UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

Commission File Number: 000-51003

 

CALAMOS ASSET MANAGEMENT, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)		32-0122554 (I.R.S. Employer Identification No.)
2020 Calamos Court, Naperville, Illinois (Address of Principal Executive Offices)		60563 (Zip Code)

(630) 245-7200
(Registrant’s telephone number, including area code)

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 (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

At April 30, 2011, the company had 20,124,701 shares of Class A common stock and 100 shares of Class B common stock outstanding.

 

 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except share data)

		March 31,				December 31,
		2011				2010
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	78,540			$	82,870
Receivables:
Affiliates and affiliated funds			21,316				19,320
Customers			11,195				10,351
Investment securities			349,151				314,215
Derivative assets			1,952				4,026
Partnership investments, net			22,678				41,678
Prepaid expenses			4,504				3,087
Deferred tax assets, net			9,410				8,757
Other current assets			2,023				1,481
Total current assets			500,769				485,785
Non-current assets:
Deferred tax assets, net			63,598				66,960
Deferred sales commissions			8,017				8,515
Property and equipment, net of accumulated depreciation ($48,661 at March 31, 2011 and $47,512 at December 31, 2010)			25,921				26,745
Other non-current assets			1,174				1,241
Total non-current assets			98,710				103,461
Total assets		$	599,479			$	589,246
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Current liabilities:
Distribution fees payable		$	17,011			$	16,560
Accrued compensation and benefits			8,769				21,411
Current portion of long-term debt			32,885				32,885
Loans payable			6,875				—
Interest payable			1,972				3,026
Derivative liabilities			571				5,918
Accrued expenses and other current liabilities			5,348				3,906
Total current liabilities			73,431				83,706
Long-term liabilities:
Long-term debt			92,115				92,115
Deferred rent			9,465				9,456
Other long-term liabilities			428				577
Total long-term liabilities			102,008				102,148
Total liabilities			175,439				185,854
STOCKHOLDERS’ EQUITY
Class A Common Stock, $0.01 par value; authorized 600,000,000 shares; 24,124,701 shares issued and 20,124,701 shares outstanding at March 31, 2011; 23,942,317 shares issued and 19,942,317 shares outstanding at December 31, 2010			241				239
Class B Common Stock, $0.01 par value; authorized 1,000 shares; 100 shares issued and outstanding at March 31, 2011 and December 31, 2010			0				0
Additional paid-in capital			212,914				212,256
Retained earnings			62,590				59,895
Accumulated other comprehensive income			7,796				5,841
Treasury stock at cost; 4,000,000 shares at March 31, 2011 and December 31, 2010			(95,215	)			(95,215	)
Calamos Asset Management, Inc. stockholders’ equity			188,326				183,016
Non-controlling interest in Calamos Holdings LLC (Calamos Interests)			235,714				218,679
Non-controlling interest in partnership investments			—				1,697
Total non-controlling interest			235,714				220,376
Total stockholders’ equity			424,040				403,392
Total liabilities and stockholders’ equity		$	599,479			$	589,246

See accompanying notes to consolidated financial statements.

CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2011 and 2010
(in thousands, except share data)
(unaudited)

		2011				2010
REVENUES
Investment management fees		$	67,608			$	58,570
Distribution and underwriting fees			22,112				21,835
Other			828				725
Total revenues			90,548				81,130
EXPENSES
Employee compensation and benefits			20,632				20,132
Distribution expenses			18,233				16,790
Amortization of deferred sales commissions			1,748				2,566
Marketing and sales promotion			3,439				2,732
General and administrative			9,181				8,392
Total operating expenses			53,233				50,612
Operating income			37,315				30,518
NON-OPERATING INCOME
Net interest expense			(1,895	)			(1,844	)
Investment and other income (loss)			(1,627	)			8,753
Total non-operating income (loss)			(3,522	)			6,909
Income before income tax provision			33,793				37,427
Income tax provision			2,907				3,222
Net income			30,886				34,205
Net income attributable to non-controlling interest in Calamos Holdings LLC (Calamos Interests)			(26,249	)			(29,387	)
Net income attributable to non-controlling interest in partnership investments			(5	)			(7	)
Net income attributable to Calamos Asset Management, Inc.		$	4,632			$	4,811
Earnings per share:
Basic		$	0.23			$	0.24
Diluted		$	0.23			$	0.24
Weighted average shares outstanding:
Basic			20,035,394				19,820,744
Diluted			20,478,456				20,122,940
Cash dividends per share		$	0.095			$	0.075

See accompanying notes to consolidated financial statements.

CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
Three Months Ended March 31, 2011
(in thousands)
(unaudited)

																						Non-
																						controlling
																						interest in
		CALAMOS ASSET MANAGEMENT, INC. STOCKHOLDERS																				Calamos				Non-
														Accumulated								Holdings				controlling
						Additional								Other								LLC				interest in
		Common				Paid-in				Retained				Comprehensive				Treasury				(Calamos				partnership
		Stock				Capital				Earnings				Income				Stock				Interests)				investments				Total
Balance at Dec. 31, 2010		$	239			$	212,256			$	59,895			$	5,841			$	(95,215	)		$	218,679			$	1,697			$	403,392
Net income			—				—				4,632				—				—				26,249				5				30,886
Changes in unrealized gains on available-for- sale securities, net of income taxes			—				—				—				2,112				—				12,148				—				14,260
Reclassification adjustment for realized gains on available-for-sale securities included in income, net of income taxes			—				—				—				(228	)			—				(1,301	)			—				(1,529	)
Total comprehensive income																															43,617
Issuance of common stock (182,384 Class A common shares)			2				(2	)			—				—				—				—				—				—
Cumulative impact of changes in ownership of Calamos Holdings LLC			—				250				(3	)			71				—				(1,344	)			—				(1,026	)
Compensation expense recognized under stock incentive plans			—				410				—				—				—				1,470				—				1,880
Dividend equivalent accrued under stock incentive plans			—				—				(22	)			—				—				(77	)			—				(99	)
Liquidation of Calamos Market Neutral Opportunities Fund LP			—				—				—				—				—				—				(1,702	)			(1,702	)
Distribution to non-controlling interests			—				—				—				—				—				(20,110	)			—				(20,110	)
Dividends declared			—				—				(1,912	)			—				—				—				—				(1,912	)
Balance at March 31, 2011		$	241			$	212,914			$	62,590			$	7,796			$	(95,215	)		$	235,714			$	—			$	424,040

See accompanying notes to consolidated financial statements.

CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2011 and 2010
(in thousands)
(unaudited)

		2011				2010
Cash and cash equivalents at beginning of period		$	82,870			$	145,431
Cash flows from operating activities:
Net income			30,886				34,205
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred sales commissions			1,748				2,566
Other depreciation and amortization			1,480				2,457
Deferred rent			9				33
Change in unrealized appreciation on CFS securities, derivative assets, derivative liabilities and partnership investments, net			(3,274	)			(601	)
Net realized (gain) loss on sale of investment securities, derivative assets and derivative liabilities			5,769				(7,104	)
Deferred taxes			1,565				1,995
Stock based compensation			1,880				2,381
Employee taxes paid on vesting under stock incentive plans			(1,031	)			(1,017	)
Increase in assets:
Receivables:
Affiliates and affiliated funds, net			(1,996	)			(1,245	)
Customers			(844	)			(583	)
Deferred sales commissions			(1,250	)			(1,802	)
Other assets			(1,922	)			(687	)
Increase (decrease) in liabilities:
Distribution fees payable			451				858
Accrued compensation and benefits			(12,642	)			(9,140	)
Accrued expenses and other liabilities			137				(1,433	)
Net cash provided by operating activities			20,966				20,883
Cash flows used in investing activities:
Net additions to property and equipment			(626	)			(261	)
Purchase of investment securities			(30,823	)			(119,657	)
Proceeds from sale of investment securities			12,106				93,855
Net purchases of derivatives			(9,381	)			(4,097	)
Net changes in partnership investments			18,571				(95	)
Net cash used in investing activities			(10,153	)			(30,255	)
Cash flows used in financing activities:
Net proceeds from margin loans			6,875				—
Deferred tax benefit on vesting under stock incentive plans			4				57
Distributions paid to non-controlling interests			(20,110	)			(19,633	)
Cash dividends paid to common stockholders			(1,912	)			(1,481	)
Net cash used in financing activities			(15,143	)			(21,057	)
Net decrease in cash			(4,330	)			(30,429	)
Cash and cash equivalents at end of period		$	78,540			$	115,002
Supplemental disclosure of cash flow information:
Cash paid for:
Income taxes, net		$	1,266			$	1,050
Interest		$	2,977			$	2,977

See accompanying notes to consolidated financial statements.

CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(1) Organization and Description of Business

Calamos Asset Management, Inc. (CAM) is a holding company and as of March 31, 2011 owned 21.9% of Calamos Holdings LLC (Holdings), an intermediate holding company. CAM, together with Holdings and Holdings’ subsidiaries (the Company), operates the investment advisory and distribution services businesses reported within these consolidated financial statements. CAM operates and controls all of the business and affairs of Holdings and, as a result of this control, consolidates the financial results of Holdings with its own financial results. The remaining 78.1% ownership interest in Holdings is held by Calamos Family Partners, Inc. (CFP) and John P. Calamos, Sr. (collectively Calamos Interests), which interest in accordance with applicable rules, is reflected and referred to within these consolidated financial statements as “non-controlling interests in Calamos Holdings LLC”. As shown in the diagram below, CFP also owns all of CAM’s outstanding Class B common stock, which represents 97.5% of the combined voting power of all classes of CAM’s voting stock. The graphic below illustrates our organizational and ownership structure as of March 31, 2011:

CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

The Company primarily provides investment advisory services to individuals and institutional investors through a series of investment products that include open-end mutual funds, closed-end funds, separate accounts, offshore funds and partnerships. Collectively, we transact business under the group trade name Calamos Investments. The subsidiaries through which the Company provides these services include: Calamos Advisors LLC (CAL), a Delaware limited liability company and registered investment advisor; Calamos Financial Services LLC (CFS), a Delaware limited liability company and registered broker-dealer; Calamos Partners LLC (CPL), a Delaware limited liability company and registered investment advisor; and Calamos Wealth Management LLC, a Delaware limited liability company and registered investment advisor; and Calamos International LLP, a United Kingdom limited liability partnership, registered investment advisor with the Financial Services Authority and a distributor of the Offshore Funds and Company products globally.

(2) Basis of Presentation

The consolidated financial statements as of March 31, 2011 and for the three months ended March 31, 2011 and 2010 have not been audited by the Company’s independent registered public accounting firm. In the opinion of management, these statements contain all adjustments, including those of a normal recurring nature, necessary for fair presentation of the financial condition and results of operations. The results for the interim periods presented are not necessarily indicative of the results to be obtained for a full fiscal year. Certain amounts for the prior year have been reclassified to conform to the current year’s presentation. This Form 10-Q filing should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

The Calamos Interests combined 78.1% and 78.3% interest in Holdings at March 31, 2011 and 2010, respectively, is represented as non-controlling interest in Calamos Holdings LLC in the Company’s financial statements. Non-controlling interest in Calamos Holdings LLC is derived by multiplying the historical equity of Holdings by the Calamos Interests’ aggregate ownership percentage for the periods presented. Issuances and repurchases of CAM’s common stock may result in changes to CAM’s ownership percentage and to the non-controlling interests’ ownership percentage of Holdings. The Company’s corresponding changes to stockholders’ equity are reflected in the consolidated statement of changes in stockholders’ equity. Income is allocated to non-controlling interests based on the average ownership interest during the period in which the income is earned.

CPL, a subsidiary of Holdings, was the general partner of Calamos Market Neutral Opportunities Fund LP (the Partnership) a private investment partnership that was primarily comprised of highly liquid marketable securities. During the first quarter of 2011 the Partnership was liquidated. Prior to its liquidation, substantially all the activities of the Partnership were conducted on behalf of the Company and its related parties; therefore, the Company consolidated the financial results of the Partnership into its results.

For the periods presented prior to the liquidation of the Partnership, the assets and liabilities of the Partnership are presented on a net basis as partnership investments in the consolidated statements of financial condition, the net income is included in investment and other income in the consolidated statements of operations, and the change in partnership investments is included in the net changes in partnership investments in the consolidated statements of cash flows.

The Partnership is presented on a net basis in order to provide more clarity to the financial position and results of the core operations of the Company. The underlying assets and liabilities that are being consolidated are described in Note 5. The non-controlling interests of the Partnership are presented as non-controlling interests in partnership investments in the respective financial statements.

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from these estimates.

CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(3) Investment Securities

The following table provides a summary of investment securities owned as of March 31, 2011 and December 31, 2010. As a registered broker-dealer, Calamos Financial Services LLC is required to carry all investment securities it owns (CFS Securities) at fair value and record all changes in fair value in current earnings. As such, unrealized gains and losses on CFS Securities, as well as realized gains and losses on all investment securities, are included in investment and other income (loss) in the consolidated statements of operations.

		March 31, 2011
						Unrealized				Unrealized
(in thousands)		Cost				Gains				Losses				Fair Value
Available-for-sale securities:
Mutual Funds
Equity		$	154,996			$	42,843			$	(1	)		$	197,838
Fixed income			84,460				475				(110	)			84,825
Low-volatility equity			45,185				15,261				—				60,446
Other			1,602				75				(202	)			1,475
Total available-for-sale securities		$	286,243			$	58,654			$	(313	)		$	344,584
CFS securities:
Mutual Funds
Equity		$	3,004			$	1,426			$	—			$	4,430
Common Stock			56				81				—				137
Total CFS securities		$	3,060			$	1,507			$	—			$	4,567
Total investment securities														$	349,151

CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

		December 31, 2010
						Unrealized				Unrealized
(in thousands)		Cost				Gains				Losses				Fair Value
Available-for-sale securities:
Mutual Funds
Equity		$	129,280			$	32,483			$	(3	)		$	161,760
Fixed income			89,712				18				(425	)			89,305
Low-volatility equity			45,219				12,580				(1	)			57,798
Other			1,579				51				(242	)			1,388
Total available-for-sale securities		$	265,790			$	45,132			$	(671	)		$	310,251
CFS securities:
Mutual Funds
Equity		$	3,004			$	834			$	—			$	3,838
Common Stock			56				70				—				126
Total CFS securities		$	3,060			$	904			$	—			$	3,964
Total investment securities														$	314,215

Of the $349.0 million and $314.1 million investments in mutual funds at March 31, 2011 and December 31, 2010, respectively, $304.8 million and $270.9 million were invested in affiliated mutual funds.

The aggregate fair value of available-for-sale investment securities that were in an unrealized loss position at March 31, 2011 and December 31, 2010 was $30.7 million and $83.1 million, respectively. The cumulative losses on securities that had been in a continuous loss position for 12 months or longer were immaterial as of the end of each reporting period.

At March 31, 2011 and December 31, 2010, the Company believes that the unrealized losses attributed to its mutual fund investments are only temporary in nature, as these losses are a result of short-term declines in the net asset value of the funds. Additionally, unrealized losses exist for only a small portion of the overall available-for-sale investment securities. Further, the Company has the intent and ability to hold these securities for a period of time sufficient to allow for recovery of the market value.

The table below summarizes information on available-for-sale securities as well as unrealized gains (losses) on CFS Securities for the three months ended March 31, 2011 and 2010.

		Three Months Ended March 31,
(in thousands)		2011				2010
Available-for-sale securities:
Proceeds from sale		$	12,106			$	93,855
Gross realized gains on sales			1,737				10,229
Unrealized gains			15,544				5,308
Net gains reclassified out of accumulated other comprehensive income to earnings			1,665				8,638
CFS securities:
Unrealized gains			603				581

CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(4) Derivative Assets and Liabilities

In order to reduce the volatility in fair value of the Calamos corporate investment portfolio, the Company uses exchange traded equity option contracts as an economic hedge against price changes in its investment securities portfolio. The Company’s investment securities, totaling $349.2 million at March 31, 2011, consists primarily of positions in several Calamos equity, fixed income and low-volatility equity mutual funds. The equity price risk in the investment portfolio is hedged using exchange-traded put and call option contracts on several major equity market indices that correlate most closely with the change in value of the portfolio being hedged. The use of both purchased put and sold call options is part of a single strategy to minimize downside risk in the hedged portfolio, while participating in a portion of the upside of a market rally. The Company may adjust its hedge position in response to movement and volatility in prices and changes in the composition of the hedged portfolio, but generally is not actively buying and selling contracts.

The fair value of purchased puts and sold call contracts are reported in derivative assets and derivative liabilities, respectively, in the consolidated statements of financial condition. Net gains and losses on these contracts are reported in investment and other income in the consolidated statements of operations with net losses of $6.1 million and $3.8 million for the three months ended March 31, 2011 and 2010, respectively. The Company is using these derivatives for risk management purposes but has not designated the contracts as hedges for accounting purposes.

(5) Partnership Investments

Presented below are the underlying assets and liabilities of the partnerships that the Company reports on a net basis and the investments accounted for under the equity method. These investments are presented as partnership investments, net in its consolidated statements of financial condition as of March 31, 2011 and December 31, 2010.

		March 31,				December 31,
(in thousands)		2011				2010
Calamos Market Neutral Opportunities Fund LP:
Deposits with broker		$	—			$	11,128
Securities owned			—				16,365
Securities sold but not yet purchased			—				(7,175	)
Accrued expenses and other current liabilities			—				(62	)
Other current assets			—				69
Calamos Market Neutral Opportunities Fund LP, net			—				20,325
Investment in other partnerships			22,678				21,353
Partnership investments, net		$	22,678			$	41,678

During the first quarter of 2011, the Company liquidated the Partnership for total proceeds of $18.6 million and realized capital gains of $1.4 million, net of non-controlling interests. At December 31, 2010, the Company had a net interest of $18.6 million (91.6%) in the Partnership. At December 31, 2010, the non-controlling interests of the Partnership totaled $1.7 million (8.4%) and are presented in the consolidated statements of financial condition as non-controlling interest in partnership investments.

As of March 31, 2011 and December 31, 2010, the Company held a non-controlling interest in certain other partnership investments and accounted for these investments using the equity method. These investments are presented collectively as investments in other partnerships in the table above.

CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(6) Fair Value Measurements

The Company utilizes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows: Level 1 — observable inputs such as quoted prices in active markets; Level 2 — inputs, other than the quoted prices in active markets, that are observable either directly or indirectly (including quoted prices of similar securities, interest rates, credit risk, etc.); and Level 3 — unobservable inputs in which there is little or no market data, and require the reporting entity to develop its own assumptions. For each period presented, the Company did not have any positions in Level 3 securities and did not have any transfers between the levels.

Investments are presented in the consolidated financial statements at fair value in accordance with accounting principles generally accepted in the United States of America. Investments in mutual funds are stated at fair value based on end of day published net asset values of shares owned by the Company. Investments in securities traded on a national securities exchange are stated at the last reported sales price on the day of valuation. Other securities, including derivatives, traded in the over-the-counter market and listed securities for which no sale was reported on that date are stated at the last quoted bid price. However, short sales positions and call options written are reported at the last quoted asked price. Convertible bonds and other securities for which quotations are not readily available are valued at fair value based on observable inputs such as market prices for similar instruments as validated by third party pricing agencies and the Company’s prime broker.

The following tables provide the hierarchy of inputs used to derive the fair value of the Company’s investment securities, derivative assets and liabilities, securities and derivatives owned and securities sold but not yet purchased by the Partnership and derivative liabilities of the Partnership as of March 31, 2011 and December 31, 2010, respectively. Foreign currency contracts are presented on a net basis where the right of offset exists, and no impact of these positions exists for either period presented.

						Fair Value Measurements Using
						Quoted Prices
						in Active				Significant
						Markets for				Other
						Identical Assets				Observable
(in thousands)		March 31,				and Liabilities				Inputs
Description		2011				(Level 1)				(Level 2)
Cash and cash equivalents
Money market funds		$	33,982			$	33,982			$	—
Investment securities (Note 3)
Mutual Funds
Equity			202,268				202,268				—
Fixed income			84,825				84,825				—
Low-volatility equity			60,446				60,446				—
Other			1,475				1,475				—
Total mutual funds			349,014				349,014				—
Common stock			137				137				—
			349,151				349,151				—
Derivative assets (Note 4)
Exchange-traded put option contracts			1,952				1,952				—
Derivative liabilities (Note 4)
Exchange-traded call option contracts			(571	)			(571	)			—
Total		$	384,514			$	384,514			$	—

CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

						Fair Value Measurements Using
						Quoted Prices
						in Active				Significant
						Markets for				Other
						Identical Assets				Observable
(in thousands)		December 31,				and Liabilities				Inputs
Description		2010				(Level 1)				(Level 2)
Cash and cash equivalents
Money market funds		$	35,392			$	35,392			$	—
Investment securities (Note 3)
Mutual Funds
Equity			165,598				165,598				—
Fixed income			89,305				89,305				—
Low-volatility equity			57,798				57,798				—
Other			1,388				1,388				—
Total mutual funds			314,089				314,089				—
Common stock			126				126				—
			314,215				314,215				—
Derivative assets (Note 4)
Exchange-traded put option contracts			4,026				4,026				—
Derivative liabilities (Note 4)
Exchange-traded call option contracts			(5,918	)			(5,918	)			—
Securities and derivatives owned by the Partnership (Note 5)
Convertible bonds			16,140				—				16,140
Purchased options			145				145				—
Common stocks			80				80				—
			16,365				225				16,140
Securities sold but not yet purchased of the Partnership (Note 5)
Common stocks			(7,165	)			(7,165	)			—
Exchange-traded call option contracts			(10	)			(10	)			—
			(7,175	)			(7,175	)			—
Total		$	356,905			$	340,765			$	16,140

(7) Fair Value of Financial Instruments

The fair value of long-term debt, which has a carrying value of $125 million, was approximately $139.3 million at March 31, 2011. Fair value estimates are calculated using discounted cash flows based on the Company’s incremental borrowing rates for the debt and market prices for similar bonds at the measurement date. This method of assessing fair value may differ from the actual amount realized.

CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

The carrying value of all other financial instruments approximates fair value due to the short maturities of these financial instruments.

(8) Loans Payable

The Company utilizes margin loans for the settlement of call options, as well as an additional source of liquidity. The interest rate charged on the margin loans at March 31, 2011 was 2.5% per annum. These loans are due on demand. At March 31, 2011, the margin loans amounted to $6.9 million and are collateralized by a portion of the Company’s investment securities. The Company can borrow up to 70% of its marginable securities on deposit with its brokerage firm.

(9) Stock Based Compensation

Under the Company’s incentive compensation plan, certain employees of the Company receive stock based compensation comprised of stock options and restricted stock units (RSUs). Historically, RSUs have been settled with newly issued shares so that no cash was used by the Company to settle awards; however, the Company may also use treasury shares or issue new shares upon the exercise of stock options and upon conversion of RSUs. The Company’s Annual Report on Form 10-K for the year ended December 31, 2010 provides details of this plan and its provisions.

During the three months ended March 31, 2011, there were no stock options or RSUs granted. There were forfeitures of 43,621 stock options and 33,859 RSUs during the quarter.

During the three months ended March 31, 2011, 242,631 RSUs vested with 60,247 units withheld for taxes and 182,384 RSUs converted into an equal number of shares of CAM’s Class A common stock. The total intrinsic value and the fair value of the converted shares was $3.1 million. The total tax benefit realized in connection with the vesting of the RSUs during the three months ended March 31, 2011 was $353,000, as the Company receives tax benefits based upon the portion of Holdings’ income that it recognizes.

During the three months ended March 31, 2011, compensation expense recorded in connection with the RSUs and stock options was $1.9 million of which $410,000, after giving effect to the non-controlling interests, was credited as additional paid-in capital. During the three months ended March 31, 2010, expense recorded in connection with the RSUs and stock options was $2.4 million of which $515,000, after giving effect to the non-controlling interests, was credited as additional paid-in capital. The amount of deferred tax asset created was approximately $152,000 and $191,000 during the three months ended March 31, 2011 and 2010, respectively. At March 31, 2011, approximately $15.6 million of total unrecognized compensation expense related to unvested stock option and RSU awards is expected to be recognized over a weighted-average period of 3.2 years.

(10) Non-operating Income (Loss)

Non-operating income (loss) was comprised of the following components for the three months ended March 31, 2011 and 2010:

		Three Months Ended
		March 31,
(in thousands)		2011				2010
Interest income		$	69			$	106
Interest expense			(1,964	)			(1,950	)
Net interest expense			(1,895	)			(1,844	)
Investment income (loss)			(1,664	)			8,602
Miscellaneous other income			37				151
Investment and other income (loss)			(1,627	)			8,753
Non-operating income (loss)			(3,522	)			6,909

CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(11) Income Taxes

Holdings is subject to certain income-based state taxes; therefore, income taxes reflect not only the portion attributed to CAM stockholders but also a portion of income taxes attributable to non-controlling interests. CAM’s effective income tax rate for the three months ended March 31, 2011 and March 31, 2010 was approximately 37.3% and 37.6%, respectively.

		Three Months Ended
		March 31,
(in thousands)		2011				2010
Income tax provision		$	2,907			$	3,222
Income tax provision attributable to non-controlling interest in Calamos Holdings LLC			(153	)			(321	)
Income tax provision attributable to CAM			2,754				2,901
Net income attributable to CAM			4,632				4,811
Income before taxes attributable to CAM		$	7,386			$	7,712
CAM’s effective income tax rate			37.3	%			37.6	%

(12) Earnings Per Share

The following table reflects the calculation of basic and diluted earnings per share:

		Three Months Ended
		March 31,
(in thousands, except per share data)		2011				2010
Earnings per share — basic
Earnings available to common shareholders		$	4,632			$	4,811
Weighted average shares outstanding			20,035				19,821
Earnings per share — basic		$	0.23			$	0.24
Earnings per share — diluted
Earnings available to common shareholders		$	4,632			$	4,811
Weighted average shares outstanding			20,035				19,821
Dilutive impact of restricted stock units			443				302
Weighted average diluted shares outstanding			20,478				20,123
Earnings per share — diluted		$	0.23			$	0.24

Diluted shares outstanding are calculated (a) assuming the Calamos Interests exchanged all of their ownership interest in Holdings and their CAM Class B common stock for shares of CAM’s Class A common stock (collectively, the Exchange) and (b) including the effect of outstanding dilutive equity incentive compensation awards.

The Company uses the treasury stock method to reflect the dilutive effect of unvested RSUs and unexercised stock options on diluted earnings per share. Under the treasury stock method, if the average market price of common stock increases above the option’s exercise price, the proceeds that would be assumed to be realized from the exercise of the option would be used to acquire outstanding shares of common stock. However, the awards may be anti-dilutive even when the market price of the underlying stock exceeds the option’s exercise price. This result is possible because compensation cost attributed to future services and not yet recognized is included as a component of the assumed proceeds upon exercise. The dilutive effect of such options and RSUs would increase the weighted average number of shares used in the calculation of diluted earnings per share.

Effective March 1, 2009, the Company amended its certificate of incorporation requiring that the Exchange be based on a fair value approach (details of the amendment are set forth in the Company’s Schedule 14C filed with the Securities and

CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Exchange Commission on January 12, 2009). The amendment results in the same or fewer shares of Class A common stock being issued at the time of the Exchange. The effects of the Exchange are anti-dilutive and are therefore excluded from the calculation of diluted earnings per share for the three months ended March 31, 2011 and 2010.

The shares issued upon Exchange as presented below are estimated solely on the formula as described in the Schedule 14C that does not necessarily reflect all inputs used in a fair valuation. It is critical to note that this formula does not incorporate certain economic factors and as such, in the event of an actual Exchange, the majority of the Company’s independent directors may determine the fair market value of CAM’s net assets and its ownership in Holdings. For example, discounts and\or premiums for control and marketability as well as a different discount rate for future cash flows may be applied. Therefore, the directors’ valuation may result in the actual number of shares being materially different from the shares presented below. Further, based upon currently available information, we believe it is extremely remote that any Exchange would transpire without a fair market valuation of CAM’s net assets.

The following table shows the number of shares which were excluded from the computation of diluted earnings per share as they were anti-dilutive:

		Three Months Ended
		March 31,
		2011				2010
Exchange of Calamos Interests’ ownership interest in Holdings for shares of Class A common stock			51,451,838				52,506,228
Restricted stock units			—				44,083
Stock options			2,368,245				2,452,653
Total			53,820,083				55,002,964

The maximum number of shares of Class A common stock that could be issued to the Calamos Interests’ upon exchange is 71,931,522 at March 31, 2011.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

We are a firm of 318 full-time associates that provides investment advisory services to institutions and individuals, managing $38.0 billion in assets at March 31, 2011. Our operating results fluctuate primarily due to changes in the total value and composition of our assets under management. The value and composition of our assets under management are, and will continue to be, influenced by a variety of factors, including purchases and redemptions of shares of mutual funds and net inflows into and withdrawals from separate accounts that we manage, fluctuations in the financial markets around the world that result in appreciation or depreciation of assets under management and the number and types of our investment strategies and products.

We market our investment strategies to our clients through a variety of products designed to suit their investment needs. We currently categorize the portfolios that we manage within four investment product types captured in our investment companies and separate accounts. The following table lists our assets under management by product at March 31, 2011 and 2010.

		March 31,
(in millions)		2011				2010
Investment Companies
Open-end mutual funds		$	23,575			$	19,959
Closed-end funds			5,506				5,081
Total investment companies			29,081				25,040
Separate Accounts
Institutional accounts			6,179				5,047
Managed accounts			2,701				2,876
Total separate accounts			8,880				7,923
Total Assets Under Management		$	37,961			$	32,963

Our revenues are substantially comprised of investment management fees earned under contracts with the investment companies and separate accounts that we manage. Our revenues are also comprised of distribution and underwriting fees, including asset-based distributions and/or service fees received pursuant to Rule 12b-1 plans. Investment management fees and distribution and underwriting fees may fluctuate based on a number of factors, including the total value and composition of our assets under management, market appreciation or depreciation and the level of net inflows and outflows, which represent the sum of new client investments, additional funding from existing clients, withdrawals of assets from and termination of client accounts, and purchases and redemptions of mutual fund shares. The mix of assets under management among our investment products also has an impact on our revenues as our fee schedules vary by product.

Our largest operating expenses are typically related to employee compensation and benefits expense, which includes salaries, incentive compensation and related benefits costs, the distribution of mutual funds, including Rule 12b-1 payments, marketing and sales promotion expenses and the amortization of deferred sales commissions for open-end mutual funds. Operating expenses may fluctuate due to a number of factors, including changes in distribution expense as a result of fluctuations in mutual fund net sales and market appreciation or depreciation, variations in staffing and compensation, and marketing-related expenses that include supplemental distribution payments.

Operating Results

Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010

Assets Under Management

Assets under management increased by $5.0 billion, or 15%, to $38.0 billion at March 31, 2011 from $33.0 billion at March 31, 2010. Our assets under management consisted of 77% investment companies and 23% separate accounts at March 31, 2011 and 76% investment companies and 24% separate accounts at March 31, 2010.

		Three Months Ended March 31,								Change
( in millions)		2011				2010				Amount				Percent
Total Investment Companies
Beginning assets under management		$	27,352			$	24,480			$	2,872				12	%
Net purchases (redemptions)			346				(32	)			378				*
Market appreciation			1,383				592				791				134
Ending assets under management			29,081				25,040				4,041				16
Average assets under management			28,367				24,347				4,020				17
Institutional
Beginning assets under management			5,559				4,619				940				20	%
Net inflows			254				259				(5	)			2
Market appreciation			366				169				197				117
Ending assets under management			6,179				5,047				1,132				22
Average assets under management			5,815				4,722				1,093				23
Managed Accounts
Beginning assets under management			2,503				3,615				(1,112	)			31	%
Net inflows (outflows)			18				(774	)			792				*
Market appreciation			180				35				145				414
Ending assets under management			2,701				2,876				(175	)			6
Average assets under management			2,598				3,279				(681	)			21
Total Assets Under Management
Beginning assets under management			35,414				32,714				2,700				8	%
Net inflows (outflows)			618				(547	)			1,165				*
Market appreciation			1,929				796				1,133				142
Ending assets under management			37,961				32,963				4,998				15
Average assets under management		$	36,780			$	32,348			$	4,432				14

During the first quarter of 2011, net purchases in the investment companies that we manage were $346 million and represent a favorable change of $378 million from net redemptions of $32 million in the first quarter of 2010. The improvement in net flows was primarily due to increased net purchases within our low-volatility equity and global mutual funds, as well as a significant decrease in net redemptions from our Growth Fund. During the most recent quarter, we generated positive net purchases in twelve of our mutual funds, including all five of our Dublin-based UCITS, which collectively added $115 million during the quarter. This improvement in net purchases was tempered by net redemptions in our Convertible Fund and a significant reduction in net purchases into our Market Neutral Income Fund as both funds were closed to new investors in January 2011. Assets under management within our investment companies were positively impacted by market appreciation of $1.4 billion during the three months ended March 31, 2011 compared to market appreciation of $592 million during the three months ended March 31, 2010.

During the first quarter of 2011, net inflows of $272 million increased assets under management within our separate accounts, which are comprised of institutional and managed accounts. Net outflows were $515 million for the comparable prior-year period. The current quarter improvement is mostly due to positive net inflows into our managed accounts of $18 million for the first quarter 2011 compared to the $774 million of outflows in the first quarter of 2010 that stemmed from our decision to increase the account minimums for our convertible-based strategies on separately-managed account platforms. Our institutional strategies continue to garner strong interest with $254 million of net inflows for the quarter,

especially abroad where we won our first large investment mandate in Asia. Market appreciation increased these assets under management by $546 million during the current quarter.

Financial Overview

		Three Months Ended March 31,								Change
(in thousands, except margin)		2011				2010				Amount				Percent
Operating income		$	37,315			$	30,518			$	6,797				22	%
Operating margin			41.2	%			37.6	%			3.6	%			10	%
Net income attributable to Calamos Asset Management, Inc.		$	4,632			$	4,811			$	(179	)			(4	)%

Operating results were strong during the first quarter. Operating income of $37.3 million increased by $6.8 million, or 22% from the prior year. Operating margin for the current quarter increased to 41.2% from 37.6% from the first quarter 2010. Despite these strong operating results, net income decreased slightly because non-operating activities resulted in current period losses of $3.5 million compared with gains of $6.9 million last year. For the three months ended March 31, 2011 non-operating losses reflect decreases in security valuations on derivatives used as an economic hedge to price changes in our corporate investment portfolio. Unlike the changes in the security prices for the investment securities being hedged, price changes in the derivatives impact current period earnings.

In order to gather assets under management, we engage in distribution and underwriting activities, principally with respect to our family of open-end mutual funds. When analyzing our business, we consider the result of these distribution activities as a net amount of revenue as they are typically a result of a single open-end mutual fund share purchase. Hence, the result of presenting this information in accordance with generally accepted accounting principles is a reduction to our overall operating margin, as the margin on distribution activities is generally lower than the margins on the remainder of our business. The following table summarizes the net distribution fee margin for the three months ended March 31, 2011 and 2010:

		Three Months Ended March 31,
(in thousands)		2011				2010
Distribution and underwriting fees		$	22,112			$	21,835
Distribution expenses			(18,233	)			(16,790	)
Amortization of deferred sales commissions			(1,748	)			(2,566	)
Net distribution fees		$	2,131			$	2,479
Net distribution fee margin			10	%			11	%

Net distribution fee margin varies by share class because each share class has different distribution and underwriting activities, which are described in our 2010 Annual Report on Form 10-K. Distribution fee revenues and expenses vary with our average assets under management while deferred sales commissions are typically amortized on a straight-line basis with adjustments made upon redemption of existing assets. As a result, in periods of declining assets under management, our distribution margin will be more severely impacted by amortization expense.

Revenues

Total revenues increased by $9.4 million, or 12%, to $90.5 million for the three months ended March 31, 2011 from $81.1 million for the comparable prior-year period. The increase was primarily due to higher investment management fees and distribution and underwriting fees.

		Three Months Ended March 31,								Change
(in thousands)		2011				2010				Amount				Percent
Investment management fees		$	67,608			$	58,570			$	9,038				15	%
Distribution and underwriting fees			22,112				21,835				277				1
Other			828				725				103				14
Total revenues		$	90,548			$	81,130			$	9,418				12	%

Investment management fees increased 15% in the first quarter of 2011 primarily due to a $4.4 billion, or 14%, increase in average assets under management across all products for the first quarter of 2011 versus 2010. Investment management fees from open-end mutual funds increased to $43.4 million for the recent quarter from $36.5 million for the prior-year period, driven by a $3.6 billion increase in open-end mutual fund average assets under management. Investment management fees from our closed-end funds increased to $12.1 million for the first quarter of 2011 from $11.0 million last year, due to a $449 million increase in closed-end fund average assets under management. Investment management fees from our separately managed accounts increased to $12.1 million for the first quarter of 2011 from $11.1 million in the prior year again due to a $412 million increase in average assets under management. Investment management fee rate that we earned as a percentage of average assets under management was approximately 0.75% for the quarter of 2011 compared to 0.73% for the first quarter of 2010.

Distribution and underwriting fees were little changed for the three months ended March 31, 2011. Distribution and underwriting fees are comprised of asset-based distribution fees received from our family of mutual funds, front-end sales charges on sales of Class A mutual fund shares and contingent deferred sales charges received on certain redemptions from Class B and Class C mutual fund shares. The increase of $277,000 from the prior quarter represents an increase in asset-based distribution fees, offset by a decrease in contingent deferred sales charges that we earned from Class B shares redemptions. The fee rate earned on contingent deferred sales charges decreases with the average age of the Class B share asset and expires after 6 years. Given that Class B shares are closed to new investors, the average age of the Class B shares will continue to increase over time and will reduce future rates we receive from contingent deferred sales charges. Consistent with a trend that began in 2010, the percentage of Class I shares continues to increase. Because we do not earn distribution fees from Class I share assets under management, changes in asset-based distribution fees are not expected to be as sensitive to changes in the level of average mutual fund assets under management.

Operating Expenses

Operating expenses increased by $2.6 million to $53.2 million for the three months ended March 31, 2011 from $50.6 million in the prior-year period reflecting increased employee compensation and asset-related expenses, and reduced amortization of deferred sales commissions.

		Three Months Ended March 31,								Change
(in thousands)		2011				2010				Amount				Percent
Employee compensation and benefits		$	20,632			$	20,132			$	500				2	%
Distribution expenses			18,233				16,790				1,443				9
Amortization of deferred sales commissions			1,748				2,566				(818	)			(32	)
Marketing and sales promotion			3,439				2,732				707				26
General and administrative			9,181				8,392				789				9
Total operating expenses		$	53,233			$	50,612			$	2,621				5	%

Employee compensation and benefits expenses increased by $500,000 to $20.6 million for first quarter 2011 when compared to the same period a year ago. Performance-related incentive compensation accruals, which are based on our

operating results, relative investment performance and the growth in our assets under management, among others, were the cause to the increase in expenses.

Distribution expenses increased by $1.4 million, or 9%, for the first quarter of 2011 when compared to the prior-year period. Increases in asset-based Rule 12b-1 expenses and in the age of Class C mutual fund share assets are the cause for the change in the period. As discussed previously, there are no distribution revenues or expenses associated with Class I mutual fund shares. Because the percentage of Class I shares has been increasing during the comparable periods, the increase in distribution expenses trails the increase in average mutual fund assets under management. We expect this trend to continue.

Amortization of deferred sales commissions decreased to $1.7 million for the three months ended March 31, 2011 when compared to the first quarter of 2010, mainly due to discontinuing Class B share mutual fund sales during 2009. We expect amortization expense associated with Class B shares deferred sales commissions to continue to decrease until these assets fully convert to Class A shares eight years after the purchase date.

Marketing and sales promotion increased by $707,000 to $3.4 million for the three months ended March 31, 2011 when compared to the same period a year ago. Two items contributed to the increased spending are supplemental distribution payments to intermediaries, which are positively correlated with the levels mutual fund assets that we manage, and selective advertising campaigns used to build awareness about our growth and low-volatility equity strategies.

For the three months ending March 31, 2011, general and administrative expenses were up 9% to $9.2 million due to professional services expenses related to outsourcing our middle- and back-office operations functions and to various legal proceedings. As this outsourcing initiative nears completion in 2011, we expect professional services to vary based upon the level of assets under management and the number of portfolios that we manage. Depreciation expenses associated with occupying our facilities dropped by nearly $1.0 million from the prior year period as new purchases associated with the construction and occupancy of our headquarters have been fully depreciated.

Non-operating Activities, Net of Non-controlling Interest in Partnership Investments

The following table summarizes our non-operating activities, net of non-controlling interest in partnership investments for the three months ended March 31, 2011 and 2010:

		Three Months Ended March 31,
(in thousands)		2011				2010				Change
Interest income		$	69			$	106			$	(37	)
Interest expense			(1,964	)			(1,950	)			(14	)
Net interest expense			(1,895	)			(1,844	)			(51	)
Investment income (loss)			(1,664	)			8,602				(10,266	)
Miscellaneous other income			37				151				(114	)
Investment and other income (loss)			(1,627	)			8,753				(10,380	)
Non-operating income			(3,522	)			6,909				(10,431	)
Net income attributable to non-controlling interest in partnership investments			(5	)			(7	)			2
Non-operating income (loss), net of non- controlling interest in partnerships		$	(3,527	)		$	6,902			$	(10,429	)