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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year
ended October 31, 1997
Commission File Number 1-8100
EATON VANCE CORP.
(Exact name of registrant as specified in its charter)
Maryland 04-2718215
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
24 Federal Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
(617) 482-8260
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Non-Voting Common Stock
($0.03125 par value) New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Non-Voting Common Stock par value $0.03125 per share
Title of Class
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the close of the latest practicable date.
Class Outstanding at December 31, 1997
Non-Voting Common Stock,
$0.03125 par value 18,545,360
Common Stock, $0.03125 par value 38,720
Aggregate market value of Non-Voting Common Stock held by non-affiliates of the
Registrant, based on the closing price of $37.75 on December 31, 1997 on the New
York Stock Exchange was $493,605,259. Calculation of holdings by non-affiliates
is based upon the assumption, for these purposes only, that executive officers,
directors, and persons holding 5% or more of the registrant's Non-Voting Common
Stock are affiliates.
Portions of registrant's Annual Report to Stockholders for the fiscal year ended
October 31, 1997, (Exhibit 13.1 hereto) have been incorporated by reference into
the following Parts of this report: Part I, Part II and Part IV.
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PART I
ITEM 1. BUSINESS
The Company's principal business is creating, marketing and managing mutual
funds and providing management and counseling services to institutions and
individuals. The Company has been in the investment management business for over
seventy years, tracing its history to two Boston-based investment managers:
Eaton & Howard, formed in 1924, and Vance, Sanders & Company, organized in 1934.
As of October 31, 1997, the Company managed $21.3 billion in portfolios with
investment objectives ranging from high current income to maximum capital gain.
INVESTMENT MANAGEMENT AND ADMINISTRATIVE ACTIVITIES
The Company conducts its investment management and counseling business through
two wholly-owned subsidiaries, Eaton Vance Management ("EVM") and Boston
Management and Research ("BMR"), each of which is a Massachusetts business trust
registered with the Securities and Exchange Commission ("the Commission") as an
investment adviser under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"). Eaton Vance Distributors, Inc. ("EVD"), a wholly owned
broker/dealer registered under the Securities Exchange Act of 1934 (the
"Exchange Act"), markets and sells the Eaton Vance Funds.
As of October 31, 1997, the Company provided investment advisory or
administration services to over 70 Funds ("Funds") and to over 800 separately
managed individual and institutional accounts. At that date, the Funds had
aggregate net assets of $18.9 billion and the Company's separately managed
accounts had aggregate net assets of $2.4 billion. The following table shows net
assets in the Funds and the separately managed accounts for the dates indicated:
FUND AND SEPARATELY MANAGED ACCOUNT ASSETS
AT OCTOBER 31,
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1997 1996 1995 1994 1993
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Funds: (in millions)
Money Market $ 200 $ 200 $ 200 $ 200 $ 200
Equities 5,200 3,100 2,400 2,300 2,200
Bank Loans 3,900 2,800 1,400 600 800
Taxable Fixed Income 2,100 1,300 1,300 1,300 1,100
Non-Taxable Fixed Income 7,500 8,200 8,900 9,000 8,900
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Total 18,900 15,600 14,200 13,400 13,200
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Separately Managed Accounts 2,400 1,700 1,800 1,600 2,200
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Total $21,300 $17,300 $16,000 $15,000 $15,400
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On October 31, 1997, equity fund assets increased to 24 percent of total assets
under management from 18 percent on October 31, 1996, while taxable and
non-taxable fixed-income funds decreased to 45 percent of total assets under
management from 55 percent a year ago. Floating-rate bank loan funds increased
to 18 percent of total assets under management on October 31, 1997 from 16
percent a year ago.
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ITEM 1. BUSINESS (CONTINUED)
Investment decisions for all but four of the over 70 Funds are made by portfolio
managers employed by the Company and are made in accordance with each Fund's
investment objectives and policies. Investment decisions for ten of the
Company's international equity funds are made by Lloyd George Management, an
independent investment management company based in Hong Kong in which the
Company owns a minority equity position. Investment decisions for the Eaton
Vance Worldwide Health Sciences Fund are made by OrbiMed Advisors, Inc.
(formerly named Mehta and Isaly Asset Management, Inc.), an independent
investment management company based in New York. The Company's portfolio
management staff have, on average, more than 20 years of experience in the
securities industry. The Company's investment advisory agreements with each of
the Funds provide for fees ranging from 45 to 95 basis points of average net
assets annually for management services provided. The investment advisory
agreements must be approved annually by the trustees of the respective Funds,
including a majority of the independent trustees, i.e., those unaffiliated with
the management company. Amendments to the investment advisory agreements must be
approved by Fund shareholders. These agreements are generally terminable by the
Fund upon 30 to 60 days notice without penalty.
Investment decisions for the separately managed accounts are made by investment
counselors employed by the Company. The Company's investment counselors use the
same sources of information as Fund portfolio managers, but tailor investment
decisions to the needs of individual clients. The Company's investment advisory
fee agreements for the separately managed accounts provide for fees ranging from
30 to 80 basis points of average net assets on an annual basis. These agreements
are generally terminable upon 30 to 60 days notice without penalty.
The following table shows investment advisory and administration fees received
for the past five years ended October 31, 1997.
INVESTMENT ADVISORY AND
ADMINISTRATION FEES*
YEAR ENDED OCTOBER 31,
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1997 1996 1995 1994 1993
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(in thousands)
Investment Advisory Fees -
Funds $ 95,531 $ 81,473 $ 69,094 $ 68,284 $ 59,322
Separately Managed Accounts 9,503 8,865 8,712 9,807 8,949
Administration Fees - Funds 12,071 7,793 4,631 4,257 3,295
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Total $ 117,105 $ 98,131 $ 82,437 $ 82,348 $ 71,551
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* Excludes gold mining investment management fees and administration fees
received from funds other than Eaton Vance Funds.
GENERAL DEVELOPMENT OF BUSINESS
The Company's growth has resulted from its ability to develop, offer
successfully and manage effectively new funds and to increase the assets of
existing Funds. The Company's strategy is to develop and manage products with
clearly understood and clearly presented investment characteristics coupled with
distribution arrangements that are attractive to third-party distributors of the
Funds.
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ITEM 1. BUSINESS (CONTINUED)
In 1993, the Company introduced the Master/Feeder structure. Master/Feeder is a
two-tiered arrangement in which Funds (Feeder Funds) with substantially
identical investment objectives pool their assets by investing in a common
portfolio (Master Fund). Eaton Vance used Master/Feeder to introduce four
distinct mutual fund families (Traditional, Marathon, Classic and Medallion),
with each family having its own prospectus, sales literature, product design and
distribution structure (see Marketing and Distribution of Fund Shares below).
The structure was intended to benefit fund shareholders through lower operating
costs, while allowing the Company to offer cost-effective distribution
alternatives to the broker/dealers and their clients. In 1997, the Company began
to modify the Master/Feeder structure to reduce the number of Feeder Funds by
merging some Feeder Funds into a single Fund with multiple Classes. It is
anticipated that this modification will further reduce operating costs in the
future by reducing existing prospectus and sales literature requirements, while
continuing to offer a variety of distribution alternatives to investors and
maintaining the ability to attract unaffiliated Feeder Funds.
In 1995, the Company increased its ownership interest in Lloyd George Management
(BVI) Limited ("LGM"), an independent investment management company based in
Hong Kong. The two firms became affiliated in 1992 with the introduction of the
Eaton Vance Greater China Funds, which are advised by LGM from its headquarters
in Hong Kong. The investment management capabilities of LGM, with offices in
Hong Kong, London and Mumbai, coupled with the introduction of the EV Medallion
family of offshore funds, allows Eaton Vance both to manage and to distribute
mutual funds globally.
In 1996, the directors of the Medical Research Investment Fund, Inc., approved
the conversion of the Fund to the Master/Feeder structure and engaged EVM as
administrator and EVD as distributor. As part of the conversion, the fund
changed its name to EV Traditional Worldwide Health Sciences Fund and became a
member of the Eaton Vance Family of Funds. The Fund, which concentrates
investments in equity securities of domestic and foreign companies engaged in
research and the health care industry, is managed by OrbiMed Advisors Inc.
("OrbiMed") (formerly named Mehta and Isaly Asset Management), the Fund's
advisor since inception.
In 1997, the Company focused on developing products that are managed to maximize
after-tax returns and on broadening its existing tax-efficient equity product
line. In May and June of 1997, the Company introduced Belvedere Equity Fund LLC,
a private fund for investors seeking to diversify concentrated positions in
common stocks with substantial market appreciation. In September of 1997, the
Company introduced Eaton Vance Tax-Managed Emerging Growth Fund, a companion
product to Eaton Vance Tax-Managed Growth Fund which was introduced in the
spring of 1996. A tax-managed international fund is planned for 1998.
INVESTMENT ADVISORY AGREEMENTS AND DISTRIBUTION PLANS
Each Eaton Vance Master Fund (excluding those managed by LGM and OrbiMed) has
entered into an investment advisory agreement with either EVM or BMR. Although
the specific terms of each such agreement vary, the basic terms of the
agreements are similar. Pursuant to the agreements, either EVM or BMR, as
applicable, provides overall management services to each of the Master Funds,
subject to the supervision of each Fund's Board of Trustees in accordance with
each Fund's fundamental investment objectives and policies. The investment
advisory agreements are approved by Fund shareholders and their continuance must
be approved annually by the trustees of the respective Funds, including a
majority of the independent trustees. Amendments to the investment advisory
agreements must be approved by Fund shareholders.
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ITEM 1. BUSINESS (CONTINUED)
EVM also serves as administrator or manager under an Administration Agreement or
Management Contract (each an "Agreement") to most Funds (including those managed
by LGM and OrbiMed). Under such Agreement(s) EVM is responsible for managing the
business affairs of these Funds, subject to the supervision of each Fund's Board
of Trustees. EVM's services include recordkeeping, preparing and filing
documents required to comply with federal and state securities laws, supervising
the activities of the Funds' custodian and transfer agent, providing assistance
in connection with the Funds' shareholders meetings and other administrative
services, including furnishing office space and office facilities, equipment and
personnel which may be necessary for managing and administering the business
affairs of the Funds. EVM (or an affiliate) provides investment management or
advisory services to most of these Funds. For the services provided under the
Agreement(s), each Fund is required, in some cases, to pay EVM a monthly fee
calculated at an annual rate not to exceed 0.25% of average daily net assets.
Each Agreement remains in full force and effect indefinitely, but only to the
extent that the continuance of such Agreement is specifically approved at least
annually by the Fund's Board of Trustees.
In addition, certain of the Feeder Funds have adopted distribution plans which,
subject to applicable law, provide for the reimbursement to the Company for the
payment of applicable sales commissions to the retail distribution firms through
the payment of an ongoing distribution fee (i.e., a 12b-1 fee). These
distribution plans are implemented through a distribution agreement between EVD
and the Fund. Although the specific terms of each such agreement vary, the basic
terms of the agreements are similar. Pursuant to the agreements, EVD acts as
underwriter for the Fund and distributes shares of the Fund through unaffiliated
dealers. Pursuant to the terms of the distribution plans and agreements and the
Investment Company Act, each distribution plan and agreement is initially
approved and its subsequent continuance must be approved annually by the
trustees of the respective Funds, including a majority of the independent
trustees.
Each Fund bears all expenses associated with its operation and the issuance and
redemption or repurchase of its securities, except for the compensation of
trustees and officers of the Fund who are employed by the Company. Under some
circumstances, particularly in connection with the introduction of new funds and
special promotions, EVM or BMR may waive a portion of its fee and pay for some
expenses of the Fund.
EVM has entered into investment advisory agreements which set forth investment
objectives and fee schedules with respect to each separately managed account.
Pursuant to the agreements, EVM invests the assets of the accounts in accordance
with the stated investment objectives. The Company's investment counselors may
assist clients in formulating investment strategy.
MARKETING AND DISTRIBUTION OF FUND SHARES
The Company markets and distributes shares of the Feeder Funds through EVD. EVD
sells Fund shares through a retail network of national and regional dealers,
including those affiliated with banks, insurance companies and financial
planners. Although the firms in the Company's retail distribution network have
each entered into selling agreements with the Company, such agreements (which
generally are terminable by either party) do not legally obligate the firms to
sell any specific amount of the Company's investment products. For the 1997,
1996 and 1995 calendar years, the five dealer firms responsible for the largest
volume of Fund sales accounted for approximately 36%, 37% and 42%, respectively,
of the Company's Fund sales volume. EVD currently maintains a sales force of
more than 30 wholesalers and 30 sales assistants. Wholesalers and their
assistants work closely with the retail distribution network to assist in
selling shares of Eaton Vance Funds.
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ITEM 1. BUSINESS (CONTINUED)
While a substantial majority of sales are made through national and large
regional firms, in 1990 the Company embarked on a program to broaden its
channels of distribution by establishing the Independent Financial Institutions
sales force, a separate wholesaling force focusing on banks and financial
planners. In an additional distribution initiative in 1997, the Company began
offering its Funds to investors, without sales commissions or other transaction
fees, through fee-based registered investment advisors via various institutional
programs both domestically and internationally.
EVD currently sells its U.S. registered Funds under three separate commission
structures: 1) front-end load commission (Traditional or Class A); 2)
spread-load commission (Marathon or Class B); and 3) level-load commission
(Classic or Class C). For Traditional or Class A shares, the shareholder pays
the broker's commission and EVD receives an underwriting commission of up to 75
basis points of the dollar value of the Fund or Class shares sold. The Fund pays
a service fee to authorized firms not to exceed 25 basis points of average net
assets and may also pay a Rule 12b-1 fee not to exceed 25 basis points of
average daily net assets.
For Marathon or Class B shares, EVD pays a commission to the dealer at the time
of sale and such payments are capitalized and amortized in the Company's
financial statements over a four to six year period. The shareholder pays a
contingent deferred sales charge to EVD in the event shares are redeemed within
a four, five or six year period from the date of purchase. EVD uses its own
funds (which may be borrowed) to pay such commissions. EVD recovers the dealer
commissions paid on behalf of the shareholder through distribution plan payments
limited to an annual rate of 75 basis points of the average net assets of the
Fund or Class in accordance with a distribution plan adopted by the Fund
pursuant to Rule 12b-1 under the Investment Company Act. Like the investment
advisory agreement, the distribution plan and related payments must be approved
annually by a vote of the trustees, including a majority of the independent
trustees. The Commission has taken the position that Rule 12b-1 would not permit
a Fund to continue making compensation payments to EVD after termination of the
plan and that any continuance of such payments may subject the Fund to legal
action. These distribution plans are terminable at any time without notice or
penalty. In addition, the Fund pays a service fee to authorized firms not to
exceed 25 basis points of average net assets.
For Classic or Class C shares, the shareholder pays no front-end commissions or
contingent deferred sales charges after the first year. EVD pays a commission
and the first year's service fees to the dealer at the time of sale. The Fund
makes monthly distribution plan payments to EVD similar to those for Marathon or
Class B shares, equal to 75 basis points of average net assets of the Fund or
Class. Service fees are paid by the Fund to EVD in the first year and generally
to authorized firms in subsequent years, at an annual rate not to exceed 25
basis points of average net assets. The introduction of level-load shares is
consistent with the efforts of many broker/dealers to rely less on transaction
fees and more on continuing fees for servicing assets.
In addition to its U.S. registered Funds, the Company also sponsors a family of
Cayman Island domiciled off-shore funds known as the EV Medallion family of
funds. The Medallion Funds are sold by certain dealer firms through EVD to
non-U.S. persons, with commission structures similar to those of the U.S.
registered Funds. The Company earns distribution, administration and advisory
fees directly or indirectly from the Medallion Funds.
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
Reference is made to Note 12 of the Notes to Consolidated Financial Statements
contained in the Eaton Vance Corp. Annual Report to Shareholders for the fiscal
year ended October 31, 1997 (which report is furnished as Exhibit 13.1 hereto)
for a description of the major customers that provided over 10% of the total
revenue of the Company.
FORWARD-LOOKING STATEMENTS
From time to time, information provided by the Company or information included
in its filings with the Commission (including this Form 10-K) may contain
statements which are not historical facts, for this purpose referred to as
"forward-looking statements." The Company's actual future results may differ
significantly from those stated in any forward-looking statements. Important
factors that could cause actual results to differ materially from those
indicated by such forward-looking statements include, but are not limited to,
the factors discussed in "Competitive Conditions and Risk Factors" below.
COMPETITIVE CONDITIONS AND RISK FACTORS
The Company is subject to substantial competition in all aspects of its
business. The Company's ability to market investment products is highly
dependent on access to the retail distribution systems of national and regional
securities dealer firms, banks and independent financial planners which
generally offer competing internally and externally managed investment products.
Although the Company has historically been successful in gaining access to these
channels, there can be no assurance that it will continue to do so. The
inability to have such access could have a material adverse effect on the
Company's business.
There are few barriers to entry by new investment management firms. The
Company's funds compete against an ever increasing number of investment products
sold to the public by investment dealers, banks, insurance companies and others
that sell tax-free investments, taxable income funds, equity funds and other
investment products. Many institutions competing with the Company have greater
resources than the Company. The Company competes with other providers of
investment products on the basis of the range of products offered, the
investment performance of such products, quality of service, fees charged, the
level and type of sales representative compensation, the manner in which such
products are marketed and distributed and the services provided to investors.
The Company derives almost all of its revenues from investment advisory and
administration fees and distribution income received from the Funds and
separately managed accounts. As a result, the Company is dependent upon the
contractual relationships its maintains with these Funds and separately managed
accounts. In the event that any of the management contracts, administration
contracts, underwriting contracts or service agreements is not renewed pursuant
to the terms of these contracts or agreements, the Company's financial results
may be adversely affected.
The major sources of revenue for the Company - i.e., investment advisory fees -
are calculated as a percentage of assets under management. A decline in
securities prices in general would reduce fee income. If, as a result of
inflation, expenses rise and assets under management decline, lower fee income
and higher expenses will reduce or eliminate profits. If expenses rise and
assets rise, bringing increased fees to offset the increased expenses, profits
may not be affected by inflation. There is no predictable relationship between
changes in financial assets under management and the rate of inflation.
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ITEM 1. BUSINESS (CONTINUED)
TECHNOLOGY
In 1996, management initiated a program to prepare the Company's computer
systems and applications for the year 2000 and is currently in the process of
modifying or replacing all non-compliant systems. Although the Company expects
to incur additional internal staff costs as well as other expenses necessary to
prepare its systems for the year 2000, it anticipates that the majority of these
costs will likely represent the redeployment of existing information technology
resources and will not represent significant incremental costs to the Company.
The Company is also monitoring the progress its major service providers are
making to prepare their systems for operations for the year 2000. The Company
does not anticipate that it or its major service providers will be unable to
meet year 2000 operation commitments.
REGULATION
EVM and BMR are each registered with the Commission under the Advisers Act. The
Advisers Act imposes numerous obligations on registered investment advisers,
including fiduciary duties, recordkeeping requirements, operational requirements
and disclosure obligations. Each Eaton Vance Fund is registered with the
Commission under the Investment Company Act of 1940. Except for private Funds
exempt from registration, each Fund is also required to make notice filings with
all states where it is offered for sale. Virtually all aspects of the Company's
investment management business are subject to various federal and state laws and
regulations. These laws and regulations are primarily intended to benefit
shareholders of the Funds and investment counseling clients and generally grant
supervisory agencies and bodies broad administrative powers, including the power
to limit or restrict the Company from carrying on its investment management
business in the event that it fails to comply with such laws and regulations. In
such event, the possible sanctions which may be imposed include the suspension
of individual employees, limitations on EVM's or BMR's engaging in the
investment management business for specified periods of time, the revocation of
EVM's or BMR's registration as an investment adviser and other censures or
fines.
EVD is registered as a broker/dealer under the Securities Exchange Act of 1934
and is subject to regulation by the Commission, the National Association of
Securities Dealers ("NASD") and other federal and state agencies. EVD is subject
to the Commission's net capital rule designed to enforce minimum standards
regarding the general financial condition and liquidity of a broker/dealer.
Under certain circumstances, this rule limits the ability of the Company to make
withdrawals of capital and receive dividends from EVD. EVD's regulatory net
capital has consistently exceeded such minimum net capital requirements. The
securities industry is one of the most highly regulated in the United States,
and failure to comply with related laws and regulations can result in the
revocation of broker/dealer licenses, the imposition of censures or fines and
the suspension or expulsion from the securities business of a firm, its officers
or employees.
The Company's officers, directors and employees may from time to time own
securities which are held by one or more of the Funds. The Company's internal
policies with respect to individual investments require prior clearance of most
types of transactions and reporting of all securities transactions, and restrict
certain transactions so as to avoid the possibility of conflicts of interest.
EMPLOYEES
On October 31, 1997, the Company and its wholly-owned subsidiaries had 359
full-time employees. On October 31, 1996, the comparable figure was 362.
<PAGE>
ITEM 2. PROPERTIES
Northeast Properties, Inc., a wholly-owned subsidiary of the Company, owns
various investment properties, including office buildings located at 24 Federal
Street (in which the Company is the primary tenant) and 79 Milk Street in
Boston. For information with respect to the properties, reference is made to
Schedule III and Note 4 of the Notes to Consolidated Financial Statements
contained in the Eaton Vance Corp. 1997 Annual Report to Shareholders (Exhibit
13.1 hereto), which are incorporated herein by reference.
In 1997, the Company committed to a plan to sell the majority of investment
properties not occupied by Eaton Vance Corp. and its subsidiaries. As noted in
Schedule III and Notes 4 and 5 of the Notes to Consolidated Financial Statements
contained in the Eaton Vance Corp. 1997 Annual Report to Shareholders, three of
these properties were identified in 1997 for sale and evaluated to ensure that
the estimated net realizable values of the properties exceeded their respective
carrying values at October 31, 1997. In conjunction with this continuing
commitment, the Board of Directors of Northeast Properties, Inc. voted in
January 1998 to authorize management to obtain an independent appraisal of the
value of a fourth property in Troy, New York in order to determine whether it
will be feasible for the Company to offer such property for sale. If the
property is offered for sale, it is unclear what impact the potential sale will
have on the financial statements of the Company.
ITEM 3. LEGAL PROCEEDINGS
Certain of the Company's subsidiaries are subject to legal proceedings arising
in the ordinary course of business. On the basis of information presently
available and advice received from counsel, it is the opinion of management that
the disposition or ultimate determination of such legal proceedings will not
have a material adverse effect on the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of holders of Voting Common Stock ("Stockholders") of Eaton
Vance Corp. was held at the principal office of the Company on October 24, 1997.
All of the outstanding Voting Common Stock, namely 38,720 shares, was
represented in person at the meeting.
The following matters received the affirmative vote of all of the outstanding
Voting Common stock:
1) The acts of the Board of Directors since the special meeting in lieu of
the annual meeting of Stockholders held on January 8, 1997 were ratified.
2) Landon T. Clay was removed as a Director of the Company.
3) The written consents of the Company, each dated October 14, 1997, as sole
shareholder of Eaton Vance, Inc., of EV Gold, Inc., of Fulcrum Management,
Inc., and of MinVen, Inc. were ratified.
4) The actions of the Company relating to the purchase of the shares of
Voting Common Stock from Landon T. Clay, the purchase of such shares, and
all other actions of the Corporation in connection therewith were
ratified.
5) The Amendment to the Voting Trust Agreement dated October 22, 1997 was
ratified.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (CONTINUED)
A special meeting in lieu of the annual meeting of Stockholders of Eaton Vance
Corp. was held at the principal office of the Company on January 14, 1998. All
of the outstanding Voting Common Stock, namely 38,720 shares, was represented in
person at the meeting.
The following matters received the affirmative vote of all of the outstanding
Voting Common Stock:
1) The Annual Report to Shareholders of the Company for the fiscal year ended
October 31, 1997 was received and approved.
2) The following individuals were elected as Directors for the ensuing
corporate year to hold office until the next annual meeting and until
their successors are elected and qualify:
John G. L. Cabot
M. Dozier Gardner
James B. Hawkes
John M. Nelson
Benjamin A. Rowland, Jr.
Ralph Z. Sorenson
3) The firm of Deloitte & Touche LLP was selected as the auditors to audit
the books of the Company for its fiscal year ended October 31, 1998.
4) The 1995 Stock Option Plan, Restatement No. 2, adopted by the Board of
Directors on October 8 , 1997, providing for a one-time option for each
new independent Director and an increase in the annual option award for
each independent Director, was approved.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Voting Common Stock, $0.03125 par value, is not traded and is held
by seven Voting Trustees pursuant to the Voting Trust described in paragraph (A)
of Item 12 hereof, which paragraph (A) is incorporated herein by reference.
The Company's Non-Voting Common Stock, $0.03125 par value, is traded on the New
York Stock Exchange under the symbol EV. The approximate number of holders of
record of the Company's Non-Voting Common Stock at October 31, 1997, was 949.
The additional information required to be disclosed in Item 5 is found on page 5
of the Company's 1997 Annual Report to Shareholders (furnished as Exhibit 13.1
hereto), under the caption "Eaton Vance Corp.," and is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data appearing under the caption "Five Year Summary" on page
13 of the Company's 1997 Annual Report to Shareholders, furnished as Exhibit
13.1 hereto, is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's discussion and analysis of financial condition and results of
operations appearing on pages 12 through 16 of the Company's 1997 Annual Report
to Shareholders, furnished as Exhibit 13.1 hereto, is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements and related notes thereto and
the independent auditors' report appearing on pages 19 through 37 of the
Company's 1997 Annual Report to Shareholders, furnished as Exhibit 13.1 hereto,
are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name, age and positions of each of the
Company's directors and executive officers at December 31, 1997.
NAME AGE POSITION
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James B. Hawkes 56 Chairman of the Board, President, Chief
Executive Officer
M. Dozier Gardner 64 Vice Chairman of the Board of Directors
Benjamin A. Rowland, Jr. 62 Vice President and Director
John G. L. Cabot 63 Director
Ralph Z. Sorenson 64 Director
Alan R. Dynner 57 Vice President and Chief Legal Officer
Thomas E. Faust, Jr. 39 Vice President and Director of Equity Research
and Management
Thomas Otis 66 Vice President and Secretary
Laurie G. Russell 31 Vice President and Chief Accounting Officer
William M. Steul 55 Vice President, Treasurer and Chief Financial
Officer
Peter D. Stokinger 33 Vice President and Internal Auditor
Wharton P. Whitaker 53 President, Eaton Vance Distributors, Inc.
Eaton Vance Corp. was formed as a holding company by its subsidiary, Eaton &
Howard, Vance Sanders, Inc., in February, 1981. Eaton & Howard, Vance Sanders,
Inc. (renamed Eaton Vance Management, Inc. in June, 1984 and reorganized as
Eaton Vance Management in October, 1990) was formed at the time of the
acquisition of Eaton & Howard, Incorporated by Vance, Sanders & Company, Inc. on
May 1, 1979. In this Item 10, the absence of a corporate name indicates that,
depending on the dates involved, the executive held the indicated titles in a
firm in the chain of Vance, Sanders & Company, Inc., Eaton & Howard, Vance
Sanders Inc., or Eaton Vance Corp. In general, the following officers hold their
positions for a period of one year or until their successors are duly chosen or
elected.
Mr. Hawkes was elected Chairman of the Board in October, 1997 and President and
Chief Executive Officer in October, 1996. He was Executive Vice President of the
Company from January, 1990 to October, 1996 and a Vice President of the Company
from June, 1975 to January, 1990. He has been a Director since January, 1982.
Mr. Hawkes serves as Chairman of the Executive Committee and as a member of the
Compensation, Management and Nominating Committees established by the Company's
Board of Directors. Mr. Hawkes is an officer, trustee or director of 74
registered investment companies for which Eaton Vance Management or Boston
Management and Research acts as investment adviser. He is a Director of Eaton
Vance Distributors, Inc., a wholly-owned subsidiary of Eaton Vance Management.
He is also a Director of Fulcrum Management, Inc., MinVen, Inc., and EV Gold,
Inc., each a wholly-owned subsidiary of Eaton Vance Corp.
Mr. Gardner was elected Vice Chairman of the Board of Directors in October,
1996. He was Chief Executive Officer of the Company from October, 1990 to
October, 1996 and President of the Company from October 1979 to October,
1996. He has been a Director since July, 1970. Mr. Gardner serves as a
member of the Management and Executive Committees established by the
Company's Board of Directors. Mr. Gardner is an officer or trustee of 13
registered investment companies for which Eaton Vance Management or Boston
Management and Research acts as investment adviser.
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
Mr. Rowland has been a Vice President of the Company since April, 1969 and a
Director since January, 1982. He serves as a member of the Management
Committee established by the Company's Board of Directors. Mr. Rowland is a
Director of Northeast Properties, Inc., a wholly-owned subsidiary of Eaton
Vance Management, and Eaton Vance Distributors, Inc.
Mr. Cabot has served as a Director of the Company since March, 1989. He is
Chairman of the Audit and Nominating Committees and serves as a member of the
Compensation and Option Committees established by the Company's Board of
Directors.
Mr. Sorenson has served as a Director of the Company since March, 1989. He is
Chairman of the Compensation Committee and serves as a member of the Audit,
Option and Nominating Committees established by the Company's Board of
Directors.
Mr. Dynner has been a Vice President and Chief Legal Officer of the Company
since November, 1996. Prior to joining the Company, Mr. Dynner was a senior
partner with the law firm of Kirkpatrick & Lockhart LLP in its New York and
Washington, D.C. offices. From February, 1994 to September, 1995 he was
Executive Vice President of Newberger & Berman Management, Inc., a mutual fund
management company. Mr. Dynner is a member of the Management Committee
established by the Company's Board of Directors. He is an officer of all of the
registered investment companies for which Eaton Vance Management or Boston
Management and Research acts as investment advisor.
Mr. Faust has been a Vice President and Director of Equity Research and
Management of the Company since February, 1995. He has been Portfolio Manager
and Vice President of Investors Portfolio since July, 1993 and Portfolio Manager
and Vice President of Eaton Vance Growth Portfolio since April, 1996. Mr. Faust
joined Eaton Vance as a Research Associate in June, 1985. Mr. Faust serves as a
member of the Management Committee established by the Company's Board of
Directors.
Mr. Otis has been Secretary since October, 1969 and a Vice President of the
Company since April, 1973. He has been the Company's counsel since 1966.
Ms. Russell has been Chief Accounting Officer since October, 1997 and a Vice
President since June, 1994. She was Internal Auditor of the Company from June,
1994 to October, 1997. Prior to joining the Company, Ms. Russell was a Senior
Accountant with Deloitte & Touche LLP.
Mr. Steul has been a Vice President and Chief Financial Officer of the
Company since December, 1994. Prior to joining the Company, Mr. Steul was
Vice President, Finance and Chief Financial Officer of Digital Equipment
Corporation. Mr. Steul is a member of the Management Committee established
by the Company's Board of Directors. Mr. Steul is also a Director of Eaton
Vance Distributors, Inc. and Northeast Properties, Inc.
Mr. Stokinger has been the Internal Auditor since October, 1997 and a Vice
President since January, 1996. He was the Company's Tax Accountant from
September, 1992 to October, 1997.
Mr. Whitaker has been President, Eaton Vance Distributors, Inc., since November,
1991. He was Executive Vice President and National Sales Director of Eaton Vance
Distributors, Inc. from June, 1987 to October, 1991. Mr. Whitaker is a member of
the Management Committee established by the Company's Board of Directors.
NEW POLICIES AFFECTING DIRECTORS AND OFFICERS
After completing a review of the Company's corporate governance policies, the
Board of Directors voted in October 1997 to adopt new guidelines. These include
policies requiring each senior officer to retire as an employee and Director at
age 65 and each independent Director to retire at the annual meeting of
stockholders nearest his or her 72nd birthday. In addition, the Board determined
as a matter of policy that independent Directors should constitute a majority of
the Board as soon as practicable. Toward this goal, Mr. John M. Nelson was
elected an independent director in January 1998.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and Directors and persons who own more than ten percent of a registered
class of the Company's equity securities to file forms reporting their
affiliation with the Company and reports of ownership and changes in ownership
of the Company's equity securities with the Securities and Exchange Commission
and the New York Stock Exchange. These persons and entities are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. To the best of the Company's knowledge, all Section 16(a) filing
requirements applicable to the Company's officers and directors were complied
with for the 1997 fiscal year.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
(A) SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the compensation
for each of the last three fiscal years of the Chief Executive Officer of the
Company and the four other most highly compensated executive officers of the
Company (hereafter referred to in this document as the "named executive
officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
------------------------------------------------------------------------------
OTHER SECURITIES ALL
ANNUAL UNDERLYING OTHER
YEAR SALARY BONUS(1) COMPENSATION(2) OPTIONS COMPENSATION(3)
-------------------------------------------------------------------------------
NAME AND PRINCIPAL POSITION ($) ($) ($) (#) ($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
James B. Hawkes 1997 400,000 755,000 1,350 200,000 30,000
Chief Executive Officer
1996 375,000 520,000 4,703 10,000 30,000
1995 350,000 391,460 4,488 - 23,783
- ---------------------------------------------------------------------------------------------------------------
M. Dozier Gardner 1997 350,000 292,591 2,475 - 30,000
Vice Chairman of the Board
1996 360,577 444,891 9,034 - 30,000
1995 385,000 333,014 8,618 - 23,783
- ---------------------------------------------------------------------------------------------------------------
Benjamin A. Rowland, Jr. 1997 260,000 275,000 - - 30,000
Vice President
1996 250,000 429,380 - - 30,000
1995 225,000 181,460 - 5,000 23,255
- ---------------------------------------------------------------------------------------------------------------
Thomas E. Faust, Jr. 1997 250,000 1,060,000 6,968 30,000 31,160
Vice President
1996 200,000 225,000 7,891 30,000 31,040
1995 175,000 150,000 8,935 16,000 23,540
- ---------------------------------------------------------------------------------------------------------------
Wharton P. Whitaker 1997 235,000 588,814 1,252 12,000 30,000
President, EVD
1996 225,000 428,557 9,034 6,000 30,000
1995 220,000 277,409 8,618 - 23,871
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
(1) Bonuses include payments in lieu of option grants to Mr. Gardner $40,000
and $44,070 in 1997 and 1996, respectively. Mr. Rowland also received
bonuses in lieu of option grants of $25,000 and $29,380 in 1997 and
1996, respectively.
(2) The amounts appearing under "Other Annual Compensation" represent the
10% discount on the purchase of the Company's stock under the Company's
Employee Stock Purchase Plan and Incentive Plan - Stock
Alternative.
(3) The amounts appearing under "All Other Compensation" represent
contributions by the Company to the Company's Profit Sharing,
Supplemental Profit Sharing and 401(k) Plans.
(B) OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes stock option grants during 1997 to the named
executive officers.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
PERCENTAGE AT ASSUMED ANNUAL
NUMBER OF OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR
OPTIONS EMPLOYEES IN PRICE EXPIRATION OPTION TERM(1)
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 5%($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
James B. Hawkes 10,136 2% 22.962 12/20/01 64,303 142,092
189,864 38% 20.875 12/20/01 1,095,017 2,419,702
M. Dozier Gardner None (Cash - - - - -
bonus in
lieu of
options)
Benjamin A. Rowland, Jr. None (Cash - - - - -
bonus in
lieu of
options)
Thomas E. Faust, Jr. 30,000 6% 20.875 12/20/01 173,021 382,332
Wharton P. Whitaker 12,000 2% 28.875 12/20/01 69,209 152,933
(1) Amounts calculated using 5% and 10% assumed annual rates of stock price appreciation represent hypothetical
gains that could be achieved for the respective options if exercised at the end of the option term. Actual
gains, if any, on stock option exercises will depend on the future performance of the Company's stock and the
dates on which the options are exercised.
</TABLE>
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
(C) AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
The following table summarizes stock options exercised during 1997 and stock
options held as of October 31, 1997 by the named executive officers.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SHARES SECURITIES UNDERLYING UNEXERCISED
ACQUIRED ON VALUE UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
EXERCISE REALIZED AT FISCAL YEAR END AT FISCAL YEAR END(1)
---------------------------------------------------------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
James B. Hawkes 187,275 3,892,744 97,283 213,334 2,388,824 3,303,354
M. Dozier Gardner 48,328 1,243,142 - - - -
Benjamin A. Rowland, Jr. 28,998 568,463 21,748 - 497,025 -
Thomas E. Faust, Jr. - - 25,880 41,870 609,555 718,641
Wharton P. Whitaker 60,410 1,290,531 2,280 21,720 50,160 396,840
(1) Based on the fair market value of the Company's common stock on October 31, 1997 ($36.125) as reported on the
New York Stock Exchange, less the option exercise price.
</TABLE>
(D) COMPENSATION OF DIRECTORS
Directors not otherwise employed by the Company receive a retainer of $4,000 per
quarter and $750 per meeting. During the fiscal year ended October 31, 1997,
John G.L. Cabot and Ralph Z. Sorenson each received $23,000; in addition, each
was granted options for 1,198 shares.
(E) COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
James B. Hawkes, Chairman of the Board, is a member of the Compensation
Committee of the Board of Directors of the Company.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) COMMON STOCK
All outstanding shares of the Company's Voting Common Stock, $0.03125 par value,
(which is the only class of the Company's stock having voting rights) are
deposited in a Voting Trust, of which the Voting Trustees were (as of October
30, 1997), James B. Hawkes (Chairman of the Board of Directors, President and
Chief Executive Officer of the Company), M. Dozier Gardner (Vice Chairman of the
Board of Directors of the Company), Benjamin A. Rowland, Jr. (a Vice President
and a Director of the Company), Thomas E. Faust, Jr., (a Vice President of the
Company), Wharton P. Whitaker (President of Eaton Vance Distributors, Inc., a
wholly owned subsidiary of Eaton Vance Management), Alan R. Dynner (a Vice
President of the Company), and William M. Steul (a Vice President of the
Company). The Voting Trust (a copy of which is filed herewith as Exhibit 9.1)
expires October 30, 2000. The Voting Trustees have unrestricted voting rights
for the election of the Company's directors. At December 31, 1997, the Company
had outstanding 38,720 shares of Common Stock. Inasmuch as the seven Voting
Trustees of said Voting Trust have unrestricted voting rights with respect to
said Common Stock (except that the Voting Trust Agreement provides that the
Voting Trustees shall not vote such Stock in favor of the sale, mortgage or
pledge of all or substantially all of the Company's assets or for any change in
the capital structure or powers of the Company or in connection with a merger,
consolidation, reorganization or dissolution of the Company without the written
consent of the holders of Voting Trust Receipts representing at least a majority
of such Stock subject at the time to the Voting Trust Agreement), they may be
deemed to be the beneficial owners of all of the Company's outstanding Common
Stock by virtue of Rule 13d-3(a)(1) under the Securities Exchange Act of 1934.
The Voting Trust Agreement provides that the Voting Trustees shall act by a
majority if there be four or more Voting Trustees; otherwise they shall act
unanimously except as otherwise provided in the Voting Trust Agreement. The
address of said Voting Trustees is 24 Federal Street, Boston, Massachusetts
02110.
The following table sets forth the beneficial owners at December 31, 1997, of
the Voting Trust Receipts issued under said Voting Trust Agreement, which
Receipts cover the aggregate of 38,720 shares of the Common Stock then
outstanding:
NUMBER OF SHARES
OF VOTING COMMON
STOCK COVERED BY
TITLE OF CLASS NAME RECEIPTS % OF CLASS
- -------------------------------------------------------------------------------
Voting Common Stock James B. Hawkes 9,280 24%
Voting Common Stock M. Dozier Gardner 9,280 24%
Voting Common Stock Benjamin A. Rowland, Jr. 5,840 15%
Voting Common Stock Thomas E. Faust, Jr., Jr. 5,040 13%
Voting Common Stock Wharton P. Whitaker 3,094 8%
Voting Common Stock Alan R. Dynner 3,093 8%
Voting Common Stock William M. Steul 3,093 8%
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(CONTINUED)
Messrs. Hawkes, Gardner, and Rowland are all officers and Directors of the
Company and Voting Trustees of the Voting Trust; Messrs. Faust, Dynner and Steul
are all officers of the Company and Voting Trustees of the Voting Trust. Mr.
Whitaker is President of Eaton Vance Distributors, Inc. and a Voting Trustee of
the Voting Trust. No transfer of any kind of the Voting Trust Receipts issued
under the Voting Trust may be made at any time unless they have first been
offered to the Company at book value. In the event of the death, or termination
of employment with the Company or a subsidiary, of a holder of the Voting Trust
Receipts, the shares represented by such Voting Trust Receipts must be offered
to the Company at book value. Similar restrictions exist with respect to the
Voting Common Stock, all shares of which are deposited and held of record in the
Voting Trust.
(B) NON-VOTING COMMON STOCK
The Articles of Incorporation of the Company provide that its Non-Voting Common
Stock, $0.03125 par value, shall have no voting rights under any circumstances
whatsoever. As of December 31, 1997, the officers and Directors of the Company,
as a group, beneficially owned 2,025,672 shares of such Non-Voting Common Stock
or 10.49% of the 19,319,097 shares then outstanding. (Such figures include
773,737 shares subject to options exercisable within 60 days and is based solely
upon information furnished by the officers and Directors.)
The following table sets forth the beneficial ownership of the Company's
Non-Voting Common Stock by (i) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Non-Voting Common Stock,
(ii) each Director of the Company, and (iii) each of the named executive
officers of the Company (as defined in Item 11, "Executive Compensation") as of
December 31, 1997 (such investment power being sole unless otherwise indicated):
AMOUNT OF PERCENTAGE
TITLE OF CLASS BENEFICIAL OWNERS BENEFICIAL OF CLASS
OWNERSHIP (A) (B)
- -------------------------------------------------------------------------------
Non-Voting Common Stock Landon T. Clay 3,580,207(d)(g) 19.31
Non-Voting Common Stock M. Dozier Gardner 651,164(c)(f) 3.51
Non-Voting Common Stock James B. Hawkes 508,430(c)(d)(f) 2.73
Non-Voting Common Stock Benjamin A. Rowland,Jr. 396,708(c)(e) 2.14
Non-Voting Common Stock Wharton P. Whitaker 150,431(c) 0.81
Non-Voting Common Stock Thomas E. Faust, Jr. 118,422(c) 0.64
Non-Voting Common Stock John G. L. Cabot 46,078(c)(h) 0.25
Non-Voting Common Stock Ralph Z. Sorenson 18,284(c) 0.10
(a) Based solely upon information furnished by the individuals.
(b) Based on 18,545,360 outstanding shares plus options exercisable within 60
days of 63,332 for Mr. Hawkes, 15,360 for Mr. Whitaker, 33,208 for Mr.
Faust, 3,406 for Mr. Cabot and 3,406 for Mr. Sorenson.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(CONTINUED)
(c) Includes shares subject to options Exercisable within 60 days granted to,
but not exercised by, each named executive officer and director as listed in
Note (b) above.
(d) Includes 14,076 shares held by Mr. Hawkes' daughter and 5,000 shares held by
Mr. Clay's children.
(e) Includes 2,400 shares owned by Mr. Rowland's spouse as to which Mr. Rowland
disclaims beneficial ownership.
(f) Includes 23,290 shares owned by Mr. Hawkes' spouse, and 75,218 shares owned
by Mr. Gardner's spouse.
(g) Includes 2,090 shares held in the trust of Profit Sharing Retirement Plan
for employees of Flowers Antigua, of which the sole beneficiary is the
spouse of Mr. Clay. Also includes 12,710 shares held in trust of Profit
Sharing Retirement Plan for employees of LTC Corp., wholly owned by Mr.
Clay.
(h) Includes 8,000 shares held in a Family Limited Partnership and 2,000 shares
held in a Grantor Retained Annuity Trust.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 4, 1987, the Company became a limited partner in VenturesTrident II,
L.P. ("VenturesTrident II"), a Delaware Limited Partnership formed to invest in
equity securities of public and private mining ventures, principally in precious
metals. As a limited partner, the Company has invested $3,000,000 in cash in
VenturesTrident II. The investment by the Company was made entirely from
internally generated funds. The Company, through its ownership of such limited
partnership interest, currently owns a 3.042% interest in VenturesTrident II.
In addition to the above, MinVen, Inc. ("MinVen"), a wholly-owned subsidiary of
the Company, has a general partnership interest in the general partner of
VenturesTrident II. This acquisition required MinVen to pay $748,235 to such
general partner.
The general partner of VenturesTrident II is Fulcrum Management Partners II,
L.P. ("Fulcrum Partners II"), a Delaware Limited Partnership of which MinVen,
Inc. is one of the general partners. MinVen owns a 82.13% interest in Fulcrum
Partners II. The Company, by reason of MinVen's 82.13% interest in Fulcrum
Partners II, indirectly owns an additional 16.43% interest in VenturesTrident
II.
Two directors of the Company, M. Dozier Gardner and Benjamin A. Rowland, Jr.,
have limited partnership interests in VenturesTrident II; each invested $50,000
and owns a .05% interest in VenturesTrident II. Messrs. Gardner and Rowland, by
reason of their positions with and ownership of stock of the Company, have an
indirect interest in the aggregate 19.47% interest in VenturesTrident II
directly and indirectly owned by the Company.
Fulcrum Partners II terminated the VenturesTrident II effective December 31,
1997. Fulcrum Partners II acts as liquidator to wind up the affairs of the
Partnership in an orderly manner. Substantially all of the Partnership's assets
were distributed to the limited partners prior to October 31, 1997.
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED)
(B) CERTAIN BUSINESS RELATIONSHIPS
M. Dozier Gardner and James B. Hawkes, each a Director and executive officer of
the Company, are officers and directors, trustees or general partners of various
investment companies for which either Eaton Vance Management or Boston
Management and Research serves as investment adviser and for which EVD acts as
principal underwriter; such investment companies make substantial payments to
these subsidiaries for advisory and management services or under their
distribution plans.
(C) INDEBTEDNESS OF MANAGEMENT
In 1995, the Company increased to $10,000,000 the amount of money in the
Executive Loan Program which is available for loans to certain key employees for
the purpose of financing the exercise of stock options for shares of the
Company's Non-Voting Common Stock. Such loans are written for a seven-year
period, at varying fixed interest rates, and notes evidencing them require
repayment in annual installments commencing with the third year in which the
loan is outstanding. Loans outstanding under this program amounted to $3,168,000
at October 31, 1997.
The following table sets forth the executive officers and Directors of the
Company who were indebted to the Company under the foregoing loan programs at
any time since November 1, 1996, in an aggregate amount in excess of $60,000:
LARGEST AMOUNT LOANS
OF LOANS OUTSTANDING
OUTSTANDING AS OF RATE OF INTEREST CHARGED
SINCE 11/1/96 12/31/97 ON LOANS AS OF 12/31/97
- -------------------------------------------------------------------------------
M. Dozier Gardner $ 656,184 $ 620,329 6.22%- 8.06% (1)
James B. Hawkes 527,461 484,466 5.31%- 8.06% (2)
Wharton P. Whitaker 224,796 224,796 6.69% (3)
Thomas E. Faust, Jr. 81,758 81,758 6.56% (4)
(1) 8.06% interest payable on $65,973 principal amount of loan, 6.22% interest
payable on $77,000 principal amount, 7.55% interest payable on $124,740
principal amount, 6.36% interest payable on $250,244 principal amount, and
7.07% interest payable on $102,372 principal amount.
(2) 8.06% interest payable on $59,976 principal amount, 6.11% interest payable
on $88,000 principal amount, 5.31% interest payable on $2,599 principal
amount, 5.31% interest payable on $138,600 principal amount, 5.74% interest
payable on $56,791 principal amount and 7.61% interest payable on $38,500,
and 6.77% interest payable on $100,000 principal amount.
(3) 6.69% interest payable on $224,796 principal amount.
(4) 6.56% interest payable on $81,758 principal amount of loan.
<PAGE>
PART IV
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(1) The following consolidated financial statements of Eaton Vance Corp. and
report of independent accountants, included on pages 19 through 37 of the
Annual Report, are incorporated by reference as a part of this Form 10-K:
SEPARATE
EATON VANCE CORP. 1997 ANNUAL REPORT TO DOCUMENT
SHAREHOLDERS PAGE NUMBER
- -------------------------------------------------------------------------------
Consolidated Statements of Income for each of the three
years in the period ended October 31, 1997 19
Consolidated Balance Sheets as of October 31, 1997 and 1996 20-21
Consolidated Statements of Cash Flows for each of the three
years in the period ended October 31, 1997 ` 22
Consolidated Statements of Shareholders' Equity for each of
the three years in the period ended October 31, 1997 23
Notes to Consolidated Financial Statements 24-36
Independent Auditors' Report 37
(2) The following financial statement schedules and independent accountants'
report are filed as part of this Form 10-K and are located on the following
pages:
DESCRIPTION
NUMBER PAGE
-----------------------------------------------------------------------------
Independent Auditors' Report on Financial Statement
Schedules 21
Schedule II Valuation and Qualifying Accounts 22
Schedule III Real Estate and Accumulated Depreciation 23-24
All other schedules have been omitted because they are not required, are not
applicable or the information is otherwise shown in the consolidated
financial statements or notes thereto.
(3) The list of exhibits required by Item 601 of Regulation S-K is set forth in
the Exhibit Index and is incorporated herein by reference.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Eaton Vance Corp.:
We have audited the consolidated financial statements of Eaton Vance Corp. and
its subsidiaries as of October 31, 1997 and 1996, and for each of the three
years in the period ended October 31, 1997, and have issued our report thereon
dated November 25, 1997; such consolidated financial statements and report are
included in your 1997 Annual Report to Shareholders and are incorporated herein
by reference. Our audits also included the consolidated financial statement
schedules of Eaton Vance Corp. and its subsidiaries, listed in Item 14. These
consolidated financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such consolidated financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 25, 1997
<PAGE>
EATON VANCE CORP.
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
- ---------------------------------------------------------------------------------------------------------------
ADDITIONS
BALANCE AT CHARGED TO
BEGINNING COSTS AND BALANCE AT
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS END OF YEAR
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Valuation accounts deducted from
assets to which they apply:
Allowance for doubtful accounts on
notes receivable and receivables from
affiliates:
Year ended October 31:
1997 $ 775,000 - $775,000 -
1996 $1,200,000 $300,000 $725,000 $ 775,000
1995 $ 800,000 $400,000 - $1,200,000
</TABLE>
<PAGE>
<TABLE>
EATON VANCE CORP.
REAL ESTATE AND ACCUMULATED DEPRECIATION SCHEDULE III
<CAPTION>
OCTOBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
COSTS
CAPITALIZED GROSS CARRYING AMOUNT
INITIAL COST SUBSEQUENT OCTOBER 31, 1997 (1)
--------------------- TO --------------------
ACQUISITION DATE OF DEPRE-
(IMPROVE- ACCUMULATED CONSTRUC- DATE CIABLE
DESCRIPTION ENCUMBRANCES LAND BUILDINGS MENTS) LAND BUILDINGS DEPRECIATION TION ACQUIRED LIFE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shopping mall
and office
building -
Troy, NY $2,424,185 $ 834,100 $4,033,921 $3,387,803 $ 834,100 $7,421,724 $1,818,550 1978 05/01/87 31.5yrs.
Office
building -
Boston, MA - 280,800 4,009,836 2,017,501 280,800 6,027,337 2,595,443 1920 10/31/90 20 yrs.
Boston, MA 5,872,149 1,164,113 4,651,554 153,231 1,164,113 4,804,785 80,727 1883 03/03/97 39 yrs.
----------------------------------------------------------------------------------------
TOTAL $8,296,334 $2,279,013 $12,695,311 $5,558,535 $2,279,013 $18,253,846 $4,494,720
========================================================================================
(1) The aggregate cost of real estate for federal income tax purposes is approximately the same as the gross carrying amount
recorded for book purposes.
</TABLE>
<PAGE>
EATON VANCE CORP.
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED) SCHEDULE III
YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
- -------------------------------------------------------------------------------
1997 1996 1995
-------------------------------------
LAND AND BUILDINGS:
Gross carrying amount, beginning
of year $26,353,167 $30,288,033 $29,812,704
Additions during period:
Acquisition (1) 5,855,284 - -
Improvements 833,184 1,650,801 475,329
Deductions during period:
Cost of real estate sold (78,203) - -
Reclassification of assets
held for sale (2) (3) (12,430,573) (5,585,667) -
-------------------------------------------
Gross carrying amount, end of year $20,532,859 $26,353,167 $30,288,033
===========================================
Accumulated depreciation,
beginning of year $ 7,534,281 $8,424,489 $ 7,510,277
Additions during period:
Depreciation 852,435 914,212 918,105
Deductions during period:
Reclassification of assets
held for sale (2) (3) (3,891,996) (1,808,313) -
-------------------------------------------
Accumulated depreciation, end
of year $ 4,494,720 7,534,281 $ 8,424,489
===========================================
(1) In 1997, the Company acquired the remaining fifty percent interest in a
partnership which owns an office building in Boston, Massachusetts for $0.6
million in cash. The acquisition was accounted for using the purchase method
of accounting and, accordingly, the purchase price was allocated to the
assets acquired and the liabilities assumed based on their estimated fair
values at the date of acquisition.
(2) In the fourth quarter of 1996, the Company committed to a plan to sell an
office building located in Boston, Massachusetts and recognized a pre-tax
impairment loss of $1.3 million based on the estimated net realizable value
of the property (estimated fair value less estimated selling costs).
Estimated fair value of the property was calculated using market appraisals
and other available valuation techniques. At October 31, 1996, the property
was classified as a current asset held for sale for financial reporting
purposes.
(3) In 1997, the Company committed to a plan to sell two industrial warehouse
buildings located in Springfield, Massachusetts and Colonie, New York and a
shopping center in Goffstown, New Hampshire. At October 31, 1997, the
properties were classified as current assets held for sale for financial
reporting purposes.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Eaton Vance Corp. has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
EATON VANCE CORP.
/s/ James B. Hawkes
James B. Hawkes
Chairman, Director and Principal
Executive Officer
January 28, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Eaton Vance Corp.
and in the capacities and on the dates indicated:
/s/ James B. Hawkes Chairman, Director and January 28, 1998
James B. Hawkes Principal Executive Officer
/s/ M. Dozier Gardner Vice Chairman and Director January 28, 1998
M. Dozier Gardner
/s/ William M. Steul Chief Financial Officer January 28, 1998
William M. Steul
/s/ Laurie G. Russell Chief Accounting Officer January 28, 1998
Laurie G. Russell
/s/ Benjamin A. Rowland, Jr. Director January 28, 1998
Benjamin A. Rowland, Jr.
/s/ John G.L. Cabot Director January 28, 1998
John G.L. Cabot
/s/ Ralph Z. Sorenson Director January 28, 1998
Ralph Z. Sorenson
<PAGE>
EXHIBIT INDEX
Each Exhibit is listed in this index according to the number assigned to it in
the exhibit table set forth in Item 601 of Regulation S-K. The following
Exhibits are filed as a part of this Report or incorporated herein by reference
pursuant to Rule 12b-32 under the Securities Exchange Act of 1934:
EXHIBIT NO. DESCRIPTION
3.1 The Company's Amended Articles of Incorporation are filed as Exhibit
3.1 to the Company's registration statement on Form 8-B dated
February 4, 1981, filed pursuant to Section 12(b) or (g) of the
Securities Exchange Act of 1934 (S.E.C. File No. 1-8100) and are
incorporated herein by reference.
3.2 The Company's By-Laws are filed as Exhibit 3.2 to the Company's
registration statement of Form 8-B dated February 4, 1981, filed
pursuant to Section 12(b) or (g) of the Securities Exchange Act of
1934 (S.E.C. File No. 1-8100) and are incorporated herein by
reference.
3.3 Copy of the Company's Articles of Amendment effective at the close
of business on November 22, 1983, has been filed as Exhibit 3.3 to
the Annual Report on Form 10-K of the Company for the fiscal year
ended October 31, 1983, (S.E.C. File No. 1-8100) and is incorporated
herein by reference.
3.4 Copy of the Company's Articles of Amendment effective at the close
of business on February 25, 1986 has been filed as Exhibit 3.4 to
the Annual Report on Form 10-K of the Company for the fiscal year
ended October 31, 1986, (S.E.C. File No. 1-8100) and is incorporated
herein by reference.
4.1 The rights of the holders of the Company's Common Stock, par value
$.03125 per share, and Non-Voting Common Stock, par value $.03125
per share, are described in the Company's Amended Articles of
Incorporation (particularly Articles Sixth, Seventh and Ninth
thereof) and the Company's By-Laws (particularly Article II
thereof). See Exhibits 3.1, 3.2, 3.3 and 3.4 above as incorporated
herein by reference.
9.1 Copy of the Voting Trust Agreement made as of October 30, 1997
(filed herewith).
10.1 Description of Performance Bonus Arrangement for Members of
Investment Division of Eaton Vance Management has been filed as
Exhibit 10.1 to the Annual Report on Form 10-K of the Company for
the fiscal year ended October 31, 1995, (S.E.C. File No. 1-8100) and
is incorporated herein by reference.
10.2 Description of Incentive Bonus Arrangement for Marketing Personnel
of Eaton Vance Distributors, Inc. has been filed as Exhibit 10.2 to
the Annual Report on Form 10-K of the Company for the fiscal year
ended October 31, 1995, (S.E.C. File No. 1-8100) and is incorporated
herein by reference.
<PAGE>
EXHIBIT INDEX (CONTINUED)
EXHIBIT NO. DESCRIPTION
10.3 Copy of 1988 Profit Improvement Bonus Plan of Eaton Vance
Management, Inc. has been filed as Exhibit 10.9 of the Annual Report
on Form 10-K of the Company for the fiscal year ended October 31,
1987 (S.E.C. File No 1-8100) and is incorporated herein by
reference.
10.4 Description of 1990 Performance and Retention of Officers Pool
(bonus plan to reward key officers of Eaton Vance Management and
Eaton Vance Distributors, Inc.) of Eaton Vance Corp. has been filed
as Exhibit 10.5 to the Annual Report on Form 10-K of the Company for
the fiscal year ended October 31, 1995, (S.E.C. File No. 1-8100) and
is incorporated herein by reference.
10.5 Copy of 1992 Stock Option Plan as adopted by the Eaton Vance Corp.
Board of Directors on April 8, 1992 has been filed as Exhibit 10.12
to the Annual Report on Form 10-K of the Company for the fiscal year
ended October 31, 1992 S.E.C. File No. 1-8100), and is incorporated
herein by reference.
10.6 Copy of 1986 Employee Stock Purchase Plan as amended and restated by
the Eaton Vance Corp. Board of Directors on April 8, 1992 has been
filed as Exhibit 10.13 to the Annual Report on Form 10-K of the
Company for the fiscal year ended October 31, 1992 (S.E.C. File No.
1-8100), and is incorporated herein by reference.
10.7 Copy of 1992 Incentive Plan - Stock Alternative as adopted by the
Eaton Vance Corp. Board of Directors on July 17, 1992 has been filed
as Exhibit 10.14 to the Annual Report on Form 10-K of the Company
for the fiscal year ended October 31, 1992 (S.E.C. File No. 1-8100),
and is incorporated herein by reference.
10.8 Copy of 1995 Stock Option Plan as adopted by the Eaton Vance Corp.
Board of Directors on October 12, 1995, has been filed as Exhibit
10.9 to the Annual Report on Form 10-K of the Company for the fiscal
year ended October 31, 1995, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.9 Copy of 1986 Employee Stock Purchase Plan as amended and restated by
the Eaton Vance Corp. Board of Directors on October 12, 1995, has
been filed as Exhibit 10.10 to the Annual Report on Form 10-K of the
Company for the fiscal year ended October 31, 1995, (S.E.C. File No.
1-8100) and is incorporated herein by reference.
<PAGE>
EXHIBIT INDEX (CONTINUED)
EXHIBIT NO. DESCRIPTION
10.10 Copy of 1995 Executive Loan Program relating to financing or
refinancing the exercise of options by key directors, officers, and
employees adopted by the Company's Directors on October 12, 1995,
has been filed as Exhibit 10.2 to the Annual Report on Form 10-K of
the Company for the fiscal year ended October 31, 1995, (S.E.C. File
No. 1-8100) and is incorporated herein by reference.
10.11 Copy of the Eaton Vance Corp. Supplemental Profit Sharing Plan
adopted by the Company's Directors on October 9, 1996, has been
filed as Exhibit 10.12 to the Annual Report on Form 10-K of the
Company for the fiscal year ended October 31, 1996, (S.E.C. File No.
1-8100) and is incorporated herein by reference.
10.12 Copy of 1992 Stock Option Plan - Restatement No. 1 as adopted by the
Eaton Vance Corp. Board of Directors on April 9, 1997, has been
filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q for the
fiscal quarter ended April 30, 1997, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.13 Copy of 1995 Stock Option Plan - Restatement No. 1 as adopted by the
Eaton Vance Corp. Board of Directors on April 9, 1997, has been
filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q for the
fiscal quarter ended April 30, 1997, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.14 Copy of 1992 Incentive Plan - Stock Alternative - Restatement No. 2
as adopted by the Eaton Vance Corp. Board of Directors on April 9,
1997, has been filed as Exhibit 10.3 to the Quarterly Report on Form
10-Q for the fiscal quarter ended April 30, 1997, (S.E.C. File No.
1-8100) and is incorporated herein by reference.
10.15 Copy of 1992 Stock Option Plan - Restatement No. 2 as adopted by the
Eaton Vance Corp. Board of Directors on October 30, 1997 (filed
herewith).
10.16 Copy of 1995 Stock Option Plan - Restatement No. 2 as adopted by the
Eaton Vance Corp. Board of Directors on October 30, 1997 (filed
herewith).
11.1 Statement of Computation of average number of Shares outstanding
(filed herewith).
13.1 Copy of the Company's Annual Report to Shareholders for the fiscal
year ended October 31, 1997 (furnished herewith - such Annual
Report, except for those portions thereof which are expressly
incorporated by reference in this report on Form 10-K, is furnished
solely for the information of the Securities and Exchange Commission
and is not to be deemed "filed" as a part of this report on Form
10-K).
21.1 List of the Company's Subsidiaries as of October 31, 1997 (filed
herewith).
23.1 Independent Auditors' Consent (filed herewith).
<PAGE>
EXHIBIT INDEX (CONTINUED)
EXHIBIT NO. DESCRIPTION
27.1 Financial Data Schedule as of October 31, 1997 (filed herewith -
electronic filing only).
99.2 List of Eaton Vance Corp. Open Registration Statements (filed
herewith).
<PAGE>
EXHIBIT 9.1
VOTING TRUST AGREEMENT
THIS VOTING TRUST AGREEMENT is made as of October 30, 1997, by and between
(1) Alan R. Dynner, Thomas E. Faust, Jr., M. Dozier Gardner, James B. Hawkes,
Benjamin A. Rowland, Jr., William M. Steul, and Wharton P. Whitaker
(collectively, the "Voting Trustees"); (2) the undersigned holders
(collectively, the "Stockholders") of all of the issued and outstanding 38,720
shares of voting Common Stock, par value $.03125 per share, of Eaton Vance
Corp., a Maryland corporation (the "Stock"); and (3) Eaton Vance Corp. (the
"Company").
WITNESSETH THAT:
WHEREAS, the Company has authorized 160,000 shares of the Stock, of which
38,720 shares were issued and outstanding and held subject to the voting trust
created by the Voting Trust Agreement made as of December 31, 1996 (the "1996
Agreement");
WHEREAS, the voting trust created by the 1996 Agreement has been
terminated, the Stock has been distributed to the former holders of the voting
trust receipts issued under the 1996 Agreement, and such holders are among the
Stockholders by virtue of such distribution; and
WHEREAS, the Stockholders wish to create and constitute a new voting trust
and to deposit their Stock with the Voting Trustees to be held subject to this
Agreement, in order to ensure the successful prosecution and development of the
Company's business by providing a consistent policy of management through
vesting in the Voting Trustees the power and authority conferred upon them
hereby;
NOW THEREFORE, in consideration of the premises and of the deposit of the
Stock by the Stockholders hereunder, the parties agree as follows:
1. Each Stockholder hereby directs that the shares of his Stock set
against his name be deposited with the Voting Trustees and registered on the
books of the Company in the name of the Voting Trustees, and acknowledges that
his Stock shall be held by the Voting Trustees hereunder, collectively, and not
individually, subject to this Agreement.
The Company consents to this Agreement and the voting trust created hereby
(the "Voting Trust"). The Company does not ordinarily issue certificates for
shares of Stock, and has caused all shares of Stock deposited hereunder to be
registered on its books in the names of the Voting Trustees collectively, and
not individually.
Any holder of shares of Stock may, with the consent of the Voting
Trustees, deposit his or her Stock hereunder and receive Voting Trust Receipts
with respect thereto, and become a Stockholder party to this Agreement subject
to all of the provisions hereof, by executing Schedule A of this Agreement. No
Stockholder party hereto may withdraw his or her Stock deposited under this
Agreement, unless (a) the Voting Trustees consent to such withdrawal, or (b)
such Stock is repurchased by the Company, or (c) the Voting Trust is terminated
as provided herein.
<PAGE>
EXHIBIT 9.1 (CONTINUED)
2. Any Stockholder party hereto whose Stock is deposited hereunder may,
with the consent of the Voting Trustees and the consent required by Section
3(5), become a Voting Trustee party to this Agreement, subject to all of the
provisions hereof, by executing Schedule B of this Agreement.
A Voting Trustee may be removed, with or without cause, by the vote of a
majority of the other Voting Trustees, with the consent required by Section
3(5). If a Voting Trustee for any reason, including by the sale of his or her
Stock to the Company and the transfer, as provided herein, of all of his or her
Voting Trust Receipts to another person or persons, no longer holds any Stock or
any Voting Trust Receipts, he or she shall automatically cease being a Voting
Trustee.
3. Except as otherwise provided herein, all actions and decisions by the
Voting Trustees for all purposes, including voting the Stock deposited
hereunder, shall be by a vote of at least a majority of the Voting Trustees;
provided, that if there are fewer than three Voting Trustees, such vote must be
unanimous for the Voting Trustees to act; provided, further, that any action by
the Voting Trustees to approve (1) the sale, mortgage or pledge of all or
substantially all of the assets of the Company, or (2) a change in the capital
structure or the powers of the Company, or (3) a merger, consolidation,
reorganization, or dissolution of the Company, or (4) an amendment to, or the
termination of the Voting Trust under, this Agreement, or (5) the addition of a
Voting Trustee, or the removal of a Voting Trustee by the other Voting Trustees,
or (6) the renewal of the term of the Voting Trust, shall require the written
consent of the holders of outstanding Voting Trust Receipts representing at
least a majority of the shares of Stock subject to the Voting Trust. All votes
of the Voting Trustees shall be either (a) taken at a meeting of the Voting
Trustees called by any Voting Trustee with at least 24 hours notice to all other
Voting Trustees (or upon waiver of notice), or (b) recorded without a meeting on
one or more written proxies signed by each Voting Trustee showing his or her
vote on each matter.
4. The Voting Trustees shall issue Voting Trust Receipts in the form
attached hereto as Exhibit A for all shares of Stock deposited hereunder. Voting
Trust Receipts shall entitle the holders to receive the equivalent of all cash
dividends that may be paid to the Voting Trustees with respect to the deposited
Stock represented thereby. The Voting Trustees may provide for direct payment of
such cash dividends to the holders of Voting Trust Receipts by a dividend order
to the Company. In case of any stock dividend upon the deposited Stock, the
Voting Trustees shall hold the Stock so issued as such dividend as additional
Stock deposited hereunder by the Stockholder entitled thereto, and issue and
deliver to the appropriate record holders of the Voting Trust Receipts
additional Voting Trust Receipts representing such additional Stock.
If the capital stock of the Company shall be increased and the Voting
Trustees, as holders of the deposited Stock shall be entitled to subscribe for
additional shares, they shall notify the holders of record of the outstanding
Voting Trust Receipts, and provide appropriate forms for subscription or
assignment of corresponding rights in this Voting Trust, and fix a time for
payment to the Voting Trustees of the amount required to take up subscription
rights and enable them to purchase on behalf of the voting trust the new Stock
to which they may be entitled. Upon receipt of said sums, the Voting Trustees
shall subscribe for the new shares and hold them as part of the Stock deposited
under this Agreement and shall issue and deliver to the subscribing holders of
Voting Trust Receipts additional Voting Trust Receipts representing such
additional Stock so purchased. In case the holder of any Voting Trust Receipts
shall fail to furnish the money for subscription for such new Stock, the Voting
Trustees shall be under no obligation to subscribe, but they may sell such
rights, and shall account to the holders of the Voting Trust Receipts entitled
thereto for the proceeds of any rights sold, but they shall be under no duty to
sell such rights, and shall not be liable for failure to make such sale.
<PAGE>
EXHIBIT 9.1 (CONTINUED)
5. Voting Trust Receipts shall be transferable with the consent in writing
of the Voting Trustees on surrender of the Voting Trust Receipt duly endorsed
for transfer, or accompanied by a transfer in writing signed by the record
holder thereof. The Voting Trustees shall record such transfers upon books kept
by them for that purpose. All Voting Trust Receipts shall be held subject to the
conditions and restrictions set forth below, the provisions of which shall at
all times apply equally both to an original holder and to each and every
subsequent holder thereof; and each holder of any Voting Trust Receipt, by
acceptance thereof, agrees with the Company and each other such holder to the
following conditions and restrictions:
(i) No transfer of any kind of the Voting Trust Receipts shall be
made at any time unless the Voting Trustees have consented thereto.
(ii) In the event of death of a holder of the Voting Trust Receipts or in the
event such a holder who is an employee of the Company or of a subsidiary of the
Company ceases for any reason to be such an employee, the Stock represented by
such Voting Trust Receipts may be purchased by the Company at book value, as
provided in the Company's Articles of Incorporation, as amended (the
"Articles").
If at any time a Stockholder shall be obligated to offer his shares of
Stock to the Company for purchase by the Company at book value, as provided in
Article SEVENTH of the Articles, and if the Company, whether or not such
Stockholder offers such Stock to the Company, indicates its intent to so
purchase such Stock and tenders payment therefor to such Stockholder, then, if
such Stock has been deposited under this Agreement, (a) the Company may treat
such Stock as having been purchased by the Company and may cause such Stock to
be registered on its books as authorized but unissued shares of Stock of the
Company, and (b) such Stockholder shall immediately deliver the Voting Trustee
Receipts representing such Stock to the Company, and if such Voting Trust
Receipts are not returned to the Company by such Stockholder within one day
after such tender of payment, they shall be null and void.
6. Title to the Stock deposited hereunder shall be vested in and held of
record in the names of the Voting Trustees, collectively and not individually.
Stock deposited shall be pooled and shall not be sold or disposed of during the
term of this Voting Trust, except that (a) the Voting Trustees may facilitate
the sale of Stock to the Company, as provided in the Articles, and (b) the
Voting Trustees may sell all, but not less than all, of the deposited Stock, at
a price approved in writing by all the holders of all outstanding Voting Trust
Receipts. In case of sale under clause (b), the proceeds (less any brokerage
fees, transfer taxes and other expenses of sale and any legal or other expenses
and liabilities incurred by the Voting Trustees) shall be divided, as soon as
conveniently practicable, among the holders of Voting Trust Receipts according
to their holdings.
7. The Voting Trust shall terminate on the date three years from the date
hereof, and may be renewed by the Voting Trustees, with the consent required by
Section 3(6), for an additional three year term. The Voting Trust may be
terminated at any time by the Voting Trustees, with the consent required by
Section 3(4). At the termination of this Voting Trust, the deposited Stock, if
not previously sold by the Voting Trustees under powers hereby vested in them,
shall be distributed among the holders of the outstanding Voting Trust Receipts
according to their respective interests by the Company recording on its books
the name of each holder as the stockholder of record of the number of shares of
Stock to which he or she is entitled.
<PAGE>
EXHIBIT 9.1 (CONTINUED)
8. The Voting Trustees shall have power to prescribe the method of deposit
of shares of Stock, the issue of Voting Trust Receipts, the division of proceeds
of sale of the deposited Stock among the holders of the Voting Trust Receipts,
the redemption of the deposited Stock, if not sold, and all other matters
concerning the operation and management of this Voting Trust. They shall have
power to appoint and remove at their discretion depositories to hold any
certificates which the Company may issue for the deposited Stock, and agents to
act under them in administering the Voting Trust, and proxies to vote the
deposited Stock.
Any Voting Trustee may acquire, hold and sell for himself or in any
fiduciary capacity Voting Trust Receipts issued under the Agreement, and may be
an officer, director, and/or stockholder of the Company, and may vote as a
stockholder for his own election to office, and may accept employment from the
Company, and have any dealings with the Company as freely as if he or she were
not a Voting Trustee. No purchaser from the Voting Trustees shall be liable for
their disposal of the purchase money.
Any statement signed by the Voting Trustees concerning this Voting Trust
or any act done by them as Voting Trustees, shall be conclusive evidence that
the statement is true and the act is within their powers. Any certificate or
other document signed by at least three of the Voting Trustees (or two, if there
are only three Voting Trustees) and filed with the duplicate original of this
Agreement at the office of the Company, shall be sufficient evidence, for all
purposes, of the facts certified therein.
9. No Voting Trustee shall be liable for the acts or defaults of any other
Voting Trustee, or of any depository, agent or attorney employed by the Voting
Trustees, or for any error of judgment or mistake of law or fact, or for
anything except his or her own willful misconduct or gross negligence. The
Voting Trustees shall serve without remuneration. They shall be entitled to
indemnity out of the trust property against any loss or liability incurred in
the performance of their duties. The Company hereby indemnifies and holds
harmless each of the Voting Trustees for and against all claims, loss, expenses
(including legal fees and expenses), and liabilities of any kind arising out of
or in connection with sewing as a Voting Trustee hereunder and not adjudicated
as due to his or her own willful misconduct or gross negligence.
10. This Agreement may be amended from time to time by action of the
Voting Trustees, with the consent required Section 3(4), and such amendment
shall become binding upon all the holders of Voting Trust Receipts. This
Agreement and any amendment hereof may be executed in several counterparts,
which shall in each case be treated as a single instrument for all purposes. A
duplicate original of this Agreement and of each amendment shall be kept at the
office of the Company in Boston, Massachusetts, where it may be inspected by any
of the Stockholders during ordinary business hours.
11. This Agreement shall be governed by the internal laws of the State of
Maryland. This Agreement shall be binding upon the parties hereto, the holders
of the Voting Trust Receipts issued hereunder, their respective executors,
administrators, and successors and assigns, and the Voting Trustees and their
successors in office.
<PAGE>
EXHIBIT 9.1 (CONTINUED)
IN WITNESS WHEREOF, the Voting Trustees, the Company and the Stockholders
have hereunto set their hands, all as of the day and year first shown above
written:
STOCKHOLDERS AND NUMBER OF SHARES
THE COMPANY VOTING TRUSTEES OF STOCK DEPOSITED
EATON VANCE CORP.
By 3,093
----------------------- ---------------------------
James B. Hawkes Alan R. Dynner
its President
5,040
---------------------------
Thomas E. Faust, Jr.
9,280
---------------------------
M. Dozier Gardner
9,280
---------------------------
James B. Hawkes
5,840
---------------------------
Benjamin A. Rowland, Jr.
3,093
---------------------------
William M. Steul
3,094
---------------------------
Wharton P. Whitaker
<PAGE>
EXHIBIT 9.1 (CONTINUED)
SCHEDULE A
The undersigned, _________________________________, is the owner of
____________shares of voting Common Stock, par value $.03125 per share, of Eaton
Vance Corp., and hereby deposits with the Voting Trustees all such shares, which
shall be registered on the books of the Company in the name of the Voting
Trustees and shall be held by the Voting Trustees, and the undersigned has
received Voting Trust Receipts with respect to such shares. By executing this
Schedule A to the Voting Trust Agreement made as of October 30, 1997, the
undersigned, with the consent of the Voting Trustees, becomes a Stockholder
party to said Agreement, subject to all of the provisions thereof.
Dated:
----------------------
-------------------------------
Certified as Consented to by Stockholder
at least a majority of the
Voting Trustees:
- ---------------------------- ----------------------------
Voting Trustee Voting Trustee
- -----------------------------
Voting Trustee
<PAGE>
EXHIBIT 9.1 (CONTINUED)
SCHEDULE B
The undersigned, _________________________________, is the owner of
____________shares of voting Common Stock, par value $.03125 per share, of Eaton
Vance Corp., which are deposited with the Voting Trustees and registered on the
books of the Company in the name of the Voting Trustees and held by the Voting
Trustees, and the undersigned has received Voting Trust Receipts with respect to
such shares. By executing this Schedule B to the Voting Trust Agreement made as
of October 30, 1997, the undersigned, with the consent of the Voting Trustees,
becomes a Voting Trustee party to said Agreement, subject to all of the
provisions thereof.
Dated:______________________
-------------------------------
Certified as Consented to by at least Stockholder
a majority of the Voting
Trustees and by the holders
of outstanding Voting Trust
Receipts representing at
least a majority of the
shares of Stock subject to
the Voting Trust Agreement.
- ---------------------------- ---------------------------------
Voting Trustee Voting Trustee
- -----------------------------
Voting Trustee
<PAGE>
EXHIBIT 9.1 (CONTINUED)
EXHIBIT A
EATON VANCE CORP.
VOTING TRUST RECEIPT
FOR VOTING COMMON STOCK
NO.___________ __________ SHARES
This certifies that
will be entitled to receive from the Voting Trustees under a Voting Trust
Agreement made as of October 30, 1997, as heretofore and hereafter amended, and
lodged in the office of the Company at Boston, Massachusetts, or their
successors or assigns, a certificate or certificates issued by Eaton Vance
Corp., a Maryland corporation, for
shares of its common stock, par value $.03125 per share, or, if the Company does
not then issue certificates for its shares of common stock, will be entitled to
have such shares registered in his or her name on the books of the Company; and
that pending the sale or distribution of the stock held by the Voting Trustees
under said Agreement, the registered holder hereof from time to time, as cash
dividends and distributions of assets are paid by the Company, will be entitled
to receive in respect of this Receipt the equivalent of said dividends or
distributions upon the number of shares represented by this Voting Trust
Receipt. This Receipt is issued under and subject to the provisions (including
but not limited to Section 5 which is set forth on the reverse side hereof) of
said Agreement as heretofore and hereafter amended to which the holder hereof by
accepting this Receipt assents and agrees to be bound. No voting right attaches
to this Receipt or passes to the holder thereof under any agreement expressed or
implied, and no stock certificate will be due or deliverable hereunder, except
according to the provisions of said Agreement. This Receipt is transferable on
the books of the Voting Trustees by the registered holder in person or by
attorney on surrender of this Receipt only with the written consent of the
Voting Trustees as certified to on the reverse side hereof and upon compliance
with the provisions of Section 5 of said Agreement. Until so transferred the
Voting Trustees may treat the registered holder as owner of this Receipt for all
purposes.
IN WITNESS WHEREOF, the undersigned Voting Trustees hereunto subscribe
their names this day of , 19 , and certify that the issuance of this Voting
Trust Receipt has been duly authorized by the Voting Trustees.
- --------------------------- --------------------------
VOTING TRUSTEE VOTING TRUSTEE
------------------------------
VOTING TRUSTEE
<PAGE>
EXHIBIT 9.1 (CONTINUED)
For Value Received, the undersigned,____________________________________________
hereby sells, assigns and transfers the interest represented by the within
Receipt and all right, title and interest of the undersigned in, or in respect
of, the stock represented thereby, under and subject to the terms of the
Agreement within mentioned, and do hereby irrevocably constitute and appoint
___________________________________________________
as my attorney-in-fact to make such transfer upon the books of the Voting
Trustees, with full power of substitution in the premises.
Dated: , 19
-----------------------------------
Witness:
(The signature to this assignment
must correspond exactly with the name
------------------ as written on the face of the
Receipt.)
We hereby certify that the Voting Trustees have consented to the sale,
assignment and transfer of the interest represented by the within Receipt.
Date: , 19
-----------------
------------------------------
VOTING TRUSTEE
- ------------------------------
VOTING TRUSTEE
------------------------------
VOTING TRUSTEE
<PAGE>
EXHIBIT 9.1 (CONTINUED)
Section 5 of the Voting Trust Agreement made as of October 30, 1997, states as
follows:
5. Voting Trust Receipts shall be transferable with the consent in writing of
the Voting Trustees on surrender of the Voting Trust Receipt duly endorsed for
transfer, or accompanied by a transfer in writing signed by the record holder
thereof. The Voting Trustees shall record such transfers upon books kept by them
for that purpose. All Voting Trust Receipts shall be held subject to the
conditions and restrictions set forth below, the provisions of which shall at
all times apply equally both to an original holder and to each and every
subsequent holder thereof; and each holder of any Voting Trust Receipt, by
acceptance thereof, agrees with the Company and each other such holder to the
following conditions and restrictions:
(i) No transfer of any kind of the Voting Trust Receipts shall be
made at any time unless the Voting Trustees have consented thereto.
(ii) In the event of death of a holder of the Voting Trust Receipts
or in the event such a holder who is an employee of the Company or of a
subsidiary of the Company ceases for any reason to be such an employee,
the Stock represented by such Voting Trust Receipts may be purchased by
the Company at book value, as provided in the Company's Articles of
Incorporation, as amended (the "Articles").
If at any time a Stockholder shall be obligated to offer his shares of
Stock to the Company for purchase by the Company at book value, as provided in
Article SEVENTH of the Articles, and if the Company, whether or not such
Stockholder offers such Stock to the Company, indicates its intent to so
purchase such Stock and tenders payment therefor to such Stockholder, then, if
such Stock has been deposited under this Agreement, (a) the Company may treat
such Stock as having been purchased by the Company and may cause such Stock to
be registered on its books as authorized but unissued shares of Stock of the
Company, and (b) such Stockholder shall immediately deliver the Voting Trustee
Receipts representing such Stock to the Company, and if such Voting Trust
Receipts are not returned to the Company by such Stockholder within one day
after such tender of payment, they shall be null and void.
<PAGE>
EXHIBIT 9.1 (CONTINUED)
EATON VANCE CORP.
VOTING TRUST RECEIPT
FOR VOTING COMMON STOCK
NO.___________ __________ SHARES
This certifies that
will be entitled to receive from the Voting Trustees under a Voting Trust
Agreement made as of October 30, 1997, as heretofore and hereafter amended, and
lodged in the office of the Company at Boston, Massachusetts, or their
successors or assigns, a certificate or certificates issued by Eaton Vance
Corp., a Maryland corporation, for
shares of its common stock, par value $.03125 per share, or, if the Company does
not then issue certificates for its shares of common stock, will be entitled to
have such shares registered in his or her name on the books of the Company; and
that pending the sale or distribution of the stock held by the Voting Trustees
under said Agreement, the registered holder hereof from time to time, as cash
dividends and distributions of assets are paid by the Company, will be entitled
to receive in respect of this Receipt the equivalent of said dividends or
distributions upon the number of shares represented by this Voting Trust
Receipt. This Receipt is issued under and subject to the provisions (including
but not limited to Section 5 which is set forth on the reverse side hereof) of
said Agreement as heretofore and hereafter amended to which the holder hereof by
accepting this Receipt assents and agrees to be bound. No voting right attaches
to this Receipt or passes to the holder thereof under any agreement expressed or
implied, and no stock certificate will be due or deliverable hereunder, except
according to the provisions of said Agreement. This Receipt is transferable on
the books of the Voting Trustees by the registered holder in person or by
attorney on surrender of this Receipt only with the written consent of the
Voting Trustees as certified to on the reverse side hereof and upon compliance
with the provisions of Section 5 of said Agreement. Until so transferred the
Voting Trustees may treat the registered holder as owner of this Receipt for all
purposes.
IN WITNESS WHEREOF, the undersigned Voting Trustees hereunto subscribe
their names this day of , 19 , and certify that the issuance of this Voting
Trust Receipt has been duly authorized by the Voting Trustees.
- --------------------- --------------------------
VOTING TRUSTEE VOTING TRUSTEE
------------------------------
VOTING TRUSTEE
<PAGE>
EXHIBIT 9.1 (CONTINUED)
For Value Received, the undersigned,___________________________________________
hereby sells, assigns and transfers the interest represented by the within
Receipt and all right, title and interest of the undersigned in, or in respect
of, the stock represented thereby, under and subject to the terms of the
Agreement within mentioned, and do hereby irrevocably constitute and appoint
___________________________________________________
as my attorney-in-fact to make such transfer upon the books of the Voting
Trustees, with full power of substitution in the premises.
Dated: , 19
-----------------------------
Witness:
(The signature to this assignment must
correspond exactly with the name as
written on the face of the Receipt.)
We hereby certify that the Voting Trustees have consented to the sale,
assignment and transfer of the interest represented by the within Receipt.
Date: , 19
-----------------
------------------------------
VOTING TRUSTEE
- ------------------------------
VOTING TRUSTEE
------------------------------
VOTING TRUSTEE
<PAGE>
EXHIBIT 9.1 (CONTINUED)
Section 5 of the Voting Trust Agreement made as of October 30, 1997, states as
follows:
5. Voting Trust Receipts shall be transferable with the consent in writing of
the Voting Trustees on surrender of the Voting Trust Receipt duly endorsed for
transfer, or accompanied by a transfer in writing signed by the record holder
thereof. The Voting Trustees shall record such transfers upon books kept by them
for that purpose. All Voting Trust Receipts shall be held subject to the
conditions and restrictions set forth below, the provisions of which shall at
all times apply equally both to an original holder and to each and every
subsequent holder thereof; and each holder of any Voting Trust Receipt, by
acceptance thereof, agrees with the Company and each other such holder to the
following conditions and restrictions:
(i) No transfer of any kind of the Voting Trust Receipts shall be
made at any time unless the Voting Trustees have consented thereto.
(ii) In the event of death of a holder of the Voting Trust Receipts
or in the event such a holder who is an employee of the Company or of a
subsidiary of the Company ceases for any reason to be such an employee,
the Stock represented by such Voting Trust Receipts may be purchased by
the Company at book value, as provided in the Company's Articles of
Incorporation, as amended (the "Articles").
If at any time a Stockholder shall be obligated to offer his shares of
Stock to the Company for purchase by the Company at book value, as provided in
Article SEVENTH of the Articles, and if the Company, whether or not such
Stockholder offers such Stock to the Company, indicates its intent to so
purchase such Stock and tenders payment therefor to such Stockholder, then, if
such Stock has been deposited under this Agreement, (a) the Company may treat
such Stock as having been purchased by the Company and may cause such Stock to
be registered on its books as authorized but unissued shares of Stock of the
Company, and (b) such Stockholder shall immediately deliver the Voting Trustee
Receipts representing such Stock to the Company, and if such Voting Trust
Receipts are not returned to the Company by such Stockholder within one day
after such tender of payment, they shall be null and void.
<PAGE>
EXHIBIT 10.15
EATON VANCE CORP. 10/30/97
1992 STOCK OPTION PLAN - RESTATEMENT NO. 2
1. Definitions. As used in this Eaton Vance Corp. 1992 Stock Option Plan -
Restatement No. 2, the following terms shall have the following meaning:
Board means the Company's Board of Directors.
Code means the Internal Revenue Code of 1986, as amended.
Committee means a committee comprised of one or more directors of the
Company, appointed by the Board of Directors of the Company, responsible for the
administration of the Plan, as provided in Section 5.
Company means Eaton Vance Corp., a Maryland corporation.
Director Option means a nonstatutory stock option granted to a director
pursuant to Section 8.
Grant Date means the date on which an Option is granted.
Incentive Option means an Option that satisfies the requirements of
Section 422 of the Code.
Market Value means the closing price on the New York Stock Exchange for
the Shares for any date.
Nonstatutory Option means an Option other than an Incentive Option granted
to an employee.
Option means an option to purchase Shares granted under the Plan.
Option Agreement means an agreement between the Company and an Optionee,
setting forth the terms and conditions of an Option.
Option Price means the price to be paid by an Optionee upon exercise of an
Option.
Optionee means a person eligible to receive an Option to whom an Option
shall have been granted under the Plan.
Plan means this 1992 Stock Option Plan.
Shares means shares of Non-Voting Common Stock of the Company.
Subsidiary means a subsidiary of the Company, as defined in Section 424(f)
of the Code.
<PAGE>
EXHIBIT 10.15 (CONTINUED)
2. Purpose. The purpose of the Plan is to advance the interests of the
Company by strengthening the ability of the Company and its Subsidiaries to
attract, retain and motivate directors and key employees by providing them with
an opportunity to purchase non-voting common stock of the Company and thus
participate in its ownership, including the opportunity to share in any
appreciation in the value of that stock. It is intended that some of the Options
to be granted will be Incentive Options and others will not be. It is further
intended that this Plan will satisfy all of the conditions of Rule 16b-3 under
the Securities Exchange Act of 1934, as amended.
3. Effective Date. The original Plan became effective on April 8, 1992,
the date it was adopted by the Board, and was approved by the stockholders of
the Company on May 15, 1992. This Restatement No. 1 was approved by the Board
and such stockholders on April 9, 1997.
4. Stock Subject to the Plan. The Shares with respect to which Options may
be granted under this Plan shall not exceed 300,000 Shares. Any Shares subject
to an Option which for any reason expires or is terminated unexercised as to
such Shares may again be the subject of an Option. In addition, any Shares
purchased by an Optionee upon exercise of an Option which are subsequently
repurchased by the Company pursuant to the terms of that Option may again be
made the subject of an Option. The Shares delivered upon exercise of Options may
be either authorized but unissued Shares or issued Shares reacquired by the
Company.
5. Administration. The Board shall appoint a Committee consisting
exclusively of at least two directors who are not employees of the Company or
any of its Subsidiaries and who have not, within twelve months preceding any
action by the Committee, received any option (other than a Director Option)
granted by the Company or any Subsidiary. The Plan shall be administered by the
Committee. Subject to the provisions of the Plan, the Committee shall have full
power to construe and interpret the Plan and to establish, amend and rescind
rules and regulations for its administration. Any decision made with respect
thereto shall be final and binding on the Company, the Optionees and all other
persons.
6. Duration of the Plan. This Plan shall terminate ten years from the
original effective date hereof, unless terminated earlier pursuant to Section
14, and no Options may be granted thereafter.
7. Options for Employees.
(a) Eligible Employees. Options may be granted to key employees of the
Company or of any of its Subsidiaries selected by the Committee.
(b) Restrictions on Incentive Options. Incentive Options shall be subject
to the following restrictions:
(i) Limitation on Number of Shares. To the extent that the aggregate
Market Value on the Grant Date of the Shares with respect to which an Option
that would otherwise constitute an Incentive Option (when aggregated, if
appropriate, with incentive stock options granted before the Option under this
Plan or any other plan maintained by the Company or any Subsidiary of the
Company) is exercisable for the first time by the Optionee during any calendar
year exceeds $100,000, the Option shall be treated as a Nonstatutory Option.
<PAGE>
EXHIBIT 10.15 (CONTINUED)
(ii) 10% Stockholder. If any Optionee to whom an Incentive Option is
granted is on the Grant Date the owner of stock (as determined under Section
424(d) of the Code) possessing more than 10% of the total combined voting power
of all classes of stock of the Company or any of its Subsidiaries, then the
following special provisions shall be applicable to that Incentive Option:
(A) The Option Price per Share shall not be less than 110% of the Market Value
on the Grant Date; and
(B) The Incentive Option shall expire not more than five years after the Grant
Date.
(c) Price. Subject to the conditions on certain Incentive Options in
Section 7(b), the Option Price per Share payable upon the exercise of each
Incentive Option shall be not less than 100% of the Market Value on the Grant
Date. The Option Price per Share of stock payable upon exercise of each
Nonstatutory Option shall be determined by the Committee, provided that the
Option Price shall not be less than 50% of the Market Value on the Grant Date.
(d) Number of Shares. Each Option Agreement shall specify the number of
Shares to which it pertains.
(e) Exercise of Options. Subject to the conditions on Incentive Options in
Section 7(b), each Option shall be exercisable for the full amount or for any
part thereof and at such intervals or in such installments as the Committee may
determine at the time it grants the Option; provided, however, that no Option
shall be exercisable with respect to any Shares later than ten years after the
Grant Date.
8. Options for Directors. On the third Friday of December in each year,
each director who is not an employee of the Company and its Subsidiaries shall
receive a Director Option to purchase the number of Shares calculated by
dividing $25,000 by the Market Value of the Shares on the Grant Date. In the
event that on the third Friday of any December, there is not a sufficient number
of Shares available to implement fully the preceding sentence, then each such
director shall receive a pro rata portion of the Director Option contemplated by
the preceding sentence. The Option Price for each Director Option shall be the
Market Value on the Grant Date or, in the event there is no Market Value
available on the Grant Date, on the date next following the Grant Date for which
a Market Value is available. Each Director Option shall become exercisable in
four equal installments upon each of the first four anniversaries of the Grant
Date. No Director Option shall be exercisable later than ten years after the
Grant Date.
9. Terms and Condition Applicable to All Options.
(a) Non-Transferability. No Option shall be transferable by the Optionee
otherwise than by will or the laws of descent and distribution, and each Option
shall be exercisable during the Optionee's lifetime only by him or her.
<PAGE>
EXHIBIT 10.15 (CONTINUED)
(b) Notice of Exercise and Payment. An Option shall be exercisable only by
delivery of a written notice to the Company's Treasurer or any other officer of
the Company designated by the Committee to accept such notices on its behalf,
specifying the number of Shares for which it is exercised. If the Shares are not
at that time effectively registered under the Securities Act of 1933, as
amended, the Optionee shall include with such notice a letter, in form and
substance satisfactory to the Company, confirming that the Shares are being
purchased for the Optionee's own account for investment and not with a view to
distribution. Payment shall be made in full at the time the Option is exercised.
Payment shall be made by (i) cash or check, (ii) delivery and assignment to the
Company of already-owned Shares having a Market Value as of the date of exercise
equal to the exercise price, (iii) if approved by the Committee, delivery of the
Optionee's promissory note for the exercise price, or (iv) any combination of
(i), (ii) or (iii) above.
(c) Rights as Shareholder. No Optionee shall have any rights as a
shareholder or any claim to dividends paid with respect to any Shares to which
the Option relates until the date such Shares are issued to him or her.
10. Termination of Options. Each Option shall terminate and may no longer
be exercised if the Optionee ceases to perform services for the Company or a
Subsidiary, in accordance with the following provisions:
(i) if the Optionee's services shall have been terminated by
resignation or other voluntary action, or if such services shall have been
terminated involuntarily for cause, all of the Optionee's Options shall
terminate and may no longer be exercised;
(ii) if the Optionee's services shall have been terminated for any
reason other than cause, resignation or other voluntary action before his or her
eligibility to retire, and before his or her disability or death, he or she may
at any time within a period of fifteen (15) months after such termination of
service exercise his or her Options to the extent that the Options were
exercisable on the date of termination of service;
(iii) if the Optionee's service shall have been terminated because
of disability within the meaning of Section 22(e)(3) of the Code, he or she may
at any time within a period of fifteen (15) months after such termination of
service exercise his or her Options to the extent that such Options were
exercisable on the date of termination of service; and
(iv) if the Optionee dies at a time when he or she might have
exercised an Option, then his or her estate, personal representative or
beneficiary to whom it has been transferred pursuant to Section 9(a) hereof may
at any time within a period of fifteen (15) months after the Optionee's death
exercise the Option to the extent the Optionee might have exercised it at the
time of death;
provided, however, that the Committee may, at its sole discretion, provide
specifically in an Option Agreement for such other period of time during which
an Optionee may exercise an Option after termination of the Optionee's services
as the Committee may approve, subject to the overriding limitation that no
Option may be exercised to any extent by anyone after the date of expiration of
the Option.
<PAGE>
EXHIBIT 10.15 (CONTINUED)
11. Withholding Taxes; Delivery of Shares. The Company's obligation to
deliver Shares upon exercise of an Option shall be subject to the Optionee's
satisfaction of all applicable federal, state and local income and employment
tax withholding obligations. The Optionee may satisfy the obligations by
electing (a) to make a cash payment to the Company, or (b) to have the Company
withhold Shares with a value equal to the amount required to be withheld, or (c)
to deliver to the Company already-owned Shares with a value equal to the amount
required to be withheld. The value of Shares to be withheld or delivered shall
be based on the Market Value on the date the amount of tax to be withheld is to
be determined. The Optionee's election to have Shares withheld for this purpose
will be subject to the following restrictions: (1) the election must be made
prior to the date the amount of tax is to be determined, (2) the election must
be irrevocable, and (3) the election will be subject to the disapproval of the
Committee.
12. Stock Dividends; Stock Splits: Stock Combinations; Recapitalizations.
Appropriate adjustment shall be made in the maximum number of Shares subject to
the Plan or subject to Options to any one person to give effect to any stock
dividends, stock splits, stock combinations, recapitalizations and other similar
changes in the capital structure of the Company. Appropriate adjustment shall be
made in the number, kind, and price of Shares covered by any outstanding Option
hereunder to give effect to any stock dividends, stock splits, stock
combinations, recapitalizations and other similar changes in the capital
structure of the Company after the date the Option is granted.
13. Merger; Sale of Assets; Dissolution. In the event of a change of the
Company's Non-Voting Common Stock resulting from a merger or similar
reorganization as to which the Company is the surviving corporation, the number
and kind of shares which thereafter may be optioned and sold under the Plan and
the number and kind of shares then subject to Options granted hereunder and the
price per share thereof shall be appropriately adjusted in such manner as the
Board may deem equitable to prevent substantial dilution or enlargement of the
rights available or granted hereunder. If the Board, in its discretion,
determines that the Company will undergo a merger or similar reorganization
which it will not survive or a sale of all or substantially all it assets, the
Board may accelerate, in whole or in part, the vesting and/or exercisability of
any outstanding Option granted under this Plan. Except as otherwise determined
by the Board, a merger or a similar reorganization which the Company does not
survive, or a sale of all or substantially all of the assets of the Company,
shall cause every Option outstanding hereunder to terminate, to the extent not
then exercised, unless any surviving entity agrees to assume the obligations
thereof.
14. Termination or Amendment of Plan. The Board may at any time terminate
the Plan or make such changes in or additions to the Plan as it deems advisable
without further action on the part of the shareholders of the Company, provided:
(a) that no such termination or amendment shall adversely affect or impair
any then outstanding Option without the consent of the Optionee holding that
Option; and
(b) that any such amendment which:
(i) increases the maximum number of Shares subject to this Plan,
(ii) changes the class of persons eligible to participate in this
Plan, or
(iii) materially increases the benefits accruing to participants
under this Plan
<PAGE>
EXHIBIT 10.15 (CONTINUED)
shall be subject to approval by the shareholders of the Company within one year
from the effective date of such amendment and shall be null and void if such
approval is not obtained.
15. Change of Control - Automatic Vesting of Options. Notwithstanding
anything to the contrary herein, the Board or the Committee shall include in the
Option Agreement for each unvested Option granted under this Plan the following
provision (which shall be added by amendment to each existing Option Agreement
for an unvested Option granted prior to April 9, 1997, and such amendment may
incorporate said provision by reference to this Section 15), and such inclusion
may be effected by incorporating said provision by reference to this Section 15:
This Option shall be immediately exercisable and the Optionee shall
become eligible to purchase any and all shares covered by each Option at
any time or from time to time after the occurrence of a Change of Control
of the Company. A "Change of Control" shall mean:
(a) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d) (3) or 14(d) (2) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of either (i) the then
outstanding non-voting common stock of the Company (the "Non-Voting
Stock") or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Company Voting Securities"); provided, that any
acquisition by (x) the Company or any of its subsidiaries, or any employee
benefit plan (or related trust) sponsored or maintained by the Company or
any of its subsidiaries or (y) any Person that is eligible, pursuant to
Rule 13d-1(b) under the Exchange Act, to file a statement on Schedule 13G
with respect to its beneficial ownership of Company Voting Securities,
whether or not such Person shall have filed a statement on Schedule 13G,
unless such Person shall have filed a statement on Schedule 13D with
respect to beneficial ownership of 25% or more of the Company Voting
Securities, shall not constitute a Change of Control; and provided,
further, that the provisions of this subsection (a) shall apply whether or
not the Company Voting Securities or the Non-Voting Stock is registered or
required to be registered under the Exchange Act; or
(b) Individuals who, as of the date hereof, constitute the Company's
Board of Directors (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided, that any individual
becoming a director of the Company ("Director") subsequent to the date of
the Option whose election or nomination for election by the Company's
shareholders, was approved by at least a majority of the Directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the Directors of the Company (as such terms are used in Rule
14a-11 of the Regulation 14A promulgated under the Exchange Act); or
<PAGE>
EXHIBIT 10.15 (CONTINUED)
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation (a "Business Combination"), in each case with
respect to which all or substantially all of the individuals and entities
who were the respective beneficial owners of the Non-Voting Stock and of
the Company Voting Securities immediately prior to such Business
Combination will not, following such Business Combination, beneficially
own, directly or indirectly, more than 60% of, respectively, the then
outstanding non-voting stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election
of directors of the corporation or other entity resulting from the
Business Combination in substantially the same proportion as their
ownership immediately prior to such Business Combination of the Non-Voting
Stock and Company Voting Securities, as the case may be; or
(d) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company, or (ii) a sale or other
disposition of all or substantially all of the assets of the Company, or
(iii) a sale or disposition of Eaton Vance Management (or any successor
thereto) or of all or substantially all of the assets of Eaton Vance
Management (or any successor thereto), or (iv) an assignment by any direct
or indirect investment adviser subsidiary of the Company of investment
advisory agreements pertaining to more than 50% of the aggregate assets
under management of all such subsidiaries of the Company, in the case of
(ii), (iii) or (iv) other than to a corporation or other entity with
respect to which, following such sale or disposition or assignment, more
than 60% of, respectively, the outstanding non-voting stock and the
combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors is then owned beneficially,
directly or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners of the Non-Voting Stock and
Company Voting Securities immediately prior to such sale, disposition or
assignment in substantially the same proportion as their ownership of the
Non-Voting Stock and Company Voting Securities, as the case may be,
immediately prior to such sale, disposition or assignment.
Notwithstanding the foregoing, the following events shall not cause,
or be deemed to cause, and shall not constitute, or be deemed to
constitute, a Change of Control:
(1) The acquisition, holding or disposition of Company Voting
Securities deposited under the Voting Trust Agreement dated as of December
31, 1996 or of the voting trust receipts issued therefor, or any change in
the persons who are voting trustees thereunder, or the acquisition,
holding or disposition of Company Voting Securities deposited under any
subsequent replacement voting trust agreement or of the voting trust
receipts issued therefor, or any change in the persons who are voting
trustees under any such subsequent replacement voting trust agreement;
provided, that any such acquisition, disposition or change shall have
resulted solely by reason of the death, incapacity, retirement,
resignation, election or replacement of one or more voting trustees.
(2) Any termination or expiration of a voting trust agreement
under which Company Voting Securities have been deposited or the
withdrawal therefrom of any Company Voting Securities deposited
thereunder, if all Company Voting Securities and/or the voting trust
receipts issued therefor continue to be held thereafter by the same
persons in the same amounts, or if contemporaneously there shall be a
Business Combination or change in the capitalization of the Company as
described in clause (3) below.
<PAGE>
EXHIBIT 10.15 (CONTINUED)
(3) A Business Combination or change in the capitalization of the Company
pursuant to which the holders of the Non-Voting Stock of the Company
become holders of voting securities of the Company or of the corporation
or other entity resulting from such Business Combination, in substantially
the same proportion as their ownership of Non-Voting Stock immediately
prior to such Business Combination or change in capitalization.
16. No additional Options shall be granted under this Plan on or after
April 9, 1997.
<PAGE>
EXHIBIT 10.16
EATON VANCE CORP. 10/30/97
1995 STOCK OPTION PLAN - RESTATEMENT NO. 2
1. Definitions. As used in this Eaton Vance Corp. 1995 Stock Option Plan -
Restatement No. 2, the following terms shall have the following meaning:
Board means the Company's Board of Directors.
Code means the Internal Revenue Code of 1986, as amended.
Committee means a committee comprised of one or more directors of the
Company, appointed by the Board of Directors of the Company, responsible for the
administration of the Plan, as provided in Section 5.
Company means Eaton Vance Corp., a Maryland corporation.
Director Option means a nonqualified stock option granted to a director
pursuant to Section 8.
Grant Date means the date on which an Option is granted.
Incentive Option means an Option that satisfies the requirements of
Section 422 of the Code.
Market Value means the closing price on the New York Stock Exchange for
the Shares for any date.
Nonqualified Option means an Option other than an Incentive Option granted
to an employee.
Option means an option to purchase Shares granted under the Plan.
Option Agreement means an agreement between the Company and an Optionee,
setting forth the terms and conditions of an Option.
Option Price means the price to be paid by an Optionee upon exercise of an
Option.
Optionee means a person eligible to receive an Option to whom an Option
shall have been granted under the Plan.
Plan means this 1995 Stock Option Plan.
Shares means shares of Non-Voting Common Stock of the Company.
Subsidiary means a subsidiary of the Company, as defined in Section 424(f)
of the Code.
<PAGE>
EXHIBIT 10.16 (CONTINUED)
2. Purpose. The purpose of the Plan is to advance the interests of the
Company by strengthening the ability of the Company and its Subsidiaries to
attract, retain and motivate directors and key employees by providing them with
an opportunity to purchase non-voting common stock of the Company and thus
participate in its ownership, including the opportunity to share in any
appreciation in the value of that stock. It is intended that some of the Options
to be granted will be Incentive Options and others will not be.
3. Effective Date. The Plan originally became effective on October 12,
1995, the date it was adopted by the Board, and was approved by the stockholders
of the Company on April 10, 1996. This Restatement No. 1 was approved by the
Board and such stockholders on April 9, 1997.
4. Stock Subject to the Plan. The Shares with respect to which Options may
be granted under this Plan shall not exceed 600,000 Shares (which number shall
on May 15, 1997 be increased to 1,200,000 Shares to reflect the two-for-one
stock split effective on that date). Any Shares subject to an Option which for
any reason expires or is terminated unexercised as to such Shares may again be
the subject of an Option. In addition, any Shares purchased by an Optionee upon
exercise of an Option which are subsequently repurchased by the Company pursuant
to the terms of that Option may again be made the subject of an Option. The
Shares delivered upon exercise of Options may be either authorized but unissued
Shares or issued Shares reacquired by the Company.
5. Administration. The Board shall appoint a Committee consisting
exclusively of two or more directors who are "outside directors" within the
meaning of Section 162(m) of the Code and the regulations thereunder and
"non-employee directors" within the meaning of Rule 16b-3(b)(3) under the
Securities Exchange Act of 1934. Each Option granted to a "covered employee"
within the meaning of Section 162(m) of the Code and the regulations thereunder
shall be granted by the Committee. The Plan shall be administered by the
Committee. Subject to the provisions of the Plan, the Committee shall have full
power to construe and interpret the Plan and to establish, amend and rescind
rules and regulations for its administration. Any decision made with respect
thereto shall be final and binding on the Company, the Optionees and all other
persons.
6. Duration of the Plan. This Plan shall terminate ten years from the
original effective date hereof, unless terminated earlier pursuant to Section
14, and no Options may be granted thereafter.
7. Options for Employees.
(a) Eligible Employees. Options may be granted to key employees of the
Company or of any of its Subsidiaries selected by the Committee.
(b) Restrictions on Incentive Options. Incentive Options shall be subject
to the following restrictions:
(i) Limitation on Number of Shares. To the extent that the aggregate
Market Value on the Grant Date of the Shares with respect to which an Option
that would otherwise constitute an Incentive Option (when aggregated, if
appropriate, with incentive stock options granted before the Option under this
Plan or any other plan maintained by the Company or any Subsidiary of the
Company) is exercisable for the first time by the Optionee during any calendar
year exceeds $100,000, the Option shall be treated as a Nonqualified Option.
<PAGE>
EXHIBIT 10.16 (CONTINUED)
(ii) 10% Stockholder. If any Optionee to whom an Incentive Option is
granted is on the Grant Date the owner of stock (as determined under Section
424(d) of the Code) possessing more than 10% of the total combined voting power
of all classes of stock of the Company or any of its Subsidiaries, then the
following special provisions shall be applicable to that Incentive Option:
(A) The Option Price per Share shall not be less than 110% of the Market Value
on the Grant Date; and
(B) The Incentive Option shall expire not more than five years after the Grant
Date.
(c) Price. Subject to the conditions on certain Incentive Options in
Section 7(b), the Option Price per Share payable upon the exercise of each
Incentive Option shall be not less than 100% of the Market Value on the Grant
Date. The Option Price per Share of stock payable upon exercise of each
Nonstatutory Option shall be determined by the Committee, provided that the
Option Price shall not be less than 50% of the Market Value on the Grant Date.
(d) Number of Shares. Each Option Agreement shall specify the number of
Shares to which it pertains. No Optionee may receive, during any three year
period, Options to purchase more than 300,000 Shares (which number shall on May
15, 1997 be increased to 600,000 Shares to reflect the two-for-one stock split
effective on that date).
(e) Exercise of Options. Subject to the conditions on Incentive Options in
Section 7(b), each Option shall be exercisable for the full amount or for any
part thereof and at such intervals or in such installments as the Committee may
determine at the time it grants the Option; provided, however, that no Option
shall be exercisable with respect to any Shares later than ten years after the
Grant Date.
8. Options for Directors. Upon first election to the Board of Directors of
the Company of a person who was not, within twelve months preceding election,
either an officer of employee of the Company or any Subsidiary, such person
shall be granted a Director Option to purchase the number of Shares calculated
by dividing $60,000 by the Market Value of the Shares on the Grant Date. On the
third Friday of December in each year, each director who is not an employee of
the Company and its Subsidiaries shall receive a Director Option to purchase the
number of Shares calculated by dividing $25,000 (which number shall, on the
first day after October 30, 1997 on which a Director Option is granted pursuant
to the preceding sentence, be increased to $60,000) by the Market Value of the
Shares on the Grant Date. In the event that on any Grant Date there is not a
sufficient number of Shares available to implement fully the preceding
sentences, then each such director shall receive a pro rata portion of the
Director Option contemplated by the preceding sentences. The Option Price for
each Director Option shall be the Market Value on the Grant Date or, in the
event there is no Market Value available on the Grant Date, on the date next
following the Grant Date for which a Market Value is available. Each Director
Option shall become exercisable in four equal installments upon each of the
first four anniversaries of the Grant Date. No Director Option shall be
exercisable later than ten years after the Grant Date.
<PAGE>
EXHIBIT 10.16 (CONTINUED)
9. Terms and Condition Applicable to All Options.
(a) Non-Transferability. No Option shall be transferable by the Optionee
otherwise than by will or the laws of descent and distribution, and each Option
shall be exercisable during the Optionee's lifetime only by him or her.
(b) Notice of Exercise and Payment. An Option shall be exercisable only by
delivery of a written notice to the Company's Treasurer or any other officer of
the Company designated by the Committee to accept such notices on its behalf,
specifying the number of Shares for which it is exercised. If the Shares are not
at that time effectively registered under the Securities Act of 1933, as
amended, the Optionee shall include with such notice a letter, in form and
substance satisfactory to the Company, confirming that the Shares are being
purchased for the Optionee's own account for investment and not with a view to
distribution. Payment shall be made in full at the time the Option is exercised.
Payment shall be made by (i) cash or check, (ii) delivery and assignment to the
Company of already-owned Shares having a Market Value as of the date of exercise
equal to the exercise price, (iii) if approved by the Committee, delivery of the
Optionee's promissory note for the exercise price, or (iv) any combination of
(i), (ii) or (iii) above.
(c) Rights as Shareholder. No Optionee shall have any rights as a
shareholder or any claim to dividends paid with respect to any Shares to which
the Option relates until the date such Shares are issued to him or her.
10. Termination of Options. Each Option shall terminate and may no longer
be exercised if the Optionee ceases to perform services for the Company or a
Subsidiary, in accordance with the following provisions:
(i) if the Optionee's services shall have been terminated by
resignation or other voluntary action, or if such services shall have been
terminated involuntarily for cause, all of the Optionee's Options shall
terminate and may no longer be exercised;
(ii) if the Optionee's services shall have been terminated for any
reason other than cause, resignation or other voluntary action before his or her
eligibility to retire, and before his or her disability or death, he or she may
at any time within a period of fifteen (15) months after such termination of
service exercise his or her Options to the extent that the Options were
exercisable on the date of termination of service;
(iii) if the Optionee's service shall have been terminated because
of disability within the meaning of Section 22(e)(3) of the Code, he or she may
at any time within a period of fifteen (15) months after such termination of
service exercise his or her Options to the extent that such Options were
exercisable on the date of termination of service; and
<PAGE>
EXHIBIT 10.16 (CONTINUED)
(iv) if the Optionee dies at a time when he or she might have
exercised an Option, then his or her estate, personal representative or
beneficiary to whom it has been transferred pursuant to Section 9(a) hereof may
at any time within a period of fifteen (15) months after the Optionee's death
exercise the Option to the extent the Optionee might have exercised it at the
time of death;
provided, however, that the Committee may, at its sole discretion, provide
specifically in an Option Agreement for such other period of time during which
an Optionee may exercise an Option after termination of the Optionee's services
as the Committee may approve, subject to the overriding limitation that no
Option may be exercised to any extent by anyone after the date of expiration of
the Option.
11. Withholding Taxes; Delivery of Shares. The Company's obligation to
deliver Shares upon exercise of an Option shall be subject to the Optionee's
satisfaction of all applicable federal, state and local income and employment
tax withholding obligations. The Optionee may satisfy the obligations by
electing (a) to make a cash payment to the Company, or (b) to have the Company
withhold Shares with a value equal to the amount required to be withheld, or (c)
to deliver to the Company already-owned Shares with a value equal to the amount
required to be withheld. The value of Shares to be withheld or delivered shall
be based on the Market Value on the date the amount of tax to be withheld is to
be determined. The Optionee's election to have Shares withheld for this purpose
will be subject to the following restrictions: (1) the election must be made
prior to the date the amount of tax is to be determined, (2) the election must
be irrevocable, and (3) the election will be subject to the disapproval of the
Committee.
12. Stock Dividends; Stock Splits: Stock Combinations; Recapitalizations.
Appropriate adjustment shall be made in the maximum number of Shares subject to
the Plan or subject to Options to any one person to give effect to any stock
dividends, stock splits, stock combinations, recapitalizations and other similar
changes in the capital structure of the Company. Appropriate adjustment shall be
made in the number, kind, and price of Shares covered by any outstanding Option
hereunder to give effect to any stock dividends, stock splits, stock
combinations, recapitalizations and other similar changes in the capital
structure of the Company after the date the Option is granted.
13. Merger; Sale of Assets; Dissolution. In the event of a change of the
Company's Non-Voting Common Stock resulting from a merger or similar
reorganization as to which the Company is the surviving corporation, the number
and kind of shares which thereafter may be optioned and sold under the Plan and
the number and kind of shares then subject to Options granted hereunder and the
price per share thereof shall be appropriately adjusted in such manner as the
Board may deem equitable to prevent substantial dilution or enlargement of the
rights available or granted hereunder. If the Board, in its discretion,
determines that the Company will undergo a merger or similar reorganization
which it will not survive or a sale of all or substantially all it assets, the
Board may accelerate, in whole or in part, the vesting and/or exercisability of
any outstanding Option granted under this Plan. Except as otherwise determined
by the Board, a merger or a similar reorganization which the Company does not
survive, or a sale of all or substantially all of the assets of the Company,
shall cause every Option outstanding hereunder to terminate, to the extent not
then exercised, unless any surviving entity agrees to assume the obligations
thereof.
<PAGE>
EXHIBIT 10.16 (CONTINUED)
14. Termination or Amendment of Plan. The Board may at any time terminate
the Plan or make such changes in or additions to the Plan as it deems advisable
without further action on the part of the shareholders of the Company, provided:
(a) that no such termination or amendment shall adversely affect or impair
any then outstanding Option without the consent of the Optionee holding that
Option; and
(b) that any such amendment which:
(i) increases the maximum number of Shares subject to this Plan,
(ii) changes the class of persons eligible to participate in this
Plan, or
(iii) materially increases the benefits accruing to participants
under this Plan
shall be subject to approval by the shareholders of the Company within one year
from the effective date of such amendment and shall be null and void if such
approval is not obtained.
15. Change of Control - Automatic Vesting of Options. Notwithstanding
anything to the contrary herein, the Board or the Committee shall include in the
Option Agreement for each unvested Option granted under this Plan the following
provision (which shall be added by amendment to each existing Option Agreement
for an unvested Option granted prior to April 9, 1997, and such amendment may
incorporate said provision by reference to this Section 15), and such inclusion
may be effected by incorporating said provision by reference to this Section 15:
This Option shall be immediately exercisable and the Optionee shall
become eligible to purchase any and all shares covered by each Option at
any time or from time to time after the occurrence of a Change of Control
of the Company. A "Change of Control" shall mean:
(a) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d) (3) or 14(d) (2) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of either (i) the then
outstanding non-voting common stock of the Company (the "Non-Voting
Stock") or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Company Voting Securities"); provided, that any
acquisition by (x) the Company or any of its subsidiaries, or any employee
benefit plan (or related trust) sponsored or maintained by the Company or
any of its subsidiaries or (y) any Person that is eligible, pursuant to
Rule 13d-1(b) under the Exchange Act, to file a statement on Schedule 13G
with respect to its beneficial ownership of Company Voting Securities,
whether or not such Person shall have filed a statement on Schedule 13G,
unless such Person shall have filed a statement on Schedule 13D with
respect to beneficial ownership of 25% or more of the Company Voting
Securities, shall not constitute a Change of Control; and provided,
further, that the provisions of this subsection (a) shall apply whether or
not the Company Voting Securities or the Non-Voting Stock is registered or
required to be registered under the Exchange Act; or
<PAGE>
EXHIBIT 10.16 (CONTINUED)
(b) Individuals who, as of the date hereof, constitute the Company's
Board of Directors (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided, that any individual
becoming a director of the Company ("Director") subsequent to the date of
the Option whose election or nomination for election by the Company's
shareholders, was approved by at least a majority of the Directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the Directors of the Company (as such terms are used in Rule
14a-11 of the Regulation 14A promulgated under the Exchange Act); or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation (a "Business Combination"), in each case with
respect to which all or substantially all of the individuals and entities
who were the respective beneficial owners of the Non-Voting Stock and of
the Company Voting Securities immediately prior to such Business
Combination will not, following such Business Combination, beneficially
own, directly or indirectly, more than 60% of, respectively, the then
outstanding non-voting stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election
of directors of the corporation or other entity resulting from the
Business Combination in substantially the same proportion as their
ownership immediately prior to such Business Combination of the Non-Voting
Stock and Company Voting Securities, as the case may be; or
(d) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company, or (ii) a sale or other
disposition of all or substantially all of the assets of the Company, or
(iii) a sale or disposition of Eaton Vance Management (or any successor
thereto) or of all or substantially all of the assets of Eaton Vance
Management (or any successor thereto), or (iv) an assignment by any direct
or indirect investment adviser subsidiary of the Company of investment
advisory agreements pertaining to more than 50% of the aggregate assets
under management of all such subsidiaries of the Company, in the case of
(ii), (iii) or (iv) other than to a corporation or other entity with
respect to which, following such sale or disposition or assignment, more
than 60% of, respectively, the outstanding non-voting stock and the
combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors is then owned beneficially,
directly or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners of the Non-Voting Stock and
Company Voting Securities immediately prior to such sale, disposition or
assignment in substantially the same proportion as their ownership of the
Non-Voting Stock and Company Voting Securities, as the case may be,
immediately prior to such sale, disposition or assignment.
Notwithstanding the foregoing, the following events shall not cause,
or be deemed to cause, and shall not constitute, or be deemed to
constitute, a Change of Control:
<PAGE>
EXHIBIT 10.16 (CONTINUED)
(1) The acquisition, holding or disposition of Company Voting
Securities deposited under the Voting Trust Agreement dated as of December
31, 1996 or of the voting trust receipts issued therefor, or any change in
the persons who are voting trustees thereunder, or the acquisition,
holding or disposition of Company Voting Securities deposited under any
subsequent replacement voting trust agreement or of the voting trust
receipts issued therefor, or any change in the persons who are voting
trustees under any such subsequent replacement voting trust agreement;
provided, that any such acquisition, disposition or change shall have
resulted solely by reason of the death, incapacity, retirement,
resignation, election or replacement of one or more voting trustees.
(2) Any termination or expiration of a voting trust agreement
under which Company Voting Securities have been deposited or the
withdrawal therefrom of any Company Voting Securities deposited
thereunder, if all Company Voting Securities and/or the voting trust
receipts issued therefor continue to be held thereafter by the same
persons in the same amounts, or if contemporaneously there shall be a
Business Combination or change in the capitalization of the Company as
described in clause (3) below.
(3) A Business Combination or change in the capitalization of
the Company pursuant to which the holders of the Non-Voting Stock of the
Company become holders of voting securities of the Company or of the
corporation or other entity resulting from such Business Combination, in
substantially the same proportion as their ownership of Non-Voting Stock
immediately prior to such Business Combination or change in
capitalization.
<PAGE>
EXHIBIT 10.16 (CONTINUED)
EATON VANCE CORP
AMENDMENT TO INCENTIVE STOCK OPTION AGREEMENT
UNDER 1995 STOCK OPTION PLAN - RESTATEMENT NO. 1
The Incentive Option Agreement effective ___________, 1996, between Eaton
Vance Corp. (the "Company") and the undersigned Optionee granting an incentive
stock option to purchase Non-Voting Common Stock of the Company is hereby
amended to add thereto the provision for automatic vesting after a Change of
Control of the Company, as set forth in Section 15 of the Company's 1995 Stock
Option Plan - Restatement No. 1, which provision is incorporated herein by
reference thereto as if fully stated herein.
IN WITNESS WHEREOF, the Company and the Optionee have caused this Amendment to
be duly executed as of April 9, 1997.
EATON VANCE CORP
By:
- ---------------------------- -----------------------------
Optionee Vice President and Treasurer
<PAGE>
EXHIBIT 10.16 (CONTINUED)
EATON VANCE CORP
AMENDMENT TO NONQUALIFIED STOCK OPTION AGREEMENT
UNDER 1995 STOCK OPTION PLAN - RESTATEMENT NO. 1
The Nonqualified Option Agreement effective ___________, 1996, between
Eaton Vance Corp. (the "Company") and the undersigned Optionee granting a
nonqualified stock option to purchase Non-Voting Common Stock of the Company is
hereby amended to add thereto the provision for automatic vesting after a Change
of Control of the Company, as set forth in Section 15 of the Company's 1995
Stock Option Plan - Restatement No. 1, which provision is incorporated herein by
reference thereto as if fully stated herein.
IN WITNESS WHEREOF, the Company and the Optionee have caused this Amendment to
be duly executed as of April 9, 1997.
EATON VANCE CORP
By:
- ---------------------------- -----------------------------
Optionee Vice President and Treasurer
<PAGE>
EXHIBIT 10.16 (CONTINUED)
EATON VANCE CORP
AMENDMENT TO DIRECTOR STOCK OPTION AGREEMENT
UNDER 1995 STOCK OPTION PLAN - RESTATEMENT NO. 1
The Director Option Agreement effective ___________, 1996, between Eaton
Vance Corp. (the "Company") and the undersigned Optionee granting a director
stock option to purchase Non-Voting Common Stock of the Company is hereby
amended to add thereto the provision for automatic vesting after a Change of
Control of the Company, as set forth in Section 15 of the Company's 1995 Stock
Option Plan - Restatement No. 1, which provision is incorporated herein by
reference thereto as if fully stated herein.
IN WITNESS WHEREOF, the Company and the Optionee have caused this Amendment to
be duly executed as of April 9, 1997.
EATON VANCE CORP
By:
- ---------------------------- -----------------------------
Optionee Vice President and Treasurer
<PAGE>
EXHIBIT 11.1
Computation of average number of shares outstanding in accordance with
Securities and Exchange Commission Act of 1934, Release No. 9083
OCTOBER 31,
-----------------------------------------------
1997 1996 1995
-----------------------------------------------
PRIMARY:
Weighted average number of
voting and non-voting common
shares outstanding 18,659,050 18,863,046 18,422,866
Assumed exercise of certain
non-voting stock options based
on average market value and
shares reserved for issuance
under employee stock purchase 689,826 290,406 154,208
plan
===============================================
Weighted average number of
shares used in primary per
share computations 19,348,876 19,153,452 18,577,074
===============================================
FULLY DILUTED:
Weighted average number of
voting and non-voting common
shares outstanding 18,659,050 18,863,046 18,422,866
Assumed exercise of certain
non-voting stock options
based on higher of average
or closing market value and
shares reserved for issuance 938,456 740,920 645,548
under employee stock purchase
plan
===============================================
Weighted average number of
shares used in fully diluted
per share computations 19,597,506 19,603,966 19,068,414
===============================================
<PAGE>
EXHIBIT 13.1
------------------------
EATON VANCE CORP.
[Graphic Omitted]
1997 Annual Report
------------------------
<PAGE>
Eaton Vance Corp.
- -------------------------------------------------
Eaton Vance Corp. is the investment adviser and distributor
of over 70 mutual funds. The Company also manages
investments for approximately 800 individual and
institutional clients.
Eaton Vance Corp. was formed by the 1979 merger of two
Boston-based investment firms: Eaton & Howard, founded in
1924, and Vance, Sanders & Company, founded in 1934.
<PAGE>
Financial Highlights
(in billions of dollars) 1997 1996
- --------------------------------------------------------------------------------
Assets Under Management $ 21.3 $ 17.3
Sales of Mutual Funds 4.2 2.6
(in millions of dollars)
- --------------------------------------------------------------------------------
Revenue $200.9 $ 182.0
Net Income 40.2 37.4
Shareholders' Equity 226.3 210.8
(in dollars)
- --------------------------------------------------------------------------------
Per Common Share
Net Income $ 2.08 $ 1.95
Shareholders' Equity 12.23 11.23
Dividends 0.42 0.35
EARNINGS PER SHARE
10-Year Growth Rate: 12%
FISCAL YEAR EARNINGS PER SHARE
- ----------------------------------------
1988 $0.68
1989 $0.50
1990 $0.51
1991 $0.87
1992 $1.25
1993 $1.55
1994 $1.57
1995 $1.63
1996 $1.95
1997 $2.08
Dividends Per Share
10-Year Growth Rate: 19%
FISCAL YEAR DIVIDENDS PER SHARE
- -----------------------------------
1988 $0.10
1989 $0.11
1990 $0.12
1991 $0.15
1992 $0.20
1993 $0.25
1994 $0.30
1995 $0.32
1996 $0.35
1997 $0.42
<PAGE>
To Shareholders
- ------------------------------------------------
[Photo of James B. Hawkes]
James B. Hawkes
Excluding an extraordinary item and gold operations, earnings per share grew 15
percent in 1997.
Eaton Vance Corp. has increased its dividend in each of the past 17 years at an
annual growth rate of 18 percent.
Growth of Assets
Under Management
FISCAL YEAR PERCENT OF ASSET GROWTH
- --------------------------------------------
1995 6.7
1996 8.1
1997 23.0
Eaton Vance Corp. earned a record $40.2 million in fiscal 1997, with
earnings per share increasing to $2.08 from $1.95 last year. Excluding
an extraordinary item last year and the impact of gold operations, earnings per
share were 15 percent greater than in 1996. Assets under management grew 23
percent to $21.3 billion at year end. On October 9, the Company raised its
dividend 20 percent to an effective annual rate of $0.48 per share. Eaton Vance
Corp. has increased its dividend in each of the past 17 years at an annual
growth rate of 18 percent.
Gross sales of mutual funds rose 62 percent during fiscal 1997 to $4.2
billion, while net sales advanced 180 percent to $1.4 billion. Equity fund
assets increased by 73 percent in fiscal 1997 to $5.2 billion and now represent
24 percent of total assets under management. This growth was led by strong sales
of Eaton Vance Tax-Managed Growth Fund, Eaton Vance Worldwide Health Sciences
Fund and Belvedere Equity Fund LLC private placement. Income fund assets grew
also, with the Company's floating-rate bank loan funds increasing 37 percent to
$3.9 billion, and its other taxable fixed-income funds growing 50 percent to
$2.1 billion. While municipal bond fund assets declined for Eaton Vance and the
industry, the Company's High Yield Municipals Fund rose 69 percent to $261
million. Significant new account development, strong fixed-income performance
and the rising financial markets resulted in a 33 percent increase in investment
counsel assets under management to $2.4 billion at year end.
Eaton Vance achieved two important goals in 1997. Assets under management grew
at a substantially faster rate than in recent years, and equity fund sales
contributed a significantly higher proportion of total fund sales. Progress in
both areas is displayed in the accompanying charts. Double-digit growth in
managed assets provides a foundation for achieving management's long-term goals
for growth in earnings and dividends, while increased participation in the
market for equity funds demonstrates Eaton Vance's intention and capacity to
grow in all segments of the fund industry.
During the summer, Eaton Vance introduced "Mutual Funds for People Who Pay
Taxes," a marketing/positioning strategy which conceptually bundles the
Company's tax-managed equity funds with its family of national and
state-specific municipal bond funds, the most extensive in the industry. In
September, the Company's tax-efficient equity product line was broadened with
the introduction of the Eaton Vance Tax-Managed Emerging Growth Fund. Response
to "Mutual Funds for People Who Pay Taxes" has been encouraging, with increasing
sales of tax-managed equity funds and clear signs of growing interest by
broker/dealers, brokers and financial planners in investing to maximize
after-tax return. A tax-managed international fund is planned for 1998.
Gross sales of mutual funds rose 62 percent during fiscal 1997 to $4.2 billion,
while net sales advanced 180 percent to $1.4 billion.
Belvedere Equity Fund LLC, a private fund, raised $1.1 billion in two closings
in May and June.
Equity Fund Sales
As a Percent of Total Sales
FISCAL YEAR PERCENT OF TOTAL SALES*
- ----------------------------------------------
1995 6%
1996 12%
1997 - 1st Quarter 22%
1997 - 2nd Quarter 25%
1997 - 3rd Quarter 34%
1997 - 4th Quarter 38%
* Excludes Broadmoor and Belvedere Private Placements
Belvedere Equity Fund LLC, a private fund for investors seeking to
diversify concentrated positions in common stocks with substantial market
appreciation, raised $1.1 billion in two closings in May and June. New
equity-based private funds are expected to be offered in 1998.
Eaton Vance continues to withdraw from businesses unrelated to the management of
assets for mutual funds, institutions and individuals.
The holdings of VenturesTrident II, L.P., the second of two gold partnerships
offered by the Company in the 1980s, have been distributed to the limited
partners and the partnership was terminated December 31, 1997, on schedule. The
Company's future earnings will not be subject to the price volatility inherent
in commodity investing. Also, it is anticipated that most real estate holdings
of Northeast Properties, Inc. will be sold in 1998.
After completing a review of Eaton Vance's corporate governance policies during
1997, the Board of Directors voted to implement new guidelines. These include a
retirement policy for senior executives and Directors, a requirement of
significant stock ownership on the part of senior executives and Board members,
and a reconstitution of the Board so that a majority will be independent or
"outside" Directors.
In October, 1997, I replaced Landon T. Clay as Chairman of the Board. Landon,
who joined Eaton Vance in 1968, had served as its Chairman since 1971. Many of
the Company's accomplishments over more than 25 years were the result of
investment principles and management policies he established.
Eaton Vance is a financially strong growth company in an exciting growth
industry. The Company has significant competitive strengths in its people,
products and productive relationships with broker/dealers, brokers and financial
planners globally. Substantial momentum in the growth of assets under management
and equity funds was achieved in 1997. Assuming favorable market trends, Eaton
Vance is well positioned for continued growth in shareholder value.
/s/ James B. Hawkes
James B. Hawkes
Chairman of the Board
President and Chief Executive Officer
<PAGE>
Fiscal Year 1997 Highlights
- --------------------------------------------------------------------------------
o Eaton Vance's stock appreciated 65 percent in fiscal 1997, from $21 7/8 at
October 31, 1996 to $36 1/8 at October 31, 1997.
o On April 9, 1997, Eaton Vance declared a two-for-one stock split for
shareholders of record on May 15, 1997.
o Assets under management increased 23 percent to $21.3 billion.
o Gross sales of mutual funds were $4.2 billion, exceeding 1996 sales of $2.6
billion by 62 percent.
o Including private placements, equity funds represented 45 percent of total
fund sales in fiscal 1997 compared to 17 percent in 1996.
o Investors and investment advisers responded enthusiastically to the Company's
"Mutual Funds for People Who Pay Taxes" program.
o Assets under management in tax-managed equity portfolios grew by $1.9 billion,
from $0.9 billion at fiscal year-end 1996 to $2.8 billion at October 31, 1997,
an increase of over 200 percent.
o Belvedere Equity Fund LLC, a private fund for investors seeking to diversify
concentrated positions of highly appreciated common stocks, attracted more
than $1 billion in assets.
o New institutional investment counsel clients contributed to a 33 percent
increase in managed assets to $2.4 billion.
Shareholders' Equity Per Share
10-Year Growth Rate: 18%
FISCAL YEAR SHAREHOLDERS' EQUITY PER SHARE
- ------------------------------------------------------
1988 $2.46
1989 $2.84
1990 $3.22
1991 $3.91
1992 $5.04
1993 $7.94
1994 $9.09
1995 $10.42
1996 $11.23
1997 $12.23
Assets Under Management
(in billions)
10 - year growth rate: 16%
Fiscal Year End Assets Under Management
- -----------------------------------------------
1988 $ 4.9
1989 $ 7.1
1990 $ 7.3
1991 $ 9.6
1992 $11.3
1993 $15
1994 $15
1995 $16
1996 $17.3
1997 $21.3
<PAGE>
Eaton Vance Corp. trades on the New York Stock Exchange under the symbol "EV."
Price and Dividend Information
Low High Dividend
Price Price Per Share
- --------------------------------------------------------------------------------
Quarter Ended January 31, 1996 $13 $16 1/8 $0.09
April 30, 1996 15 1/4 17 3/8 0.09
July 31, 1996 15 20 1/8 0.09
October 31, 1996 18 1/4 22 5/16 0.10
Quarter Ended January 31, 1997 $20 7/8 $24 7/8 $0.10
April 30, 1997 20 7/8 24 3/8 0.10
July 31, 1997 22 31 1/8 0.10
October 31, 1997 26 7/16 37 13/16 0.12
Quarterly High and Low Stock Prices
Adjusted for two-for-one stock splits
November 11, 1992 and May 15, 1997
Fiscal Year and Quarter High Low
- -------------------------------------------------
1988 - 1st Quarter $3.47 $2.688
1988 - 2nd Quarter $4.88 $3.938
1988 - 3rd Quarter $4.56 $3.984
1988 - 4th Quarter $4.297 $3.891
- -------------------------------------------------
1989 - 1st Quarter $4.766 $4.094
1989 - 2nd Quarter $5.75 $4.766
1989 - 3rd Quarter $5.078 $4.563
1989 - 4th Quarter $5.797 $4.563
- -------------------------------------------------
1990 - 1st Quarter $5.859 $5.484
1990 - 2nd Quarter $5.797 $4.563
1990 - 3rd Quarter $4.766 $4.406
1990 - 4th Quarter $4.563 $3.156
- -------------------------------------------------
1991 - 1st Quarter $3.047 $3.031
1991 - 2nd Quarter $5.593 $3.781
1991 - 3rd Quarter $5.234 $3.938
1991 - 4th Quarter $6.016 $4.766
- -------------------------------------------------
1992 - 1st Quarter $7.766 $5.703
1992 - 2nd Quarter $7.922 $6.625
1992 - 3rd Quarter $7.313 $6.422
1992 - 4th Quarter $9.844 $6.844
- -------------------------------------------------
1993 - 1st Quarter $15.953 $8.50
1993 - 2nd Quarter $15.547 $12.016
1993 - 3rd Quarter $15.031 $12.75
1993 - 4th Quarter $17.094 $14.203
- -------------------------------------------------
1994 - 1st Quarter $15.547 $12.641
1994 - 2nd Quarter $15.547 $12.125
1994 - 3rd Quarter $12.75 $10.984
1994 - 4th Quarter $14.203 $10.563
- -------------------------------------------------
1995 - 1st Quarter $13.359 $10.984
1995 - 2nd Quarter $13.578 $11.703
1995 - 3rd Quarter $14.141 $13.359
1995 - 4th Quarter $16.266 $12.953
- -------------------------------------------------
1996 - 1st Quarter $16.125 $13.00
1996 - 2nd Quarter $17.375 $15.25
1996 - 3rd Quarter $20.125 $15.00
1996 - 4th Quarter $22.313 $18.25
- -------------------------------------------------
1997 - 1st Quarter $24.875 $20.875
1997 - 2nd Quarter $24.375 $20.875
1997 - 3rd Quarter $31.125 $22.00
1997 - 4th Quarter $37.813 $26.438
- -------------------------------------------------
<PAGE>
Investment Management
- --------------------------------------------------------------------------------
Equity fund sales represented 45 percent of total fund sales for the year.
Equity fund assets now represent 24 percent of total assets under management.
EQUITY FUND SALES
AS A PERCENT OF TOTAL SALES**
EQUITY FUND SALES
FISCAL YEAR AS A PERCENT OF TOTAL SALES
- --------------------------------------------------
1995 6%
1996 17%
1997 45%
** INCLUDES BROADMOOR (1996) AND BELVEDERE (1997)
Mutual Fund Assets Increased 22 Percent in Fiscal 1997 to $18.9 Billion.
Gross sales of Eaton Vance mutual funds, excluding money market funds and
reinvested dividends, were $4.2 billion in fiscal 1997, an increase of 62
percent from last year's $2.6 billion. Equity fund sales, especially of the
Firm's tax-managed growth funds and Belvedere Equity Fund private placement,
were a major factor in the increase and represented 45 percent of total fund
sales for the year. Equity fund assets grew by 73 percent in fiscal 1997 to $5.2
billion and now represent 24 percent of total assets under management compared
to 18 percent in 1996. Among fixed-income funds, the Company's floating-rate
bank debt funds and its corporate and municipal high-yield bond funds were
significant contributors to sales.
Net of redemptions, fund sales were $1.4 billion for fiscal 1997. This,
coupled with market appreciation, helped lift mutual fund assets to $18.9
billion, 22 percent higher than a year ago.
Tax-Efficient Equity Funds Find Growing Demand
Recognizing that most investors must achieve investment goals with after-tax
dollars, Eaton Vance has focused on developing products that
are managed to deliver attractive after-tax returns. In March of 1996, the
Company introduced Eaton Vance Tax-Managed Growth Fund, which seeks to maximize
after-tax returns by carefully selecting a portfolio of high-quality growth
stocks with the intention of holding those stocks for several years. This
low-turnover strategy helps the fund keep realized capital gains to a minimum.
And, because growth stocks typically have low dividends, the fund produces
little, if any, current taxable income.
During fiscal 1997, Eaton Vance Tax-Managed Growth Fund achieved a total return
of 31.9 percent, while producing no taxable capital gain distributions. Sales of
the fund through investment professionals gained momentum throughout the year.
Media attention has heightened awareness nationwide of the impact of taxes on
mutual fund returns and contributed to the strong sales of Eaton Vance
Tax-Managed Growth Fund.
[Photos of Client Brochures]
The fund's outstanding investment performance contributed to sales,
as did an effective marketing effort by Eaton Vance Distributors, Inc. External
events also played a role. During the summer of 1997, the nation's attention was
focused on Washington and the much-debated capital gains tax cut then under
consideration. With the U.S. stock market experiencing yet another year of
strong returns, financial publications discussed the sizable capital gain
distributions that many mutual funds would be paying in the fourth quarter of
the year and the damaging effect of related taxes on investment returns. Many
prominent financial journalists highlighted the fact that most mutual funds are
managed without regard to the tax obligations they produce for their
shareholders, noting that mutual funds' published returns are often
significantly different from the returns investors ultimately realize after all
taxes are paid. This media attention has heightened awareness nationwide of the
impact of taxes on mutual fund returns and contributed to the strong sales of
Eaton Vance Tax-Managed Growth Fund.
[Graphic of Billboard]
- --------------------------------------------------------------------------------
During the last week of September, Eaton Vance sponsored this 18 by 60 foot
billboard in Orlando, Florida. Strategically placed along the highway between
the airport and the Orange County Convention Center, the advertisement was
highly successful in capturing the attention of hundreds of financial planners
attending the IAFP's (International Association For Financial Planning) Annual
Meeting, the organization's most important event. Mutual Funds for People Who
Pay Taxes is an important strategy in Eaton Vance's marketing of mutual funds in
the U.S.
Building on this healthy response, the Company launched a companion product in
September, 1997: Eaton Vance Tax-Managed Emerging Growth Fund. This fund also
seeks to maximize after-tax returns but invests in smaller companies. The fund's
goal is to identify and invest in smaller companies while they are in their
fastest growth phase, known as the emerging-growth phase, and potentially on
their way to becoming the blue-chip companies of tomorrow. To further broaden
the tax-managed product line, introduction of a tax-managed international equity
fund is planned for 1998.
<TABLE>
Assets Under Management by Type
(in billions)
At Fiscal Year End
<CAPTION>
Fiscal Year End Non-Taxable Fixed Income Taxable Fixed Income Bank Loans Money Market Counsel Assets Equities
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1990 $1.5 $0.6 $1.9 $0.7 $1.3 $1.3
1991 $2.6 $1.3 $1.7 $0.4 $2 $1.6
1992 $4.6 $1.6 $1.1 $0.4 $2.1 $1.6
1993 $8.9 $1.1 $0.8 $0.2 $2.2 $2.2
1994 $9.0 $1.3 $0.6 $0.2 $1.6 $2.3
1995 $8.9 $1.3 $1.4 $0.2 $1.8 $2.4
1996 $8.2 $1.3 $2.8 $0.2 $1.7 $3.1
1997 $7.5 $2.1 $3.9 $0.2 $2.4 $5.2
</TABLE>
Total assets under management in Eaton Vance tax-managed equity portfolios grew
by $1.9 billion, nearly tripling from $935 million at October 31, 1996 to $2.8
billion at October 31, 1997.
With two tax-managed equity funds and the broadest offering of national and
state-specific municipal bond funds in the industry, Eaton Vance launched a new
marketing initiative in September called "Mutual Funds for People Who Pay
Taxes." Eaton Vance believes that the public's awareness of mutual fund taxation
will continue to grow and that the Company is an early participant in what will
become a major sector in the mutual fund industry. Eaton Vance's "Mutual Funds
for People Who Pay Taxes" program and the marketing effort planned for the
coming year are designed to ensure that Eaton Vance captures a significant share
of the assets that will flow into tax-efficient mutual funds.
As an indication of success so far, total assets under management in Eaton Vance
tax-managed equity portfolios grew by $1.9 billion in 1997, nearly tripling from
$935 million at the beginning of the year to $2.8 billion at year end. The
Belvedere Equity Fund LLC, a private fund for tax-conscious, high net-worth
investors, contributed to this success. The fund completed its offering period
in June of 1997. This was the second consecutive year that Eaton Vance
successfully offered a private fund that allows qualifying investors to
contribute large holdings of highly appreciated common stock and gain
professional management and portfolio diversification. Both funds have
participated in the stock market's strong performance. Additional private funds
are planned for 1998.
Assets under Management by Distribution Method
(October 31, 1997)
Level Load 11%
Spread Commission 53%
No Commission 3%
Investment Counsel 11%
Exchange 11%
Front End 11%
<PAGE>
Assets in the Company's floating-rate secured bank loan funds grew by 37 percent
in fiscal 1997 to $3.9 billion.
Balanced Asset Base and Diversified Investment Capabilities Provide Strength
Equity fund assets now represent 24 percent of total assets under management.
This asset growth is in part a response to innovative product development and
marketing. It is also acknowledgment by investment professionals of Eaton
Vance's capabilities as a manager of equity assets. Equities are but one of
several asset pools that have proven to be a strength for the Company in
attracting investors to Eaton Vance funds and investment counsel services. Eaton
Vance, for example, is a leading participant in the senior secured bank loan
market and in the municipal bond market. Assets in the Company's floating-rate
secured bank loan funds grew by 37 percent in fiscal 1997 to $3.9 billion.
Furthermore, Eaton Vance has the resources required in other bond markets and in
the global equity market to operate efficiently and to provide superior returns
to its mutual fund investors.
Investment Counsel
The Firm's investment counsel division provides custom investment services to
more than 800 institutional and individual clients. Investment counsel assets
grew 33 percent during fiscal 1997 to $2.4 billion. The strong investment
performance of Eaton Vance's fixed-income asset management was a major
contributor to this growth, leading to the addition of several large new
clients.
Assets Under Management by Asset Class
(October 31, 1997)
Money Market 1%
Non-Taxable Fixed Income 36%
Equities 24%
Floating Rate Bank Loans 18%
Counsel 11%
Taxable Fixed Income 10%
<PAGE>
In fiscal 1997, Northeast Properties, Inc. sold a 43,000 square foot office
building in Boston at a pre-tax gain of $1.0 million.
Real Estate
At fiscal year end, Northeast Properties, Inc. owned 662,000 square feet of
income-producing real estate in Massachusetts, New Hampshire and New York. The
markets in which Northeast Properties operates generally strengthened in 1997,
and rental income and cash flow improved versus the prior year. Capitalizing on
this stronger market, Northeast Properties sold a 43,000 square foot office
building in Boston at a pre-tax gain of $1.0 million. During 1997, Northeast
Properties increased its ownership from 50 to 100 percent of a 55,000 square
foot office building adjacent to Eaton Vance's home office and partially
occupied by Eaton Vance personnel. This investment will enhance the value of the
Company's headquarters facilities and provide for future expansion.
Rental Property by Property Type
(October 31, 1997)
Industrial 224,000 Sq. Ft.
Retail 191,600 Sq. Ft.
Office 246,400 Sq. Ft.
Consistent with a plan to withdraw from activities not related to the management
of financial assets, Eaton Vance expects in fiscal 1998 to sell most of
Northeast Properties' holdings which are not occupied by Eaton Vance.
Precious Metal Mining
Gold operations contributed gains of $0.03 per share in 1997 and $0.08 per share
in 1996 to Eaton Vance Corp.'s earnings per share. Consistent with the plan to
withdraw from businesses unrelated to the management of financial assets,
VenturesTrident II, L.P., was terminated as scheduled at the end of calendar
1997, and substantially all of the partnership's investments were distributed to
its partners. In the future, Eaton Vance's earnings will not be subject to the
price volatility inherent in commodity investing.
New Initiatives
As the only floating-rate senior bank loan funds to feature mandatory offers to
repurchase shares, the Eaton Vance bank loan funds have a meaningful competitive
advantage in the marketplace.
Eaton Vance is well positioned to expand its services in both domestic
and foreign markets. The Company's sales and marketing efforts address the large
population of investors who seek investment advice from financial professionals.
Analysts of the mutual fund industry indicate that approximately 70 percent of
mutual fund purchases are made through professional intermediaries. New avenues
of distribution to reach this market are an important corporate focus.
In 1997, for example, Eaton Vance began offering its mutual funds to investors,
without sales commissions or other transaction fees, through fee-based
Registered Investment Advisors (RIAs) via various institutional programs as
Charles Schwab & Co., Jack White & Co., Trust Company of America, Fidelity
Investment Advisor Group, DATAlynx and Waterhouse Securities. During 1998, the
Company will actively develop this promising distribution channel in the U.S. as
well as abroad through Charles Schwab International.
Eaton Vance monitors the industry to ensure that the professionals who
distribute its products are fairly compensated for their services. To that end,
Eaton Vance adjusted the commission structure of its funds during 1997, putting
commissions on par with the Company's significant competitors.
During fiscal 1997, Eaton Vance received clearance from the Securities and
Exchange Commission to make certain improvements in the structure of its
floating-rate bank loan funds. These funds enjoyed continued popularity with
investors who want relative stability of principal and yields substantially
higher than money market interest rates. Because these funds invest in bank
loans instead of fixed-income securities, they are offered to the public as
closed-end funds, with quarterly liquidity provided by the funds' offer to
repurchase at net asset value shares tendered by fund shareholders. During every
quarter since their inception, these funds have accepted shares tendered by
those shareholders seeking liquidity. However, the process involved in doing so
was costly and was subject to the discretion of the funds' trustees. In order to
provide shareholders with an even greater assurance of quarterly liquidity and,
at the same time, to reduce fund expenses, Eaton Vance has simplified this
process and now provides mandatory offers to repurchase shares. As the only
floating-rate bank loan funds offering this feature, the Eaton Vance funds
further enhanced their record for reliability and customer service and have a
meaningful competitive advantage in the marketplace.
Outlook
The outlook for providing investment management services and distributing
investment products continues to be favorable, both in
the United States and abroad. The demographics of the baby boom generation in
the U.S. and similar populations in Europe and Asia suggest that more and more
people will be focusing on accumulating assets for important long-term financial
goals, such as a secure retirement or funding their children's education. Mutual
funds have proved to be the investment of choice to meet these objectives.
At the same time, the emergence of market-oriented economies in Latin America,
Eastern Europe and Asia suggests growing opportunities for investment and for
expanding the asset management industry worldwide.
Eaton Vance has the investment expertise, products and distribution strengths to
capitalize on these expanding asset management opportunities.
[Photo of Client Brochures]
<PAGE>
<TABLE>
Five-Year Financial Summary
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
Years Ended October 31,
(in thousands, except per share figures) 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Statement Data
Revenue:
Investment adviser and administration fees $118,434 $100,450 $ 85,393 $ 85,769 $ 75,193
Distribution income 76,382 76,182 77,978 80,069 71,651
Income from real estate activities 4,155 3,597 3,347 4,224 3,758
Other income 1,939 1,760 1,199 1,154 1,674
- ---------------------------------------------------------------------------------------------------------------------------
Total revenue 200,910 181,989 167,917 171,216 152,276
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Compensation of officers and employees 48,155 41,420 38,947 39,265 39,668
Amortization of deferred sales commissions 54,464 52,585 50,186 52,794 40,892
Other expenses 34,386 28,963 31,350 31,291 27,576
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 137,005 122,968 120,483 123,350 108,136
- ---------------------------------------------------------------------------------------------------------------------------
Operating income 63,905 59,021 47,434 47,866 44,140
- ---------------------------------------------------------------------------------------------------------------------------
Other Income (Expense):
Interest income 3,571 3,735 2,641 963 856
Interest expense (3,951) (3,742) (4,702) (5,337) (4,914)
Gain (loss) on sale of investments 3,561 546 (250) -- --
Equity in net income (loss) of affiliates 384 1,639 (1,382) (289) 3,894
Impairment loss on real estate -- (1,277) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before
income taxes, extraordinary item and cumulative
effect of change in accounting for income taxes 67,470 59,922 43,741 43,203 43,976
Income taxes 27,236 24,088 16,773 17,393 18,459
- ---------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before
extraordinary item and cumulative effect of
change in accounting for income taxes 40,234 35,834 26,968 25,810 25,517
Income from discontinued operations,
net of income taxes -- -- 3,408 2,676 1,824
Extraordinary gain on early retirement
of debt, net of income taxes -- 1,590 -- -- --
Cumulative effect of change in accounting
for income taxes -- -- -- 1,300 --
- ---------------------------------------------------------------------------------------------------------------------------
Net income $ 40,234 $ 37,424 $ 30,376 $ 29,786 $ 27,341
===========================================================================================================================
Earnings per share from continuing operations
before extraordinary item and cumulative
effect of change in accounting for income taxes $ 2.08 $ 1.87 $ 1.45 $ 1.36 $ 1.44
Earnings per share from discontinued
operations, net of income taxes -- -- 0.18 0.14 0.11
Extraordinary gain on early retirement
of debt, net of income taxes, per share -- 0.08 -- -- --
Cumulative effect of change in accounting for
income taxes, per share -- -- -- 0.07 --
- ---------------------------------------------------------------------------------------------------------------------------
Earnings per share $ 2.08 $ 1.95 $ 1.63 $ 1.57 $ 1.55
===========================================================================================================================
Dividends declared, per share $ 0.42 $ 0.35 $ 0.32 $ 0.30 $ 0.25
===========================================================================================================================
Average common and common equivalent shares outstanding 19,349 19,153 18,577 18,946 17,696
===========================================================================================================================
Balance Sheet Data:
Total assets $387,375 $360,552 $357,586 $455,506 $425,547
Long-term debt $ 50,964 $ 54,549 $ 56,102 $ 60,311 $ 73,228
Shareholders' equity $226,280 $210,780 $194,520 $165,608 $145,300
Shareholders' equity per share $ 12.23 $ 11.23 $ 10.42 $ 9.09 $ 7.94
</TABLE>
<PAGE>
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
The Company's primary sources of revenue are investment adviser and
administration fees and distribution fees received from Eaton Vance funds and
adviser fees received from separately managed accounts. Generally, these fees
are 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. The Company's major expenses are the amortization of deferred sales
commissions and other marketing costs, employee compensation, occupancy costs,
and service fees.
Results of Operations Fiscal Year 1997
Compared to Fiscal Year 1996
Eaton Vance Corp. reported record earnings of $40.2 million or $2.08 per share
in 1997 compared to $37.4 million or $1.95 per share reported in 1996. Net
income for the year ended October 31, 1996 included an extraordinary gain of
$1.6 million, or $0.08 per share, related to the early retirement at a discount
of mortgage debt on an office building owned by the Company. The per share data
for all periods presented reflect the two-for-one stock split declared on April
9, 1997 for shareholders of record on May 15, 1997.
Assets under management of $21.3 billion on October 31, 1997 were 23 percent
higher than the $17.3 billion reported a year earlier as a result of net sales
of new fund shares and appreciation of the market value of managed assets.
Mutual fund sales for the year ended October 31, 1997 of $4.2 billion were 62
percent higher than the $2.6 billion reported in fiscal 1996. This growth can be
primarily attributed to strong sales of the Eaton Vance Tax-Managed Growth Fund,
the Eaton Vance Worldwide Health Sciences Fund and a $1.1 billion private
placement of the Belvedere Equity Fund LLC. As a result of continued sales
growth, equity fund assets increased to 24 percent of total assets under
management on October 31, 1997 from 18 percent on October 31, 1996, while
taxable and non-taxable fixed-income funds decreased to 46 percent of total
mutual fund assets under management on October 31, 1997 from 55 percent a year
ago. Floating-rate bank loan funds increased to 18 percent of total assets under
management on October 31, 1997 from 17 percent on October 31, 1996.
Revenue increased $18.9 million to $200.9
million in 1997 from $182.0 million in 1996. Investment adviser and
administration fees increased by 18 percent to $118.4 million in 1997 from
$100.5 million in 1996, primarily as a result of the growth in total assets
under management and the change in the Company's product mix. Distribution fees
of $76.4 million in 1997 were comparable to the $76.2 million reported in 1996.
Operating expenses of $137.0 million were 11 percent greater than the $123.0
million recorded for 1996. The increases noted in both compensation and other
expenses were primarily the result of an increase in marketing expenses and
sales incentives associated with higher mutual fund sales and the Belvedere
Equity Fund LLC private placement. Amortization expense increased by $1.9
million or 4 percent to $54.5 million in 1997 primarily due to the increase in
gross sales of the Company's spread-commission funds.
The Company's gold mining partnership, VenturesTrident II, L.P., contributed
income of $0.1 million in the year ended October 31, 1997 compared to income of
$1.2 million a year earlier. The decrease in partnership income in 1997 resulted
primarily from reductions in the portfolio valuation of the partnership.
VenturesTrident II, L.P. was terminated effective December 31, 1997.
Interest income decreased 3 percent to $3.6 million in 1997 from $3.7 million in
fiscal 1996, largely as a result of a decrease in average cash and cash
equivalent balances maintained throughout the year. Interest expense increased
$0.3 million to $4.0 million in 1997 as a result of the acquisition of an office
building in Boston, Massachusetts and the assumption of the related mortgage.
Realized gains on investments in 1997 can be attributed to the sale of
short-term investments and the sale of an office building in Boston,
Massachusetts.
The Company's 1997 effective tax rate of 40.4 percent was substantially the same
as the 1996 effective tax rate of 40.2 percent.
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation," which was effective for fiscal
years beginning after December 15, 1995. In accordance with SFAS No. 123, the
Company has provided disclosures in Note 7 to the consolidated financial
statements presenting pro forma net income and earnings per share amounts as if
employee stock options had been expensed over the appropriate vesting periods
based on their fair value on the grant date, determined using the Black-Scholes
option pricing model.
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share." SFAS No. 128 establishes standards for computing and
presenting earnings per share and will require the Company to change its
presentation of earnings per share from primary earnings per share to basic and
diluted earnings per share for its fiscal year ending October 31, 1998. In the
first quarter of 1998, all prior period earnings per share data will be
restated. Neither basic nor diluted earnings per share as calculated in
accordance with SFAS No. 128 would be materially different from earnings per
share as presented in these financial statements.
Results of Operations Fiscal Year 1996
Compared to Fiscal Year 1995
Eaton Vance Corp. reported earnings of $37.4 million or $1.95 per share in 1996,
significantly higher than the $30.4 million or $1.63 per share reported in 1995.
Net income for the year ended October 31, 1996 included an extraordinary gain of
$1.6 million, or $0.08 per share, related to the early retirement at a discount
of mortgage debt on an office building owned by the Company. In the fourth
quarter of 1996, management committed to a plan to sell this property and
recognized a pre-tax impairment loss of $1.3 million based on the estimated net
realizable value of the property. Net income for the year ended October 31, 1995
included income from discontinued operations of $3.4 million or $0.18 per share.
Assets under management of $17.3 billion on October 31, 1996 were 8 percent
higher than the $16.0 billion reported a year earlier. Mutual fund sales for the
year ended October 31, 1996 of $2.6 billion were 63 percent higher than the $1.6
billion reported for 1995. Mutual fund redemptions were $2.1 billion in both
1996 and 1995.
Investment adviser and administration fees increased by 18 percent to $100.5
million in 1996 from $85.4 million in 1995. The increase can be attributed to
the increase in total assets under management as well as to the growth in 1996
in the Company's Senior Debt Portfolio and equity portfolios which have higher
management and administration fee rates than the Company's other portfolios.
Assets under management in the Senior Debt Portfolio increased to $2.8 billion
on October 31, 1996 from $1.4 billion on October 31, 1995.
Distribution fees decreased by $1.8 million or 2 percent to $76.2 million for
1996 from $78.0 million in 1995. The decrease in distribution fees can be
attributed to a decrease in average assets under management in the Company's
spread-commission funds.
Operating expenses of $123.0 million were 2 percent greater than the $120.5
million recorded a year earlier. Compensation expense increased by $2.5 million
to $41.4 million in 1996, primarily as a result of an increase in sales
incentives associated with the increase in mutual fund sales. Amortization
expense increased by $2.4 million in 1996 or 5 percent to $52.6 million
primarily as a result of the increase in gross sales of Eaton Vance Prime Rate
Reserves, a spread-commission fund which invests in the Company's Senior Debt
Portfolio. The increases noted in compensation and amortization expense were
offset by a decrease in other expenses compared to 1995. Other expenses in 1995
included a one-time charge of $2.2 million resulting from a National Association
of Securities Dealers (NASD) arbitration panel award.
The Company's gold mining partnerships contributed income of $1.2 million in the
year ended October 31, 1996 compared to a loss of $1.4 million a year earlier.
The loss in 1995 resulted primarily from reductions in the portfolio valuations
of the partnerships.
Interest income increased 42 percent to $3.7 million in 1996 from $2.6 million
in 1995, largely as a result of a 47 percent increase in cash, cash equivalents
and short-term investments. Interest expense decreased $1.0 million to $3.7
million in 1996 as a result of the retirement of mortgage debt in both the
second quarter of 1996 and the fourth quarter of 1995.
Due to the absence of gold mining losses which reduced taxes in 1995, the
Company's effective tax rate rose to 40.2 percent in 1996 from 38.4 percent in
1995.
Liquidity and Capital Resources
Cash, cash equivalents and short-term investments aggregated $140.5 million at
October 31, 1997, an increase of $24.1 million from October 31, 1996.
Operating activities generated cash of $44.7 million in fiscal 1997 compared to
$49.4 million in fiscal 1996. The decrease can be attributed primarily to an
increase in commissions paid to brokers in connection with the sale of the
Company's spread-commission funds and the payment of $5.8 million associated
with an assessment made by the Massachusetts Department of Revenue ("MDOR"). The
assessment was made in conjunction with the MDOR's examination of the Company's
state tax returns for fiscal years 1993 through 1995. The Company, on the basis
of the opinion of legal counsel, has filed for an abatement and intends to
vigorously contest the assessment. Massachusetts General Laws, however, require
payment of the amount assessed prior to the resolution of the issues and the
Company has made such payment as required. The payment of additional taxes and
interest has therefore been recorded in "Other receivables" on the Company's
consolidated balance sheet.
Investing activities, consisting primarily of the purchase and sale of
short-term investments, reduced cash and cash equivalents by $12.8 million and
$50.7 million, respectively, in fiscal 1997 and 1996. In fiscal 1997, additions
to real estate, equipment and leasehold improvements included the purchase of
the remaining 50 percent interest in an office building in Boston, Massachusetts
adjacent to the Company's home office.
Financing activities for the Company reduced cash and cash equivalents by $25.6
million in fiscal 1997 and $10.8 million in fiscal 1996. Significant financing
activities during fiscal 1997 included the repurchase of 803,000 shares of the
Company's non-voting common stock. The Company's dividend was increased in the
fourth quarter of 1997 to an effective annual rate of $0.48 per share.
At October 31, 1997, the Company had no borrowings under its $50.0 million
senior unsecured revolving credit facility.
The Company anticipates that cash flows from operations and available debt will
be sufficient to meet the Company's foreseeable cash requirements and provide
the Company with the financial resources to take advantage of strategic growth
opportunities.
Certain Factors That May Affect Future Results
From time to time, information provided by the Company or information included
in its filings with the Securities and Exchange Commission (including this
Annual Report) may contain statements which are not historical facts, for this
purpose referred to as "forward-looking statements." The Company's actual future
results may differ significantly from those stated in any forward-looking
statements. Important factors that could cause actual results to differ
materially from those indicated by such forward-looking statements include, but
are not limited to, the factors discussed below.
The Company is subject to substantial competition in all aspects of its
business. The Company's ability to market investment products is highly
dependent on access to the retail distribution systems of national and regional
securities dealers firms, which generally offer competing internally and
externally managed investment products. Although the Company has historically
been successful in gaining access to these channels, there can be no assurance
that it will continue to do so. The inability to have such access could have a
material adverse effect on the Company's business.
There are few barriers to entry by new investment management firms. The
Company's funds compete against an ever increasing number of investment products
sold to the public by investment dealers, banks, insurance companies and others
that sell tax-free investments, taxable income funds, equity funds and other
investment products. Many institutions competing with the Company have greater
resources than the Company. The Company competes with other providers of
investment products on the basis of the range of products offered, the
investment performance of such products, quality of service, fees charged, the
level and type of sales representative compensation, the manner in which such
products are marketed and distributed and the services provided to investors.
The Company derives almost all of its revenues from investment adviser and
administration fees and distribution income received from the Eaton Vance funds
and separately managed accounts. As a result, the Company is dependent upon the
contractual relationships it maintains with these funds and separately managed
accounts. In the event that any of the management contracts, administration
contracts, underwriting contracts or service agreements is not renewed pursuant
to the terms of these contracts or agreements, the Company's financial results
may be adversely affected.
The major sources of revenue for the Company - i.e., investment adviser fees -
are calculated as a percentage of assets under management. A decline in
securities prices in general would reduce fee income. If, as a result of
inflation, expenses rise and assets under management decline, lower fee income
and higher expenses will reduce or eliminate profits. If expenses rise and
assets rise, bringing increased fees to offset the increased expenses, profits
may not be affected by inflation. There is no predictable relationship between
changes in financial assets under management and the rate of inflation.
<PAGE>
Consolidated Statements of Income
- --------------------------------------------------------------------------------
Years Ended
October 31,
(in thousands, except per share figures) 1997 1996 1995
- --------------------------------------------------------------------------------
REVENUE:
Investment adviser and administration fees $118,434 $100,450 $ 85,393
Distribution income 76,382 76,182 77,978
Income from real estate activities 4,155 3,597 3,347
Other income 1,939 1,760 1,199
- --------------------------------------------------------------------------------
Total revenue 200,910 181,989 167,917
- --------------------------------------------------------------------------------
EXPENSES:
Compensation of officers and employees 48,155 41,420 38,947
Amortization of deferred sales commissions 54,464 52,585 50,186
Other expenses 34,386 28,963 31,350
- --------------------------------------------------------------------------------
Total expenses 137,005 122,968 120,483
- --------------------------------------------------------------------------------
Operating income 63,905 59,021 47,434
OTHER INCOME (EXPENSE):
Interest income 3,571 3,735 2,641
Interest expense (3,951) (3,742) (4,702)
Gain (loss) on sale of investments 3,561 546 (250)
Equity in net income (loss) of affiliates 384 1,639 (1,382)
Impairment loss on real estate -- (1,277) --
- --------------------------------------------------------------------------------
Income from continuing operations before
income taxes and extraordinary item 67,470 59,922 43,741
Income taxes 27,236 24,088 16,773
- --------------------------------------------------------------------------------
Income from continuing operations before
extraordinary item 40,234 35,834 26,968
Income from discontinued operations, net of
income taxes -- -- 3,408
Extraordinary gain on early retirement
of debt, net of income taxes -- 1,590 --
- --------------------------------------------------------------------------------
Net income $ 40,234 $ 37,424 $ 30,376
================================================================================
Earnings per share from continuing
operations before extraordinary item $ 2.08 $ 1.87 $ 1.45
Earnings per share from discontinued
operations, net of income taxes -- -- 0.18
Extraordinary gain on early retirement
of debt, net of income taxes, per share -- 0.08 --
- --------------------------------------------------------------------------------
Earnings per share $ 2.08 $ 1.95 $ 1.63
================================================================================
Dividends declared, per share $ 0.42 $ 0.35 $ 0.32
================================================================================
Average common and common equivalent shares
outstanding 19,349 19,153 18,577
================================================================================
See notes to consolidated financial statements.
<PAGE>
Consolidated Balance Sheets
- -----------------------------------------
Years Ended
October 31,
(in thousands) 1997 1996
- --------------------------------------------------------------------------------
Assets
CURRENT ASSETS:
Cash and equivalents $ 61,928 $ 55,583
Short-term investments 78,592 60,792
Investment adviser fees and other receivables 7,204 7,650
Assets held for sale 8,539 2,500
Other current assets 7,905 3,837
- --------------------------------------------------------------------------------
Total current assets 164,168 130,362
- --------------------------------------------------------------------------------
OTHER ASSETS:
Investments:
Real estate 16,038 18,541
Investment in affiliates 7,918 9,565
Investment companies 10,763 8,965
Other investments 5,160 5,763
Other receivables 5,850 1,241
Deferred sales commissions 172,485 180,283
Equipment and leasehold improvements,
net of accumulated depreciation
and amortization of $5,075 and
$4,543, respectively 2,537 2,828
Goodwill and other intangibles,
net of accumulated amortization
of $3,559 and $2,924, respectively 2,456 3,004
- --------------------------------------------------------------------------------
Total other assets 223,207 230,190
- --------------------------------------------------------------------------------
Total assets $387,375 $360,552
================================================================================
See notes to consolidated financial statements.
<PAGE>
Years Ended
October 31,
(in thousands, except share figures) 1997 1996
- --------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
CURRENT LIABILITIES:
Accrued compensation $ 12,252 $ 10,981
Accounts payable and accrued expenses 9,515 8,129
Dividend payable 2,226 1,881
Current portion of long-term debt 9,458 1,545
Other current liabilities 6,517 1,835
- --------------------------------------------------------------------------------
Total current liabilities 39,968 24,371
- --------------------------------------------------------------------------------
OTHER LIABILITIES:
6.22% Senior Note 42,857 50,000
Mortgage notes payable 8,107 4,549
- --------------------------------------------------------------------------------
Total other liabilities 50,964 54,549
- --------------------------------------------------------------------------------
Deferred income taxes 70,163 70,852
- --------------------------------------------------------------------------------
Commitments and contingencies -- --
SHAREHOLDERS' EQUITY:
Common stock, par value $.03125 per share:
Authorized, 160,000 shares
Issued, 38,720 shares 1 1
Non-voting common stock, par value $.03125 per share:
Authorized, 23,840,000 shares
Issued, 18,468,834 and 18,729,576 shares, respectively 577 585
Additional paid-in capital 21,001 36,788
Unrealized gain on investments 2,445 3,598
Notes receivable from stock option exercises (3,168) (3,221)
Retained earnings 205,424 173,029
- --------------------------------------------------------------------------------
Total shareholders' equity 226,280 210,780
- --------------------------------------------------------------------------------
Total shareholders' equity $387,375 $360,552
================================================================================
See notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
Years Ended
October 31,
(in thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
Cash and equivalents (including IB&T for 1995),
beginning of year $55,583 $67,650 $34,025
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income, excluding discontinued operations 40,234 37,424 26,968
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary gain on early retirement of
debt -- (1,590) --
Equity in net (income) loss of affiliates (384) (1,639) 1,382
Dividends received from affiliate 928 -- --
Impairment loss on real estate -- 1,277 --
Deferred income taxes (2,802) (12,239) (8,440)
Amortization of deferred sales commissions 54,464 52,585 50,186
Depreciation and other amortization 2,600 2,420 2,377
Payment of sales commissions (76,333) (55,784) (39,843)
Capitalized sales charges received 29,658 32,580 36,218
Gain on sale of investments (3,561) (546) 250
Changes in other assets and liabilities (91) (5,073) 3,061
Cash used for discontinued operations -- -- (8,574)
- --------------------------------------------------------------------------------
Net cash provided by operating activities 44,713 49,415 63,585
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate, equipment and
leasehold improvements (2,201) (2,680) (1,172)
Investment in partnership -- -- (88)
Net (increase) decrease in notes and
receivables from affiliates 694 563 (1,121)
Investment in affiliate -- -- (4,812)
Net increase in investment companies and
other investments (205) (2,762) (945)
Acquisition of management and distribution
contracts -- (2,000) --
Proceeds from sale of real estate 3,534 -- --
Proceeds from sale of investments 64,294 16,125 64
Purchase of short-term investments (78,879) (59,939) (11,000)
- --------------------------------------------------------------------------------
Net cash used for investing activities (12,763) (50,693) (19,074)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (1,573) (1,486) (6,469)
Proceeds from the issuance of non-voting
common stock 5,627 2,602 3,351
Dividends paid (7,839) (6,415) (5,891)
Repurchase of non-voting common stock (21,820) (5,490) (1,877)
- --------------------------------------------------------------------------------
Net cash used for financing activities (25,605) (10,789) (10,886)
- --------------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents 6,345 (12,067) 33,625
- --------------------------------------------------------------------------------
Cash and equivalents, end of year $61,928 $55,583 $67,650
================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 3,887 $ 3,748 $ 4,708
================================================================================
Income taxes paid $36,737 $38,723 $27,662
================================================================================
See notes to consolidated financial statements.
<PAGE>
<TABLE>
Consolidated Statements of Shareholders' Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Notes
Receivable
Non-Voting Additional Unrealized from Stock Total
Common Common Paid-in Gain (Loss) on Option Retained Shareholders'
(in thousands) Shares Stock Stock Capital Investments Exercises Earnings Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, October 31, 1994 18,220 $1 $568 $ 49,595 $ -- $(2,511) $117,955 $165,608
Add (Deduct):
Net income -- -- -- -- -- -- 30,376 30,376
Dividends declared ($0.32
per share) -- -- -- -- -- -- (6,020) (6,020)
Issuance of non-voting
common stock:
On exercise of stock options 348 -- 11 2,371 -- (1,258) -- 1,124
Under employee stock
purchase plan 50 -- 1 674 -- -- -- 675
Under employee incentive
plan 22 -- 1 293 -- -- -- 294
For investment in affiliate 166 -- 5 2,693 -- -- -- 2,698
Repurchase of non-voting
common stock (136) -- (4) (1,873) -- -- -- (1,877)
Unrealized gain on
investments -- -- -- -- 1,186 -- -- 1,186
Collection of notes
receivable -- -- -- -- -- 456 -- 456
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, October 31, 1995 18,670 $1 $582 $ 53,753 $ 1,186 $(3,313) $142,311 $194,520
Add (Deduct):
Net income -- -- -- -- -- -- 37,424 37,424
Dividends declared ($0.35
per share) -- -- -- -- -- -- (6,706) (6,706)
Issuance of non-voting
common stock:
On exercise of stock options 332 -- 10 1,623 -- (747) -- 886
Under employee stock
purchase plan 52 -- 2 646 -- -- -- 648
Under employee incentive
plan 22 -- 1 320 -- -- -- 321
Repurchase of non-voting
common stock (308) -- (10) (5,480) -- -- -- (5,490)
Unrealized gain on
investments -- -- -- -- 2,412 -- -- 2,412
Distribution of Investors
Financial Services Corp. -- -- -- (14,074) -- -- -- (14,074)
Collection of notes receivable -- -- -- -- -- 839 -- 839
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, October 31, 1996 18,768 $1 $585 $ 36,788 $ 3,598 $(3,221) $173,029 $210,780
Add (Deduct):
Net income -- -- -- -- -- -- 40,234 40,234
Dividends declared ($0.42
per share) -- -- -- -- -- -- (7,839) (7,839)
Issuance of non-voting
common stock:
On exercise of stock options 489 -- 15 4,702 -- (718) -- 3,999
Under employee stock
purchase plan 36 -- 1 592 -- -- -- 593
Under employee incentive plan 17 -- 1 316 -- -- -- 317
Tax benefit of exercise
of stock options -- -- -- 398 -- -- -- 398
Repurchase of non-voting
common stock (803) -- (25) (21,795) -- -- -- (21,820)
Unrealized loss on investments -- -- -- -- (1,153) -- -- (1,153)
Collection of notes receivable -- -- -- -- -- 771 -- 771
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, OCTOBER 31, 1997 18,507 $1 $ 577 $ 21,001 $ 2,445 $(3,168) $205,424 $226,280
====================================================================================================================================
See notes to consolidated financial statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. Summary of Significant Accounting Policies
BUSINESS AND ORGANIZATION
Eaton Vance Corp. and subsidiaries (the "Company") provide investment advisory
and distribution services to mutual funds and investment management services to
private counsel clients. Company revenue is largely dependent on the total value
and composition of assets under management, which include domestic equity,
international equity, domestic and international debt, and bank loan portfolios.
Accordingly, fluctuations in financial markets and in the composition of assets
under management impact revenue and the results of operations.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Eaton Vance Corp.
and all of its wholly owned subsidiaries. The equity method of accounting is
used for investments in affiliates in which the Company's ownership ranges from
20 to 50 percent. All material intercompany accounts and transactions have been
eliminated.
CASH AND EQUIVALENTS
Cash equivalents consist principally of short-term, highly liquid investments
and are recorded at cost, which is equivalent to market value.
INVESTMENTS
Investments in short-term investments, investment companies and certain other
investments are classified as available-for-sale and are carried at their
estimated fair value. Net unrealized holding gains on securities are reported
net of income taxes as a separate component of shareholders' equity.
The Company, as a non-managing general partner of an investment company
partnership, is required to maintain a minimum investment in such partnership.
At October 31, 1997, the Company's investment exceeded the minimum $0.9 million
required under the terms of the partnership agreement.
Investments in investment companies held in connection with the Company's
activities as principal underwriter are recorded at market value. Other
investments are carried at the lower of cost or management's estimate of net
realizable value.
REAL ESTATE
Real estate properties are carried at the lower of cost or fair value, with
depreciation provided using the straight-line method over the estimated useful
lives of the assets. Assets held for sale are carried at the lower of cost or
fair market value less cost to sell.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
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.
DEFERRED SALES COMMISSIONS
Sales commissions paid to brokers and dealers in connection with sales of shares
of certain investment companies are capitalized 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.
Contingent deferred sales charges received by the Company from redeeming
shareholders reduce unamortized deferred sales commissions first, with any
remaining amount recorded in income.
GOODWILL AND OTHER INTANGIBLES
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. Other intangibles represent the cost of
management contracts acquired. Amortization is provided on a straight-line basis
over the estimated useful lives of these assets, not exceeding 20 years.
REVENUE RECOGNITION
Investment advisory, administration and distribution fees are accrued as earned.
Sales of shares of investment companies in connection with the Company's
activities as principal underwriter are accounted for on a settlement date
basis, with the related commission income and expenses recorded on a trade date
basis.
INCOME TAXES
Deferred income taxes reflect the expected future tax consequences of temporary
differences between the carrying amounts and tax bases of the Company's assets
and liabilities. Such taxes relate principally to sales commissions paid to
brokers and dealers, which are deducted currently for tax purposes.
EARNINGS PER SHARE
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.
The number of shares used for purposes of calculating earnings per share and all
other per share data has been adjusted for all periods presented to reflect a
two-for-one stock split effective May 15, 1997.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." SFAS No.
128 establishes standards for computing and presenting earnings per share and
will require a dual presentation of basic and diluted earnings per share on the
face of the consolidated statement of income for all periods presented beginning
with the Company's fiscal quarter ending January 31, 1998. Neither basic nor
diluted earnings per share as calculated in accordance with SFAS No. 128 would
be materially different from earnings per share as presented in these
consolidated financial statements.
STOCK-BASED COMPENSATION
Effective November 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation." The
Company has elected to continue to account for stock-based compensation in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees." Accordingly, pro forma net income and earnings per
share information has been presented in Note 7 as required under SFAS No. 123.
ACCOUNTING ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results may differ from those estimates.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current year
presentation.
2. Investment in Affiliates
The Company maintained a 21 percent and 23 percent equity interest in Lloyd
George Management (BVI) Limited (LGM) at October 31, 1997 and 1996,
respectively. LGM is an independent investment management company based in Hong
Kong that manages a series of emerging market mutual funds sponsored by the
Company. The Company's investment in LGM was $7.8 million and $8.4 million at
October 31, 1997 and 1996, respectively. At October 31, 1997, the Company's
investment exceeded its share of the underlying net assets of LGM by $6.0
million. This excess is being amortized over a 20-year period.
The Company also maintains an 82 percent general partnership interest in Fulcrum
Management Partners II, L.P. (FMPII), a Delaware limited partnership. FMPII is a
20 percent general partner of VenturesTrident II, L.P. (VTII), a Delaware
limited partnership formed to invest in equity securities of public and private
gold mining ventures. In addition to its general partnership interest in FMPII,
the Company maintains a direct 3 percent limited partnership interest in VTII.
VTII has completed its tenth and final year and was terminated effective
December 31, 1997. In fiscal 1997, the Company received gold mining securities
with a value of $1.0 million in a distribution of VTII's assets and additional
gold mining securities with a value of $2.1 million in settlement of notes
receivable for management services provided to the partnership. The Company
received gold mining securities with a value of $1.4 million in a distribution
from VTII in fiscal 1996.
In fiscal 1996, the Company received gold mining securities with a value of
approximately $0.3 million resulting from the termination of another gold mining
partnership (VenturesTrident, L.P.) (VT) and the subsequent distribution of the
partnership's assets. The Company received additional gold mining securities
with a value of $1.8 million in settlement of notes receivable for management
services provided to VT.
The Company's investment in these gold mining partnerships was $137,000 and $1.2
million at October 31, 1997 and 1996, respectively.
3. Discontinued Operations
On November 10, 1995, the Company completed the spin-off of its banking
operations in a tax-free distribution to its shareholders of shares of Investors
Financial Services Corp. (IFSC), a newly created holding company for Investors
Bank & Trust Company. Under the plan of distribution, the Company transferred to
IFSC approximately $14.1 million of net banking assets, including $10.1 million
of cash. Each shareholder of the Company received 2.799 shares of Common Stock
of IFSC and .538 shares of Class A Stock of IFSC for each 10 shares of Eaton
Vance Corp. stock held at the close of business on October 30, 1995, which was
the record date of the distribution. The accompanying consolidated statements of
income and cash flows for fiscal 1995 reflect the banking business as a
discontinued operation. Revenue and income taxes applicable to discontinued
operations were $57.4 million and $2.8 million, respectively, in 1995. The
contribution to fiscal 1996 net income from IFSC was not material to the
consolidated financial statements.
4. Real Estate Investments
Real estate investments held at October 31, 1997 and 1996 follow:
(in thousands) 1997 1996
- ----------------------------------------------------------------------
Buildings $18,254 $24,632
Land 2,279 1,721
- ----------------------------------------------------------------------
Total 20,533 26,353
Less accumulated
depreciation 4,495 7,534
- ----------------------------------------------------------------------
Net book value 16,038 18,819
Share of accumulated
losses in excess of
partnership interest -- (278)
- ----------------------------------------------------------------------
Total $16,038 $18,541
======================================================================
In 1996, the Company's real estate subsidiary retired at a discount a mortgage
with a remaining unpaid balance of $4.0 million and realized an extraordinary
gain on the retirement of $1.6 million, net of income taxes of $1.1 million.
Subsequent to the retirement, the Company committed to a plan to sell the
property previously under mortgage and recognized a pre-tax impairment loss of
$1.3 million based on its estimated net realizable value. In 1997, the Company
sold the property and recognized a pre-tax gain of $1.0 million based on a
carrying value of $2.5 million at the time of sale.
In 1997, the Company's real estate subsidiary acquired the remaining 50 percent
interest in a partnership which owns an office building in Boston, Massachusetts
for $0.6 million in cash. The acquisition was accounted for using the purchase
method of accounting and, accordingly, the purchase price was allocated to the
assets acquired and the liabilities assumed based on their estimated fair values
on the date of acquisition. The cost in excess of net assets acquired of $88,000
is being amortized on a straight-line basis over a 20-year period. The operating
results of the acquired partnership interest have been included in the
consolidated financial statements since the date of acquisition. The acquisition
did not have a material pro forma impact on operations.
In 1997, the Company committed to a plan to sell two industrial warehouse
buildings located in Springfield, Massachusetts and Colonie, New York and a
shopping center in Goffstown, New Hampshire. The estimated net realizable values
of the buildings exceeded their respective carrying values of $1.4 million, $1.6
million and $5.5 million at October 31, 1997. The Company expects sales of the
properties to be completed in fiscal 1998.
5. Long-Term Debt
6.22% SENIOR NOTE
The Company has 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 full at any
time. Certain covenants in the Senior Note Purchase Agreement require specific
levels of cash flow and net income and others restrict additional investment and
indebtedness.
REVOLVING CREDIT FACILITY
The Company has a five-year, senior unsecured revolving credit agreement with
six unaffiliated banks under which it may borrow up to $50 million. The terms of
the facility provide for various borrowing rate options and allow the Company to
increase the facility amount to a maximum of $75 million at any time during the
five-year period. The agreement contains financial covenants with respect to
borrowings, tangible net worth leverage and interest coverage and requires the
Company to pay an annual facility fee on the total commitment. The facility fee
is calculated on a pricing grid based on the Company's total debt to earnings
ratio. At October 31, 1997, the Company had no borrowings under this facility.
MORTGAGE NOTES PAYABLE
The balance of mortgage notes payable on October 31, 1997 and 1996 follow:
Interest
Maturity Rate 1997 1996
- ----------------------------------------------------------------------
(in thousands)
2002 7.97% $ 2,126 $2,180
1999 9.75% 5,872 --
- -- Floating -- 1,349
2015-2016 Various 2,424 2,565
- ----------------------------------------------------------------------
Total $10,422 6,094
======================================================================
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. At October 31, 1997, non-recourse mortgages totaled approximately $9.2
million.
Principal payments due on mortgage notes outstanding at October 31, 1997 for
each of the next five years and in the aggregate thereafter follow:
Year Ending
October 31 Amount
- ----------------------------------------------------------------------
(in thousands)
1998 $ 2,315
1999 5,965
2000 142
2001 143
2002 143
Thereafter 1,714
- ----------------------------------------------------------------------
Total $10,422
======================================================================
6. Lease Commitments
The Company leases certain real estate and equipment under noncancelable
operating leases. Rent expense under these leases in 1997, 1996 and 1995
amounted to $0.6 million, $0.7 million and $0.7 million, respectively. Future
minimum lease commitments are as follows:
Year Ending
October 31 Amount
- ----------------------------------------------------------------------
(in thousands)
1998 $ 544
1999 574
2000 574
2001 562
2002 314
Thereafter --
- ----------------------------------------------------------------------
Total $2,568
======================================================================
7. Stock Plans
Effective November 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation." As a
result, the Company has elected to continue to account for stock-based
compensation in accordance with Accounting Principles Board (APB) Opinion No.
25, "Accounting for Stock Issued to Employees," and has provided below the
additional pro forma disclosures required by SFAS No. 123. The adoption of this
standard has not had an impact on the Company's financial position or results of
operations.
In accordance with APB No. 25, no compensation cost has been recognized in the
consolidated financial statements for the Company's stock option, stock purchase
and stock alternative plans. Had compensation cost for the Company's stock-based
compensation plans been determined consistent with the fair value method as
described in SFAS No. 123, the Company's net income and earnings per share for
the years ended October 31, 1997 and 1996 would have been reduced to the
following pro forma amounts:
(net income figures in thousands) 1997 1996
- ----------------------------------------------------------------------
Net income:
As reported $40,234 $37,424
Pro forma $39,044 $37,007
Earnings per share:
As reported $ 2.08 $ 1.95
Pro forma $ 2.02 $ 1.93
The fair value of each option grant included in the pro forma net income shown
above is estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions used for grants in fiscal
1997 and 1996: dividend yield of 1.8 percent; expected volatility of 30 percent;
risk-free interest rate of 6.2 percent and 5.6 percent, respectively; and
expected option lives of five years. For purposes of pro forma disclosure, the
estimated fair value of each option grant is amortized to expense over the
option vesting period. These pro forma amounts may not be indicative of the
future benefit, if any, to be received by the option holder.
The pro forma information reflected above may not be representative of the
amounts to be expected in future years as the fair value method of accounting
described in SFAS No. 123 is not applicable to options granted in fiscal years
prior to 1996.
STOCK OPTION PLAN
The Company has a Stock Option Plan administered by the Option Committee of the
Board of Directors under which stock options may be granted to key employees of
the Company. No stock options may be granted under the plan with an exercise
price of less than the fair market value of the stock at the time the stock
option is granted. The options expire five years from the date of grant and vest
over a two-, three- or four-year period as stipulated in each grant.
Stock option transactions under the current plan and predecessor plans are
summarized as follows:
1997 1996 1995
- --------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- --------------------------------------------------------------------------------
Balance, beginning
of period 1,433,294 $11.73 1,339,442 $10.90 1,465,496 $10.02
Granted 496,396 21.02 282,540 14.22 266,600 12.67
Exercised (489,619) 9.63 (332,720) 4.92 (348,654) 6.62
Forfeited/Expired (118,826) 13.29 (134,784) 12.39 (44,000) 12.47
Adjustment for spin-off -- -- 278,816 12.04 -- --
- --------------------------------------------------------------------------------
Balance, end of
period 1,321,245 $12.60 1,433,294 $11.73 1,339,442 $10.90
================================================================================
Outstanding options to subscribe to shares of non-voting common stock issued
under the current plan and predecessor plans are summarized as follows:
Options Outstanding Options Exercisable
- --------------------------------------------------------------------------------
Weighted
Average Weighted Weighted
Outstanding Remaining Average Exercisable Average
Range of as of Contractual Exercise as of Exercise
Exercise Prices 10/31/97 Life Price 10/31/97 Price
- --------------------------------------------------------------------------------
$11.28-$11.48 347,283 1.3 $11.40 336,291 $11.39
$12.41-$15.54 481,066 2.3 13.91 331,190 13.83
$20.87-$22.96 492,896 4.1 21.02 -- --
- --------------------------------------------------------------------------------
1,321,245 2.7 $15.90 667,481 $12.60
================================================================================
In November 1997, the Company granted options for an additional 315,000 shares
at prices ranging from $35.69 to $39.26.
EMPLOYEE STOCK PURCHASE PLAN
A total of 824,000 shares of the Company's non-voting common stock has been
reserved for issuance under an Employee Stock Purchase Plan. The plan permits
eligible full-time employees to direct up to 15 percent of their salaries to a
maximum of $12,500 toward the purchase of Eaton Vance Corp. non-voting common
stock at the lower of 90 percent of the market price of the non-voting common
stock at the beginning or at the end of each six-month offering period. Through
October 31, 1997, 707,000 shares have been issued pursuant to this plan.
INCENTIVE PLAN--STOCK ALTERNATIVE
A total of 600,000 shares of the Company's non-voting common stock has been
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 average market price of the stock for the five days subsequent to the end
of the six-month offering period. Through October 31, 1997, 174,000 shares have
been issued pursuant to this plan.
EXECUTIVE LOAN PROGRAM
The Company has established an Executive Loan Program under which a maximum of
$10.0 million is available for loans to certain key employees for purposes of
financing the exercise of stock options for shares of the Company's non-voting
common stock. Such loans are written for a seven-year period, at varying fixed
interest rates (currently ranging from 5.3 percent to 8.3 percent), are payable
in annual installments commencing with the third year in which the loan is
outstanding, and are collateralized by the stock issued upon exercise of the
option. Loans outstanding under this program amounted to $3.2 million at both
October 31, 1997 and 1996.
8. Employee Benefit Plans
PROFIT SHARING RETIREMENT PLAN
The Company has a discretionary profit sharing retirement plan for the benefit
of substantially all employees whereby up to 15 percent of eligible compensation
of participants may be contributed. The Company has contributed $2.9 million,
$2.7 million and $2.8 million, the maximum amounts permitted under the plan, for
the years ended October 31, 1997, 1996 and 1995, respectively.
SAVINGS PLAN AND TRUST
The Company has a Savings Plan and Trust which is qualified under Section 401 of
the Internal Revenue Code. All full-time employees who have met certain age and
length of service requirements are eligible to participate in the plan. This
savings plan allows participating employees to contribute up to eight percent of
their gross salary on a pretax basis to the plan. The Company then matches each
participant's contribution on a dollar-for-dollar basis up to a maximum of
$1,040. The Company's expenses under the plan were $0.3 million for each of the
years ended October 31, 1997, 1996 and 1995.
SUPPLEMENTAL PROFIT SHARING PLAN
The Company has an unfunded, non-qualified Supplemental Profit Sharing Plan
whereby certain key employees of the Company may receive profit sharing
contributions in excess of the amounts allowed under the Profit Sharing
Retirement Plan. No employee may receive combined contributions in excess of
$30,000 to the Profit Sharing Retirement Plan and the Supplemental Profit
Sharing Plan. The Company's expense under the plan for each of the years ended
October 31, 1997 and 1996 was $0.1 million.
9. Common Stock Repurchases
On April 9, 1997, the Company's Board of Directors authorized the purchase by
the Company of up to 1,000,000 shares of the Company's non-voting common stock.
Through October 31, 1997, 368,000 shares have been acquired under this
authorization. An additional 435,000 shares were acquired
in fiscal 1997 under a previous repurchase authorization.
10. Income Taxes
The provision for income taxes for the years ended October 31, 1997, 1996 and
1995 consists of the following:
(in thousands) 1997 1996 1995
- ----------------------------------------------------------------------
Current:
Federal $25,162 $30,450 $19,505
State 4,876 5,877 5,708
Deferred:
Federal (2,405) (10,261) (5,459)
State (397) (1,978) (2,981)
- ----------------------------------------------------------------------
Income taxes $27,236 $24,088 $16,773
======================================================================
Deferred income taxes reflect the expected future tax consequences of temporary
differences between the carrying amounts and tax bases of the Company's assets
and liabilities. The significant components of deferred income taxes are as
follows:
(in thousands) 1997 1996
- ----------------------------------------------------------------------
DEFERRED TAX ASSETS:
Capital loss carryback $ 1,317 $ 1,317
Reserve for arbitration
award 1,255 1,077
Impairment loss on
real estate -- 522
Investments in affiliate
and limited partnership 528 414
Other 188 538
- ----------------------------------------------------------------------
Total $ 3,288 $ 3,868
======================================================================
DEFERRED TAX LIABILITIES:
Deferred sales
commissions $(66,779) $(69,809)
Differences between
book and tax bases
of property (1,353) (1,744)
Unrealized net
holding gains
on investments (1,492) (1,951)
Other (1,255) (1,216)
- ----------------------------------------------------------------------
Total $(70,879) $(74,720)
======================================================================
NET DEFERRED TAX LIABILITY $(67,591) $(70,852)
======================================================================
Deferred tax assets and liabilities are reflected on the Company's consolidated
balance sheets at October 31, 1997 and 1996 as follows:
(in thousands) 1997 1996
- ----------------------------------------------------------------------
Current deferred tax assets $ 2,572 $ --
Non-current deferred tax liabilities (70,163) (70,852)
- ----------------------------------------------------------------------
Net deferred tax liability $(67,591) $(70,852)
======================================================================
The following table reconciles the statutory federal income tax rate to the
Company's effective income tax rate:
1997 1996 1995
- ----------------------------------------------------------------------
Federal statutory tax rate 35.0% 35.0% 35.0%
Increases (decreases) in taxes from:
State income tax (net of effect of
federal tax) 4.3 4.2 3.9
Tax deductible losses on mining
investments -- (1.7) (5.4)
Other 1.1 2.7 4.8
- ----------------------------------------------------------------------
Effective tax rate 40.4% 40.2% 38.3%
======================================================================
The Massachusetts Department of Revenue (MDOR) has examined the tax returns for
the Company and its subsidiaries for the fiscal years 1993 through 1995. In
connection with this examination, the MDOR has assessed additional taxes and
interest of $5.8 million. In the opinion of management, after consultation with
outside tax and legal counsel, there is significant merit to the positions
claimed on the tax returns as filed and the Company intends to contest
vigorously the assessment. However, Massachusetts General Laws require the
Company to pay the assessment in advance. At October 31, 1997, the payment has
been recorded in "Other receivables" on the Company's consolidated balance
sheet.
11. Financial Instruments
The estimated fair value of the Company's financial instruments has been
determined by the Company using available market information and appropriate
valuation methodologies. The fair value amounts discussed below are not
necessarily indicative of either the amounts the Company would realize upon
disposition of these instruments or the Company's intent or ability to dispose
of these assets.
CASH AND EQUIVALENTS, SHORT-TERM INVESTMENTS AND INVESTMENT IN INVESTMENT
COMPANIES
The estimated fair value of cash and equivalents, short-term investments and
investment in investment companies approximates their carrying value.
OTHER INVESTMENTS
Included in other investments are certain investments carried at cost, amounting
to $0.9 million and $1.1 million at October 31, 1997 and 1996, respectively.
Management believes it is impracticable to calculate the fair values of these
investments due to the difficulty of predicting future returns and the period in
which these amounts will be received. Accordingly, the Company values these
investments at cost with adjustments for impairment, if needed.
The estimated fair value of the remaining financial instruments in other
investments, amounting to $4.3 million and $4.7 million at October 31, 1997 and
1996, respectively, approximates their carrying value.
NOTES RECEIVABLE AND RECEIVABLES FROM AFFILIATES
The estimated fair value of notes receivable and receivables from affiliates
included in "Other receivables" on the Company's consolidated balance sheet has
been calculated by discounting expected future cash flows using management's
estimates of current market interest rates for such notes and receivables. The
estimated fair value of these notes and receivables approximates their carrying
value. Included in this category are "Notes receivable from stock option
exercises" which are a component of shareholder's equity on the consolidated
balance sheet.
6.22% SENIOR NOTE
The estimated fair value of the Company's $50 million Senior Note at October 31,
1997 and 1996 is $49.4 million and $48.4 million, respectively, based on
discounted future cash flows using a market interest rate available for debt
with similar terms and remaining maturity.
MORTGAGE NOTES PAYABLE
The estimated fair value of the Company's mortgage notes payable at October 31,
1997 and 1996 is $10.5 million and $5.9 million, respectively, based on
discounted future cash flows using current market interest rates available for
mortgages with similar terms and remaining maturities.
UNREALIZED SECURITIES HOLDING GAINS
The Company has classified as available-for-sale securities having an aggregate
fair value of $93.6 million and $74.4 million at October 31, 1997 and 1996,
respectively. These securities are classified as "Short-term investments,"
"Investments in investment companies," and "Other investments" on the Company's
consolidated balance sheet. Gross unrealized gains of $6.7 million and $5.6
million and gross unrealized losses of $2.8 million and $44,000 at October 31,
1997 and 1996, respectively, have been excluded from earnings and reported as a
separate component of shareholders' equity, net of deferred taxes.
12. Related Party Transactions
Investment advisory and distribution income earned from investment companies
sponsored by the Company were $183.7 million, $164.8 million and $151.7 million
in 1997, 1996 and 1995, respectively.
The portfolios and related funds that provided over 10 percent of the total
revenue of the Company are as follows:
(dollar figures in thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
SENIOR DEBT PORTFOLIO AND RELATED FUNDS:
Investment adviser and administration
fees and early withdrawal charges $40,637 $26,526 $10,327
Percent of revenue 20.2% 14.6% 6.2%
NATIONAL MUNICIPALS PORTFOLIO AND RELATED FUNDS:
Investment adviser fees, distribution
plan payments and contingent
deferred sales charges $25,117 $26,547 $26,892
Percent of revenue 12.5% 14.6% 16.0%
Investments in sponsored mutual funds which are classified as "Cash and
equivalents," "Short-term investments" and "Investment in investment companies"
in the accompanying consolidated financial statements, aggregate approximately
$128.6 million and $104.2 million at October 31, 1997 and 1996, respectively.
Dividend and interest income earned on these investments aggregated
approximately $3.2 million in 1997, $3.0 million in 1996 and $1.7 million in
1995. The Company recognized net gains of approximately $2.7 million and $0.6
million in 1997 and 1996, respectively, resulting from the disposition of
sponsored mutual fund investments.
The Company earned fees of $0.4 million, $1.1 million and $1.7 million in 1997,
1996 and 1995, respectively, for providing management and administration
services to VT and VTII. At October 31, 1996, the Company had a note receivable
due from VTII in the amount of $1.2 million which is included in "Other
receivables" on the Company's consolidated balance sheet.
At October 31, 1997, the Company had an outstanding payable to officers of the
Company in the amount of $4.5 million arising from the repurchase of non-voting
common stock which is included in "Other current liabilities" on the Company's
consolidated balance sheet.
13. Regulatory Requirements
Eaton Vance Distributors, Inc., a wholly owned subsidiary of the Company and
principal underwriter of the Eaton Vance Funds, is subject to the Securities and
Exchange Commission uniform net capital rule (Rule 15c3-1) which requires the
maintenance of minimum net capital. For purposes of this rule, the subsidiary
had net capital of $28.0 million which exceeds its respective minimum net
capital requirement of $373,000 at October 31, 1997. The ratio of aggregate
indebtedness to net capital at October 31, 1997 was 0.20-to-1.
14. Comparative Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
1997
- ----------------------------------------------------------------------------------------------
First Second Third Fourth Full
(in thousands, except per share figures) Quarter Quarter Quarter Quarter Year
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenue $47,812 $47,737 $51,497 $53,864 $200,910
Net income $10,027 $ 9,463 $10,521 $10,223 $ 40,234
Earnings per share $ 0.51 $ 0.49 $ 0.55 $ 0.53 $ 2.08
<CAPTION>
1996
- ----------------------------------------------------------------------------------------------
First Second Third Fourth Full
(in thousands, except per share figures) Quarter Quarter Quarter Quarter Year
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenue $44,633 $45,665 $45,368 $46,323 $181,989
Income from:
Continuing operations $ 9,798 $ 8,811 $ 9,495 $ 7,730 $ 35,834
Extraordinary item -- 1,590 -- -- 1,590
- ----------------------------------------------------------------------------------------------
Net Income $ 9,798 $10,401 $ 9,495 $ 7,730 $ 37,424
==============================================================================================
Earnings per share from:
Continuing operations $ 0.52 $ 0.47 $ 0.49 $ 0.39 $ 1.87
Extraordinary item -- 0.08 -- -- 0.08
- ----------------------------------------------------------------------------------------------
Earnings per share $ 0.52 $ 0.55 $ 0.49 $ 0.39 $ 1.95
==============================================================================================
</TABLE>
<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, 1997 and 1996, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended October 31, 1997. 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, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
October 31, 1997 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 25, 1997
<PAGE>
Eaton Vance Corp. Directors and Officers
- --------------------------------------------------------------------------------
JAMES B. HAWKES BENJAMIN A. ROWLAND, JR.
Chairman, President, Vice President and Director
Chief Executive Officer
and Director LAURIE G. RUSSELL
Vice President
JOHN G.L. CABOT and Chief Accounting Officer
Director
RALPH Z. SORENSON
ALAN R. DYNNER Director
Vice President
and Chief Legal Officer WILLIAM M. STEUL
Vice President
M. DOZIER GARDNER and Chief Financial Officer
Vice Chairman and Director
PETER D. STOKINGER
THOMAS OTIS Vice President
Vice President and Secretary and Internal Auditor
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 1997 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
BostonEquiserve 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 change 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:
BankBoston, N.A.
c/o Boston EquiServe, L.P.
Investor Relations Department
Post Office Box 8040
Mail Stop 45-02-64
Boston, MA 02266-8040
(781) 575-3400
(800) 733-5001
Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
(617) 261-8000
Design: Robert Farrell Associates, Inc.
<PAGE>
EATON VANCE CORP.
24 Federal Street
Boston, MA 02110
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
AS OF OCTOBER 31, 1997*
STATE OR JURISDICTION OF NAME UNDER WHICH
INCORPORATION OR SUBSIDIARY DOES
ORGANIZATION BUSINESS
--------------------------------------------
FIRST TIER SUBSIDIARIES OF
EATON VANCE CORP.:
Eaton Vance Management Massachusetts Same
Fulcrum Management, Inc. Massachusetts Same
EV Gold, Inc. 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, 1997.
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements
listed at Exhibit 99.2 of Eaton Vance Corp. (the Company) on Forms S-8 and S-3
of our report dated November 25, 1997 appearing in the Annual Report on Form
10-K of the Company for the year ended October 31, 1997.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 28, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000350797
<NAME> EATON VANCE CORP.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<CASH> 61928
<SECURITIES> 78592
<RECEIVABLES> 7204
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 164168
<PP&E> 2537
<DEPRECIATION> 0
<TOTAL-ASSETS> 387375
<CURRENT-LIABILITIES> 39968
<BONDS> 0
<COMMON> 578
0
0
<OTHER-SE> 225702
<TOTAL-LIABILITY-AND-EQUITY> 387375
<SALES> 0
<TOTAL-REVENUES> 200910
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 137005
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3951
<INCOME-PRETAX> 67470
<INCOME-TAX> 27236
<INCOME-CONTINUING> 40234
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40234
<EPS-PRIMARY> 2.08
<EPS-DILUTED> 2.08
</TABLE>
<PAGE>
EXHIBIT 99.2
EATON VANCE CORP.
OPEN REGISTRATION STATEMENTS
REGISTRATION STATEMENT FILING DATE CONSENT DATE FILING NUMBER
Form S-8 December 19, 1997 December 18, 1997 333-42813
Form S-3 June 28, 1995 June 22, 1995 33-60649
Form S-8 June 27, 1995 June 22, 1995 33-60617
Form S-8 December 1, 1994 December 1, 1994 33-56701
Form S-8 June 8, 1994 June 8, 1994 33-54035
Form S-8 March 8, 1994 March 4, 1994 33-52559
Form S-8 April 23, 1992 April 21, 1992 33-47405
Form S-8 April 23, 1992 April 21, 1992 33-47403
Form S-8 April 23, 1992 April 21, 1992 33-47402
Form S-8 April 23, 1992 April 21, 1992 33-47401
Form S-3 February 13, 1992 February 11, 1992 33-45685
Form S-8 September 16, 1991 September 16, 1991 33-42667
Form S-8 October 11, 1989 October 5, 1989 33-31382
Form S-8 April 10, 1987 April 8, 1987 33-13217
