total 101,237
------------------------------------------------------
DEFERRED TAX ASSETS:
Operating loss carryforwards 8,932
Tax credit carryforwards 2,259
Other 506
------------------------------------------------------
Total 11,697
------------------------------------------------------
Valuation allowance --
------------------------------------------------------
NET DEFERRED TAX LIABILITY $ 89,540
------------------------------------------------------
</TABLE>
12. SEGMENT INFORMATION
A. The Company and its subsidiaries are engaged in the following business
segments:
1. Investment management operations, including portfolio
management of regulated investment companies and investment
counseling clients through Eaton Vance Management and Boston
Management and Research, and the sale of shares of investment
companies through Eaton Vance Distributors, Inc.
2. Banking, through ownership of 77.3% of the capital stock
of Investors Bank & Trust Company (IB&T). IB&T, a state-chartered
bank, provides custodial, accounting, and pricing services for
mutual funds, unit investment trusts and other pooled investment
vehicles, including the Eaton Vance mutual funds. IB&T also provides
custodial, trust, and banking services to individuals, investment
advisers, private trustees, lawyers and accountants, financial
planners, other banks and fiduciaries, and other institutions.
3. Real estate investment through wholly owned Northeast
Properties, Inc.
4. Precious Metal Mining and Other includes precious metal
mining venture investment and management through wholly owned
Minven, Inc., EV Gold Inc., and Fulcrum Management, Inc., and oil
and gas exploration and development through wholly owned Energex
Corporation and Marblehead Energy Corporation.
77
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
12. SEGMENT INFORMATION (CONTINUED)
B. Financial data applicable to each business segment follow:
<TABLE>
<CAPTION> PRECIOUS METAL
INVESTMENT REAL MINING & ELIMI- CONSOLIDATED
MANAGEMENT BANKING ESTATE OTHER NATIONS TOTAL
- - -------------------------------------------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED 10/31/94
Identifiable assets $321,228 $127,606 $26,847 $8,886 $(29,061) $455,506
Liabilities 155,447 113,893 18,360 955 1,243 289,898
Total income 164,699 47,827 5,154 2,293 (1,967) 218,006
Operating income (loss) 47,219 5,323 1,036 (696) (676) 52,206
Net income (loss) before
cumulative effect of change in
accounting for income taxes 26,184 3,461 (100) (274) (785) 28,486
Cumulative effect of change in
accounting for income taxes 1,374 -- 129 (203) -- 1,300
Net income (loss) 27,558 3,461 29 (477) (785) 29,786
Capital expenditures 1,394 1,616 325 3 -- 3,338
Depreciation and amortization 54,046 2,676 1,068 16 -- 57,806
YEAR ENDED 10/31/93
Identifiable assets $294,750 $120,184 $26,892 $12,852 $(29,131) $425,547
Liabilities 149,452 109,872 18,435 1,545 943 280,247
Total income 145,564 37,509 5,080 2,954 (1,962) 189,145
Operating income (loss) 43,829 3,570 1,102 (619) (442) 47,440
Net income (loss) 23,546 2,359 (293) 2,264 (535) 27,341
Capital expenditure 1,221 1,877 524 3 -- 3,625
Depreciation and amortization 42,173 2,696 1,037 16 -- 45,922
YEAR ENDED 10/31/92
Identifiable assets $214,078 $103,184 $27,362 $10,605 $(37,030) $318,199
Liabilities 136,613 95,171 18,612 599 (8,597) 242,398
Total income 113,003 33,323 5,337 3,652 (2,162) 153,153
Operating income (loss) 33,238 2,734 1,403 535 (351) 37,559
Net income (loss) 18,263 1,571 (178) 2 (351) 19,307
Capital expenditures 1,439 1,188 804 51 -- 3,482
Depreciation and amortization 29,144 1,309 1,403 96 -- 31,952
</TABLE>
78
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
12. SEGMENT INFORMATION (CONTINUED)
C. Major customers that provided over 10% of the total income of the
Company are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
- - ---------------------------------------------------------------------------------------------------------------------
EATON VANCE NATIONAL MUNICIPALS FUND (all dollar figures in thousands)
<S> <C> <C> <C>
Investment adviser fees, distribution plan payments,
early withdrawal charges and custody fees $26,230 $24,726 $20,050
Percent of total income 12.0% 13.1% 13.1%
EATON VANCE PRIME RATE RESERVES
Investment adviser fees, administration fees,
early withdrawal charges and custody fees $8,244 $11,942 $18,393
Percent of total income 3.8% 6.3% 12.0%
</TABLE>
13. RELATED PARTY TRANSACTIONS
Investment advisory and distribution income earned from investment
companies sponsored by the Company were $163.8 million, $144.5 million
and $112.6 million in 1994, 1993 and 1992, respectively.
The Company provides management and administration services to
VenturesTrident and VenturesTrident II for which it earned fees of $2.1
million, $2.4 million and $3.0 million, in 1994, 1993 and 1992,
respectively. Amounts outstanding for these services were $2.8 million
and $3.0 million at October 31, 1994 and 1993, respectively, and are
included in "Notes receivable and receivables from affiliates."
IB&T earned fees from investment companies sponsored by the Company for
custodial, bookkeeping and pricing services of $3.6 million, $3.0 million
and $2.8 million in 1994, 1993 and 1992, respectively.
Investment companies sponsored by the Company had approximately $2.0
million and $0.3 million of cash on deposit at IB&T on October 31, 1994
and 1993, respectively.
IB&T has made loans to certain shareholders, officers and employees of
the Company totaling $1.6 million and $1.3 million, at October 31, 1994
and 1993, respectively.
14. SHAREHOLDERS' EQUITY
On April 15, 1994, the Company's Board of Directors authorized the
purchase by the Company of up to 500,000 shares of the Company's
non-voting common stock at a cost to be determined at the time of
purchase. Through October 31, 1994, 234,000 shares had been acquired
under this plan.
15. REGULATORY REQUIREMENTS
The broker/dealer subsidiary of the Company, Eaton Vance Distributors,
Inc., is subject to the Securities and Exchange Commission uniform net
capital rule (Rule 15c3 - 1) which requires the subsidiary to maintain a
certain minimum level of net capital (as defined). For purposes of this
rule the subsidiary had net capital of $16.5 million, which exceeded the
net capital requirement of $0.1 million at October 31, 1994.
The banking subsidiary, IB&T, is required to maintain certain average
cash reserve balances with the Federal Reserve Bank. The average reserve
balance requirement at October 31, 1994, was $3.3 million. IB&T is also
required to maintain certain minimum capital ratios. Management believes
that IB&T was in compliance with all such capital requirements at October
31, 1994.
79
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
16. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
At October 31, 1994, IB&T had off-balance sheet financial instruments
consisting of secured open lines of credit and interest-rate floor
contracts. The open lines of credit totaled $7.5 million, against which
$3.1 million in loans were drawn. IB&T uses interest rate floor contracts
as part of its overall interest rate risk management. The notional amount
of the interest-rate floor contracts was $80.0 million. Management of
IB&T does not anticipate significant credit loss from these instruments.
17. QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
TOTAL NET EARNINGS
INCOME INCOME PER SHARE
- - --------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
QUARTER ENDED:
January 31, 1993 $ 42,121 $ 4,924 $0.62
April 30, 1993 45,470 7,184 0.86
July 31, 1993 48,544 11,282 1.19
October 31, 1993 53,010 3,951 0.41
-------------------------------------------------------------------------------------------------
Year ended October 31, 1993 $189,145 $27,341 $3.09
-------------------------------------------------------------------------------------------------
QUARTER ENDED:
January 31, 1994 $ 53,107 $ 7,706* $0.81*
April 30, 1994 54,254 7,638 0.80
July 31, 1994 54,814 6,157 0.65
October 31, 1994 55,831 8,285 0.89
-------------------------------------------------------------------------------------------------
Year ended October 31, 1994 $218,006 $29,786 $3.14
-------------------------------------------------------------------------------------------------
</TABLE>
*The quarter ended January 31, 1994, reflects the cumulative effect of the
change in accounting for income taxes of $1.3 million, or $0.14 per share.
Net income before the cumulative effect of the change in accounting for
income taxes was $6,406,000 for the quarter ended January 31, 1994.
Total income for the four quarters ended October 31, 1993, and for the
two quarters ended April 30, 1994, have been reclassified to reflect the
current financial statement presentation of recording trail commission
payments to brokers net of the related fees received from the Eaton Vance
mutual funds.
The per share earnings for each quarter of 1993 and 1994 include credits
(charges) of ($0.14), $0.16, $0.44, ($0.21) and ($0.04), $0.08, ($0.13),
$0.09, respectively, representing the earnings per share effect from the
Company's management of, and investment in, gold mining interests.
80
<PAGE>
INDEPENDENT AUDITORS' REPORT
- - --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND
SHAREHOLDERS OF EATON VANCE CORP.
We have audited the accompanying consolidated balance sheets of Eaton Vance
Corp. and its subsidiaries as of October 31, 1994 and 1993, and the related
consolidated statements of income, shareholders' equity, and cash flows for
each of the three years in the period ended October 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Eaton Vance Corp. and its
subsidiaries as of October 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period
ended October 31, 1994 in conformity with generally accepted accounting
principles.
As discussed in Notes 1 and 11 to the consolidated financial statements,
effective November 1, 1993, the Company changed its method of accounting for
income taxes to conform with Statement of Financial Accounting Standards No.
109.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 13, 1994
81
<PAGE>
EATON VANCE CORP. DIRECTORS AND OFFICERS
- - --------------------------------------------------------------------------------
[PHOTO]
Eaton Vance Corp. Directors: seated - M. Dozier Gardner (left) and Landon T.
Clay; standing (from left) - Benjamin A. Rowland, Jr., Ralph Z. Sorenson,
James B. Hawkes, John G. L. Cabot and H. Day Brigham, Jr.
Landon T. Clay Chairman of the Board of Directors
M. Dozier Gardner President and Director
James B. Hawkes Executive Vice President and Director
H. Day Brigham, Jr. Vice President, Director and Chairman
of the Management Committee
John G. L. Cabot Director
Benjamin A. Rowland, Jr. Vice President and Director
Ralph Z. Sorenson Director
Thomas Otis Vice President and Secretary
Laurie G. Russell Vice President and Internal Auditor
John P. Rynne Vice President and Corporate Controller
William M. Steul Vice President and Chief Financial Officer
82
<PAGE>
INVESTOR INFORMATION
- - --------------------------------------------------------------------------------
EATON VANCE CORP. AND FORM 10-K
Eaton Vance Corp. has filed an Annual Report on Form 10-K with the Securities
and Exchange Commission for the 1994 fiscal year. For a copy of that Report,
which is available free of charge to shareholders of Eaton Vance Corp. upon
request, or other information regarding the Company, please contact:
WILLIAM M. STEUL, CHIEF FINANCIAL OFFICER
EATON VANCE CORP.
24 FEDERAL STREET
BOSTON, MA 02110
(617) 482-8260
TRANSFER AGENT AND REGISTRAR
The First National Bank of Boston is the Transfer Agent and Registrar for the
Company's common stock and maintains shareholder accounting records. The
Transfer Agent should be contacted on questions of changes in address, name
or ownership, lost certificates and consolidation of accounts. When
corresponding with the Transfer Agent, shareholders should state the exact
name(s) in which the stock is registered and the certificate number, as well
as pertinent account information. Contact:
THE FIRST NATIONAL BANK OF BOSTON
SHAREHOLDER CORRESPONDENCE, MAIL STOP 45-02-09
POST OFFICE BOX 644
BOSTON, MA 02102-0644
(617) 575-3400
AUDITORS
DELOITTE & TOUCHE LLP
125 SUMMER STREET
BOSTON, MA 02110
(617) 261-8000
83
<PAGE>
- - --------------------------------------------------------------------------------
EATON VANCE CORP.
24 FEDERAL STREET
BOSTON, MA 02110
84
<PAGE>
EXHIBIT 21.1
List of Subsidiaries
As of October 31, 1994*
State or Jurisdiction Name Under Which
First Tier Subsidiaries of of Incorporation or Subsidiary Does
Eaton Vance Corp. Organization Business
Eaton Vance Management Massachusetts Same
Fulcrum Management, Inc. Massachusetts Same
Investors Bank & Trust Company Massachusetts Same
MinVen, Inc. Massachusetts Same
Certain Subsidiaries of
Eaton Vance Management
Eaton Vance Distributors, Inc. Massachusetts Same
Northeast Properties, Inc. Massachusetts Same
Boston Management and Research Massachusetts Same
* The names of certain subsidiaries have been omitted in this list inasmuch
as the unnamed subsidiaries, considered in the aggregate as a single
subsidiary, would not constitute a significant subsidiary as of the
Company's fiscal year ended October 31, 1994.
-85-
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration Statement
No. 33-58496 of Eaton Vance Corp. (the company) on Form S-8 of our report
dated December 13, 1994 appearing in the Annual Report on Form 10-K of the
company for the year ended October 31, 1994.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 18, 1995
-86-
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