-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JAVFt+5wu8oyn/O6O2RMmKO3YTps6hkyGMbblPnpGEoCMNIzM1GUhhkjPdzCNeeP 5c0QaKbLlxwGYdfi8py/oQ== 0000350797-98-000015.txt : 19981021 0000350797-98-000015.hdr.sgml : 19981021 ACCESSION NUMBER: 0000350797-98-000015 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981020 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19981020 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EATON VANCE CORP CENTRAL INDEX KEY: 0000350797 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 042718215 STATE OF INCORPORATION: MD FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-08100 FILM NUMBER: 98727802 BUSINESS ADDRESS: STREET 1: 24 FEDERAL ST CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6174828260 MAIL ADDRESS: STREET 1: 24 FEDERAL STREET STREET 2: 11TH FLOOR CITY: BOSTON STATE: MA ZIP: 02110 8-K 1 8-K FILING OF EVC DTD 10-20-98 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 October 20, 1998 --------------------------- (Date of Report) EATON VANCE CORP. ----------------------------------------------------- (Exact name of registrant as specified in its charter) Maryland 1-8100 04-2718215 - -------------------- ---------------- -------------------------------- (State or other (Commission File (IRS Employer Identification No.) jurisdiction of Number) incorporation) 24 Federal Street, Boston, Massachusetts 02110 - ----------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (617) 482-8260 ------------------------------------------------- Registrant's telephone number, including area code Page 1 of 4 pages INFORMATION INCLUDED IN THE REPORT Item 5. Other Events - ------- ------------ Registrant's financial statements will be affected by the October 8, 1998 Financial Accounting Standards Board staff announcement (Topic No. D-76), a copy of which is filed herewith as Exhibit 99.1 and incorporated herein by reference. The effect of the accounting change required by this announcement is described in registrant's news release of October 13, 1998, a copy of which is filed herewith as Exhibit 99.2 and incorporated herein by reference. Item 7. Financial Statements and Exhibits - ------- --------------------------------- (c) The exhibits are furnished in accordance with the provisions of Item 601 of Regulation S-K and are set forth in the Exhibit Index and are incorporated herein by reference. Page 2 of 4 pages SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. EATON VANCE CORP. (Registrant) Date: October 20, 1998 /s/ William M. Steul ------------------------------------- William M. Steul, Chief Financial Officer Page 3 of 4 Pages 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 part of this report: Exhibit No. Description - ----------- ----------- 99.1. Copy of Financial Accounting Standards Board staff announcement (Topic No. D-76) dated October 8, 1998. 99.2. Copy of registrant's news release dated October 13, 1998. Page 4 of 4 pages EX-99.1 2 ACCOUNTING STANDARDS BOARD STAFF ANNOUNCEMENT EXHIBIT 99.1 FINANCIAL ACCOUNTING STANDARDS BOARD 401 Merritt 7, P.O. Box 5116 Norwalk, Connecticut 06856-5116 Telephone: 203-847-0700 Fax: 203-849-9714 Internet address: eitf@fasb.org or namcpartland@fasb.org - -------------------------------------------------------------------------------- October 8, 1998 Topic No. D-76 Topic: Accounting by Advisors for Offering Costs Paid on Behalf of Funds, When the Advisor Does Not Receive both 12b-1 Fees and Contingent Deferred Sales Charges Dates Discussed: July 23, 1998; September 23-24, 1998 The FASB staff has been asked to address how an advisor should account for offering costs paid to distribute shares of a fund when that advisor does not receive both distribution fees, pursuant to a plan under Rule 12b-1 of the Investment Company Act of 1940 (12b-1 fees), and contingent deferred sales charges (CDSC fees). An example is when an advisor pays the initial costs of offering shares of a closed-end fund. Closed-end funds are investment companies that issue a fixed number of shares (that generally trade on an open market) in order to raise capital, similar to the way in which an entity sells stock in an initial public offering. It is the FASB staff's understanding that, typically, the advisor of a closed-end fund manages the fund's investments in exchange for an advisory (or management) fee paid pursuant to a contract that is required to be renewed annually. Historically, costs of offering the shares of the fund have been incurred by the fund's initial shareholders at the commencement of the fund's operations, thereby immediately reducing the net asset value of the fund. Recently, some advisors of closed-end funds have chosen to bear the offering costs on behalf of the fund. The advisor is not, however, reimbursed through both 12b-1 fees and CDSC fees. The staff observes that EITF Issue No. 85-24, "Distribution Fees by Distributors of Mutual Funds That Do Not Have a Front-End Sales Charge," provides the accounting by fund advisors who are reimbursed, for offering costs paid, through both 12b-1 fees and CDSC fees. Accordingly, the accounting by those advisors for fees and offering costs are outside the scope of this announcement. The staff believes that the benefits expected from the expenditures paid by an advisor in connection with the distribution of shares of a fund (when the advisor does not receive both 12b-1 fees and CDSC fees) do not meet the definition of an asset of the advisor as provided in FASB Concepts Statement No. 6, Elements of Financial Statements. Accordingly, the staff has concluded that offering costs paid by the investment advisor should be expensed as incurred. In addition, the staff believes that initial offering costs paid by such an investment advisor are start-up costs of the advisor, which should be accounted for (effective for fiscal years beginning after December 15, 1998) in accordance with AICPA Statement of Position 98-5, Reporting on the Costs of Start-Up Activities. As stated at the July 23, 1998 EITF meeting, this announcement is applicable to all offering costs paid by fund advisors subsequent to July 23, 1998. That is, subsequent to July 23, 1998, all offering costs paid by advisors of funds (when the advisor does not receive both 12b-1 fees and CDSC fees) should be expensed as incurred. In addition, the staff observes that any costs capitalized prior to July 24, 1998 should continue to be amortized until SOP 98-5 is adopted, at which time any unamortized balance would be written off and reported as a cumulative effect of a change in accounting principle, as described in APB Opinion No. 20, Accounting Changes. EX-99.2 3 REGISTRANT'S NEWS RELEASE DTD 10/13/98 EXHIBIT 99.2 NEWS RELEASE EATON VANCE CORP. 24 Federal Street, Boston, MA 02110 (617) 482-8260 CONTACT: William M. Steul October 13, 1998 FOR IMMEDIATE RELEASE EATON VANCE CORP. EXPLAINS EFFECTS OF CHANGE IN ACCOUNTING FOR CERTAIN SALES COMMISSIONS Eaton Vance Corp.'s financial statements will be affected by an October 8,1998 Financial Accounting Standards Board (FASB) staff announcement that changes the long-standing treatment of sales commissions incurred by an investment adviser for the distribution of shares of certain types of funds. Under the new requirement, sales commissions paid by the adviser with respect to funds that do not have both Rule 12b-1 distribution fees and contingent deferred sales charges must now be treated as start-up costs and expensed as incurred. Previously, such commissions were capitalized on the balance sheet of the adviser and amortized over future years. Eaton Vance's financial statements will be affected by this accounting change because the Company sponsors several types of funds (representing about one-third of fund assets under management) that are covered by the announcement. These covered funds include certain continuously offered closed-end funds which invest in corporate loans, some privately offered funds, and a new exchange-traded closed-end fund scheduled to close in late October, 1998. Commissions for covered funds that Eaton Vance paid and capitalized before July 24, 1998 will be reflected as a "cumulative effect of a change in accounting principle" in the Company's financial statements for its first quarter, fiscal year 1999 (commencing November 1, 1998). This "below-the-line" one-time adjustment to net income, expected to be in the range of $36 million to $38 million, will extinguish deferred commissions that would otherwise have been amortized in future years. The FASB staff announcement also requires that after July 23, 1998, sales commissions for covered funds must be expensed as incurred, rather than capitalized and amortized over future years. Because Eaton Vance is sponsoring and paying sales commissions for a new closed-end fund that is scheduled to close in October, 1998, an expense equal to those sales commissions will be reflected in the fourth quarter of the current fiscal year ending October 31, 1998. The precise effect of this expense on Eaton Vance's financial statements for fiscal year 1998 cannot be determined until the offering is completed at the end of the fourth quarter. Paradoxically, as a result of the new accounting requirement, the more successful this offering is, the more commissions will be paid and expensed in fiscal year 1998, thereby reducing reported earnings for that year. However, since all sales commissions related to the new fund will be Page 1 of 2 expensed in fiscal year 1998, earnings derived from this fund in fiscal year 1999 (which begins November 1, 1998) and thereafter will be higher than they would have been if the commissions had been capitalized and amortized in those years. As a result of the FASB staff announcement, different types of funds which can have equivalent economic outcomes (identical cash flows) for Eaton Vance will have different accounting treatments for fund sales commissions. For example, sales commissions for closed-end funds, including continuously offered closed-end funds with contingent deferred sales charges, will be expensed immediately, while sales commissions for open-end funds will be capitalized and amortized. Under the new required accounting treatment, Eaton Vance's reported earnings may be reduced in a quarter when the Company pays and immediately expenses commissions for covered funds. However, the earnings derived from these funds are expected to be higher in subsequent periods, because the continuous fee income from such funds will not be reduced by amortized commission payments. The Company is exploring ways to minimize the effect on future reported earnings that may result from the FASB staff announcement. Eaton Vance Corp., a Boston-based investment management firm, is traded on the New York Stock Exchange under the symbol EV. This news release contains statements which are not historical facts, referred to as "forward-looking statements." The Company's actual future results may differ significantly from those stated in any forward-looking statements, depending upon factors such as the volume of sales and repurchases of fund shares, and the continuation of fund investment advisory, administration, distribution and service contracts. Page 2 of 2 -----END PRIVACY-ENHANCED MESSAGE-----