e10vk
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended: December 31, 2005 |
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or - |
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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)
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Delaware |
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32-0122554 |
(State or other jurisdiction of
incorporation or organization) |
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(I.R.S. Employer
Identification No.) |
2020 Calamos Court,
Naperville, Illinois
(Address of principal executive offices) |
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60563
(Zip Code) |
Registrants telephone number, including area code:
630-245-7200
Securities registered pursuant to Section 12(b) of the
Act:
None
Securities registered pursuant to Section 12(g) of the
Act:
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Title of each class |
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Class A Common Stock, $0.01 par value |
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
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. Yes þ No o
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
registrants 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. [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2 of the
Exchange Act. (Check one)
Large accelerated
filer o Accelerated
filer þ Non-accelerated
filer o
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2 of the
Act). Yes o No þ
The aggregate market value of common stock held by
non-affiliates (assuming that all directors and executive
officers are affiliates) on June 30, 2005, the last
business day of the registrants most recently completed
second fiscal quarter, was $626.5 million.
At March 1, 2006, there were 23,161,898 shares of
Class A common stock and 100 shares of Class B
common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Part III Portions of the definitive proxy
statement for our Annual Meeting of Shareholders on June 1,
2006, as specifically described herein.
TABLE OF CONTENTS
PART I
In this report, unless the context otherwise requires,
references to we, us, our
and our company refer to Calamos Asset
Management, Inc., a Delaware corporation, and its consolidated
subsidiaries, including Calamos Holdings LLC and the operating
company subsidiaries of Calamos Holdings LLC. Calamos Asset
Management, Inc. was incorporated on July 23, 2004, in
preparation for our companys initial public offering later
that year.
Unless the context otherwise requires:
Calamos Advisors refers to Calamos Advisors
LLC, a Delaware limited liability company, registered investment
advisor and wholly owned subsidiary of Calamos Holdings LLC.
Calamos Advisors acts as an investment advisor in managing our
open-end and closed-end mutual funds; and
Calamos Financial Services refers to Calamos
Financial Services LLC, a Delaware limited liability company,
registered broker-dealer and wholly owned subsidiary of Calamos
Holdings LLC. Calamos Financial Services acts as the sole
distributor of our family of open-end mutual funds.
The other operating company subsidiaries of Calamos Holdings LLC
are Calamos Property Management LLC, a provider of real estate
investment services; and Calamos Partners LLC and Calamos
Capital LLC, investment advisors that provide investment
management services primarily related to alternative investment
products.
The assets under management and other financial data presented
in this report with respect to the mutual funds we manage
include the Calamos Growth and Income Portfolio, which is a
portfolio of the Calamos Advisors Trust, a registered open-end
investment company. However, references to the terms
mutual funds and open-end
funds in this report do not otherwise include this
portfolio.
Overview
We provide investment advisory services to institutions and
individuals, managing $43.8 billion in client assets at
December 31, 2005. For nearly 30 years, we have been
steadfast in our focus on providing our clients with superior
risk-adjusted returns, which we define as investment returns
that are superior to performance benchmarks, with an equal or
lower level of assumed risk. We have consistently applied an
investment philosophy and proprietary process centered on risk
management across an expanding range of investment strategies,
including equity, balanced high yield, convertible, and
alternative assets, while analyzing global markets. We believe
this disciplined adherence to our investment philosophy and
process has enabled us to deliver superior risk-adjusted
returns. At December 31, 2005, 95% of the
$25.6 billion of open-end fund assets managed by us, with
an overall Morningstar rating, were rated by Morningstar as
four stars or five stars.
These ratings are based on past performance, which may not
be predictive of future results. For additional information
about Morningstar ratings, see Mutual Fund Ratings
and Rankings.
Our target clients are institutions and individuals with
long-term investment horizons. We make our range of investment
strategies available to these clients, directly and through
intermediaries, by offering an array of investment products
designed to suit their individual investment needs, such as
open-end funds, closed-end funds and separate accounts,
including alternative investments. We plan to introduce new
investment strategies that provide the opportunity for
attractive risk-adjusted returns for our clients.
We believe our investment performance, broad range of investment
strategies, diverse product offerings and an expanded sales
effort have allowed us to consistently grow our assets under
management and revenues and position us for continued organic
growth. Our assets under management have increased from
$9.3 billion at December 31, 2001 to
$43.8 billion at December 31, 2005.
On October 28, 2004, the Class A common stock of
Calamos Asset Management, Inc. began trading on the Nasdaq
National Market under the symbol CLMS. We paid our first
quarterly dividend of 7 cents per share in February 2005 and
increased our quarterly dividend 29% to 9 cents per share in
February 2006. We
2
have added new board members to ensure that we have a majority
of independent directors on our board, who are members of our
audit, compensation, and nominating and governance committees.
We expect to recruit additional outside expertise to our board
over time.
Business Strategy
Our business strategy is to continue to diversify the assets we
manage by investment product and type of client. Investment
products have been created organically within what we believe to
be a strong core competency in investment research and portfolio
management. We apply a team approach to investment research and
portfolio management, which continues to provide significant
leverage of investment talent. Our franchise is built upon a
consistent investment philosophy and process that has produced
strong risk-adjusted investment performance and driven
significant organic growth in assets under management. In
managing historical growth and in planning for future growth, we
have been, and will continue to be, guided by the following:
A key guiding principle is to have the clients best
interests in mind and to work hard to outperform client
expectations in performance and service. We strongly believe
that the success of our company is a byproduct of our success in
helping clients achieve their investment objectives.
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Maintain Superior Investment Performance |
We have a long-term record of achieving high, risk-adjusted
returns on the mutual funds and separate accounts that we
manage. As of December 31, 2005, Lipper ranked our Growth
Fund as the #1 multi-cap growth fund for 10 years, our
Market Neutral Fund as the #1 flexible income fund for
10 years, and our Convertible Fund as the #3
convertible fund for 10 years. For additional information
about Lipper rankings, see Mutual Fund Ratings and
Rankings. Our key strategy is to maintain our
investment performance by consistently applying our investment
philosophy and process while actively managing each of our
strategies to maintain a stable balance of risk and reward over
the full course of a market cycle. We are equally mindful of
protecting our clients during changing market conditions and
accordingly have closed, and expect to continue to close,
products to new investments during periods when we do not
believe satisfactory risk-adjusted returns can be achieved on
additional new investments.
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Focus on Serving Long-Term Investors |
Our investment strategies are focused on seeking to generate
superior risk-adjusted returns over the long term. We seek to
attract and retain long-term clients. In order to attract these
clients, we focus on educating investors about our investment
philosophy and process. We believe that excellent client service
is critical to attracting, developing and maintaining long-term
client relationships. To ensure top-notch service, we brought
our mutual fund client services team in-house in 2005 rather
than relying on our transfer agent to provide this important
function. Our client services representatives handle calls to
our toll-free number and support our sales force via outbound
calls to enhance awareness of our strategies. As another measure
of the value we place on excellent client service, our
operations departments received ISO 9001:2000
certification from the International Organization of
Standardization (ISO). We believe that our firm is one of the
first investment advisors to implement this standard within an
investment operations group. We intend to pursue ISO
certification for additional departments within the firm, as it
provides a rigorous framework for documenting and continually
improving our business practices.
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Selectively Expand Our Investment Strategies |
Since the introduction of our first convertible strategy in
1977, we have expanded product offerings globally among equity,
balanced, high yield, convertible, and alternative asset
strategies. Each expansion has been based on our core competency
in investment research. We have developed proprietary research
capabilities, including an expertise in valuing companies,
taking into consideration their total capital structure.
3
In 1990 we introduced our first equity strategy and in 1999 we
began offering a high yield strategy, both of which make use of
the analytics and modeling originally designed to assess the
hybrid nature of convertible securities. In 2003, we expanded
our equity strategies by creating a strategy to focus solely on
the large cap sector of the market. In 2004, we introduced a
more flexible total return strategy, providing investors access
to our equity, convertible and high yield expertise in one
vehicle. Also in 2004, we introduced an equity-oriented
alternative investment product and expanded the investment
strategies employed by an existing convertible arbitrage
alternative investment product. In 2005, we launched an open-end
fund and a closed-end fund that place greater emphasis on
investments outside the United States. Looking ahead, we expect
to focus on building our alternative investment products, which
may include a mezzanine fund and/or a private equity fund. In
late 2004 and 2005, Calamos Holdings LLC invested
$50 million in new products and set aside another
$30 million for new product initiatives. During the same
period, Calamos Family Partners, Inc. invested $104 million
in our products, with another $30 million earmarked for our
products. We will continue to selectively expand our investment
strategies where we believe the application of our core
competencies and our investment philosophy and process can
produce attractive risk-adjusted returns. We believe that by
doing so, we can enhance our long-term ability to increase our
assets under management and revenues.
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Selectively Expand Our Distribution Relationships and
Client Base |
We strive to expand our presence in distribution channels that
best deliver our strategies to long-term investors, in order to
grow our client base, assets under management and revenues. For
example, our first institutional account mandate was initiated
in 1981 for a pension fund account that remains a client today.
In the late 1980s, we became one of the first participants in
the broker-sponsored managed account business, and in 2002, we
launched the first of our four closed-end funds. In 2005, we
reorganized our sales force in order to place additional
emphasis on institutional investors, including private pension
funds, public funds, endowment funds, banks and insurance
companies. We have continued to expand our distribution among
family offices, private foundations and high net worth
investors, as well as among 401 (k) platforms, broker
consultants, broker-dealers, financial planners and other
channels for mutual funds and managed account products. We see
continued opportunities to expand and diversify our distribution
relationships and client base. Specifically, we believe we can
continue to grow organically by focusing on institutional client
growth, increasing the number of intermediaries that distribute
Calamos products, and increasing the average number of Calamos
funds recommended by broker-dealers and financial advisors. In
addition, we have expanded our distribution outside the United
States through alternative investments and other managed account
relationships, as well as our first fund distribution
arrangement outside the United States: a co-branding and
investment management agreement signed in 2005 with a leading
Swiss bank, Union Bancaire Privée (UBP). This agreement
enables us to increase our brand recognition in Europe while
benefiting from UBPs established sales force. We also see
a significant opportunity to expand our alternative investment
offerings by creating partnerships and other vehicles. In
addition, to manage our growth, we have recruited senior-level
managers with extensive industry experience to run our
day-to-day operations
so that our investment professionals can focus on investment
performance.
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Capitalize on Our Recognized and Respected Brand |
We believe that brand awareness can accelerate our organic asset
growth and help expand our client base. Over the years, we have
been recognized for producing top-tier investment performance
across a range of investment strategies. For example, Forbes
named the Growth Fund number one in its annual mutual fund
survey, published September 19, 2005. This was the third
consecutive year in which we received this recognition. In the
Investors Guide 2006 issue of Fortune,
December 12, 2005, the Growth Fund was named one of seven
star funds. The company itself was profiled in a
variety of articles during 2005, including
Pensions & Investments and BusinessWeek.
Furthermore, our chief investment officers John P.
Calamos, Sr. and Nick P. Calamos have written books on
investments in convertible securities and are recognized experts
on investing. During 2005, they discussed their investment
insights in Barrons, BusinessWeek and the New
York Times, as well as on CNBC and Bloomberg TV. We believe
that as a public company, we have been able to further
strengthen the Calamos brand, awareness of our investment
philosophy and the positive recognition we enjoy.
4
Investment Philosophy, Management and Process
We believe that a successful investment philosophy must be
consistent and long-term oriented. Our investment philosophy is
based on our strong views about the longer-term trends and
economic conditions that impact financial markets. We assume
there will always be unforeseen events that will continually
test the conventional wisdom. We believe we can achieve
favorable investment results based on our experience in many
market environments, continued study of economics and financial
markets, and application of a sound investment process that can
cope with volatility and risky markets. Because of this
investment philosophy, our investment process is focused on risk
management. The creation of wealth for our clients over the long
term is not solely about producing returns, but about managing
risk, which we define as the potential for loss and the
variability of returns.
We seek to provide our clients with superior risk-adjusted
returns over the long term. While seeking to achieve strong
returns, we are focused, first and foremost, on managing risk.
We offer a variety of investment strategies that represent
distinct balances, or profiles, of risk and reward. We believe
that diversification is critical to managing risk and moderating
the impact of volatile markets. Our objective is to maintain the
consistency of each strategys risk and reward profile,
whether managing a conservative or an aggressive strategy.
We construct portfolios by applying various proprietary
investment tools and techniques. We analyze and select
individual securities in the context of our perspective on
macroeconomic themes in the U.S. and the world. To maintain
diversified portfolios for our clients, we assess the impact a
security will have on the portfolios asset class
allocation (where applicable) as well as its industry and sector
weightings. Our investment philosophy embraces the extensive use
of quantitative tools, overlaid with internal qualitative
research and analysis.
We view our quantitative approach as a competitive advantage and
have a history of committing resources to build, maintain and
enhance our analytical abilities. In addition to our sizable
allocation of staff and resources to technology, a separate
research development team is dedicated solely to investment team
needs and projects, reporting directly to our chief investment
officers. Our preference to build software reflects our desire
to control underlying assumptions and to allow for the
customization of our investment process. We have consistently
sought technological advantages to improve the investment
process, and continue to devote significant resources in this
area.
Our investment management team is led by John P.
Calamos, Sr. and Nick P. Calamos, our chief investment
officers. As the originators of our investment philosophy, they
developed a team approach to implementing that philosophy
through our investment process. This team approach allows for
valuable contributions from numerous analysts within our company
and creates a synergy of expertise that can be applied across
many different investment strategies. We also believe that
pooling the expertise of our analysts provides for more
consistent investment performance over the long term and enables
our company to manage asset growth without significantly adding
personnel.
Members of our investment team participate in a career track
system that helps institutionalize our investment process by
immersing many analysts and other team members in our system
from early in their careers. Additionally, key members of the
investment team participate in our incentive compensation plan.
Through this plan, investment team members will be able to share
in the overall success of our company. As of year-end 2005, our
investment management team included 68 members focused on
portfolio management and research, trading, portfolio
administration and development of analytical models. In 2006, we
intend to hire several additional investment professionals to
accommodate asset growth and facilitate building an alternative
investment strategy, which we expect will be run by a separate
investment team following our investment process under the
leadership of our chief investment officers.
5
We believe that the financial markets operate in a manner that
precludes using a single method of analysis and that market
fluctuations call for a more flexible approach. Our long-term
investment strategy is based on an investment process that uses
a variety of sophisticated quantitative models. Our approach
also incorporates academic theory and real-world experience to
determine a companys economic enterprise value. Using this
process, our investment management team is able to value all
securities within a corporate capital structure. This process is
employed in each of our investment strategies.
The key steps in our investment process are:
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Assess Business Value. We analyze businesses as would a
buyer of the entire company, analyzing financial statements to
determine an economic enterprise value. |
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Assess Security Value. Once we understand the value of a
business, our investment team focuses on individual security
values within its capital structure. |
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Assess Investment Opportunities. By understanding all
aspects of a companys capital structure, we seek to
identify opportunities across asset classes (where applicable),
as well as investment strategies. |
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Assess the Opportunitys Role in the Portfolio.
Using risk management and portfolio construction techniques, we
determine whether an individual security has a place in our
investment portfolios and strategies. |
Investment Strategies
The following table describes our investment strategies within
the equity, balanced, high yield, convertible and alternative
asset classes. At December 31, 2005, we and Calamos Family
Partners, Inc. have a total of $286 million invested in our
firms investment strategies.
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Assets Under | |
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Management at | |
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December 31, 2005 | |
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Asset Strategies |
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(in billions) | |
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Description |
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Equity
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$ |
23.7 |
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Invests in a range of U.S. and global companies of various
market capitalization under both growth and value disciplines |
Balanced
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11.3 |
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Invests in dynamic blend of convertible securities, equities and
high yield securities, both in the U.S. and globally |
Convertible
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5.6 |
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Invests primarily in convertible securities |
High Yield
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2.8 |
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Invests in high yield securities, or junk bonds as
well as higher-yielding convertible securities |
Alternative
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0.4 |
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Invests in non-traditional strategies, including convertible
arbitrage and leveraged equity among others |
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Total
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$ |
43.8 |
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Investment Products
We market our investment strategies to our clients through a
variety of products designed to suit their individual investment
needs. We currently offer six types of investment products that
fall into the categories of mutual funds and separate accounts.
6
Mutual funds include registered open-end funds and registered
closed-end funds and totaled $31.9 billion at December 31,
2005.
At December 31, 2005, we had $26.0 billion of assets
under management in open-end funds, representing approximately
59% of our total assets under management. Open-end funds are
continually offered and are not listed on an exchange. Open-end
funds issue new shares for purchase, unless they are closed to
new investors, and redeem shares from those shareholders who
sell. The share price for purchases and redemptions of open-end
funds is determined by each funds net asset value, which
is calculated at the end of each business day.
We introduced our first open-end fund, the Convertible Fund, in
1985. We have since expanded our open-end fund products and
services to invest in securities world-wide and to include
equity, balanced, high yield, convertible and alternative
strategies that we believe offer attractive risk-adjusted return
potential when managed in a manner that is consistent with our
core investment philosophy and process. The strategic focus of
our sales and marketing effort has been on increasing access to
our products, including open-end funds, offered by each
financial intermediary. We currently act as the investment
advisor to nine open-end funds offered to customers primarily
through financial intermediaries. Additionally, we have
proactively responded to changing market conditions by
repositioning certain existing open-end funds. Since 2003, the
Convertible Fund and the Market Neutral Income Fund were closed
because we did not believe the market for convertible securities
provided satisfactory risk-adjusted returns for additional
investments in these funds. As of December 30, 2005, we
renamed our Market Neutral Fund the Calamos Market Neutral
Income Fund and broadened its mandate to include a covered call
strategy. Calamos Market Neutral Income Fund reopened to new
investments on January 3, 2006. We expect to continue to
seek opportunities to expand and develop the investment
strategies offered in our open-end fund products as market
conditions change.
Calamos Advisors manages the strategies of each of the open-end
funds with the goal of achieving higher returns with less risk
than that of the broad market. To do so, our investment team
focuses on maintaining each strategys distinct balance
between risk and return throughout the full course of the market
cycle. The
7
following table provides the assets under management, risk,
overall Morningstar ratings and Lipper rankings for each
open-end fund managed as of December 31, 2005.
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As of December 31, 2005 | |
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Overall Morningstar Rating(3) | |
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Fund and |
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Assets | |
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Risk (Beta | |
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Number of | |
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Lipper Ranking(4) |
Year of |
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Under | |
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vs. S&P | |
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Funds in | |
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Star | |
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Inception(1) |
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Management | |
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500)(2) | |
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Category |
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Category | |
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Rating | |
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Category |
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Years | |
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Ranking |
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(In billions) | |
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Growth
1990 |
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$ |
18.1 |
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0.81 |
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Mid-cap
growth funds |
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803 |
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4 |
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Multi-cap growth
funds |
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1 5 10 |
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204/409
8/279
1/89 |
Blue Chip
2003 |
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0.1 |
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n/a |
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Large blend |
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n/a |
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n/a |
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Multi-cap core funds |
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1 |
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516/829 |
Value
2002 |
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0.1 |
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n/a |
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Large blend |
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1,490 |
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3 |
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Multi-cap core funds |
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1 3 |
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633/829
177/601 |
International Growth
2005 |
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0.1 |
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n/a |
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Foreign large growth |
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n/a |
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n/a |
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International
small/mid-cap
growth funds |
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n/a |
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Not rated |
Global Growth and Income
1996 |
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0.5 |
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0.50 |
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World stock
funds |
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392 |
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3 |
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Global multi-cap
core funds |
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1 5 |
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1/69
5/42 |
Growth and Income
1988 |
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5.7 |
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0.56 |
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Convertible funds |
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80 |
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4 |
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Multi-cap core
funds |
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1 5 10 |
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230/829
39/420
8/132 |
High Yield
1999 |
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0.2 |
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0.38 |
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High yield bond
funds |
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447 |
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4 |
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High yield funds |
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1 5 |
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233/423
42/305 |
Convertible
1985(5) |
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1.0 |
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0.55 |
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Convertible funds |
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80 |
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4 |
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Convertible
funds |
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1 5 10 |
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31/76
19/57
3/33 |
Market Neutral Income
1990(6) |
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0.2 |
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0.12 |
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Conservative
allocation funds |
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318 |
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4 |
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Flexible income
funds |
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1 5 10 |
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12/17
4/11
1/7 |
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Total |
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$ |
26.0 |
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(1) |
Performance of the Blue Chip and Value funds reflects the
effects of an expense reimbursement, which improved results. For
some funds, performance shown includes the effects of an
overpayment of dividends and/or capital gains distribution to
shareholders of certain classes of shares of the fund (and a
corresponding capital contribution by Calamos Advisors), which
increased certain return figures. |
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(2) |
Source: Russell/ Mellon Analytical Services LLC. Beta is a
historic measure of a funds relative volatility. A beta of
0.5 reflects one-half
of the markets volatility, while a beta of 2.0 reflects
twice the markets volatility. This column shows risk as
measured by the funds beta (5 year) compared to the
S&P 500 Index, which is an unmanaged index generally
considered representative of the U.S. stock market. |
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(3) |
For a description of overall Morningstar ratings, see
Mutual Fund Ratings and Rankings. Rankings are
for Class A shares. As of December 31, 2005: Growth
Fund: 3 stars for 3 years, 4 stars for
5 years, and 5 stars for 10 years out of 803, 613
and 215 mid-cap
growth funds respectively; Value Fund: 3 stars for
3 years out of 1,490 large blend funds; Global Growth and
Income Fund: 2 stars for 3 years and 4 stars for
5 years out of 392 and 285 world stock funds
respectively; Growth and Income Fund: 3 stars for 3 years,
4 stars for 5 years, and 5 stars for 10 years out
of 80, 70 and 46 convertible funds respectively; High Yield
Fund: 3 stars for 3 years and 4 stars for 5 years out
of 447 and 373 high yield bond funds respectively; Convertible
Fund: 2 stars for 3 years, 3 stars for 5 years,
and 5 stars for 10 years out of 80, 70 and
46 convertible funds respectively; Market Neutral Income
Fund: 2 stars for 3 years, 4 stars for 5 years,
and 5 stars for 10 years out of 318, 194 and 69
conservative allocation funds respectively. |
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(4) |
For a description of Lipper rankings, see Mutual
Fund Ratings and Rankings. Rankings are for
Class A shares. |
|
(5) |
Closed to new investments, effective April 30, 2003. |
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(6) |
Closed to new investments from March 14, 2003 through
December 30, 2005. |
8
At December 31, 2005, we had $5.9 billion of assets
under management in closed-end funds, representing approximately
14% of our total assets under management. Closed-end funds
typically sell a finite number of shares to investors through
underwritten public offerings, unlike open-end funds, which
continually offer new shares to investors. After the public
offerings, investors buy closed-end fund shares from, and sell
those shares to, other investors through an exchange or
broker-dealer market.
We introduced our first
closed-end fund, the
Convertible Opportunities and Income Fund (NYSE: CHI), in
2002. With this fund, we were among the first managers to
combine different asset classes in a single closed-end offering,
seeking to enhance returns and limit risk. We have since
expanded our closed-end fund products and currently act as the
investment advisor to four closed-end funds, each of which
trades on the New York Stock Exchange.
Since 2002, we have sought to capitalize on the success, as
measured by risk-adjusted returns and share price performance,
achieved by our first closed-end fund, Convertible Opportunities
and Income Fund. In 2003, we introduced the Convertible and High
Income Fund (NYSE: CHY), which combines our convertible and
high yield strategies. In 2004, we introduced the Strategic
Total Return Fund (NYSE: CSQ), which seeks total return
through a combination of our equity, convertible and high yield
strategies. In 2005, we launched the Global Total Return Fund
(NYSE: CGO), which seeks total return through a globally
diversified portfolio of equity, convertible and high yield
strategies. Under favorable market conditions, we expect to
continue to seek opportunities to introduce our investment
strategies through new closed-end funds that we believe will
offer attractive risk-adjusted return potential.
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Assets Under | |
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Management at | |
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Year of | |
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Fund and Ticker |
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December 31, 2005 | |
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Inception | |
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Description |
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(in billions) | |
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Convertible Opportunities and Income |
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CHI |
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$ |
1.1 |
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2002 |
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Seeks total return through a combination of capital appreciation
and current income by investing in convertible and
non-convertible income securities. |
Convertible and High Income |
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CHY |
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1.4 |
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2003 |
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Seeks total return through a combination of capital appreciation
and current income by investing in convertible and high yield
securities. |
Strategic Total Return |
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CSQ |
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3.3 |
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2004 |
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Seeks total return through a combination of capital appreciation
and current income by investing in equity, convertible and high
yield securities. |
Global Total Return(1) |
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CGO |
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0.1 |
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2005 |
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Seeks total return through a combination of capital appreciation
and current income by investing in a globally diversified
portfolio of equity, convertible and high yield securities. |
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Total
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$ |
5.9 |
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(1) |
Following a preferred stock offering in January 2006, CGO
totaled approximately $180 million in assets at
January 31, 2006. |
Each of the closed-end funds employs leverage in its capital
structure through the issuance of preferred shares to increase
its total assets. The dividends paid to preferred shareholders
are based on short-term interest rates, while the proceeds from
the issuance of preferred shares are invested by the funds in
longer-term taxable
9
securities. In this manner, we seek to generate additional
dividend potential for the common shareholders based on
historical differences between short-term and long-term taxable
interest rates.
Separate accounts include institutional accounts, managed
accounts, private client accounts and alternative investments
and totaled $11.9 billion at December 31, 2005.
At December 31, 2005, we had $4.2 billion of assets
under management in institutional accounts, representing
approximately 9% of our total assets under management.
Institutional accounts are separately managed accounts for
institutional investors, such as private pension funds, public
funds and endowment funds, and are offered directly by us and
through institutional consultants.
Our first institutional account mandate was initiated in 1981
for a pension fund account that remains a client today. Since
initially offering convertible investment strategies to
institutions, we have broadened our mandates to include a
variety of investment strategies in other asset classes, such as
equity and high yield. Currently our convertible strategies
remain closed to new accounts. We act as investment advisor to
approximately 120 institutional accounts.
We focus on growing our institutional business through equity
and high yield mandates, managed under both domestic and global
objectives. Our target mandates allow for sufficient investment
flexibility by which to achieve the objectives of our clients
under changing market conditions. We expect to continue to
dedicate personnel to support these efforts, in both a sales and
service function.
At December 31, 2005, we had $6.9 billion of assets
under management in managed accounts, representing approximately
16% of our total assets under management. Managed accounts are
separately managed accounts for individual and institutional
investors, offered primarily through national and regional
broker-dealers. Managed accounts may be structured as investment
management agreements between us and the investor directly or us
and the broker-dealer.
We first introduced a managed account through a broker-dealer
sponsored platform in 1989. Since initially offering convertible
investment strategies to our managed account customers, we have
broadened our mandates to include balanced, equity and high
yield investment strategies. Currently our convertible
strategies remain closed to new accounts. We act as investment
advisor to more than 24,000 managed accounts, including
approximately 71 institutional managed accounts held through 21
broker-sponsored managed account programs. We focus on
selectively growing our managed account business through
expanded participation in broker-sponsored managed account
programs. For programs in which we have a relationship directly
with the investor, we target mandates that allow for greater
investment flexibility under changing market conditions. We
expect to continue to devote personnel resources to support our
relationships with broker-dealers, in both a sales and client
service function.
At December 31, 2005, we had $748 million of assets
under management in private client accounts, representing
approximately 2% of our total assets under management. Private
client accounts are separately managed accounts offered directly
by us and primarily include high net worth individuals, family
offices and private foundations, among others.
The origins of our private client business date back to 1977.
Under this business, we provide customized asset allocation
advice to our clients, under the guidance of our investment
management team. We currently act as investment advisor to more
than 900 private client accounts. For our private client
accounts, we offer a Managed Mutual Fund Program, providing
customized portfolios drawn from our mutual fund family, as well
10
as separately managed accounts. Our private client account group
will continue to develop the Managed Mutual Fund Program
and will increasingly emphasize our alternative investment
products.
At December 31, 2005, we had $91 million of assets
under management in alternative investment products,
representing less than 1% of our total assets under management.
Alternative investment products include non-registered
investment vehicles, primarily hedge funds, offered directly by
us to qualified individual and institutional investors.
Building upon our expertise in risk management, we introduced
our first alternative investment product, a multi-strategy hedge
fund (originally a convertible arbitrage fund), in 1988.
Continued development of alternative products is a key strategic
priority for us. We believe that the combination of our
investment team approach and analytical resources give us the
ability to further excel in this arena, particularly in
specialized and underserved market segments. We expect to
introduce multiple new alternative products in the form of
private investment pools, under a variety of strategies that are
consistent with our core investment philosophy and process.
Mutual Fund Ratings and Rankings
This report includes references to ratings and rankings by
Morningstar, Inc. and Lipper Analytical Services, Inc., which
were derived from information published by them. Overall
Morningstar ratings of mutual funds reflect historical
risk-adjusted performance as of a particular date and are
subject to change every month. Overall Morningstar ratings of
mutual funds are calculated from a funds three-, five- and
10-year average annual
returns, as available, in excess of
90-day T-bill returns
with appropriate fee adjustments and a risk factor that reflects
fund performance below
90-day T-bill returns.
The top 10% of the funds in an investment category receive five
stars, the next 22.5% receive four stars, the next 35% receive
three stars, the next 22.5% receive two stars and the last 10%
receive one star. Each share class of a fund is counted as a
fraction of one fund within this scale and rated separately,
which may cause slight variations in the distribution
percentages.
Lipper rankings of funds are based on net total return
performance with dividends reinvested and do not take into
account or reflect sales charges; if the rankings did reflect
sales charges, the results might be less favorable. Each fund is
ranked within a universe of funds similar in investment
objective as determined by Lipper.
All overall Morningstar ratings and Lipper rankings of the
open-end funds managed by Calamos Advisors cited in this report
are for Class A shares of those funds. The other classes of
shares of those funds may have different performance
characteristics.
The ratings and rankings included in this report are subject to
change without notice and are based on past performance, which
may not be predictive of future results.
Technology and Intellectual Property
Our investment approach demands specific requirements for all
aspects of the investment process, including risk management,
security analysis and trade processing. Our use of in-house and
third-party technology and software in particular,
our proprietary Calamos Corporate System, or CCS is
a result of this view, enabling customization of systems across
our company. Extending beyond the proprietary software used by
our investment team, all of our internal systems are geared to
the underlying assumptions that guide the investment process,
allowing for a more seamless integration of security analysis,
trade processing, accounting and the portfolio administration of
nearly 25,000 separate accounts.
We developed CCS internally and it forms the basis of our risk
management/metric system. It is highly integrated into our
system for communicating with our clients and suppliers and for
automating trade settlements and daily reconciliations. In
mid-2005, we relocated our company from two locations to a new
headquarters in Naperville, Illinois. Our infrastructure
investment included a world-class data center to
11
support our trading floor, investment analysis and other
business-critical functions. The new technology is designed to
accommodate growth in the number and complexity of applications.
Trademarks, service marks and brand-name recognition are
important to our business. We have rights to the trade and
service marks under which our products are offered in connection
with financial analysis and consultation, financial portfolio
management and financial investment. We have registered certain
service marks in the United States, France, Ireland and
Switzerland and will continue to do so as new trademarks and
service marks are developed or acquired. We have taken, and will
continue to take, action to protect our interest in these
service marks.
Distribution, Sales and Client Service
We distribute our products to both individuals and institutions,
primarily through financial intermediaries. Our sales
professionals are located across the United States. They act in
a consultative role by conducting investment seminars and
training sessions, as well as providing prospectuses and other
literature to deepen investors knowledge and understanding
of our investment strategies and proprietary investment process.
Our in-house sales representatives support the outside sales
force by making outbound calls to enhance awareness of our
strategies. We have brought our mutual fund client services
group in-house to enhance the communication that takes place
with our investors seeking additional information. In 2005, we
restructured our sales force in order to place greater emphasis
on institutional investors, including private pension funds,
public funds, endowment funds, banks and insurance companies. We
have continued to expand our distribution among family offices,
private foundations and high net worth investors, as well as
among 401(k) platforms, broker consultants, broker-dealers,
financial planners and other channels for mutual funds and
managed account products. Specifically, we believe we can
continue to grow organically by focusing on institutional client
growth, increasing the number of intermediaries that distribute
Calamos products, and increasing the average number of Calamos
funds recommended by broker-dealers and financial advisors. We
also see distribution opportunities outside the United States,
which may include expanding our investment management and
co-branding agreement with UBP, a Swiss bank that offers its
UBAM sub-advised portfolios to individual and institutional
investors via an extensive network of relationships with
financial advisors and brokers, primarily in Europe, or signing
an agreement with additional new partners in Europe or Asia.
Our sales efforts are supported by our investor marketing and
communications group, which creates information regarding our
products and strategies tailored to specific investor segments,
as well as print and online materials to educate investors about
our market insights, portfolio positioning, investment
philosophy, and commitment to risk management and superior
long-term performance. For example, we publish a quarterly
analysis of market developments, performance trends and
expectations, both in print and on our website. Our chief
investment officers also answer investor questions during a
quarterly conference call with financial advisors.
We organize our sales and client services into three primary
segments based on whether we are serving financial
intermediaries, institutions or private clients.
We have developed an extensive network of third-party financial
intermediaries that includes broker-dealers, financial
consultants and independent financial advisors. In 2005, we
continued to expand our distribution outside the United States
via a co-branding and investment management agreement with UBP.
This agreement has enabled us to increase our brand recognition
in Europe while benefiting from UBPs established sales
force. The UBAM-Calamos US Equity Growth Fund grew to more than
$350 million at year-end 2005 from approximately
$12 million when we were appointed the funds
submanager in April 2005.
Our products are structured to meet the needs of financial
intermediaries and their clients, and we opportunistically seek
to introduce new products that best deliver our investment
strategies to investors through these distribution channels. We
offer the Calamos open-end funds, closed-end funds and managed
accounts to investors through financial intermediaries in our
network.
12
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Open-end funds. All nine of the open-end funds managed by
Calamos Advisors offer share classes with sales charges paid
primarily to the financial intermediary. As such, we believe
this product type is attractive to our network of financial
intermediaries. The open-end funds are offered continuously to
investors through four different share classes, Class A,
Class B, Class C and Class I, each of which has a
different sales charge structure designed to meet the needs of
our financial intermediaries and their clients. |
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Closed-end funds. Calamos Advisors is currently the
investment advisor for four closed-end funds. Historically, we
have used this type of product to take advantage of a market
opportunity and to deliver a timely investment strategy to
investors quickly and efficiently. The closed-end funds are
distributed by national and regional broker-dealers through
underwritten public offerings. As the offering periods for
closed-end funds are limited and are accompanied by intensive
sales efforts, closed-end fund offerings provide us with a
product that allows us to build scale in an investment strategy
and deepen brand recognition in a relatively short period of
time. |
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Managed accounts. Since 1989, we have offered separately
managed account products to individual and institutional
investors through national and regional broker-dealers. Managed
accounts are offered by financial intermediaries to individual
and institutional investors. These types of accounts are an
attractive alternative to some investors, as they provide the
opportunity to customize investment guidelines and tax
efficiencies. |
Client accounts held at our top five financial intermediaries
represented approximately 44% of our assets under management as
of December 31, 2005.
Our institutional account products are distributed to
institutions directly by us and through financial
intermediaries, including institutional consultants that are
dedicated to advising the institutional investor community. We
have offered institutional account products directly to public
and private pension funds, public funds and endowment funds
since 1981. Initially, most of our institutional clients
invested in convertibles. However, we closed our convertible
strategies to new accounts in 2003 in order to preserve
performance for existing clients. Since then, we have focused on
educating institutional prospects about our performance record
in equity, fixed income and alternative investment strategies.
In pursuing this, we continue to educate our institutional
clients on the advantages that we can offer through more
flexible mandates.
In 2005, we restructured and expanded our institutional
marketing efforts in order to more effectively identify
potential new investors, educate current institutional clients
about the breadth of our investment strategies, respond to
requests for investment management proposals, provide ongoing
client service to existing institutional accounts and develop
relationships with institutional consultants. Partly as a result
of our increased emphasis on institutional outreach, we achieved
a 25% net increase in institutional assets under management
during 2005. Our institutional marketing, sales and client
service efforts are supported by members of our investment
management team.
To assist our private clients in creating and preserving wealth,
we offer them a full array of Calamos mutual funds, separate
accounts and alternative investment products. Our individualized
services include managed portfolios of mutual funds and separate
accounts in both taxable and tax-deferred accounts; development
and execution of multi-generational investment policies, asset
management and income distribution plans; managed retirement,
profit-sharing and deferred compensation plans for
entrepreneurs; asset allocation and investment management for
foundations and endowments; and the integration of alternative
investments into a comprehensive financial plan.
We believe our culture of excellence, our focus on attracting
and retaining long-term investors and our high level of client
service differentiates our distribution, sales and client
service.
13
Competition
We compete in all aspects of our business with a large number of
investment management firms, commercial banks, broker-dealers,
and insurance companies. In order to effectively compete with
these organizations, we compete principally on the basis of:
investment performance; quality of client service; brand
recognition and business reputation; continuity of client
relationships and assets under management; continuity of our
selling arrangement with financial intermediaries; the range of
products offered; the level of fees and commissions charged for
services; the level of expenses paid to financial intermediaries
for administration and distribution; and financial strength.
The following factors, among others, serve to increase our
competitive risks: the financial strength and more comprehensive
line of products and services provided by our competitors; the
consolidation within the investment management industry is
serving to increase the size and strength of certain
competitors; the relatively few barriers to entry may increase
the number of competitors; and the recruiting of our investment
professionals and other employees from us.
These and other factors could reduce our earnings and revenues
and materially adversely affect our business.
Regulatory Environment
Virtually all aspects of our businesses are subject to extensive
regulation in the United States at both the federal and state
level, as well as by self-regulatory organizations. These laws
and regulations are primarily intended to protect investment
advisory clients and shareholders of registered investment
companies. Under these laws and regulations, agencies that
regulate investment advisors, such as Calamos Advisors, have
broad administrative powers, including the power to limit,
restrict or prohibit an investment advisor from carrying on its
business in the event that it fails to comply with such laws and
regulations. Possible sanctions that may be imposed include the
suspension of individual employees, limitations on engaging in
certain lines of business for specified periods of time,
revocation of investment advisor and other registrations,
censures and fines.
Calamos Advisors is registered as an investment advisor with the
SEC. As a registered advisor, it is subject to the requirements
of the Investment Advisers Act, and the SECs regulations
thereunder, as well as to examination by the SECs staff.
The Investment Advisers Act imposes substantive regulation on
virtually all aspects of Calamos Advisors advisory
business and its relationship with its clients. Applicable
requirements relate to, among other things, fiduciary duties to
clients, engaging in transactions with clients, maintaining an
effective compliance program, performance fees, solicitation
arrangements, conflicts of interest, advertising, and
recordkeeping, reporting and disclosure requirements. The mutual
funds Calamos Advisors manages are registered with the SEC under
the Investment Company Act. The Investment Company Act imposes
additional obligations, including detailed operational
requirements for both the funds and their advisor. Moreover, an
investment advisors contract with a registered fund may be
terminated by the fund on not more than 60 days
notice, and is subject to annual renewal by the funds
board after an initial two-year term. As discussed below, both
the Investment Advisers Act and the Investment Company Act
regulate the assignment of advisory contracts
by the advisor. The SEC is authorized to institute proceedings
and impose sanctions for violations of the Investment Advisers
Act and the Investment Company Act, ranging from fines and
censures to termination of an investment advisors
registration. The failure of Calamos Advisors or the registered
funds advised by Calamos Advisors to comply with the
requirements of the SEC could have a material adverse effect on
us.
In response to recent scandals in the financial services
industry regarding late trading, market timing and selective
disclosure of portfolio information, various legislative and
regulatory proposals are pending in or before, or have been
adopted by, the U.S. Congress and the various regulatory
agencies that supervise our operations, including the SEC.
Additionally, the SEC, the National Association of Securities
Dealers, Inc., or NASD, and other regulators, as well as
Congress, are investigating certain practices within our
industry.
Bills regarding the mutual fund industry have been proposed in
the U.S. Senate, one of which is the Mutual
Fund Reform Act of 2004, or the Mutual Fund Reform
Act. If enacted, the Mutual Fund Reform Act
14
would, among other things, eliminate asset-based distribution
fees or Rule 12b-1
fees with respect to
open-end funds. The
Mutual Fund Reform Act also would prohibit revenue sharing,
which allows a mutual fund company to pay for shelf
space at brokerage firms or other intermediaries
selling mutual funds shares, as well as soft
dollar arrangements. If these reforms are adopted, it
may become more expensive for fund sponsors to distribute and
manage funds, since fund assets will not be available to defray
certain costs.
The Sarbanes-Oxley Act of 2002 and rules promulgated by the SEC
have significantly changed the corporate governance requirements
applicable to mutual funds. For example, the SEC has approved a
new regulation that generally requires at least three-quarters
of a registered funds board of directors to be
independent, i.e., persons that are not interested
persons of the investment company or its investment advisor. The
regulation also requires that the chairman of the funds
board be independent. The independent directors must also hold
quarterly meetings without fund executives present.
These regulatory and legislative initiatives, to the extent
implemented, could have a substantial impact on the regulation
and operation of mutual funds, investment advisors and
broker-dealers and could adversely affect our manner of
operation and profitability.
In its capacity as a broker-dealer, Calamos Financial Services
is subject to regulations that cover all aspects of its
business, including sales practices, use and safekeeping of a
clients funds and securities, the capital structure of
securities firms, recordkeeping and the conduct of directors,
officers and employees. Violation of applicable regulations can
result in the revocation of broker-dealer licenses, the
imposition of censure or fines and the suspension or expulsion
of a firm, its officers or employers. Calamos Financial Services
also is required to maintain certain minimum net capital and
cash reserves for the benefit of its customers.
Under the rules and regulations of the SEC promulgated pursuant
to the federal securities laws, Calamos Advisors and Calamos
Financial Services are subject to periodic examination by the
SEC. Calamos Financial Services also is subject to periodic
examination by the NASD.
Calamos Advisors is subject to the Employee Retirement Income
Security Act of 1974, as amended, or ERISA, and to regulations
promulgated thereunder, insofar as it is a
fiduciary under ERISA with respect to benefit
plan clients. ERISA and applicable provisions of the Internal
Revenue Code of 1986, as amended, impose certain duties on
persons who are fiduciaries under ERISA, prohibit certain
transactions involving ERISA plan clients and provide monetary
penalties for violations of these prohibitions. Our failure to
comply with these requirements could have a material adverse
effect on our business.
Employees
At December 31, 2005, we had 331 full-time employees.
SEC Filings
Through our Internet website, we make available our annual
report on
Form 10-K,
quarterly reports on
Form 10-Q, current
reports on
Form 8-K, and any
amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after we electronically file such
material with, or furnish it to, the Securities and Exchange
Commission. To retrieve any of this information, visit the
Investor Relations section of our website at
www.calamos.com.
Item 1A. Risk
Factors
Business Risks
We caution the reader that the following business risks and
those risks described elsewhere in this report and in our other
Securities and Exchange Commission, or SEC, filings, could cause
our actual results to differ materially from expectations stated
in our forward-looking statements.
15
Risks Related to Our Industry
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Changes in laws or regulations or in governmental policies
could limit the sources and amounts of our revenues, increase
our costs of doing business, decrease our profitability and
materially and adversely affect our business. |
Our business is subject to extensive regulation in the United
States, primarily at the federal level, including regulation by
the SEC under the Investment Company Act of 1940, as amended,
and the Investment Advisers Act of 1940, as amended, by the
Department of Labor under the Employee Retirement Income
Security Act of 1974, as amended, or ERISA, as well as
regulation by the National Association of Securities Dealers,
Inc., or NASD, and state regulators. The mutual funds managed by
Calamos Advisors are registered with the SEC as investment
companies under the Investment Company Act. The Investment
Advisers Act imposes numerous obligations on investment
advisors, including record-keeping, advertising and operating
requirements, disclosure obligations and prohibitions on
fraudulent activities. The Investment Company Act imposes
similar obligations, as well as additional detailed operational
requirements, on registered investment companies and investment
advisors. Our failure to comply with applicable laws or
regulations could result in fines, censure, suspensions of
personnel or other sanctions, including revocation of our
registration as an investment advisor or broker-dealer. Industry
regulations are designed to protect our clients and investors in
our funds and other third parties who deal with us and to ensure
the integrity of the financial markets. They are not designed to
protect our stockholders. Changes in laws or regulations or in
governmental policies could limit the sources and amounts of our
revenues, increase our costs of doing business, decrease our
profitability and materially and adversely affect our business.
In response to scandals in the financial services industry
regarding late trading, market timing and selective disclosure
of portfolio information, various legislative and regulatory
proposals are pending in or before, or have been adopted by, the
U.S. Congress, the legislatures in states in which we
conduct operations and the various regulatory agencies that
supervise our operations, including the SEC. These proposals, to
the extent enacted or adopted, could have a substantial impact
on the regulation and operation of registered funds, investment
advisors and broker-dealers and could adversely affect our
assets under management, revenues and net income. Additionally,
the SEC, the NASD and other regulators, as well as Congress, are
investigating certain practices within our industry. These
investigations could lead to further legislative and regulatory
proposals that, if enacted or adopted, could adversely affect
our business.
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To the extent we are forced to compete on the basis of
price, we may not be able to maintain our current fee
structure. |
The investment management business is highly competitive and has
relatively low barriers to entry. To the extent we are forced to
compete on the basis of price, we may not be able to maintain
our current fee structure. Although our investment management
fees vary from product to product, historically we have competed
primarily on the performance of our products and not on the
level of our investment management fees relative to those of our
competitors. In recent years, however, there has been a trend
toward lower fees in the investment management industry. In
order to maintain our fee structure in a competitive
environment, we must be able to continue to provide clients with
investment returns and service that make investors willing to
pay our fees. In addition, the board of directors of each mutual
fund managed by Calamos Advisors must make certain findings as
to the reasonableness of its fees. We cannot be assured that we
will succeed in providing investment returns and service that
will allow us to maintain our current fee structure. Fee
reductions on existing or future new business could have an
adverse effect on our profit margins and results of operations.
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We derive a substantial portion of our revenues from
contracts that may be terminated on short notice. |
We derive a substantial portion of our revenues from investment
management agreements with mutual funds that, as required by
law, are generally terminable by the funds board of
directors or a vote of the majority of the funds
outstanding voting securities on not more than
60 days written notice. After an initial term, each
funds investment management agreement must be approved and
renewed annually by the
16
independent members of such funds board of directors and,
in certain cases, by its stockholders, as required by law. These
investment management agreements may be terminated for any
number of reasons, including investment performance, advisory
fee rates and financial market performance, or may not be
renewed. If any of these agreements are terminated, we may not
be able to replace these agreements on favorable terms. The
decrease in revenues that could result from any such termination
could have a material adverse effect on our business.
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Investors in the open-end funds can redeem their
investments in these funds at any time without prior notice,
which could adversely affect our earnings. |
Open-end fund investors may redeem their investments in those
funds at any time without prior notice. Investors may reduce the
aggregate amount of assets under management for any number of
reasons, including investment performance, changes in prevailing
interest rates and financial market performance. In a declining
stock market, the pace of mutual fund redemptions could
accelerate. Poor performance relative to other asset management
firms tends to result in decreased purchases of mutual fund
shares and increased redemptions of mutual fund shares. The
redemption of investments in mutual funds managed by Calamos
Advisors would adversely affect our revenues, which are
substantially dependent upon the assets under management in our
funds. If redemptions of investments in mutual funds caused our
revenues to decline, it could have a material adverse effect on
our earnings.
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Regulatory developments designed to increase oversight of
hedge funds may adversely affect our business. |
The SEC has adopted a rule that requires registration of many
hedge fund managers. Registration under the rule requires hedge
fund managers to adopt certain compliance controls in order to
ensure compliance with applicable securities laws and permits
increased oversight of hedge fund managers by the SEC. Any
regulations applicable to hedge funds that may be adopted
pursuant to this rule could have a substantial impact on our
operations and may adversely affect our hedge fund business and
decrease our future income.
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A decline in the prices of securities would lead to a
decline in our assets under management, revenues and
earnings. |
Substantially all of our revenues are determined by the amount
of our assets under management. Under our investment advisory
contracts with our clients, the investment management fee we
receive is typically based on the market value of assets under
management. In addition, we receive asset-based distribution
and/or service fees with respect to the open-end funds managed
by Calamos Advisors over time pursuant to distribution plans
adopted under provisions of
Rule 12b-1 under
the Investment Company Act.
Rule 12b-1 fees
typically are based on the market value of assets under
management and represented approximately 28% of our revenues for
the year ended December 31, 2005 and 27% of our revenues
for the years ended December 31, 2004 and 2003.
Accordingly, a decline in the prices of securities generally may
cause our revenues and net income to decline by either causing
the value of our assets under management to decrease, which
would result in lower investment advisory and
Rule 12b-1 fees,
or causing our clients to withdraw funds in favor of investments
they perceive to offer greater opportunity or lower risk, which
would also result in lower fees. The securities markets are
highly volatile, and securities prices may increase or decrease
for many reasons, including economic and political events and
acts of terrorism beyond our control. If a decline in securities
prices caused our revenues to decline, it could have a material
adverse effect on our earnings.
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Catastrophic and unpredictable events could have a
material adverse effect on our business. |
A terrorist attack, war, power failure, cyber-attack, natural
disaster or other catastrophic or unpredictable event could
adversely affect our future revenues, expenses and earnings by:
interrupting our normal business operations; sustaining employee
casualties, including loss of our key executives; requiring
substantial expenditures and expenses to repair, replace and
restore normal business operations; and reducing investor
confidence.
17
We have a disaster recovery plan to address catastrophic and
unpredictable events but we cannot be assured that this plan
will be sufficient in responding or ameliorating the effects of
all disaster scenarios. If our employees or vendors we rely upon
for support in a catastrophic event are unable to respond
adequately or in a timely manner, we may lose clients resulting
in a decrease in assets under management with a material adverse
effect on revenues and net income.
Risks Related to Our Business
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|
|
Control by Calamos family members of a majority of the
combined voting power of our common stock may give rise to
conflicts of interests. |
As of December 31, 2005, Calamos Family Partners, Inc. and
John P. Calamos owned 77% of the membership units in
Calamos Holdings LLC and all of our Class B common
stock, representing more than 97% of the combined voting power
of all classes of our voting stock. Pursuant to the terms of our
amended and restated certificate of incorporation, Calamos
Family Partners, Inc. retains a majority of the combined voting
power of our common stock until the number of outstanding shares
of our Class B common stock, plus the number of membership
units in Calamos Holdings LLC and shares of our
Class A common stock held by holders of our Class B
common stock, falls below 15% of the total number of outstanding
membership units in Calamos Holdings LLC, at which time all
outstanding shares of our Class B common stock
automatically will convert into shares of our Class A
common stock. Accordingly, as long as Calamos Family Partners,
Inc. maintains the requisite ownership interests in our
Class B common stock and our Class A common stock and
in membership units of Calamos Holdings LLC, Calamos family
members and their trusts, through their beneficial ownership of
Calamos Family Partners, Inc., will continue to have the ability
to elect all of the members of our board of directors and
thereby control our management and affairs, including
determinations with respect to acquisitions, dispositions,
borrowings, issuances of common stock or other securities, and
the declaration and payment of dividends on our common stock. In
addition, they will continue to be able to determine the outcome
of all matters requiring stockholder approval and will continue
to be able to cause or prevent a change of control of our
company or a change in the composition of our board of directors
and could preclude any unsolicited acquisition of our company.
The concentration of ownership could deprive our Class A
stockholders of an opportunity to receive a premium for their
common stock as part of a sale of our company and might
ultimately negatively affect the market price of our
Class A common stock. As a result of the control exercised
by Calamos Family Partners, Inc., none of our agreements with
them and other companies controlled by them are deemed to be
negotiated on arms length terms. However, any
such agreements since our Initial Public Offering have been
approved in accordance with the Conflict of Interests Policy
contained in our Amended and Restated Certificate of
Incorporation.
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The loss of key executives could have a material adverse
affect on our business. |
We are dependent on the efforts of John P.
Calamos, Sr., our Chairman, Chief Executive Officer and
Co-Chief Investment
Officer, and Nick P. Calamos, our Senior Executive Vice
President and Co-Chief
Investment Officer, and other key executives. These executives
have been responsible for determining the strategic direction of
our business, are integral to our brand and the positive
business reputation we enjoy and, having overseen the management
of all of our investment portfolios and the research teams
responsible for each of our portfolio strategies, have been
responsible for the historically strong investment performance
that allows us to compete successfully. Although we have
employment agreements with John P. Calamos, Sr. and
Nick P. Calamos, we cannot assure you that they will
continue to act in their positions with us. If we lose the
services of any of these key executives, it would have a
material adverse effect on our business. We do not maintain any
key person insurance with respect to any of our
personnel.
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We depend on third-party distribution channels to market
our investment products and access our client base. |
The potential investor base for mutual funds and separate
accounts is limited, and our ability to distribute mutual funds
and access clients for separate accounts is highly dependent on
access to the retail distribution systems and client bases of
national and regional securities firms, banks, insurance
companies, defined
18
contribution plan administrators and other intermediaries, which
generally offer competing internally and externally managed
investment products. For open-end funds, such intermediaries are
paid for their services to fund shareholders, in part, through
Rule 12b-1 fees
and/or upfront commission payments by us, for which we receive
Rule 12b-1
payments in the future. Those future payments allow us to pay or
help us recover payments to selling firms. Access to such
distribution systems and client bases is substantially dependent
upon our ability to charge
Rule 12b-1 fees to
our funds. To the extent that recent regulatory initiatives
prohibit or limit the imposition of
Rule 12b-1 or
similar fees, our access to these distribution systems and
client bases may be foreclosed in the future. To a lesser
extent, our institutional separate account business depends on
referrals from financial planners and other professional
advisors, as well as from our existing clients. We cannot assure
you that these channels and client bases will continue to be
accessible to us. The inability to have such access could have a
material adverse effect on our earnings.
While we continue to diversify and add new distribution channels
for mutual funds and managed accounts, a significant portion of
the growth in our assets under management in recent years has
been accessed through intermediaries. As of December 31,
2005, substantially all of our assets under management were
attributable to accounts that we accessed through third-party
intermediaries. These intermediaries generally may terminate
their relationships with us on short notice. Loss of any of the
distribution channels afforded by these intermediaries, and the
inability to access clients through new distribution channels,
could decrease our assets under management and adversely affect
our results of operations and growth. In addition, in the case
of managed accounts offered through intermediaries to their
customers, such intermediaries may reduce the fees that they
remit to us as part of the arrangements they have with us. For
the year ended December 31, 2005, 2004 and 2003, the fees
we received from managed accounts through intermediaries were
$30.5 million, $28.5 million and $24.1 million,
respectively. A substantial reduction in fees received from
third-party intermediaries could have a material adverse affect
on our business.
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Our ability to operate our company effectively could be
impaired if we are unable to attract and retain qualified
personnel. |
Our investment management business depends on the expertise of
our personnel and their ability to work together as an effective
team. Our future success depends to a substantial degree on our
ability to attract and retain qualified personnel. In
particular, we anticipate that it will be necessary for us to
add investment professionals as we further diversify our
investment products and strategies. Competition for employees
with the necessary qualifications is intense and we may not be
successful in our efforts to recruit and retain the required
personnel.
We cannot guarantee that our compensation methods will allow us
to recruit and retain the required personnel we need. In
particular, the use of equity compensation may be ineffective if
the market price of our Class A common stock declines. The
inability to recruit and retain qualified personnel could affect
our ability to provide an acceptable level of service to our
clients and funds and our ability to attract new clients and
investors in our funds, each of which could have a material
adverse effect on our business.
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We derive a substantial portion of our revenues from a
limited number of our products. |
As of December 31, 2005, 41% of our assets under management
were concentrated in the Calamos Growth Fund, and 43% of our
investment management fees were attributable to that fund. As a
result, our operating results are particularly exposed to the
performance of that fund and our ability to minimize redemptions
from and maintain assets under management in that fund. If
investors in the Growth Fund decided to withdraw their
investments for any reason, including poor investment
performance or market conditions under which this investment
strategy is out of favor, our revenues from that fund would
decline and it could have a material adverse effect on our
earnings. Similarly, if our investment management agreement with
the Growth Fund were terminated for any reason, the decrease in
revenues that would result from any such termination would
materially impact our earnings. We cannot assure you that
investors will continue to maintain their investments in, and
that we will be able to maintain our investment management
agreement with, our Growth Fund. We also may close funds and
investment strategies to new investors, which could
19
inhibit our growth and could lead to redemptions by existing
investors, and could thereby cause a decrease in our revenues.
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|
|
We are dependent on Calamos Holdings LLC to distribute
cash to us in amounts sufficient to pay our tax liabilities and
other expenses. |
We are a holding company, and our membership units in Calamos
Holdings LLC are our primary asset. We have no significant
independent means of generating revenues. Calamos Holdings LLC
is treated as a partnership for U.S. federal income tax
purposes and, as such, is not itself subject to
U.S. federal income tax. Instead, its taxable income is
allocated on a pro rata basis to Calamos Asset Management, Inc.,
Calamos Family Partners, Inc. and John P. Calamos, Sr.
Accordingly, we incur income taxes on our proportionate share of
any net taxable income of Calamos Holdings LLC, and also incur
expenses related to our operations. We caused and in the future
intend to cause Calamos Holdings LLC to distribute cash to its
members to the extent necessary to cover their tax liabilities,
if any. To the extent we need funds to pay such taxes, or for
any other purpose, and Calamos Holdings LLC is unable to provide
such funds, it could have a material adverse effect on our
business, financial condition or results of operations.
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|
We intend to pay regular dividends to our stockholders,
but our ability to do so is subject to the discretion of our
board of directors and may be limited by our holding company
structure and applicable provisions of Delaware law. |
To date, we have paid five quarterly cash dividends and intend
to continue to pay dividends on a quarterly basis. Our board of
directors may, in its discretion, decrease the level of
dividends or discontinue the payment of dividends entirely. In
addition, as a holding company, we are dependent upon the
ability of Calamos Holdings LLC to generate earnings and cash
flows and distribute them to us so that we may pay our
obligations and expenses and pay dividends to our stockholders.
We caused and expect to cause Calamos Holdings LLC to make
distributions to its members, including us. However, the ability
of Calamos Holdings LLC to make such distributions is subject to
its operating results, cash requirements and financial
condition, the applicable laws of the State of Delaware (which
may limit the amount of funds available for distribution to its
members), its compliance with covenants and financial ratios
related to existing or future indebtedness, including its
existing Senior Unsecured Notes, and its other agreements with
third parties. If, as a consequence of these various limitations
and restrictions, we are unable to generate sufficient
distributions from our business, we may not be able to make or
may have to reduce or eliminate the payment of dividends on our
shares.
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|
|
A change of control of our company would automatically
terminate our investment management agreements with our clients,
unless our separate account clients consent and, in the case of
fund clients, the funds boards of directors and
shareholders voted to continue the agreements, and could prevent
us for a two-year period from increasing the investment advisory
fees we are able to charge our mutual fund clients. |
Under the Investment Company Act, an investment management
agreement with a fund must provide for its automatic termination
in the event of its assignment. The funds board and
shareholders must vote to continue the agreement following its
assignment, the cost of which ordinarily would be borne by us.
Under the Investment Advisers Act, a clients investment
management agreement may not be assigned by the
investment advisor without the clients consent. An
investment management agreement is considered under both acts to
be assigned to another party when a controlling block of the
advisors securities is transferred. In our case, an
assignment of our investment management agreements may occur if,
among other things, we sell or issue a certain number of
additional common shares in the future. We cannot be certain
that our clients will consent to assignments of our investment
management agreements or approve new agreements with us if a
change of control occurs. Under the Investment Company Act, if a
funds investment advisor engages in a transaction that
results in the assignment of its investment management agreement
with the fund, the advisor may not impose an unfair
burden on that fund as a result of the transaction for a
two-year period after
the transaction is completed. The term unfair burden
has been interpreted to include certain increases
20
in investment advisory fees. This restriction may discourage
potential purchasers from acquiring a controlling interest in
our company.
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|
Failure to improve or protect our intellectual property
rights may have a material adverse effect on our
business. |
We depend upon in-house technology and software across the
Company. If we fail to improve, protect or enforce our
intellectual property rights or if our Calamos Corporate System
software or our software systems do not function properly, we
could suffer business disruptions, financial losses, liability
to clients and damage to our reputation or be subject to
regulatory intervention.
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|
Damage to our reputation could adversely affect our
business. |
Through excellent client service, outstanding risk-adjusted
investment performance, comprehensive product offerings,
superior distribution and a strong brand image, we have
developed our reputation. The Calamos name and brand are
valuable assets and any damage to either could hamper our
ability to attract and retain clients and employees, thereby
having a material adverse effect on our revenues and net income.
Risks to our reputation may include regulatory inquires and
unsubstantiated accusations and managing such matters may be
expensive, time consuming and difficult.
Risks Related to the Company
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|
|
The disparity in the voting rights among the classes of
shares may have a potential adverse effect on the price of our
Class A common stock. |
Shares of our Class A common stock and Class B common
stock entitle the respective holders to identical rights, except
that each share of our Class A common stock entitles its
holder to one vote on all matters to be voted on by stockholders
generally while each share of Class B common stock entitles
its holder to a greater number of votes. The difference in
voting rights could adversely affect the value of our
Class A common stock to the extent that investors view, or
any potential future purchaser of our company views, the
superior voting rights of the Class B common stock to have
value.
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|
Future sales of our Class A common stock in the
public market could lower our stock price, and any additional
capital raised by us through the sale of equity or convertible
securities may dilute our stockholders ownership in us. |
We may sell additional shares of Class A common stock in
subsequent public offerings. We also may issue additional shares
of Class A common stock or convertible debt securities. As
of December 31, 2005, we had 23,000,000 outstanding shares
of Class A common stock.
In addition, members of the Calamos family and trusts for their
benefit own, individually and/or through their combined
ownership of Calamos Family Partners, Inc., 77,000,000
membership units in Calamos Holdings LLC. Our amended and
restated certificate of incorporation provides for the exchange
of membership units in Calamos Holdings LLC (other than those
held by us) for shares of our Class A common stock. Subject
to certain selling restrictions, Calamos family members and
their trusts could from time to time and for any reason exchange
their membership units in Calamos Holdings LLC for shares of our
Class A common stock and sell any or all of those shares.
Calamos Family Partners, Inc. and John P. Calamos, Sr.
are parties to a registration rights agreement with us. Under
that agreement, Calamos Family Partners, Inc. and John P.
Calamos, Sr. have the right to require us to effect the
registration of shares of our Class A common stock that
Calamos Family Partners, Inc. or John P. Calamos, Sr.
could acquire upon conversion of their Class B common
shares or exchange of their membership units in Calamos Holdings
LLC.
21
We cannot predict the size of future issuances of our
Class A common stock or the effect, if any, that future
issuances and sales of shares of our Class A common stock,
including by Calamos family members and their trusts, may have
on the market price of our Class A common stock. Sales or
distributions of substantial amounts of our Class A common
stock (including shares issued in connection with an
acquisition), or the perception that such sales could occur, may
cause the market price of our Class A common stock to
decline.
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|
The Calamos familys beneficial ownership of our
Class B common stock, as well as anti-takeover provisions
in our amended and restated certificate of incorporation and
bylaws, could discourage a change of control that our
stockholders may favor, which could negatively affect our stock
price. |
Members of the Calamos family and trusts for their benefit
beneficially own all outstanding shares of our Class B
common stock. As a result, Calamos family members are able to
exercise control over all matters requiring the approval of our
stockholders and would be able to prevent a change in control of
our company. In addition, provisions in our amended and restated
certificate of incorporation and bylaws may make it more
difficult and expensive for a third party to acquire control of
us even if a change of control would be beneficial to the
interests of our stockholders. For example, our amended and
restated certificate of incorporation authorizes the issuance of
preferred stock that could be issued by our board of directors
to thwart a takeover attempt. The market price of our
Class A common stock could be adversely affected to the
extent that the Calamos familys control over us, as well
as provisions of our amended and restated certificate of
incorporation and bylaws, discourage potential takeover attempts
that our stockholders may favor.
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If the Internal Revenue Service disallows all or any
portion of the tax amortization deduction allocated to the
company in association with the section 754 election made
by Calamos Holdings LLC, the action could have a material
adverse effect on our business. |
Calamos Holdings LLC made an election under section 754 of
the Internal Revenue Code of 1986, as amended (a
section 754 election). As a result of the
section 754 election, Calamos Holdings LLC increased the
companys proportionate share of the tax basis of the
assets of Calamos Holdings LLC to reflect the purchase price
paid by the company for its interest in Calamos Holdings LLC.
For federal income tax purposes, Calamos Holdings LLC is treated
as a partnership and, based upon a third party valuation, its
primary intangible assets include investment management
contracts and distribution agreements. Based on an opinion of
counsel, these types of customer-based intangibles should be
amortizable intangibles for federal income tax purposes.
Therefore, Calamos Holdings LLC allocated increased tax
amortization deductions to the company, which reduced the
companys share of taxable income. However, if the Internal
Revenue Service were to disallow all or any portion of the tax
amortization deductions allocated to the company, based on the
valuation or allocation or purchase price related to the
section 754 election, this action could have a material
adverse effect on our business.
Item 1B. Unresolved
Staff Comments
The company did not receive written comments from the Commission
staff during 2005.
Our principal executive offices are located at 2020 Calamos
Court, Naperville, Illinois 60563, where we occupy approximately
149,000 square feet of space under lease agreements with
subsidiaries of Calamos Property Holdings LLC, which is owned by
the stockholders of Calamos Family Partners, Inc. We have
approximately 15,000 square feet of additional office space
at a different location in Naperville, Illinois under a separate
lease agreement with a subsidiary of Calamos Property Holdings
LLC.
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|
Item 3. |
Legal Proceedings |
In the normal course of business, we may be subject to various
legal proceedings from time to time. Currently, there are no
material legal proceedings pending against us.
22
|
|
Item 4. |
Submission of Matters to a Vote of Security Holders |
No matters were submitted to a vote of security holders, through
the solicitation of proxies or otherwise, during the fourth
quarter of the year ended December 31, 2005.
PART II
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|
Item 5. |
Market for Registrants Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities |
Our Class A common stock ($0.01 par value) has traded
on the Nasdaq National Market under the symbol CLMS
since our initial public offering on October 28, 2004.
Before October 28, 2004, there was no public market for our
Class A common stock. There is no public market for our
Class B common stock ($0.01 par value).
The high and low trade price information for Class A common
stock and dividends per share for each class of common stock
were:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Price Range | |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
Cash Dividends | |
|
|
2005 | |
|
2004 | |
|
per Share | |
|
|
| |
|
| |
|
| |
|
|
High | |
|
Low | |
|
High | |
|
Low | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
First Quarter
|
|
$ |
31.40 |
|
|
$ |
23.01 |
|
|
|
N/A |
|
|
|
N/A |
|
|
$ |
0.07 |
|
|
|
N/A |
|
Second Quarter
|
|
$ |
28.74 |
|
|
$ |
20.55 |
|
|
|
N/A |
|
|
|
N/A |
|
|
$ |
0.07 |
|
|
|
N/A |
|
Third Quarter
|
|
$ |
29.97 |
|
|
$ |
23.23 |
|
|
|
N/A |
|
|
|
N/A |
|
|
$ |
0.07 |
|
|
|
N/A |
|
Fourth Quarter
|
|
$ |
32.81 |
|
|
$ |
23.42 |
|
|
$ |
28.35 |
|
|
$ |
18.00 |
|
|
$ |
0.09 |
|
|
$ |
0.07 |
|
On February 21, 2006, there were approximately 59 holders
of record of our outstanding Class A common stock and one
holder of record of our outstanding Class B common stock.
With respect to our Class A common stock, these shares are
primarily held in street name through brokers.
Calamos Asset Management, Inc. expects to declare and pay
quarterly cash dividends during 2006.
Equity Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities | |
|
|
|
|
|
|
Remaining Available | |
|
|
|
|
|
|
for Future Issuance | |
|
|
Number of Securities | |
|
Weighted-Average | |
|
Under Equity | |
|
|
to be Issued upon | |
|
Exercise Price of | |
|
Compensation Plans | |
|
|
Exercise of | |
|
Outstanding | |
|
(Excluding | |
|
|
Outstanding Options, | |
|
Options, Warrants | |
|
Securities Reflected | |
|
|
Warrants and Rights | |
|
and Rights | |
|
in Column (a)) | |
Plan Category |
|
(a) | |
|
(b) | |
|
(c) | |
|
|
| |
|
| |
|
| |
Equity compensation plans approved by security holders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
1,009,967 |
|
|
$ |
21.35 |
|
|
|
|
(1) |
|
Restricted stock units
|
|
|
1,412,438 |
|
|
|
|
|
|
|
|
(1) |
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,422,405 |
|
|
$ |
8.89 |
|
|
|
7,577,595 |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
A combined total of 10,000,000 shares of Calamos Asset
Management, Inc.s common stock may be granted under the
stock option and restricted stock unit plans. |
We have not repurchased any shares of our common stock since
becoming a public company in October 2004.
23
|
|
Item 6. |
Selected Financial Data |
The following tables set forth our selected historical
consolidated financial and other data, as well as financial and
other data for our predecessor, Calamos Family Partners, Inc. as
of the dates and for the periods indicated. The selected
historical consolidated income statement data for the period
January 1, 2004 to November 1, 2004 and for each of
the years in the
three-year period ended
December 31, 2003 and the selected historical consolidated
balance sheet data as of December 31, 2003, 2002 and 2001
have been derived from the audited consolidated financial
statements of Calamos Family Partners, Inc. (formerly known as
Calamos Holdings, Inc.).
For all periods presented through November 1, 2004, Calamos
Family Partners, Inc. operated as an S corporation and was
not subject to U.S. federal and certain state income taxes.
Beginning November 2, 2004, we have been subject to
U.S. federal and certain state and local income taxes
applicable to C corporations.
You should read the following selected historical consolidated
financial and other data in conjunction with
Managements Discussion and Analysis of Financial
Condition and Results of Operations, the historical
consolidated financial statements and related notes, all
included elsewhere in this Annual Report on
Form 10-K.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma | |
|
|
|
|
Year Ended | |
|
|
|
|
|
Combined | |
|
Year Ended December 31, | |
|
|
December 31, | |
|
Nov. 2 to | |
|
Jan. 1 to | |
|
Year Ended | |
|
| |
(in thousands, except per share data) |
|
2005 | |
|
Dec. 31, 2004 | |
|
Nov. 1, 2004 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
(Predecessor) | |
|
|
|
(Predecessor) | |
|
(Predecessor) | |
|
(Predecessor) | |
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fees
|
|
$ |
284,951 |
|
|
$ |
41,787 |
|
|
$ |
168,938 |
|
|
$ |
210,725 |
|
|
$ |
109,052 |
|
|
$ |
62,594 |
|
|
$ |
37,578 |
|
|
Distribution and underwriting fees
|
|
|
129,250 |
|
|
|
19,350 |
|
|
|
79,578 |
|
|
|
98,928 |
|
|
|
53,005 |
|
|
|
24,883 |
|
|
|
9,309 |
|
|
Other
|
|
|
3,366 |
|
|
|
633 |
|
|
|
1,861 |
|
|
|
2,494 |
|
|
|
328 |
|
|
|
363 |
|
|
|
454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
417,567 |
|
|
|
61,770 |
|
|
|
250,377 |
|
|
|
312,147 |
|
|
|
162,385 |
|
|
|
87,840 |
|
|
|
47,341 |
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits
|
|
|
61,029 |
|
|
|
12,537 |
|
|
|
53,170 |
|
|
|
65,707 |
|
|
|
33,657 |
|
|
|
28,317 |
|
|
|
26,117 |
|
|
Distribution expenses
|
|
|
79,446 |
|
|
|
11,040 |
|
|
|
39,517 |
|
|
|
50,557 |
|
|
|
22,576 |
|
|
|
7,982 |
|
|
|
3,634 |
|
|
Amortization of deferred sales commissions
|
|
|
31,431 |
|
|
|
5,109 |
|
|
|
24,315 |
|
|
|
29,424 |
|
|
|
19,879 |
|
|
|
11,677 |
|
|
|
3,272 |
|
|
Marketing and sales promotion
|
|
|
14,266 |
|
|
|
2,228 |
|
|
|
16,694 |
|
|
|
18,922 |
|
|
|
8,949 |
|
|
|
6,002 |
|
|
|
2,210 |
|
|
General and administrative
|
|
|
25,301 |
|
|
|
2,622 |
|
|
|
11,445 |
|
|
|
14,067 |
|
|
|
8,906 |
|
|
|
7,849 |
|
|
|
7,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
211,473 |
|
|
|
33,536 |
|
|
|
145,141 |
|
|
|
178,677 |
|
|
|
93,967 |
|
|
|
61,827 |
|
|
|
42,533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
206,094 |
|
|
|
28,234 |
|
|
|
105,236 |
|
|
|
133,470 |
|
|
|
68,418 |
|
|
|
26,013 |
|
|
|
4,808 |
|
Other income (expense), net
|
|
|
5,761 |
|
|
|
1,016 |
|
|
|
(1,487 |
) |
|
|
(471 |
) |
|
|
25 |
|
|
|
(899 |
) |
|
|
(563 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest in Calamos Holdings LLC and
income taxes
|
|
|
211,855 |
|
|
|
29,250 |
|
|
|
103,749 |
|
|
|
132,999 |
|
|
|
68,443 |
|
|
|
25,114 |
|
|
|
4,245 |
|
Minority interest in Calamos Holdings LLC
|
|
|
163,009 |
|
|
|
22,609 |
|
|
|
|
|
|
|
22,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax
|
|
|
48,846 |
|
|
|
6,641 |
|
|
|
103,749 |
|
|
|
110,390 |
|
|
|
68,443 |
|
|
|
25,114 |
|
|
|
4,245 |
|
Income taxes
|
|
|
19,624 |
|
|
|
2,649 |
|
|
|
1,567 |
|
|
|
4,216 |
|
|
|
1,117 |
|
|
|
383 |
|
|
|
69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
29,222 |
|
|
$ |
3,992 |
|
|
$ |
102,182 |
|
|
$ |
106,174 |
|
|
$ |
67,326 |
|
|
$ |
24,731 |
|
|
$ |
4,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
1.27 |
|
|
$ |
0.18 |
|
|
$ |
1.06 |
|
|
|
|
|
|
$ |
0.70 |
|
|
$ |
0.26 |
|
|
$ |
0.04 |
|
|
Diluted
|
|
$ |
1.26 |
|
|
$ |
0.17 |
|
|
$ |
1.06 |
|
|
|
|
|
|
$ |
0.70 |
|
|
$ |
0.26 |
|
|
$ |
0.04 |
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic(1)
|
|
|
23,000,100 |
|
|
|
22,700,100 |
|
|
|
96,800,000 |
|
|
|
|
|
|
|
96,800,000 |
|
|
|
96,800,000 |
|
|
|
96,800,000 |
|
|
Diluted(2)
|
|
|
100,625,824 |
|
|
|
100,491,409 |
|
|
|
96,800,000 |
|
|
|
|
|
|
|
96,800,000 |
|
|
|
96,800,000 |
|
|
|
96,800,000 |
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
(Predecessor) | |
|
(Predecessor) | |
|
(Predecessor) | |
Balance Sheet Data (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities
|
|
$ |
128,265 |
|
|
$ |
90,444 |
|
|
$ |
9,296 |
|
|
$ |
6,025 |
|
|
$ |
6,443 |
|
|
Investment in partnerships
|
|
|
79,956 |
|
|
|
60,150 |
|
|
|
2,806 |
|
|
|
2,307 |
|
|
|
1,195 |
|
|
Total assets
|
|
|
665,477 |
|
|
|
516,452 |
|
|
|
104,531 |
|
|
|
57,272 |
|
|
|
33,218 |
|
|
Long-term debt
|
|
|
150,000 |
|
|
|
150,000 |
|
|
|
23,008 |
|
|
|
10,945 |
|
|
|
6,866 |
|
|
Total liabilities
|
|
|
205,460 |
|
|
|
191,342 |
|
|
|
58,107 |
|
|
|
32,246 |
|
|
|
18,894 |
|
|
Minority interests
|
|
|
273,883 |
|
|
|
166,616 |
|
|
|
11 |
|
|
|
10 |
|
|
|
|
|
|
Total stockholders equity
|
|
|
186,134 |
|
|
|
158,494 |
|
|
|
46,413 |
|
|
|
25,016 |
|
|
|
14,324 |
|
Assets Under Management (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
|
|
31,898 |
|
|
|
26,951 |
|
|
|
14,651 |
|
|
|
5,712 |
|
|
|
2,241 |
|
|
Separate accounts
|
|
|
11,907 |
|
|
|
11,024 |
|
|
|
9,189 |
|
|
|
7,180 |
|
|
|
7,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets under management
|
|
$ |
43,805 |
|
|
$ |
37,975 |
|
|
$ |
23,840 |
|
|
$ |
12,892 |
|
|
$ |
9,335 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Basic shares for the periods to November 2, 2004 reflect
the 96,800,000 existing after giving effect to the formation
transaction, whereby on October 15, 2004, Calamos Family
Partners, Inc. contributed all of its assets and liabilities,
including all equity interest in its wholly owned subsidiaries,
to Calamos Holdings LLC in exchange for 96,800,000 of the
membership units of Calamos Holdings LLC. |
|
(2) |
Diluted shares outstanding for 2005 and for the period
November 2, 2004 to December 31, 2004 are calculated
(a) assuming Calamos Family Partners, Inc. and John P.
Calamos, Sr. exchanged all of their membership units in
Calamos Holdings LLC for shares of the Companys
Class A common stock on a one-for-one basis and
(b) including the effect of outstanding restricted stock
unit and option awards. In calculating diluted earnings per
share for 2005 and for the period November 2, 2004 to
December 31, 2004, the effective tax rates of 40.2% and
39.9%, respectively, were applied to income before minority
interest in Calamos Holdings LLC and income taxes. |
|
|
Item 7. |
Managements Discussion and Analysis of Financial
Condition and Results of Operation |
We provide investment advisory services to institutions and
individuals, managing $43.8 billion in client assets at
December 31, 2005. We offer our clients a variety of
investment products designed to suit their individual investment
needs.
Assets Under Management
Our operating results fluctuate primarily due to changes in the
total value and composition of our assets under management. The
following table details our assets under management, based on
the six types of
25
investment products we offer in the mutual fund and separate
account categories, at December 31, 2005, 2004 and 2003.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Mutual Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Open-end funds
|
|
$ |
25,957 |
|
|
$ |
20,921 |
|
|
$ |
12,130 |
|
|
Closed-end funds
|
|
|
5,941 |
|
|
|
6,030 |
|
|
|
2,521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mutual funds
|
|
|
31,898 |
|
|
|
26,951 |
|
|
|
14,651 |
|
|
|
|
|
|
|
|
|
|
|
Separate Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutional accounts
|
|
|
4,169 |
|
|
|
3,332 |
|
|
|
2,674 |
|
|
Managed accounts
|
|
|
6,899 |
|
|
|
7,091 |
|
|
|
6,241 |
|
|
Private client accounts
|
|
|
748 |
|
|
|
527 |
|
|
|
258 |
|
|
Alternative investments
|
|
|
91 |
|
|
|
74 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total separate accounts
|
|
|
11,907 |
|
|
|
11,024 |
|
|
|
9,189 |
|
|
|
|
|
|
|
|
|
|
|
Total assets under management
|
|
$ |
43,805 |
|
|
$ |
37,975 |
|
|
$ |
23,840 |
|
|
|
|
|
|
|
|
|
|
|
The value and composition of our assets under management are,
and will continue to be, influenced by a variety of factors
including, among other things:
|
|
|
|
|
purchases and redemptions of shares of the open-end funds and
other investment products; |
|
|
|
fluctuations in the financial markets around the world that
result in appreciation or depreciation of assets under
management; and |
|
|
|
our introduction of new investment strategies and products. |
In order to increase our assets under management and expand our
business, we must develop and market investment products that
suit the individual investment needs of our target
clients investors seeking superior risk-adjusted
returns over the long term. The value and composition of our
assets under management and our ability to continue to attract
clients will depend on a variety of factors, including, among
other things:
|
|
|
|
|
our ability to educate our target clients about our investment
philosophy and provide them with
best-in-class service; |
|
|
|
the relative investment performance of our investment products
as compared to competing offerings and market indices; |
|
|
|
competitive conditions in the mutual fund, asset management and
broader financial services sectors; |
|
|
|
investor sentiment and confidence; and |
|
|
|
our decision to close strategies when deemed in the best
interests of our clients. |
Investment Products
Mutual funds include registered open-end funds and registered
closed-end funds.
Open-End Funds. Open-end funds are continually offered
and are not listed on an exchange. Open-end funds issue new
shares for purchase and redeem shares from those shareholders
who sell. The share price for purchases and redemptions of
open-end funds is determined by each funds net asset
value, which is calculated at the end of each business day.
Assets under management in open-end funds vary as a result of
both market appreciation and depreciation and the level of new
purchases or redemptions of shares of a fund. Investment
management fees are our principal source of revenue from
open-end mutual funds and are derived from assets under
management.
26
We offer several share classes in each open-end fund to provide
investors with alternatives to pay for commissions, distribution
and service fees.
|
|
|
|
|
Class A shares of the open-end funds represented
$16.9 billion of our assets under management as of
December 31, 2005. These shares provide for a front-end
sales charge at the time of investment. The sales charge is
equal to a maximum of 4.75% of the amount invested. We retain an
underwriting fee representing a portion of this sales charge and
pay any remaining amounts to the selling firm, except where we
are the broker of record, in which case we retain the entire
sales charge. We received underwriting fees of $7.4 million
for the year ended December 31, 2005. We receive
Rule 12b-1
distribution and service fees on Class A shares at a rate
of 0.25% of Class A share assets under management, which is
generally offset by a 0.25% fee paid to third-party selling
agents. For the year ended December 31, 2005, we received
Class A share
Rule 12b-1 fees of
$37.4 million. For the same period, we made Class A
share Rule 12b-1
payments to selling firms of $34.5 million. |
|
|
|
Class B shares of the open-end funds represented
$2.3 billion of our assets under management as of
December 31, 2005. Investors in Class B shares do not
pay a sales charge at the time of investment; instead, we pay an
upfront commission equal to 4.0% of the amount invested directly
to the selling firm when the investment is made. This advance
payment is capitalized when paid as a deferred sales commission
asset. For the year ended December 31, 2005, we made
Class B share commission payments to selling firms of
$12.9 million. If the investor redeems Class B shares
within one year of investment, we receive from the proceeds of
the sale a contingent deferred sales charge, often referred to
as a CDSC, equal to 5.0% of the lesser of the redemption price
or purchase price excluding amounts not subject to the charge.
This contingent deferred sales charge generally decreases by
1.0% per year beginning on the first anniversary of the
investment and terminates completely after six years of
ownership. For the year ended December 31, 2005, we
received Class B share CDSC payments of $5.0 million.
We receive
Rule 12b-1 fees on
Class B shares at the rate of 1.0% of Class B share
assets under management (consisting of a 0.75% distribution fee
and a 0.25% service fee) and record these fees as distribution
and underwriting fee revenue. We make Class B share
Rule 12b-1 service
fee payments to the selling firm at the rate of 0.25% of
Class B share assets under management and record these
payments as a distribution expense. The
Rule 12b-1 fees
that we retain help us recover the upfront commissions that we
paid to the selling firm.
Rule 12b-1
payments continue for eight years, at which point Class B
shares automatically convert into Class A shares. For the
year ended December 31, 2005, we received Class B
share Rule 12b-1
fees of $21.4 million. For the same period, we made
Class B share
Rule 12b-1
payments to selling firms of $5.3 million. |
|
|
|
Class C shares of the open-end funds represented
$6.4 billion of our assets under management as of
December 31, 2005. Investors in Class C shares do not
pay a sales charge at the time of investment; instead, we pay an
upfront commission equal to 1.0% of the amount invested directly
to the selling firm when the investment is made. This advance
payment is capitalized when paid as a deferred sales commission
asset. For the year ended December 31, 2005, we made
Class C share commission payments to selling firms of
$15.5 million. If the investor redeems Class C shares
within one year of investment, we receive from the proceeds of
the sale a CDSC equal to 1.0% of the lesser of the redemption
price or purchase price, excluding amounts not subject to the
charge. For the year ended December 31, 2005, we received
Class C share CDSC payments of $1.0 million. We
receive Rule 12b-1
fees on Class C shares at the rate of 1.0% of Class C
share assets under management (consisting of a 0.75%
distribution fee and a 0.25% service fee) and record these fees
as distribution and underwriting fee revenue. We make
Class C share
Rule 12b-1
distribution and service fee payments to the selling firm
beginning in the second year following the sale at the rate of
1.0% of Class C share assets under management and record
these payments as a distribution expense. The first years
Rule 12b-1 fee
helps us to recoup the up-front commission we paid to the
selling firm. For the year ended December 31, 2005, we
received Class C share
12b-1 fees of
$56.9 million. For the same period, we made
Class C share
Rule 12b-1
payments to selling firms of $39.1 million. |
27
|
|
|
|
|
Class I shares of the open-end funds represented
$0.4 billion of our assets under management as of
December 31, 2005. These shares do not provide for a load
or Rule 12b-1 fees
and are generally offered to individual and institutional
investors making initial investments of $5 million or more. |
Closed-End Funds. Closed-end funds typically sell a
finite number of shares to investors through underwritten public
offerings, unlike open-end funds, which continually offer new
shares to investors. After the public offerings, investors buy
closed-end fund shares from, and sell those shares to, other
investors through an exchange or broker-dealer market. All four
of the closed-end funds that we manage currently use leverage by
issuing preferred securities to increase their total assets.
Assets under management in closed-end funds vary due to the
amount of assets raised in underwritten public offerings, the
amount of leverage utilized and market appreciation or
depreciation. Our revenues from closed-end funds are derived
from investment management fees on the assets that we manage. In
addition, in a typical underwritten public offering, investors
are charged a 4.5% commission by the selling firms. We do not
receive or pay commissions in connection with sales of
closed-end fund shares, although we may pay asset based
distribution and service fees, as well as, one-time distribution
and service fees to underwriters for underwriting public
offerings of closed-end funds.
Separate accounts include institutional accounts, managed
accounts, private client accounts and alternative investments.
Fund flows into and out of such accounts, which we refer to as
purchases and redemptions, affect our level of assets under
management. Assets under management from these accounts also
vary as a result of market appreciation and depreciation. Our
revenues from separate accounts are derived from investment
management fees that we charge, including in some cases
performance fees. Provided below is a brief differentiation of
these accounts:
|
|
|
|
|
Institutional accounts are separately managed accounts
for institutional investors, such as public and private pension
funds, public funds and endowment funds, and are offered
directly by us and through institutional consultants. |
|
|
|
Managed accounts are separately managed accounts for
individual and institutional investors offered primarily through
national and regional broker-dealers. Managed accounts may be
structured as investment management agreements between us and
the investor directly or between us and the broker-dealer. |
|
|
|
Private client accounts are separately managed accounts
for individual investors offered directly by us. |
|
|
|
Alternative investments include non-registered investment
vehicles, primarily hedge funds, offered directly by us to
qualified individual and institutional investors. |
Revenues
Our revenues are substantially comprised of investment
management fees earned under contracts with the mutual funds and
separate accounts managed by us. The distribution of assets
under management among our investment products also will have an
impact on our investment management fees, as some products carry
different fees than others. Investment management fees may
fluctuate based on a number of factors, including the following:
|
|
|
|
|
total value and composition of our assets under management; |
|
|
|
market appreciation or depreciation; |
|
|
|
investment performance relative to benchmarks; |
|
|
|
level of net purchases and redemptions, which represent the sum
of new client assets, additional funding from existing clients,
withdrawals of assets from and termination of client accounts
and purchases and redemptions of mutual fund shares; |
28
|
|
|
|
|
recent regulatory initiatives designed to increase the
independence of mutual fund directors, as well as recent trends
in the investment management industry generally, may result in
downward pressure on our investment management fees; |
|
|
|
a determination by the independent directors of the mutual funds
to terminate or significantly alter the funds investment
management agreements with us; and |
|
|
|
increased competition. |
Our revenues also are comprised of distribution and underwriting
fees. Asset-based distribution and/or service fees received
pursuant to
Rule 12b-1 plans,
discussed below, are a significant component of distribution and
underwriting fees. Distribution and underwriting fees may
fluctuate based on a number of factors, including the following:
|
|
|
|
|
total value and composition of our assets under management
generally and by share class; |
|
|
|
market appreciation or depreciation; |
|
|
|
the level of purchases and redemptions; and |
|
|
|
recent regulatory and legislative initiatives, including the
Mutual Fund Reform Act of 2004, which would, among other
things, eliminate
Rule 12b-1
distribution and/or service fees, if adopted. |
|
|
|
Investment Management Fees |
Investment management fees that we receive from mutual funds for
which we act as investment advisor are computed monthly on an
average daily net asset basis. Investment management fees that
we earn on separate accounts for which we act as investment
advisor are computed quarterly, either in advance or in arrears,
based on the assets under management balance at the beginning or
end of the quarterly period. We recognize the revenues derived
from these fees over the period during which we render their
investment advisory services. Investment management fees that
are calculated on assets at the beginning of the quarter are the
actual fees billed to clients and are recorded as unearned
income and recognized evenly throughout the quarter.
We may earn performance fees in addition to investment
management fees. A performance fee structure would include both
an asset-based fee and a fee based upon the performance of the
portfolio. Historically, performance fees have not been a
material source of revenues for us. However, in the future, as
we offer products that have performance-based fees, including
alternative products, we expect performance fees to become a
more significant source of revenues.
|
|
|
Distribution and Underwriting Fees |
Distribution and underwriting fees include (1) asset-based
distribution and/or service fees received pursuant to
Rule 12b-1 plans,
(2) front-end sales charges and (3) contingent
deferred sales charges.
Rule 12b-1
distribution and/or service fees are asset-based fees that
open-end funds pay us over time pursuant to distribution plans
adopted under provisions of
Rule 12b-1 under
the Investment Company Act. These fees are typically calculated
as a percentage of average daily net assets under management in
specific share classes of the open-end funds. These fees
fluctuate with both the level of average daily net assets under
management and the relative mix of assets among share classes.
Rule 12b-1 fees
are generally offset by distribution and service expenses paid
during the period, as well as the amortization of deferred sales
commissions that were previously paid by us to third parties.
We earn front-end sales charges on the sale of Class A
shares of open-end funds, which provide for a sales charge at
the time of investment. We retain a portion of the applicable
sales charge and, if Calamos Financial Services acts as the
broker-dealer for the account, we would retain the entire sales
charge. Sales charges are waived on sales to shareholders or
intermediaries that exceed specified minimum dollar amounts and
other specified conditions. Sales charges fluctuate with both
the level of Class A share sales and the mix of
Class A shares offered with and without a sales charge.
29
Contingent deferred sales charges are earned on redemptions of
Class B shares within six years of purchase and on
redemptions of Class C shares within one year of purchase.
Contingent deferred sales charges fluctuate primarily based on
the length of the investment in Class B and Class C
shares. Waivers of contingent deferred sales charges apply under
certain circumstances.
Since April 1, 2004, other revenues have consisted, and in
future periods are expected to consist, primarily of portfolio
accounting fees, which are contractual payments calculated as a
percentage of combined assets of the mutual funds for financial
accounting services, such as expense accrual and tax
calculations. For the year ended December 31, 2005, we
received $3.3 million in portfolio accounting fees. The
fees were calculated using the average daily assets of the
open-end and closed-end.
Operating Expenses
Our operating expenses, which consist of employee compensation
and benefits, distribution expenses, amortization of deferred
sales commissions, marketing and sales promotion expenses and
general and administrative expenses, may fluctuate due to a
number of factors, including the following:
|
|
|
|
|
variations in the level of total compensation expense due to,
among other things, bonuses, changes in our employee count and
mix, and competitive factors; |
|
|
|
changes in distribution expense as a result of fluctuations in
mutual fund sales, level of redemptions and market appreciation
or depreciation of assets under management; |
|
|
|
the amount of
Rule 12b-1
distribution and/or service fees that we receive, as well as our
continued ability to receive those fees in the future, which
would affect the amortization expenses associated with the
receipt of these fees; |
|
|
|
changes in the level of our marketing and promotion expenses in
response to market conditions, including our efforts to further
penetrate our existing distribution channels; |
|
|
|
expenses and capital costs, such as technology assets,
depreciation, amortization, and research and development,
incurred to maintain and enhance our administrative and
operating services infrastructure; |
|
|
|
unanticipated costs that may be incurred to protect investor
accounts and the goodwill of our clients; and |
|
|
|
disruptions of services, including those provided by third
parties, such as facilities, communications, power, and the
mutual fund transfer agent and accounting systems. |
|
|
|
Employee Compensation and Benefits |
Our largest operating expense is employee compensation and
benefits expense, which includes salaries, deferred and
incentive compensation and related benefits costs. Employee
compensation and benefits are benchmarked against industry
compensation standards. In order to attract and retain qualified
personnel, we must maintain competitive employee compensation
and benefits. We expect to experience a general rise in employee
compensation and benefits expenses over time.
We use a fair value method in recording compensation expense for
restricted stock units and stock options granted under our
incentive stock plans. Under the fair value method, compensation
expense is measured at the grant date based on the estimated
fair value of the award and is recognized as an expense over the
vesting period. Fair value is determined on the date granted
using the Black-Scholes option pricing model for the stock
options and is determined by the market value of the underlying
stock for restricted stock units.
30
Distribution expense includes payments we make to broker-dealers
and other intermediaries for selling, underwriting, servicing
and administering mutual funds. This expense is influenced by
new mutual funds sales, levels of redemptions and market
appreciation or depreciation of assets under management in these
products. With respect to open-end funds, this expense is
comprised of
Rule 12b-1
distribution and/or service fee payments to the selling firms.
|
|
|
Amortization of Deferred Sales Commissions |
As discussed above, we pay commissions to selling firms upon the
sale of Class B and C shares of open-end funds. As we pay
these commissions, we create a deferred sales commission asset
on our balance sheet. We amortize this asset over the period in
which we receive related asset-based distribution and/or service
fees pursuant to
Rule 12b-1 plans.
Amortization expenses generally offset the
Rule 12b-1 fees we
receive from the funds shareholders over this same period.
In addition, because
Rule 12b-1 fees
cease upon the redemption of open-end fund shares, amortization
expenses are accelerated when shares are redeemed, resulting in
the reduction of the deferred sales commission asset. For more
information on our financing of the sales of Class B and
Class C shares in the open-end funds, see
Liquidity and Capital Resources.
Other operating expenses include marketing and sales promotion
expenses and general and administrative expenses. Marketing and
sales promotion expenses generally vary based on the type and
level of marketing, educational, sales or other programs in
operation and include closed-end fund marketing costs and
ongoing and one-time payments to broker-dealers. In addition, as
open-end mutual funds that we manage have grown in size and
recognition, we have become subject to supplemental compensation
payments to third-party selling agents, which are a component of
marketing and sales promotion expense. We expect supplemental
compensation payments to continue to increase to the extent our
funds gain assets and further recognition. In connection with
closed-end funds, we make fee payments to certain underwriters
for distribution, consulting and/or support services rendered
during or after the offering period of each closed-end fund.
These fees are based on contractual agreements with various
underwriting firms and are either paid over time based on the
average daily net assets of such funds or are paid at the close
of the offering period based on the amount of assets raised
during the offering. General and administrative expenses
primarily include occupancy-related costs and professional and
business services and generally increase and decrease in
relative proportion to the number of employees retained by us
and the overall size and scale of our business operations.
Impact of Distribution Activities on Operating Margin
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. Generally
accepted accounting principles require that we present
distribution fees earned by us as revenues and distribution fees
paid to selling brokers and the amortization of deferred sales
commissions as expenses in the statement of income. However,
when analyzing our business, we net the result of these
distribution activities 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 year ended December 31, 2005:
|
|
|
|
|
|
|
|
2005 | |
|
|
| |
Distribution and underwriting fees
|
|
$ |
129,250 |
|
Distribution and underwriting expense
|
|
|
(79,446 |
) |
Amortization of deferred sales commissions
|
|
|
(31,431 |
) |
|
|
|
|
|
Net distribution fees
|
|
$ |
18,373 |
|
|
Net distribution fee margin
|
|
|
14 |
% |
31
Other Income (Expense), Net
Other income (expense), net represents net investment gains or
losses from a portion of our investment portfolio and from the
limited partnerships that we consolidate, net of minority
interest in those partnerships, as well as dividends and net
interest income or expense. Historically, other income
(expense), net has not been a material portion of our pre-tax
earnings. However, as we continue to invest a significant
portion of our operating cash inflow into income generating
securities, we expect that the impact of other income (expense),
net will continue to be more significant in future periods. For
more information on our liquidity and capital resources, see
Liquidity and Capital Resources.
Minority Interest
As sole manager of Calamos Holdings LLC, we consolidate the
financial results of Calamos Holdings LLC with ours. In light of
Calamos Family Partners, Inc.s and John P.
Calamos, Sr.s 77% aggregate ownership interest in
Calamos Holdings LLC as of December 31, 2005 and 2004, we
reflect their ownership as a minority interest in our
consolidated statements of financial condition and consolidated
statements of income. Our historical results are those of
Calamos Family Partners, Inc., as our predecessor company. As a
result, our income before income taxes, after excluding Calamos
Family Partners, Inc.s and John P.
Calamos, Sr.s minority interest, represent
approximately 23% of Calamos Holdings LLCs net income, and
similarly, outstanding shares of our Class A common stock
represent 23% of the outstanding membership units of Calamos
Holdings LLC. Beginning in 2005, income before minority interest
in Calamos Holdings LLC and income taxes includes investment
income earned on cash and cash equivalents held solely by
Calamos Asset Management, Inc. (CAM) during the same
period. This investment income is not reduced by any minority
interest; therefore, the resulting minority interest is less
than 77% for the year ended December 31, 2005. We expect
that as we continue to generate and invest cash held solely by
CAM, the minority interest will continue to decline as a
percentage of income before minority interest in Calamos
Holdings LLC and income taxes.
Calamos Partners LLC is the general partner of Calamos Equity
Opportunities Fund LP, an unregistered investment
partnership, and at December 31, 2005, we and our
affiliates had 41.9% and 52.2% interests in this partnership,
respectively (94.1% combined). As of December 31, 2004, we
and our affiliates had 45.5% and 54.5% interests in this
partnership, respectively (100.0% combined). During 2005 and
2004, we consolidated the financial results of this partnership.
The combined interests of the investments in the partnership not
owned by us are presented as minority interest in partnership
investments in our financial statements. We consolidate the
financial results of this partnership into our results. As
partnerships are created to launch new products, we as well as
our affiliates may invest in these entities, and these
partnerships may be required to be consolidated into our results
as well.
Income Taxes
Prior to our initial public offering, Calamos Family Partners,
Inc. elected to be taxed as an S corporation under the
Internal Revenue Code; therefore, the income and expenses of
Calamos Family Partners, Inc. were included in the income tax
returns of its stockholders. Calamos Family Partners, Inc. was
subject only to Illinois replacement tax and other state taxes,
resulting in an effective tax rate of 1.5%. Beginning
November 2, 2004, we have been subject to income taxes
applicable to C corporations. We have determined our effective
tax rate to be 40.2% for the year ended December 31, 2005
and 39.9% for the period November 2, 2004 through
December 31, 2004.
Dilutive Effect of Issuance of New Shares of Class A
Common Stock
When we issue new shares of Class A common stock, including
upon the exercise or conversion of options or restricted stock
units granted pursuant to our incentive compensation plan, our
existing Class A common stockholders will experience
dilution with regard to their indirect ownership interest in the
equity of Calamos Holdings LLC.
32
In accordance with our amended and restated certificate of
incorporation and the amended and restated limited liability
company agreement pursuant to which Calamos Holdings LLC is
governed, the net cash proceeds received by us from any future
issuance of shares of Class A common stock, including upon
the exercise or conversion of options or restricted stock units
granted under our incentive compensation plan, will be
concurrently transferred to Calamos Holdings LLC in exchange for
newly issued membership units equal in number to such number of
shares of Class A common stock issued by us. The number of
outstanding membership units owned by us will, therefore, equal
the number of outstanding shares of our Class A common
stock at all times. As a result, the amount of dilution that
existing Class A common stockholders will experience with
regard to their equity interest in Calamos Holdings LLC
resulting from the issuance of additional shares of our
Class A common stock will not be adversely affected by our
holding company structure.
Recent Developments in the Regulation of the Mutual
Fund Industry
There have been significant developments in the regulation of
the mutual fund industry in response to improprieties that have
recently been discovered in the industry. We are uncertain as to
the implementation of new rules and requirements and the impact
these rules and requirements may have on our business and
expenses. For additional information about the regulations
applicable to our business, see Regulatory
Environment.
Operating Results
|
|
|
Year Ended December 31, 2005 Compared to Year Ended
December 31, 2004 |
Prior to our initial public offering of Class A common
stock, our business was conducted by Calamos Family Partners,
Inc., wholly owned by members of the Calamos family and Calamos
family trusts. In October 2004, Calamos Family Partners, Inc.
established Calamos Holdings LLC to be the direct owner and
operator of its business. On November 2, 2004, we closed
our initial public offering of Class A common stock and
used some of the proceeds to acquire membership units in Calamos
Holdings LLC. In connection with our initial acquisition of
membership units, we became the sole manager of Calamos Holdings
LLC and began conducting the business previously conducted by
Calamos Family Partners, Inc.
Accordingly, the results for the periods from January 1,
2004 through November 1, 2004 presented below reflect the
operations for Calamos Family Partners, Inc. and its
subsidiaries (Predecessor). Results for the periods from
November 2, 2004 through December 31, 2005 reflect the
results of operations for Calamos Asset Management, Inc. We
believe that the pro forma combined results for the twelve
months ending
33
December 31, 2004 provide a more meaningful basis for
period-to-period
comparisons of our results. Therefore, we have combined the
periods in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 2 to | |
|
January 1 to | |
|
Pro Forma | |
|
|
|
|
December 31, | |
|
November 1, | |
|
Combined | |
(in thousands except share data) |
|
2005 | |
|
2004 | |
|
2004 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
(Predecessor) | |
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fees
|
|
$ |
284,951 |
|
|
$ |
41,787 |
|
|
$ |
168,938 |
|
|
$ |
210,725 |
|
|
Distribution and underwriting fees
|
|
|
129,250 |
|
|
|
19,350 |
|
|
|
79,578 |
|
|
|
98,928 |
|
|
Other
|
|
|
3,366 |
|
|
|
633 |
|
|
|
1,861 |
|
|
|
2,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
417,567 |
|
|
|
61,770 |
|
|
|
250,377 |
|
|
|
312,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits
|
|
|
61,029 |
|
|
|
12,537 |
|
|
|
53,170 |
|
|
|
65,707 |
|
|
Distribution and underwriting expenses
|
|
|
79,446 |
|
|
|
11,040 |
|
|
|
39,517 |
|
|
|
50,557 |
|
|
Amortization of deferred sales commissions
|
|
|
31,431 |
|
|
|
5,109 |
|
|
|
24,315 |
|
|
|
29,424 |
|
|
Marketing and sales promotion
|
|
|
14,266 |
|
|
|
2,228 |
|
|
|
16,694 |
|
|
|
18,922 |
|
|
General and administrative
|
|
|
25,301 |
|
|
|
2,622 |
|
|
|
11,445 |
|
|
|
14,067 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
211,473 |
|
|
|
33,536 |
|
|
|
145,141 |
|
|
|
178,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
206,094 |
|
|
|
28,234 |
|
|
|
105,236 |
|
|
|
133,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(8,142 |
) |
|
|
(1,339 |
) |
|
|
(4,627 |
) |
|
|
(5,966 |
) |
|
Investment income and other income
|
|
|
19,064 |
|
|
|
3,677 |
|
|
|
3,140 |
|
|
|
6,817 |
|
|
Minority interest in partnership investments
|
|
|
(5,161 |
) |
|
|
(1,322 |
) |
|
|
|
|
|
|
(1,322 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense), net
|
|
|
5,761 |
|
|
|
1,016 |
|
|
|
(1,487 |
) |
|
|
(471 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest in Calamos Holdings LLC and
income taxes
|
|
|
211,855 |
|
|
|
29,250 |
|
|
|
103,749 |
|
|
|
132,999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in Calamos Holdings LLC
|
|
|
163,009 |
|
|
|
22,609 |
|
|
|
|
|
|
|
22,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
48,846 |
|
|
|
6,641 |
|
|
|
103,749 |
|
|
|
110,390 |
|
Income taxes
|
|
|
19,624 |
|
|
|
2,649 |
|
|
|
1,567 |
|
|
|
4,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
29,222 |
|
|
$ |
3,992 |
|
|
$ |
102,182 |
|
|
$ |
106,174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
1.27 |
|
|
$ |
0.18 |
|
|
$ |
1.06 |
|
|
|
|
|
|
|
Diluted
|
|
$ |
1.26 |
|
|
$ |
0.17 |
|
|
$ |
1.06 |
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
23,000,100 |
|
|
|
22,700,100 |
|
|
|
96,800,000 |
|
|
|
|
|
|
|
Diluted
|
|
|
100,625,824 |
|
|
|
100,491,409 |
|
|
|
96,800,000 |
|
|
|
|
|
Assets under management increased by $5.8 billion, or 15%,
to $43.8 billion at December 31, 2005 from
$38.0 billion at December 31, 2004. At
December 31, 2005, our assets under management consisted of
73%
34
mutual funds and 27% separate accounts, as compared to 71%
mutual funds and 29% separate accounts at December 31, 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended | |
|
|
|
|
December 31, | |
|
Change | |
|
|
| |
|
| |
(in millions) |
|
2005 | |
|
2004 | |
|
Amount | |
|
Percent | |
|
|
| |
|
| |
|
| |
|
| |
Mutual Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
$ |
26,951 |
|
|
$ |
14,651 |
|
|
$ |
12,300 |
|
|
|
84% |
|
|
Net purchases
|
|
|
3,403 |
|
|
|
9,776 |
|
|
|
(6,373 |
) |
|
|
65% |
|
|
Market appreciation
|
|
|
1,544 |
|
|
|
2,524 |
|
|
|
(980 |
) |
|
|
39% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management
|
|
|
31,898 |
|
|
|
26,951 |
|
|
|
4,947 |
|
|
|
18% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
|
28,743 |
|
|
|
20,850 |
|
|
|
7,893 |
|
|
|
38% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
|
11,024 |
|
|
|
9,189 |
|
|
|
1,835 |
|
|
|
20% |
|
|
Net purchases
|
|
|
230 |
|
|
|
804 |
|
|
|
(574 |
) |
|
|
71% |
|
|
Market appreciation
|
|
|
653 |
|
|
|
1,031 |
|
|
|
(378 |
) |
|
|
37% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management
|
|
|
11,907 |
|
|
|
11,024 |
|
|
|
883 |
|
|
|
8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
|
11,230 |
|
|
|
9,857 |
|
|
|
1,373 |
|
|
|
14% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets Under Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
|
37,975 |
|
|
|
23,840 |
|
|
|
14,135 |
|
|
|
59% |
|
|
Net purchases
|
|
|
3,633 |
|
|
|
10,580 |
|
|
|
(6,947 |
) |
|
|
66% |
|
|
Market appreciation
|
|
|
2,197 |
|
|
|
3,555 |
|
|
|
(1,358 |
) |
|
|
38% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management
|
|
|
43,805 |
|
|
|
37,975 |
|
|
|
5,830 |
|
|
|
15% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
$ |
39,973 |
|
|
$ |
30,707 |
|
|
$ |
9,266 |
|
|
|
30% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual fund net purchases were $3.4 billion in 2005
compared to $9.8 billion in the prior year. The decrease in
mutual fund net purchases was primarily attributable to a
$3.3 billion closed-end fund offering during 2004 that did
not recur and to a $1.9 billion increase in redemptions,
which have increased with the growth in assets under management.
Because closed-end funds do not continually offer new shares to
investors, net purchases of closed-end funds are entirely
dependent on our ability to consummate closed-end fund
offerings. Market demand for closed-end fund offerings is
difficult to predict. We intend to monitor the market and pursue
opportunities as they present themselves and when doing so would
be consistent with our business strategy. For example, we
launched the Calamos Global Total Return Fund in the fourth
quarter of 2005 and raised approximately $115 million in
assets under management. Separate accounts net purchases
decreased to $230 million in 2005 from $804 million in
2004, largely driven by managed account outflows in our
convertible strategies, which remain closed to new investors.
35
Total revenues increased by $105.4 million, or 34%, to
$417.6 for the year ended December 31, 2005 from
$312.1 million for the prior year. The increase was
primarily due to higher investment management fees and
distribution and underwriting fees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change | |
|
|
|
|
|
|
| |
(in thousands) |
|
2005 | |
|
2004 | |
|
Amount | |
|
Percent | |
|
|
| |
|
| |
|
| |
|
| |
Investment management fees
|
|
$ |
284,951 |
|
|
$ |
210,725 |
|
|
$ |
74,226 |
|
|
|
35 |
% |
Distribution and underwriting fees
|
|
|
129,250 |
|
|
|
98,928 |
|
|
|
30,322 |
|
|
|
31 |
% |
Other
|
|
|
3,366 |
|
|
|
2,494 |
|
|
|
872 |
|
|
|
35 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$ |
417,567 |
|
|
$ |
312,147 |
|
|
$ |
105,420 |
|
|
|
34 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Compared to the prior year, investment management fees increased
35% in 2005 primarily due to a $9.3 billion increase in
average assets under management. The overall growth in
investment management fees was due primarily to an increase in
fees from mutual funds, which increased to $224.4 million
in 2005 from $162.7 million in the prior year. Open-end
fund investment management fees increased to $174.4 million
for the year ended December 31, 2005 from
$123.3 million for the prior year, primarily due to
increases in open-end fund average assets under management of
$6.8 billion for 2005 compared to the prior year.
Closed-end fund investment management fees increased to
$50.0 million for the year ended December 31, 2005
from $39.4 million in the prior year as a result of
increases in closed-end fund average assets under management of
$1.1 billion in 2005 when compared to the prior year.
Investment management fees from our separately managed accounts
increased to $60.6 million from $48.0 million, driven
by the shift to equity strategies within these accounts and by
the increase in average assets under management. Investment
management fees as a percentage of assets under management were
0.71% and 0.69% for the years ended December 31, 2005 and
2004, respectively, representing the continued shift of assets
from our convertible strategies to our equity strategies, which
generally carry higher fees.
Distribution and underwriting fees increased to
$129.3 million for the year ended December 31, 2005
from $98.9 million in the prior year, primarily due to
increases in open-end fund average assets under management of
$6.8 billion for 2005 compared to the prior year.
Operating expenses increased to $211.5 million for the year
ended December 31, 2005 from $178.7 million for the
prior year. This increase was mostly due to higher distribution
expenses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change | |
|
|
|
|
|
|
| |
(in thousands) |
|
2005 | |
|
2004 | |
|
Amount | |
|
Percent | |
|
|
| |
|
| |
|
| |
|
| |
Employee compensation and benefits
|
|
$ |
61,029 |
|
|
$ |
65,707 |
|
|
$ |
(4,678 |
) |
|
|
7 |
% |
Distribution expense
|
|
|
79,446 |
|
|
|
50,557 |
|
|
|
28,889 |
|
|
|
57 |
% |
Amortization of deferred sales commissions
|
|
|
31,431 |
|
|
|
29,424 |
|
|
|
2,007 |
|
|
|
7 |
% |
Marketing and sales promotion
|
|
|
14,266 |
|
|
|
18,922 |
|
|
|
(4,656 |
) |
|
|
25 |
% |
General and administrative
|
|
|
25,301 |
|
|
|
14,067 |
|
|
|
11,234 |
|
|
|
80 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$ |
211,473 |
|
|
$ |
178,677 |
|
|
$ |
32,796 |
|
|
|
18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits expense decreased by
$4.7 million for the year ended December 31, 2005 when
compared to the prior year, largely resulting from the decrease
of $5.7 million in expense attributable to our equity
compensation. The decrease in equity compensation expense was
primarily driven by the conversion of liability-based
compensation programs that fluctuated with the enterprise value
to our equity-based programs that are accounted for using the
fair value provisions that are fixed at the date of grant. This
decrease was partially offset by an increase in incentive-based
compensation as a result of our
36
performance. We do not anticipate large fluctuations in our
equity compensation expense in the future, except as it relates
to new award issuances; however, we expect the level of overall
employee compensation and benefits expense will increase in
future periods due to changes in staffing levels to support the
growth and expansion of our business. Current compensation
expense levels are also expected to increase due to merit
increases for our existing staff but may vary due to
compensation based on our performance.
Distribution expense increased by $28.9 million to
$79.4 million for 2005 when compared to the prior year,
primarily due to an increase of $16.4 million resulting
from the growth in the Class C share assets older than one
year and due to an increase of $12.9 million resulting from
the growth of average open-end fund assets under management.
Class C share assets do not generate distribution expense
in the first year following their sale because we retain the
Rule 12b-1 fees
during that first year to offset the upfront commissions that we
pay, but they do generate a distribution expense in subsequent
years as we pay the
Rule 12b-1 fees to
the selling firms. Although the
Rule 12b-1 fee
rates that we paid to broker-dealers and other intermediaries in
2005 did not change from the rates paid in the prior year, we
expect distribution expense to increase to the extent our
open-end mutual fund assets under management continue to grow.
Marketing and sales promotion expense decreased to
$14.3 million for the year ended December 31, 2005
from $18.9 million in the prior year, primarily due to a
$6.0 million one-time fee paid to underwriters of a
closed-end fund offering that we incurred during 2004, partially
offset by increases in supplemental compensation payments to
third party selling agents. As open-end mutual funds that we
manage have grown in size and recognition, we have become
subject to supplemental compensation payments to third-party
selling agents. We expect supplemental compensation payments to
continue to increase to the extent our funds gain assets and
further recognition.
General and administrative expense increased by
$11.2 million for the year ended December 31, 2005
from $14.1 million in the prior year. We began making lease
payments on our new headquarters in April 2005 in addition to
making lease payments and other occupancy-related payments on
our two other office facilities, which increased occupancy costs
by $3.6 million for the year ended December 31, 2005.
Maintaining two headquarters for the second and third quarters
resulted in duplicative rent and non-recurring expenses of
approximately $1.7 million. Additionally, for the year
ended December 31, 2005, professional services expense
increased $3.1 million and depreciation expense increased
$3.2 million, respectively. The increases in professional
services expense were primarily due to incremental costs
incurred as a public company, including Sarbanes-Oxley
compliance costs and higher fees related to legal and
compliance, audit services and tax preparation. The increases in
depreciation expense were primarily due to the depreciation of
new leasehold improvements in connection with the move to our
new headquarters, while $0.4 million of the increase in
depreciation expense for 2005 was due to the shortening of
depreciable lives of leasehold improvements in our previous
headquarters caused by the move into our new headquarters.
Because our move occurred in the last half of the year, we
expect that our depreciation expense in the future will increase
to reflect the full-year benefit provided by our new
improvements.
During the period from January 1, 2004 to November 1,
2004, our business was operated as an S corporation under
the Internal Revenue Code. As a result, our effective tax rate
for this period was 1.5%, while our effective tax rate for the
period from November 2, 2004 to December 31, 2004 and
for the year ended December 31, 2005 was 39.9% and 40.2%,
respectively.
37
|
|
|
Other Income (Expense), Net |
Other income (expense), net was a net income of
$5.8 million for the year ended December 31, 2005 as
compared to a net expense of approximately $471,000 for the
prior year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change | |
|
|
|
|
|
|
| |
(in thousands) |
|
2005 | |
|
2004 | |
|
Amount | |
|
Percent | |
|
|
| |
|
| |
|
| |
|
| |
Interest expense
|
|
$ |
(8,142 |
) |
|
$ |
(5,966 |
) |
|
$ |
(2,176 |
) |
|
|
36 |
% |
Investment and other income
|
|
|
19,064 |
|
|
|
6,817 |
|
|
|
12,247 |
|
|
|
180 |
% |
Minority interest in investment in partnership
|
|
|
(5,161 |
) |
|
|
(1,322 |
) |
|
|
(3,839 |
) |
|
|
290 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense), net
|
|
$ |
5,761 |
|
|
$ |
(471 |
) |
|
$ |
6,232 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The $2.2 million increase in interest expense for the year
ended December 31, 2005 compared to the prior year was
primarily due to a full 12 months of interest expense on
the $150.0 million aggregate principal Senior Unsecured
Notes, which were issued in April 2004. Investment and other
income increased by $12.2 million primarily due to
$7.7 million market appreciation and $4.6 million of
interest and dividend income. The increase in minority interest
in investment in partnerships corresponds with the increase in
market appreciation of the consolidated investment in
partnerships.
We believe that the pro forma results provide a more meaningful
basis for
period-to-period
comparisons of our results for the year ended December 31,
2005 and 2004. The pro forma results for the year ended
38
December 31, 2004 below give effect to the Real Estate
Distribution, the Formation Transaction and the consummation of
our initial public offering, as described in the Notes to Pro
Forma Adjustments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma | |
|
|
|
|
|
|
|
|
Nov. 2 to | |
|
Jan. 1 to | |
|
Combined | |
|
Pro Forma | |
|
Pro Forma | |
(in thousands, except share data) |
|
2005 | |
|
Dec. 31, 2004 | |
|
Nov. 1, 2004 | |
|
2004 | |
|
Adjustments | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
(Predecessor) | |
|
|
|
|
|
|
Revenues
|
|
$ |
417,567 |
|
|
$ |
61,770 |
|
|
$ |
250,377 |
|
|
$ |
312,147 |
|
|
$ |
(157 |
)(1) |
|
$ |
311,990 |
|
Expenses
|
|
|
211,473 |
|
|
|
33,536 |
|
|
|
145,141 |
|
|
|
178,677 |
|
|
|
(8 |
)(1) |
|
|
178,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
206,094 |
|
|
|
28,234 |
|
|
|
105,236 |
|
|
|
133,470 |
|
|
|
(149 |
) |
|
|
133,321 |
|
|
|
Total other income (expense), net
|
|
|
5,761 |
|
|
|
1,016 |
|
|
|
(1,487 |
) |
|
|
(471 |
) |
|
|
(1,808 |
)(1) |
|
|
(2,279 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest in Calamos Holdings LLC and
income taxes
|
|
|
211,855 |
|
|
|
29,250 |
|
|
|
103,749 |
|
|
|
132,999 |
|
|
|
(1,957 |
) |
|
|
131,042 |
|
Minority interest in Calamos Holdings LLC
|
|
|
163,009 |
|
|
|
22,609 |
|
|
|
|
|
|
|
22,609 |
|
|
|
78,293 |
(2) |
|
|
100,902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
48,846 |
|
|
|
6,641 |
|
|
|
103,749 |
|
|
|
110,390 |
|
|
|
(80,250 |
) |
|
|
30,140 |
|
Income taxes
|
|
|
19,624 |
|
|
|
2,649 |
|
|
|
1,567 |
|
|
|
4,216 |
|
|
|
7,805 |
(3) |
|
|
12,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
29,222 |
|
|
$ |
3,992 |
|
|
$ |
102,182 |
|
|
$ |
106,174 |
|
|
$ |
(88,055 |
) |
|
$ |
18,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share, basic
|
|
$ |
1.27 |
|
|
$ |
0.18 |
|
|
$ |
1.06 |
|
|
|
|
|
|
|
|
|
|
$ |
0.79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic
|
|
|
23,000,100 |
|
|
|
22,700,100 |
|
|
|
96,800,000 |
(4) |
|
|
|
|
|
|
|
|
|
|
23,000,100 |
(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calculation of earnings per share, diluted, assuming exchange of
membership units:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest and income taxes
|
|
|
211,855 |
|
|
|
29,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131,042 |
|
|
Impact of income taxes(6)
|
|
|
85,102 |
|
|
|
11,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings available to common shareholders
|
|
|
126,753 |
|
|
|
17,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78,769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share, diluted
|
|
$ |
1.26 |
|
|
$ |
0.17 |
|
|
$ |
1.06 |
|
|
|
|
|
|
|
|
|
|
$ |
0.79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, diluted(7)
|
|
|
100,625,824 |
|
|
|
100,491,409 |
|
|
|
96,800,000 |
|
|
|
|
|
|
|
|
|
|
|
100,080,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Pro Forma Adjustments:
|
|
(1) |
Represents the adjustment related to the Real Estate
Distribution, whereby Calamos Family Partners, Inc. (formerly
known as Calamos Holdings Inc.), distributed its interest in all
of its owned real estate assets to its stockholders, who
contributed those assets to a new limited liability company.
This adjustment is presented based on actual amounts recorded
during the periods presented. |
|
(2) |
Represents an adjustment to increase Calamos Asset Management,
Inc.s minority interest allocation in Calamos Holdings LLC
to 77.0%. Minority interest was determined by multiplying the
income before minority interest in Calamos Holdings LLC and
income taxes by Calamos Family Partners, Inc.s and John P.
Calamos, Sr.s 77.0% aggregate ownership. The minority
interest adjustment is presented based on the income for the
periods presented. |
|
(3) |
Reflects the impact of federal and state income taxes on the
income allocated from Calamos Holdings LLC to Calamos Asset
Management, Inc. Historically, Calamos Family Partners, Inc.
operated as an S corporation and was not subject to
U.S. federal and certain state income taxes, but was
subject to Illinois replacement taxes. The amount of pro forma
adjustment was determined by eliminating the |
39
|
|
|
Illinois replacement tax and applying the combined projected
federal corporate income tax rate and applicable state tax rates
to income before income taxes. |
|
|
(4) |
Represents the adjustment related to the Formation Transaction,
whereby on October 15, 2004, Calamos Family Partners, Inc.
contributed all of its assets and liabilities, including, among
other things, all equity interests in its wholly owned
subsidiaries, to Calamos Holdings LLC in exchange for
96.8 million membership units of Calamos Holdings LLC. |
|
(5) |
Reflects 23.0 million shares of Class A common stock,
which represents 23.0% of Calamos Holdings LLC. In addition to
shares of Class A common stock, there are 100 shares
of Class B common stock outstanding. |
|
(6) |
In calculating diluted earnings per share, the effective tax
rates for the years ended December 31, 2005 and 2004 of
40.2% and 39.9%, respectively, were applied to income before
minority interest and income taxes. |
|
(7) |
Diluted shares outstanding for each period presented represent
the weighted average Class A common stock after giving
effect to the offering as of the beginning of 2004. The diluted
shares outstanding are calculated: (a) including the effect
of outstanding restricted stock unit and option awards and
(b) assuming Calamos Family Partners, Inc. and John P.
Calamos, Sr. exchanged all of their membership units in
Calamos Holdings LLC for, and converted all outstanding shares
of our Class B common stock into, shares of our
Class A common stock, in each case on a one-for-one basis. |
Net income totaled $29.2 million for the year ended
December 31, 2005 compared to pro forma net income of
$18.1 million for the prior year, an increase of 61%.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change | |
|
|
|
|
Pro Forma | |
|
| |
(in thousands) |
|
2005 | |
|
2004 | |
|
Amount | |
|
Percent | |
|
|
| |
|
| |
|
| |
|
| |
Total revenues
|
|
$ |
417,567 |
|
|
$ |
311,990 |
|
|
$ |
105,577 |
|
|
|
34 |
% |
Total operating expenses
|
|
|
211,473 |
|
|
|
178,669 |
|
|
|
32,804 |
|
|
|
18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
206,094 |
|
|
|
133,321 |
|
|
|
72,773 |
|
|
|
55 |
% |
Other income (expense), net
|
|
|
5,761 |
|
|
|
(2,279 |
) |
|
|
8,040 |
|
|
|
* |
|
Minority interest
|
|
|
163,009 |
|
|
|
100,902 |
|
|
|
62,107 |
|
|
|
62 |
% |
Income taxes
|
|
|
19,624 |
|
|
|
12,021 |
|
|
|
7,603 |
|
|
|
63 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
29,222 |
|
|
$ |
18,119 |
|
|
$ |
11,103 |
|
|
|
61 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2004 Compared to Year Ended
December 31, 2003 |
Results for the period from January 1, 2004 through
November 1, 2004 reflect the operations for Calamos Family
Partners, Inc. and its subsidiaries (Predecessor). Results for
the periods from November 2, 2004 through December 31,
2005 reflect the results of operations for Calamos Asset
Management, Inc. We believe
40
that the pro forma combined results of these two periods provide
a more meaningful basis for
period-to-period
comparisons of our results. Therefore, we have combined the
periods in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma | |
|
November 2 to | |
|
January 1 to | |
|
|
|
|
Combined | |
|
December 31, | |
|
November 1, | |
|
|
(in thousands except share data) |
|
2004 | |
|
2004 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
(Predecessor) | |
|
(Predecessor) | |
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fees
|
|
$ |
210,725 |
|
|
$ |
41,787 |
|
|
$ |
168,938 |
|
|
$ |
109,052 |
|
|
Distribution and underwriting fees
|
|
|
98,928 |
|
|
|
19,350 |
|
|
|
79,578 |
|
|
|
53,005 |
|
|
Other
|
|
|
2,494 |
|
|
|
633 |
|
|
|
1,861 |
|
|
|
328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
312,147 |
|
|
|
61,770 |
|
|
|
250,377 |
|
|
|
162,385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits
|
|
|
65,707 |
|
|
|
12,537 |
|
|
|
53,170 |
|
|
|
33,657 |
|
|
Distribution and underwriting expenses
|
|
|
50,557 |
|
|
|
11,040 |
|
|
|
39,517 |
|
|
|
22,576 |
|
|
Amortization of deferred sales commissions
|
|
|
29,424 |
|
|
|
5,109 |
|
|
|
24,315 |
|
|
|
19,879 |
|
|
Marketing and sales promotion
|
|
|
18,922 |
|
|
|
2,228 |
|
|
|
16,694 |
|
|
|
8,949 |
|
|
General and administrative
|
|
|
14,067 |
|
|
|
2,622 |
|
|
|
11,445 |
|
|
|
8,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
178,677 |
|
|
|
33,536 |
|
|
|
145,141 |
|
|
|
93,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
133,470 |
|
|
|
28,234 |
|
|
|
105,236 |
|
|
|
68,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(5,966 |
) |
|
|
(1,339 |
) |
|
|
(4,627 |
) |
|
|
(999 |
) |
|
Investment income and other income
|
|
|
6,817 |
|
|
|
3,677 |
|
|
|
3,140 |
|
|
|
1,024 |
|
|
Minority interest in partnership investments
|
|
|
(1,322 |
) |
|
|
(1,322 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense), net
|
|
|
(471 |
) |
|
|
1,016 |
|
|
|
(1,487 |
) |
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest in Calamos Holdings LLC and
income taxes
|
|
|
132,999 |
|
|
|
29,250 |
|
|
|
103,749 |
|
|
|
68,443 |
|
Minority interest in Calamos Holdings LLC
|
|
|
22,609 |
|
|
|
22,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
110,390 |
|
|
|
6,641 |
|
|
|
103,749 |
|
|
|
68,443 |
|
Income taxes
|
|
|
4,216 |
|
|
|
2,649 |
|
|
|
1,567 |
|
|
|
1,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
106,174 |
|
|
$ |
3,992 |
|
|
$ |
102,182 |
|
|
$ |
67,326 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
$ |
0.18 |
|
|
$ |
1.06 |
|
|
$ |
0.70 |
|
|
|
Diluted
|
|
|
|
|
|
$ |
0.17 |
|
|
$ |
1.06 |
|
|
$ |
0.70 |
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
22,700,100 |
|
|
|
96,800,000 |
|
|
|
96,800,000 |
|
|
|
Diluted
|
|
|
|
|
|
|
100,491,409 |
|
|
|
96,800,000 |
|
|
|
96,800,000 |
|
Assets under management increased by $14.1 billion, or 59%,
to $38.0 billion at December 31, 2004 from
$23.8 billion at December 31, 2003. At
December 31, 2004, our assets under management consisted of
71%
41
mutual funds and 29% separate accounts, as compared to 61%
mutual funds and 39% separate accounts at December 31, 2003.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended | |
|
|
|
|
December 31, | |
|
Change | |
|
|
| |
|
| |
(in millions) |
|
2004 | |
|
2003 | |
|
Amount | |
|
Percent | |
|
|
| |
|
| |
|
| |
|
| |
Mutual Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
$ |
14,651 |
|
|
$ |
5,712 |
|
|
$ |
8,939 |
|
|
|
156% |
|
|
Net purchases
|
|
|
9,776 |
|
|
|
6,556 |
|
|
|
3,220 |
|
|
|
49% |
|
|
Market appreciation
|
|
|
2,524 |
|
|
|
2,383 |
|
|
|
141 |
|
|
|
6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management
|
|
|
26,951 |
|
|
|
14,651 |
|
|
|
12,300 |
|
|
|
84% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
|
20,850 |
|
|
|
9,752 |
|
|
|
11,098 |
|
|
|
114% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
|
9,189 |
|
|
|
7,180 |
|
|
|
2,009 |
|
|
|
28% |
|
|
Net purchases
|
|
|
804 |
|
|
|
475 |
|
|
|
329 |
|
|
|
69% |
|
|
Market appreciation
|
|
|
1,031 |
|
|
|
1,534 |
|
|
|
(503 |
) |
|
|
33% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management
|
|
|
11,024 |
|
|
|
9,189 |
|
|
|
1,835 |
|
|
|
20% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
|
9,857 |
|
|
|
8,085 |
|
|
|
1,772 |
|
|
|
22% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets Under Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
|
23,840 |
|
|
|
12,892 |
|
|
|
10,948 |
|
|
|
85% |
|
|
Net purchases
|
|
|
10,580 |
|
|
|
7,031 |
|
|
|
3,549 |
|
|
|
50% |
|
|
Market appreciation
|
|
|
3,555 |
|
|
|
3,917 |
|
|
|
(362 |
) |
|
|
9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management
|
|
|
37,975 |
|
|
|
23,840 |
|
|
|
14,135 |
|
|
|
59% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
$ |
30,707 |
|
|
$ |
17,837 |
|
|
$ |
12,870 |
|
|
|
72% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual fund net purchases increased by $3.2 billion, or
49%, to $9.8 billion for the year ended December 31,
2004 from $6.6 billion for the prior year. The increase in
mutual fund net purchases was largely attributable to a large
closed-end fund offering during 2004 and to increased sales of
Calamos Growth Fund and Calamos Growth and Income Fund. We
expect future mutual fund purchases to be offset by an
increasing amount of redemptions, which generally result from
increasing mutual fund assets under management. Closed-end fund
offerings contributed significantly to net purchases for the
year ended December 31, 2004, with $3.3 billion in
closed-end fund assets under management added during that
period, as compared to $1.5 billion added for the year
ended December 31, 2003. Because closed-end funds do not
continually offer new shares to investors, increases in net
purchases of closed-end funds are entirely dependent on our
ability to consummate closed-end fund offerings. Market demand
for closed-end fund offerings is difficult to predict. We intend
to monitor the market and pursue opportunities as they present
themselves and when doing so would be consistent with our
business strategy. Open-end fund net purchases increased to
$6.5 billion for the year ended December 31, 2004 from
$5.1 billion for the prior year. Separate account net
purchases increased to $804 million for the year ended
December 31, 2004 from $475 million for the prior
year. Although our convertible strategy was closed to new
accounts in mid-2003
and remained closed throughout 2004, sales of equity separate
accounts drove an overall increase in net purchases. We have
closed certain separate account strategies to new accounts in
the past and may do so in the future as conditions require.
Total revenues increased by $149.8 million, or 92%, to
$312.1 million for the year ended December 31, 2004
from $162.4 million for the year ended December 31,
2003. The increase was due to increases in both investment
management fees and distribution and underwriting fees. We
expect revenues to increase during
42
2005 as we earn investment management fees on the significant
amount of assets under management added in 2004. We also expect
to continue to emphasize sales of investment products that allow
us to generate higher fees, although we cannot be certain that
we will be able to do so successfully.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change | |
|
|
|
|
|
|
| |
(in thousands) |
|
2004 | |
|
2003 | |
|
Amount | |
|
Percent | |
|
|
| |
|
| |
|
| |
|
| |
Investment management fees
|
|
$ |
210,725 |
|
|
|
109,052 |
|
|
$ |
101,673 |
|
|
|
93% |
|
Distribution and underwriting fees
|
|
|
98,928 |
|
|
|
53,005 |
|
|
|
45,923 |
|
|
|
87% |
|
Other
|
|
|
2,494 |
|
|
|
328 |
|
|
|
2,166 |
|
|
|
660% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$ |
312,147 |
|
|
$ |
162,385 |
|
|
$ |
149,762 |
|
|
|
92% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fees increased by $101.7 million, or
93%, to $210.7 million for the year ended December 31,
2004 from $109.0 million for the prior year as a result of
a $12.9 billion increase in average assets under
management. The overall growth in investment management fees was
due primarily to an increase in mutual fund investment
management fees, which increased to $162.7 million for the
year ended December 31, 2004 from $72.1 million for
the prior year. Open-end fund investment management fees
increased to $123.3 million for the year ended
December 31, 2004 from $61.9 million for the prior
year as a result of an increase in open-end fund average assets
under management of $7.9 billion. Closed-end fund
investment management fees increased to $39.4 million for
the year ended December 31, 2004 from $10.2 million
for the prior year as a result of an increase in closed-end fund
average assets under management of $3.2 billion. Investment
management fees as a percentage of average assets under
management increased to an annualized rate of 0.69% at
December 31, 2004 from an annualized rate of 0.61% at
December 31, 2003 as the mutual fund assets under
management, which generally carry higher investment management
fees than our separate accounts, increased as a percentage of
our total assets under management.
Distribution and underwriting fees increased by
$45.9 million, or 87%, to $98.9 million for the year
ended December 31, 2004 from $53.0 million for the
prior year, primarily due to an increase in sales of open-end
fund shares and a $7.9 billion increase in open-end funds
average assets under management.
Other revenues were $2.5 million for the year ended
December 31, 2004, including $1.9 million of portfolio
accounting fees earned from mutual funds based on an agreement
beginning April 1, 2004.
Operating expenses increased by $84.7 million, or 90%, to
$178.7 million for the year ended December 31, 2004
from $94.0 million for the year ended December 31,
2003. The increase was primarily due to increases in employee
compensation and benefits and distribution expenses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change | |
|
|
|
|
|
|
| |
(in thousands) |
|
2004 | |
|
2003 | |
|
Amount | |
|
Percent | |
|
|
| |
|
| |
|
| |
|
| |
Employee compensation and benefits
|
|
$ |
65,707 |
|
|
$ |
33,657 |
|
|
$ |
32,050 |
|
|
|
95% |
|
Distribution expense
|
|
|
50,557 |
|
|
|
22,576 |
|
|
|
27,981 |
|
|
|
124% |
|
Amortization of deferred sales commissions
|
|
|
29,424 |
|
|
|
19,879 |
|
|
|
9,545 |
|
|
|
48% |
|
Marketing and sales promotion
|
|
|
18,922 |
|
|
|
8,949 |
|
|
|
9,973 |
|
|
|
111% |
|
General and administrative
|
|
|
14,067 |
|
|
|
8,906 |
|
|
|
5,161 |
|
|
|
58% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$ |
178,677 |
|
|
$ |
93,967 |
|
|
$ |
84,710 |
|
|
|
90% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits increased by
$32.1 million, primarily due to additional expense of
$12.1 million related to salary and benefits as we
continued to expand our staffing levels to support our growth,
as well as $20.0 million for incentive compensation based
primarily on our financial performance, with $6.3 million
of this increase related to the increase in value of the EAU
plan, which was terminated in October 2004. Although we expect
our employee compensation and benefits expense to increase as we
expand our
43
alternative investment business, we do not anticipate the
fluctuation in compensation expense as a result of the changes
in the enterprise value that we experienced with the variable
EAU plan, because our new incentive stock plans are accounted
for using fair value provisions that are fixed on the grant
date. Only new issuances and forfeitures will impact the future
expense associated with the incentive stock plans. Distribution
expense increased by $28.0 million, or 124%, primarily due
to growth of average open-end fund assets under management, as
well as the aging of open-end fund Class C shares. Of the
$28.0 million increase in distribution expense,
$14.9 million was primarily due to the growth of average
open-end fund assets under management and $13.2 million was
primarily due to the aging of Class C shares. Class C
share assets do not generate distribution expense in the first
year following their sale because we retain the
Rule 12b-1 fees
during that first year (to offset the upfront commissions that
we pay), but they do generate a distribution expense in
subsequent years as we pay the
Rule 12b-1 fees to
the selling firms. Although the
Rule 12b-1 fee
rates we paid to broker-dealers and other intermediaries in the
year ended December 31, 2004 did not change from the rates
paid in the prior year, we expect distribution expense to
increase to the extent our sales of mutual funds and assets
under management continue to grow. Amortization of deferred
sales commissions increased by $9.5 million, or 48%,
primarily due to increased commissions advanced on purchases of
Class B and C shares of open-end funds. Purchases of
Class B and C shares increased by 11% over the prior
year. Marketing and sales promotion expense increased to
$18.9 million for the year ended December 31, 2004
from $8.9 million for the prior year. The increase of
$10.0 million is attributable to supplemental compensation
payments to third-party selling agents, which increased by
$9.8 million to $15.1 million, including a
$6.0 million one-time fee to underwriters of a closed-end
fund offering that we incurred during the period. We expect
supplemental compensation payments to continue to increase to
the extent that our funds gain assets. General and
administrative expense increased by $5.2 million primarily
due to a $2.1 million increase in professional and business
services expenses.
|
|
|
Other Income (Expense), Net |
Other income (expense), net was a net expense of approximately
$471,000 for the year ended December 31, 2004 as compared
to a net income of approximately $25,000 for the year ended
December 31, 2003.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change | |
|
|
|
|
|
|
| |
(in thousands) |
|
2004 | |
|
2003 | |
|
Amount | |
|
Percent | |
|
|
| |
|
| |
|
| |
|
| |
Interest expense
|
|
$ |
(5,966 |
) |
|
$ |
(999 |
) |
|
$ |
(4,967 |
) |
|
|
497 |
% |
Investment and other income
|
|
|
6,817 |
|
|
|
1,024 |
|
|
|
5,793 |
|
|
|
566 |
% |
Minority interest in partnership investments
|
|
|
(1,322 |
) |
|
|
|
|
|
|
(1,322 |
) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense), net
|
|
$ |
(471 |
) |
|
$ |
25 |
|
|
$ |
(496 |
) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The $5.0 million increase in interest expense was primarily
due to our repayment in April 2004 of $25.8 million of
outstanding debt, which carried a LIBOR-based variable rate and
issuance of $150.0 aggregate principal amount of Senior
Unsecured Notes due 2011 with a fixed rate of 5.24%. Investment
and other income increased by $5.8 million, primarily due
to $4.4 million of market appreciation and
$1.4 million of interest and dividend income. The increase
in minority interest in partnership investments was due to the
consolidation of Calamos Equity Opportunities Fund LP in
2004.
We believe that pro forma combined results provide a more
meaningful representation of our performance for the
12 months ended December 31, 2004. The pro forma
results for the year end December 31, 2004 below give
effect to the Real Estate Distribution, the Formation
Transaction and the consummation of our initial public offering.
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma | |
|
|
|
|
|
|
Nov. 2 to | |
|
Jan. 1 to | |
|
Combined | |
|
Pro Forma | |
|
Pro Forma | |
(in thousands except share data) |
|
Dec. 31, 2004 | |
|
Nov. 1, 2004 | |
|
2004 | |
|
Adjustments | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
(Predecessor) | |
|
|
|
|
|
|
Total revenues(1)
|
|
$ |
61,770 |
|
|
$ |
250,377 |
|
|
$ |
312,147 |
|
|
$ |
(157 |
) |
|
$ |
311,990 |
|
Total expenses(1)
|
|
|
33,536 |
|
|
|
145,141 |
|
|
|
178,677 |
|
|
|
(8 |
) |
|
|
178,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
28,234 |
|
|
|
105,236 |
|
|
|
133,470 |
|
|
|
(149 |
) |
|
|
133,321 |
|
|
Total other income (expense), net(1)
|
|
|
1,016 |
|
|
|
(1,487 |
) |
|
|
(471 |
) |
|
|
(1,808 |
) |
|
|
(2,279 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest in Calamos Holdings LLC and
income taxes
|
|
|
29,250 |
|
|
|
103,749 |
|
|
|
132,999 |
|
|
|
(1,957 |
) |
|
|
131,042 |
|
|
Minority interest in Calamos Holdings LLC(2)
|
|
|
22,609 |
|
|
|
|
|
|
|
22,609 |
|
|
|
78,293 |
|
|
|
100,902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
6,641 |
|
|
|
103,749 |
|
|
|
110,390 |
|
|
|
(80,250 |
) |
|
|
30,140 |
|
|
Income taxes(3)
|
|
|
2,649 |
|
|
|
1,567 |
|
|
|
4,216 |
|
|
|
7,805 |
|
|
|
12,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
3,992 |
|
|
$ |
102,182 |
|
|
$ |
106,174 |
|
|
$ |
(88,055 |
) |
|
$ |
18,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share, basic
|
|
$ |
0.18 |
|
|
$ |
1.06 |
|
|
|
|
|
|
|
|
|
|
$ |
0.79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic(4)
|
|
|
22,700,100 |
|
|
|
96,800,000 |
|
|
|
|
|
|
|
|
|
|
|
23,000,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calculation of pro forma earnings per share, diluted, assuming
exchange of membership units:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest in Calamos Holdings LLC and
income taxes
|
|
$ |
29,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
131,042 |
|
|
Impact of income taxes(5)
|
|
|
11,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings available to common shareholders
|
|
$ |
17,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
78,769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share, diluted
|
|
$ |
0.17 |
|
|
$ |
1.06 |
|
|
|
|
|
|
|
|
|
|
$ |
0.79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, diluted(6)
|
|
|
100,491,409 |
|
|
|
96,800,000 |
|
|
|
|
|
|
|
|
|
|
|
100,080,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Pro Forma Adjustments:
|
|
(1) |
Represents the adjustment related to the Real Estate
Distribution, whereby Calamos Family Partners, Inc. (formerly
known as Calamos Holdings Inc.), distributed its interest in all
of its owned real estate assets to its stockholders, who
contributed those assets to a new limited liability company.
This adjustment is presented based on actual amounts recorded
during the periods presented. |
|
(2) |
Represents an adjustment to increase Calamos Asset Management,
Inc.s minority interest allocation in Calamos Holdings LLC
to 77.0%. Minority interest was determined by multiplying the
income before minority interest in Calamos Holdings LLC and
income taxes by Calamos Family Partners, Inc.s and John P.
Calamos, Sr.s 77.0% aggregate ownership. The minority
interest adjustment is presented based on the income for the
periods presented. |
|
(3) |
Reflects the impact of federal and state income taxes on the
income allocated from Calamos Holdings LLC to Calamos Asset
Management, Inc. Historically, Calamos Family Partners, Inc.
operated as an S corporation and was not subject to
U.S. federal and certain state income taxes, but was
subject to Illinois replacement taxes. The amount of pro forma
adjustment was determined by eliminating the |
45
|
|
|
Illinois replacement tax and applying the combined projected
federal corporate income tax rate and applicable state tax rates
to income before income taxes. |
|
|
(4) |
Represents 23,000,000 shares of Class A common stock,
which represents 23.0% of Calamos Holdings LLC shares after the
offering. In addition to shares of Class A common stock,
there are 100 shares of Class B common stock
outstanding. |
|
(5) |
In calculating diluted earnings per share, the effective tax
rates for the year ended December 31, 2004 of 39.9% was
applied to income before minority interest and income taxes. |
|
(6) |
Diluted shares outstanding for each period presented represent
our weighted average Class A common stock after giving
effect to the offering as of the beginning of each period
presented. The diluted shares outstanding are calculated:
(a) including the effect of outstanding restricted stock
unit and option awards and (b) assuming Calamos Family
Partners, Inc. and John P. Calamos, Sr. exchanged all
of their membership units in Calamos Holdings LLC for, and
converted all outstanding shares of our Class B common
stock into, shares of our Class A common stock, in each
case on a one-for-one basis. In calculating diluted earnings per
share an effective tax rate of 39.9% was applied to income
before minority interest and income taxes. |
Comparing pro forma net income for 2004 with net income for
2003 is not meaningful due to different tax treatments for these
two periods. The reorganization and change in ownership made the
company subject to additional income taxes for the period
November 2, 2004 through December 31, 2004 that did
not apply to 2003. For comparability purposes, the pro forma
combined results for the year ended December 31, 2004 below
do not give effect to the Real Estate Distribution, the
Formation Transaction or the consummation of our initial public
offering.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma | |
|
|
|
Change | |
|
|
Combined | |
|
|
|
| |
(in thousands) |
|
2004 | |
|
2003 | |
|
Amount | |
|
Percent | |
|
|
| |
|
| |
|
| |
|
| |
Total revenues
|
|
$ |
312,147 |
|
|
$ |
162,385 |
|
|
$ |
149,762 |
|
|
|
92 |
% |
Total operating expenses
|
|
|
178,677 |
|
|
|
93,967 |
|
|
|
84,710 |
|
|
|
90 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
133,470 |
|
|
|
68,418 |
|
|
|
65,052 |
|
|
|
95 |
% |
Other income (expense), net
|
|
|
(471 |
) |
|
|
25 |
|
|
|
(496 |
) |
|
|
* |
|
Minority interest in Calamos Holdings LLC
|
|
|
22,609 |
|
|
|
|
|
|
|
22,609 |
|
|
|
* |
|
Income taxes
|
|
|
4,216 |
|
|
|
1,117 |
|
|
|
3,099 |
|
|
|
277 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
106,174 |
|
|
$ |
67,326 |
|
|
$ |
38,848 |
|
|
|
58 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma combined net income totaled $106.2 million
for the year ended December 31, 2004 as compared to
$67.3 million for the year ended December 31, 2003, an
increase of 58%.
During the year end December 31, 2003 and for the period
January 1, 2004 to November 1, 2004, our business was
operated as an S corporation. As a result, our effective
tax rate for these periods was 1.5%, while our effective tax
rate for the period November 2, 2004 to December 31,
2004 was 39.9%.
46
Quarterly Results of Operations
Unaudited quarterly results of operations for the years ended
December 31, 2005 and 2004 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 | |
|
2005 | |
|
|
| |
|
| |
|
|
At or for the Quarter Ended | |
|
At or for the Period Ended | |
|
At or for the Quarter Ended | |
|
|
| |
|
| |
|
| |
(in thousands, |
|
|
|
Oct. 1 to | |
|
Nov. 2 to | |
|
|
except share data) |
|
March 31 | |
|
June 30 | |
|
Sept. 30 | |
|
Nov. 1 | |
|
Dec. 31 | |
|
March 31 | |
|
June 30 | |
|
Sept. 30 | |
|
Dec. 31 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Predecessor) | |
|
(Predecessor) | |
|
(Predecessor) | |
|
(Predecessor) | |
|
|
|
|
|
|
|
|
|
|
Assets under management (in millions)
|
|
$ |
28,973 |
|
|
$ |
32,262 |
|
|
$ |
33,249 |
|
|
$ |
33,909 |
|
|
$ |
37,975 |
|
|
$ |
38,246 |
|
|
$ |
39,512 |
|
|
$ |
42,169 |
|
|
$ |
43,805 |
|
Total revenue
|
|
$ |
63,660 |
|
|
$ |
75,855 |
|
|
$ |
81,231 |
|
|
$ |
29,631 |
|
|
$ |
61,770 |
|
|
$ |
97,321 |
|
|
$ |
99,072 |
|
|
$ |
107,686 |
|
|
$ |
113,488 |
|
Total operating expenses
|
|
|
39,557 |
|
|
|
42,554 |
|
|
|
45,777 |
|
|
|
17,253 |
|
|
|
33,536 |
|
|
|
48,332 |
|
|
|
50,325 |
|
|
|
54,354 |
|
|
|
58,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$ |
24,103 |
|
|
$ |
33,301 |
|
|
$ |
35,454 |
|
|
$ |
12,378 |
|
|
$ |
28,234 |
|
|
$ |
48,989 |
|
|
$ |
48,747 |
|
|
$ |
53,332 |
|
|
$ |
55,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
23,732 |
|
|
$ |
33,418 |
|
|
$ |
33,106 |
|
|
$ |
11,926 |
|
|
$ |
3,992 |
|
|
$ |
6,371 |
|
|
$ |
7,002 |
|
|
$ |
7,639 |
|
|
$ |
8,210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$ |
0.25 |
|
|
$ |
0.35 |
|
|
$ |
0.34 |
|
|
$ |
0.12 |
|
|
$ |
0.17 |
|
|
$ |
0.28 |
|
|
$ |
0.30 |
|
|
$ |
0.33 |
|
|
$ |
0.35 |
|
Diluted shares outstanding(1)
|
|
|
96,800,000 |
|
|
|
96,800,000 |
|
|
|
96,800,000 |
|
|
|
96,800,000 |
|
|
|
100,491,409 |
|
|
|
100,598,485 |
|
|
|
100,557,047 |
|
|
|
100,667,805 |
|
|
|
100,699,343 |
|
|
|
(1) |
Diluted shares outstanding for each period presented represent
the weighted average Class A common stock after giving
effect to the offering as of the beginning of 2004. The diluted
shares outstanding are calculated: (a) including the effect
of outstanding restricted stock unit and option awards and
(b) assuming Calamos Family Partners, Inc. and John P.
Calamos, Sr. exchanged all of their membership units in
Calamos Holdings LLC for, and converted all outstanding shares
of our Class B common stock into, shares of our
Class A common stock, in each case on a one-for-one basis. |
In calculating 2005 diluted earnings per share, the effective
tax rates for the quarters ended March 31, 2005,
June 30, 2005, September 30, 2005 and
December 31, 2005 of 40.0%, 40.0%, 39.7% and 40.9%,
respectively, were applied to income before minority interest
and income taxes. In calculating 2004 diluted earnings per
share, the effective tax rate for the quarters ended
March 31, 2004, June 30, 2004 and September 30,
2004 and for the periods from October 1, 2004 to
November 1, 2004 and from November 2, 2004 to
December 31, 2004 of 39.9% was applied to income before
minority interest and income taxes.
Liquidity and Capital Resources
Our current financial condition is highly liquid, with the
majority our assets comprised of cash and cash equivalents and
investment securities. Investment securities are principally
comprised of company-sponsored mutual funds and other highly
liquid exchange traded securities. Our working capital
requirements historically have been met through cash generated
by our operations and bank borrowings.
47
The following tables summarize key statements of financial
condition data relating to our liquidity and capital resources
at December 31, 2005 and 2004.
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Statements of financial condition data:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
210,469 |
|
|
$ |
149,768 |
|
|
Receivables
|
|
|
34,476 |
|
|
|
27,234 |
|
|
Investment securities
|
|
|
128,265 |
|
|
|
90,444 |
|
|
Investment in partnerships
|
|
|
79,956 |
|
|
|
60,150 |
|
|
Deferred tax asset
|
|
|
109,126 |
|
|
|
118,078 |
|
|
Deferred sales commissions
|
|
|
58,390 |
|
|
|
61,417 |
|
|
Long-term debt
|
|
|
150,000 |
|
|
|
150,000 |
|
The deferred tax asset above represents an annual reduction of
approximately $8.3 million in future taxes owed by Calamos
Asset Management, Inc. through 2019. This reduction results from
our election under section 754 of the Internal Revenue
Code, whereby we stepped up the tax basis in certain intangible
assets to their fair market value. The
step-up in basis is
amortized over fifteen years on Calamos Asset Management,
Inc.s tax return. As a result, this cash savings can only
be utilized for the benefit of the shareholders of our common
stock.
Cash flows for the years ended December 31, 2005 and 2004
are shown below. Cash flows for the year ended December 31,
2004 are shown as combined, as management believes this is most
appropriate for comparison purposes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nov. 2 | |
|
Jan. 1 | |
|
|
|
|
|
|
|
|
through | |
|
through | |
|
Pro Forma | |
|
|
|
|
|
|
Dec. 31, | |
|
Nov. 1, | |
|
Combined | |
|
|
(in thousands) |
|
2005 | |
|
2004 | |
|
2004 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
(Predecessor) | |
|
|
|
|
Cash flow data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$ |
223,592 |
|
|
$ |
21,335 |
|
|
$ |
112,032 |
|
|
$ |
133,367 |
|
|
$ |
36,825 |
|
|
Net cash used in investing activities
|
|
|
(72,564 |
) |
|
|
(49,851 |
) |
|
|
(57,499 |
) |
|
|
(107,350 |
) |
|
|
(7,903 |
) |
|
Net cash provided by (used in) financing activities
|
|
|
(90,327 |
) |
|
|
45,308 |
|
|
|
73,370 |
|
|
|
118,678 |
|
|
|
(26,497 |
) |
Net cash provided by operating activities increased by
$90.2 million to $223.6 million for the year ended
December 31, 2005 from $133.4 for the combined year ended
December 31, 2004, primarily as a result of a
$78.9 million increase in income before minority interest
and income taxes and a $5.6 million allowance received from
our landlord to fund tenant improvements in our new
headquarters. Net cash provided by operating activities
increased by $96.5 million, to $133.4 million for the
combined year ended December 31, 2004 from
$36.8 million for the year ended December 31, 2003,
primarily as a result of increased net income of
$38.8 million, increased liabilities of $16.5 million,
and decreases in receivables and other assets of
$9.7 million.
The payment of deferred sales commissions by us to financial
intermediaries who sell Class B and C shares of open-end
funds is a significant use of our operating cash flows. Use of
cash for deferred sales commissions decreased by
$13.2 million to $28.4 million for the year ended
December 31, 2005 from $41.6 million for the combined
year ended December 31, 2004. Use of cash for deferred
sales commissions increased by $0.4 million to
$41.6 million for the combined year ended December 31,
2004 from $41.2 for the year ended December 31, 2003. We
expect that the payment of deferred sales commissions will vary
in proportion to future sales of Class B and C shares of
open-end funds and that these commissions will continue to be
funded by cash flows from operations.
48
Investing activities typically consist of investments in
products that we sponsor and of the purchase of property and
equipment. Net cash used in investing activities was
$72.6 million for the year ended December 31, 2005 and
was primarily comprised of our $38.6 million investment in
property and equipment for our new facility, of which
$5.6 million was received from our landlord as an allowance
for tenant improvements, and $25 million in cash used to
seed our International Growth Fund during the first quarter of
2005. We anticipate that cash uses for property and equipment
expenditures will significantly decrease in future years now
that we have completed the move to our new headquarters.
Further, we anticipate increasing the future level of
investments in products managed by us as opportunities arise.
Net cash used in investing activities was $107.4 million
for the combined year ended December 31, 2004 and was
primarily comprised of our investments in products managed by us
of $96.0 million and construction payments on our new
headquarters facility, which were distributed to the
stockholders of Calamos Family Partners, Inc. in June 2004 in
connection with the Real Estate Distribution.
Net cash used in financing activities was $90.3 million for
the year ended December 31, 2005 and was comprised of
distributions to minority shareholders of $83.9 million,
including distributions for their tax liabilities of
$62.3 million, as well as the dividends paid to common
shareholders of $6.4 million. The increase of
$31.8 million in distributions to minority shareholders was
primarily driven by the distributions for their tax liabilities
based on the year-over-year net income growth. We anticipate
that distributions for income taxes will continue to change as
net income changes. Net cash provided by financing activities
was $118.7 million for the combined year ended
December 31, 2004 and was principally comprised of the
issuance of $150 million aggregate principal amount of
Senior Unsecured Notes in April 2004, partially offset by cash
used to repay and terminate a credit facility of approximately
$30 million in 2004 and further offset by
$52.1 million in distributions to minority shareholders.
We expect our cash and liquidity requirements will be met with
the cash on hand and through cash generated by operations. We
intend to satisfy our capital requirements over the next
12 months through these sources of liquidity.
Contractual Obligations
The following table contains supplemental information regarding
our total contractual cash obligations as of December 31,
2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period | |
|
|
| |
|
|
|
|
Less than | |
|
|
|
More than | |
(in thousands) |
|
Total | |
|
1 Year | |
|
1-3 Years | |
|
3-5 Years | |
|
5 Years | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Long-term debt obligations
|
|
$ |
150,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
150,000 |
|
Operating lease obligations(1)
|
|
|
80,874 |
|
|
|
3,517 |
|
|
|
7,114 |
|
|
|
7,334 |
|
|
|
62,909 |
|
Other long-term obligations(2)
|
|
|
720 |
|
|
|
267 |
|
|
|
315 |
|
|
|
138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
231,594 |
|
|
$ |
3,784 |
|
|
$ |
7,429 |
|
|
$ |
7,472 |
|
|
$ |
212,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
In accordance with Generally Accepted Accounting Principles,
these obligations are not reflected in the accompanying
consolidated statements of financial condition. |
|
(2) |
Other long-term obligations principally represent commitments
under equity compensation agreements. These obligations are
included in other long-term liabilities in the accompanying
consolidated statements of financial condition. |
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in
accordance with accounting principles generally accepted in the
United States requires management to make estimates and
judgments that affect the reported amounts of assets,
liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities. We base our estimates on
historical experience and on various other assumptions that are
believed
49
to be reasonable under current circumstances, the results of
which form the basis for making judgments about the carrying
value of assets and liabilities that are not readily available
from other sources. We evaluate our estimates on an ongoing
basis. Actual results may differ from these estimates under
different assumptions or conditions.
Accounting policies are an integral part of our consolidated
financial statements. A thorough understanding of these
accounting policies is essential when reviewing our reported
results of operations and our financial position. Management
believes that the critical accounting policies and estimates
discussed below involve additional management judgment due to
the sensitivity of the methods and assumptions used.
|
|
|
Deferred Sales Commissions |
Deferred sales commissions are commissions advanced by us on our
sale of Class B and Class C shares of open-end funds.
Deferred sales commissions are amortized on a straight-line
basis over the period in which
12b-1 fees are
received. Because 12b-1
fees cease upon redemption of shares, amortization expense is
accelerated when shares are redeemed, resulting in the reduction
of the deferred sales commission asset. These redemptions result
in an amortization period not to exceed 12 months for
Class C shares and 96 months (eight years) for
Class B shares.
We evaluate the carrying value of our deferred sales commissions
for impairment purposes on a quarterly basis. Significant
assumptions utilized by us to estimate future average assets
under management include expected future market performance and
redemption rates. Estimates of undiscounted future cash flows
and the remaining life of the deferred sales commission asset
are made from these assumptions. Market performance assumptions
are selected using expected average market returns based on
long-term market index benchmarks for each asset class held
within the fund. At December 31, 2005, we used average
market return assumptions ranging from 8% to 11% based on asset
class. Higher actual average market returns would increase
undiscounted cash flows, while lower actual average market
returns would decrease undiscounted future cash flows. Future
redemption assumptions were determined by using the actual
redemption rates that each fund experienced over the prior
24-month period. For
Class B shares and Class C shares, we used average
historical redemption rates of between 8% and 14%, respectively,
at December 31, 2005. An increase in the actual rate of
redemptions would decrease the undiscounted future cash flows,
while a decrease in the actual rate of redemptions would
increase undiscounted cash flows. These assumptions are reviewed
and updated quarterly, or monthly when events or changes in
circumstances occur that could significantly increase the risk
of impairment of the asset.
If we determine that the deferred sales commission asset is not
recoverable, an impairment condition would exist and a loss
would be measured as the amount by which the recorded amount of
the asset exceeds its estimated fair value. If the carrying
value of the deferred sales commission asset exceeds the
undiscounted cash flow, the asset is written down to fair value
based on discounted cash flows. Impairment adjustments are
recognized in the statement of income as a component of
amortization of deferred sales commissions. As of each reporting
period presented, we determined that no impairment of the
deferred commission asset existed, but due to the volatility of
the capital markets and the changes in redemption rates, we are
unable to predict whether or when future impairment of the
deferred sales commission asset might occur.
Effective January 1, 2004, we adopted the fair value
recognition provisions of SFAS 123. Prior to 2004, we
accounted for our long-term Equity Appreciation Plan, or EAU
plan, using the accounting methods prescribed by FASBs
Financial Interpretation No. 28, Accounting for Stock
Appreciation Rights and Other Variable Stock Option or Award
Plans, an Interpretation of APB Opinions No. 15
and 25, or FIN 28, and its related interpretations.
During 2004, we established an incentive stock plan that
provides for grants of restricted stock unit awards, or RSUs,
and stock option awards for certain employees. RSUs are
convertible on a one-for-one basis into shares of our common
stock. Stock option awards are based on shares of our common
stock. We estimate the fair value of the options as of the grant
date using the Black-Scholes option-pricing model.
50
The EAU Plan was terminated in October 2004 in connection with
our initial public offering. Prior to its termination,
compensation expense was accrued over the periods in which
employees performed services. As such, changes in the aggregate
unit value, multiplied by the ratio of actual to total number of
service periods in the vesting period, were recorded as an
increase or decrease to expense in the current period.
The value of the EAU at the valuation date was derived from an
equally weighted calculation based on multiples of assets under
management, revenue and EBITDA, defined as net income plus
interest expense, income taxes and fixed asset depreciation,
excluding amortization of deferred sales commissions. We used
industry multiples provided by independent third party sources
in computing the values, until the termination of the plan at
which time we used our initial public offering price.
Management judgment is required in developing our provision for
income taxes, including the determination of deferred tax assets
and liabilities and any valuation allowances that might be
required against deferred tax assets. As of December 31,
2005 and 2004, we have not recorded a valuation allowance on
deferred tax assets relating principally to our
step-up in tax basis to
fair market value for our intangible assets under our election
to be made under Section 754 of the Internal Revenue Code.
In the event that sufficient taxable income does not result in
future years, among other things, a valuation allowance for some
or all of our deferred tax assets would be required.
Recently Issued Accounting Pronouncements
Effective January 1, 2004, we adopted the fair value
recognition provisions of SFAS 123. In December 2004, the
FASB revised SFAS 123 (SFAS 123(R)), requiring public
registrants to recognize the cost resulting from all stock-based
compensation transactions in their financial statements. In
April 2005, the Securities and Exchange Commission deferred the
compliance date of SFAS 123(R) until 2006 for calendar-year
companies. We intend to adopt SFAS 123(R) in the first
quarter of 2006 and do not believe that the implementation will
have a material effect on our financial statements.
In June, 2005, the FASBs Emerging Issues Task Force
(EITF) ratified Issue No. 04-05, Determining Whether a
General Partner, or the General Partners as a Group, Controls a
Limited Partnership or Similar Entity When the Limited Partners
Have Certain Rights
(EITF 04-05).
EITF 04-05
provides a framework for determining whether a general partner
controls, and should consolidate, a limited partnership. The
presumption of control is overcome if the limited partners have
either substantive kick-out rights or substantive participating
rights, as defined. This guidance is applicable for limited
partnerships or similar entities that are not variable interest
entities under the FASBs Financial Interpretation
No. 46(R), Consolidation of Variable Interest
Entities. We have evaluated the provisions of EITF
No. 04-05 and have determined that the implementation of
this guidance will not have a material effect on our financial
statements.
In June 2005, the FASB issued SFAS 154, Accounting
Changes and Error Corrections. SFAS 154 changes the
requirements for the accounting for and reporting of a change in
accounting principle. Previously, voluntary changes in
accounting principle were required to be recognized by including
the cumulative effect of the change in net income of the period
of the change. SFAS 154 requires companies to account for
and apply changes in accounting principles retrospectively to
prior periods financial statements, rather than recording
a cumulative effect adjustment within the period of the change,
unless it is impractical to determine the effects of the change
to each period being presented. The provisions of SFAS 154
are effective for accounting changes and corrections of errors
made in fiscal years beginning after December 15, 2005. The
adoption of SFAS 154 is not expected to have a material
effect on our financial statements.
Forward-Looking Information
From time to time, information or statements provided by us or
on our behalf, including those within this Annual Report on
Form 10-K, may
contain certain forward-looking statements relating to future
events, future financial performance, strategies, expectations
and competitive environment, and regulations. These
forward-looking statements include, without limitation,
statements regarding proposed new products; results of
51
operations or liquidity; projections, predictions, expectations,
estimates or forecasts as to our business, financial and
operating results and future economic performance; and
managements goals and objectives and other similar
expressions concerning matters that are not historical facts.
Words such as may, will,
should, could, would,
predicts, potential,
continue, expects,
anticipates, future,
intends, plans, believes,
estimates, and similar expressions, as well as
statements in future tense, identify forward-looking statements.
Forward-looking statements should not be read as a guarantee of
future performance or results, and will not necessarily be
accurate indications of the times at, or by, which such
performance or results will be achieved. Forward-looking
statements are based on information available at the time those
statements are made and/or managements good faith belief
as of that time with respect to future events, and are subject
to risks and uncertainties that could cause actual performance
or results to differ materially from those expressed in or
suggested by the forward-looking statements. Important factors
that could cause such differences include, but are not limited
to: adverse changes in applicable laws or regulations; downward
fee pressures and increased industry competition; risks inherent
to the investment management business; the loss of revenues due
to contract terminations and redemptions; our ownership
structure; general declines in the prices of securities;
catastrophic or unpredictable events; the loss of key
executives; the unavailability of third-party retail
distribution channels; increased costs of distribution; failure
to recruit and retain qualified personnel; a loss of assets, and
thus revenues, if our largest funds perform poorly; damage to
our reputation; and our holding company structure. Further, the
value and composition of our assets under management are, and
will continue to be, influenced by a variety of factors
including, among other things: purchases and redemptions of
shares of the open-end funds and other investment products;
fluctuations in the financial markets around the world that
result in appreciation or depreciation of assets under
management; our introduction of new investment strategies and
products; our ability to educate our clients about our
investment philosophy and provide them with
best-in-class service;
the relative investment performance of our investment products
as compared to competing offerings and market indices;
competitive conditions in the mutual fund, asset management and
broader financial services sectors; investor sentiment and
confidence; and our decision to close strategies when deemed to
be in the best interests of our clients. Item 1A of this
report discusses some of these and other important factors in
detail under the caption Risk Factors.
Forward-looking statements speak only as of the date the
statements are made. Readers should not place undue reliance on
any forward-looking statements. We assume no obligation to
update forward-looking statements to reflect actual results,
changes in assumptions or changes in other factors affecting
forward-looking information, except to the extent required by
applicable securities laws.
|
|
Item 7A. |
Quantitative and Qualitative Disclosures about Market
Risk |
Our exposure to market risk is directly related to our role as
investment advisors for the mutual funds and separate accounts
we manage. A significant majority of our operating revenue,
approximately 96.8% for the year ended December 31, 2005,
is derived from investment advisory, distribution and portfolio
accounting agreements with the mutual funds and separate
accounts. Under these agreements, the fees we receive are
typically based on the market value of the assets under
management. Accordingly, a decline in the prices of securities
generally may cause our revenue and income to decline by causing
the value of the assets we manage to decrease or by causing our
clients to withdraw funds in favor of investments that they
perceive as offering greater opportunity or lower risk.
In addition, a decline in the prices of securities may present
market conditions that could preclude us from increasing assets
under management and prevent us from realizing higher fee
revenue associated with such growth.
We are also subject to market risk due to a decline in the
prices of investment securities. We own investment securities
primarily comprised of mutual funds managed by Calamos Advisors.
At December 31, 2005, the fair value of these investment
securities was $128.3 million. Assuming a 10% increase or
decrease in the value of these investments, the fair value would
increase or decrease by $12.8 million at December 31,
2005.
52
Additionally, we are subject to market risk due to a decline in
the value of our investment in partnerships, which consist
primarily of marketable securities. As a result, the market
values of these partnerships are subject to the same
fluctuations as our investment securities. At December 31,
2005, the fair value of these partnerships was
$80.0 million. Assuming a 10% increase or decrease in the
value of these partnerships, the fair value would increase or
decrease by $8.0 million at December 31, 2005.
On April 29, 2004, we issued $150 million of Senior
Unsecured Notes due April 29, 2011 to various note
purchasers in a private placement. These notes have a fixed
interest rate of 5.24%, and consequently, we do not believe that
these notes have any interest rate risk. Due to the nature of
our business, we believe that we do not face any material credit
risk, inflation, interest rate or foreign currency rate risk.
53
|
|
Item 8. |
Financial Statements and Supplementary Data |
|
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
F-1 |
|
Managements Report on Internal Control Over Financial
Reporting
|
|
|
F-2 |
|
Report of Independent Registered Public Accounting Firm on
Internal Control Over Financial Reporting
|
|
|
F-3 |
|
Consolidated Statements of Financial Condition at
December 31, 2005 and 2004
|
|
|
F-5 |
|
Consolidated Statements of Income for the year ended
December 31, 2005, the period November 2, 2004 to
December 31, 2004, the period January 1, 2004 to
November 1, 2004 and the year ended December 31, 2003
|
|
|
F-6 |
|
Consolidated Statements of Changes in Stockholders Equity
for the year ended December 31, 2005, the period
November 2, 2004 to December 31, 2004, the period
January 1, 2004 to November 1, 2004 and the year ended
December 31, 2003
|
|
|
F-7 |
|
Consolidated Statements of Cash Flows for the year ended
December 31, 2005, the period November 2, 2004 to
December 31, 2004, the period January 1, 2004 to
November 1, 2004 and the year ended December 31, 2003
|
|
|
F-8 |
|
Notes to Consolidated Financial Statements
|
|
|
F-9 |
|
54
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors of
Calamos Asset Management, Inc:
We have audited the accompanying consolidated statements of
financial position of Calamos Asset Management, Inc. as of
December 31, 2005 and 2004, and the related consolidated
statements of income, stockholders equity and cash flows
for the year ended December 31, 2005 and for the period
November 2, 2004 to December 31, 2004 (the Successor
Periods, as Calamos Asset Management, Inc.), and for the period
January 1, 2004 to November 1, 2004 and for the year
ended December 31, 2003 (the Predecessor Periods, as
Calamos Holdings, Inc.). These consolidated financial statements
are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). 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, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Calamos Asset Management, Inc. as of
December 31, 2005 and 2004, and the results of their
operations and their cash flows for the year ended
December 31, 2005 and for the period November 2, 2004
to December 31, 2004 (the Successor Periods, as Calamos
Asset Management, Inc.), and for the period January 1, 2004
to November 1, 2004 and for the year ended
December 31, 2003 (the Predecessor Periods, as Calamos
Holdings, Inc.), in conformity with U.S. generally accepted
accounting principles.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of the Companys internal control over
financial reporting as of December 31, 2005 based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO), and our report dated
March 13, 2006 expressed an unqualified opinion on
managements assessment of, and the effective operation of,
internal control over financial reporting.
Chicago, Illinois
March 13, 2006
F-1
MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING
Management of Calamos Asset Management, Inc. and its
subsidiaries (the Company) is responsible for establishing and
maintaining adequate internal control over financial reporting,
as defined in
Rule 13a-15(f) and
15d-15(f) of the
Securities Exchange Act of 1934, as amended. The Companys
internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of its consolidated
financial statements for external purposes in accordance with
U.S. generally accepted accounting principles.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of the Chief
Executive Officer and the Chief Financial Officer, management
assessed the effectiveness of the Companys internal
control over financial reporting as of December 31, 2005
based on criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on this
assessment, management concluded that the Companys
internal control over financial reporting was effective as of
December 31, 2005.
Managements assessment of the effectiveness of the
Companys internal control over financial reporting as of
December 31, 2005 has been audited by KPMG LLP, an
independent registered public accounting firm, as stated in
their report which is included herein.
|
|
|
|
/s/ John P.
Calamos, Sr.
John P. Calamos, Sr.
Chief Executive Officer and
Co-Chief Investment Officer |
|
/s/ Patrick H. Dudasik
Patrick H. Dudasik
Executive Vice President, Chief
Financial Officer and Treasurer |
March 13, 2006
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The Board of Directors of
Calamos Asset Management, Inc:
We have audited managements assessment, included in the
accompanying Managements Report on Internal Control over
Financial Reporting, that Calamos Asset Management, Inc.
maintained effective internal control over financial reporting
as of December 31, 2005, based on criteria established in
Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Companys management is responsible for
maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control
over financial reporting. Our responsibility is to express an
opinion on managements assessment and an opinion on the
effectiveness of the Companys internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
managements assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, managements assessment that the Company
maintained effective internal control over financial reporting
as of December 31, 2005, is fairly stated, in all material
respects, based on criteria established in Internal
Control Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
Also, in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as
of December 31, 2005, based on criteria established in
Internal Control Integrated Framework issued by COSO.
F-3
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated statements of financial position of Calamos Asset
Management, Inc. as of December 31, 2005 and 2004, and the
related consolidated statements of income, stockholders
equity and cash flows for the year ended December 31, 2005
and for the period November 2, 2004 to December 31,
2004 (the Successor Periods, as Calamos Asset Management, Inc.),
and for the period January 1, 2004 to November 1, 2004
and for the year ended December 31, 2003 (the Predecessor
Periods, as Calamos Holdings, Inc.), and our report dated
March 13, 2006 expressed an unqualified opinion on those
consolidated financial statements.
Chicago, Illinois
March 13, 2006
F-4
CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
(in thousands, except share data) |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
ASSETS: |
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
210,469 |
|
|
$ |
149,768 |
|
|
|
Receivables:
|
|
|
|
|
|
|
|
|
|
|
|
Affiliates and affiliated funds
|
|
|
24,670 |
|
|
|
21,222 |
|
|
|
|
Customers
|
|
|
9,806 |
|
|
|
6,012 |
|
|
|
Investment securities
|
|
|
128,265 |
|
|
|
90,444 |
|
|
|
Investment in partnerships
|
|
|
79,956 |
|
|
|
60,150 |
|
|
|
Prepaid expenses
|
|
|
2,342 |
|
|
|
1,917 |
|
|
|
Deferred tax asset, net
|
|
|
7,846 |
|
|
|
6,892 |
|
|
|
Other assets
|
|
|
195 |
|
|
|
973 |
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
463,549 |
|
|
|
337,378 |
|
|
|
|
|
|
|
|
|
Non-current assets
Deferred tax asset, net
|
|
|
101,280 |
|
|
|
111,186 |
|
|
|
Deferred sales commissions
|
|
|
58,390 |
|
|
|
61,417 |
|
|
|
Property and equipment, net
|
|
|
40,547 |
|
|
|
4,902 |
|
|
|
Other non-current assets
|
|
|
1,711 |
|
|
|
1,569 |
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
201,928 |
|
|
|
179,074 |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
665,477 |
|
|
|
516,452 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY: |
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
Accounts payable:
|
|
|
|
|
|
|
|
|
|
|
|
Brokers
|
|
|
18,485 |
|
|
|
12,514 |
|
|
|
|
Affiliates and affiliated funds
|
|
|
93 |
|
|
|
813 |
|
|
|
Accrued compensation and benefits
|
|
|
19,131 |
|
|
|
9,985 |
|
|
|
Accrued expenses and other current liabilities
|
|
|
11,025 |
|
|
|
17,767 |
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
48,734 |
|
|
|
41,079 |
|
|
|
|
|
|
|
|
|
Long-term liabilities
Long-term debt
|
|
|
150,000 |
|
|
|
150,000 |
|
|
|
Other long-term liabilities
|
|
|
6,726 |
|
|
|
263 |
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
156,726 |
|
|
|
150,263 |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
205,460 |
|
|
|
191,342 |
|
|
|
|
|
|
|
|
Minority interest in partnership investments
|
|
|
44,453 |
|
|
|
31,322 |
|
Minority interest in Calamos Holdings LLC
|
|
|
229,430 |
|
|
|
135,294 |
|
Stockholders equity
|
|
|
|
|
|
|
|
|
|
Class A Common Stock, $0.01 par value; authorized
600,000,000 shares; issued and outstanding
23,000,000 shares
|
|
|
230 |
|
|
|
230 |
|
|
Class B Common Stock, $0.01 par value; authorized
1,000 shares; issued and outstanding 100 shares
|
|
|
0 |
|
|
|
0 |
|
|
Additional paid-in capital
|
|
|
156,274 |
|
|
|
154,156 |
|
|
Retained earnings
|
|
|
26,698 |
|
|
|
2,364 |
|
|
Accumulated other comprehensive income
|
|
|
2,932 |
|
|
|
1,744 |
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
186,134 |
|
|
|
158,494 |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, minority interest and stockholders
equity
|
|
$ |
665,477 |
|
|
$ |
516,452 |
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-5
CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended | |
|
November 2 to | |
|
January 1 to | |
|
Year Ended | |
|
|
December 31, | |
|
December 31, | |
|
November 1, | |
|
December 31, | |
|
|
| |
|
| |
|
| |
|
| |
(in thousands of dollars, except per share data) |
|
2005 | |
|
2004 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
(Predecessor) | |
|
(Predecessor) | |
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fees
|
|
$ |
284,951 |
|
|
$ |
41,787 |
|
|
$ |
168,938 |
|
|
$ |
109,052 |
|
|
|
Distribution and underwriting fees
|
|
|
129,250 |
|
|
|
19,350 |
|
|
|
79,578 |
|
|
|
53,005 |
|
|
|
Other
|
|
|
3,366 |
|
|
|
633 |
|
|
|
1,861 |
|
|
|
328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
417,567 |
|
|
|
61,770 |
|
|
|
250,377 |
|
|
|
162,385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits
|
|
|
61,029 |
|
|
|
12,537 |
|
|
|
53,170 |
|
|
|
33,657 |
|
|
|
Distribution and underwriting expense
|
|
|
79,446 |
|
|
|
11,040 |
|
|
|
39,517 |
|
|
|
22,576 |
|
|
|
Amortization of deferred sales commissions
|
|
|
31,431 |
|
|
|
5,109 |
|
|
|
24,315 |
|
|
|
19,879 |
|
|
|
Marketing and sales promotion
|
|
|
14,266 |
|
|
|
2,228 |
|
|
|
16,694 |
|
|
|
8,949 |
|
|
|
General and administrative
|
|
|
25,301 |
|
|
|
2,622 |
|
|
|
11,445 |
|
|
|
8,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
211,473 |
|
|
|
33,536 |
|
|
|
145,141 |
|
|
|
93,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
206,094 |
|
|
|
28,234 |
|
|
|
105,236 |
|
|
|
68,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(8,142 |
) |
|
|
(1,339 |
) |
|
|
(4,627 |
) |
|
|
(999 |
) |
|
|
Investment and other income
|
|
|
19,064 |
|
|
|
3,677 |
|
|
|
3,140 |
|
|
|
1,024 |
|
|
|
Minority interest in partnership investments
|
|
|
(5,161 |
) |
|
|
(1,322 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense), net
|
|
|
5,761 |
|
|
|
1,016 |
|
|
|
(1,487 |
) |
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest in Calamos Holdings LLC and
income taxes
|
|
|
211,855 |
|
|
|
29,250 |
|
|
|
103,749 |
|
|
|
68,443 |
|
|
Minority interest in Calamos Holdings LLC
|
|
|
163,009 |
|
|
|
22,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
48,846 |
|
|
|
6,641 |
|
|
|
103,749 |
|
|
|
68,443 |
|
|
|
Income taxes
|
|
|
19,624 |
|
|
|
2,649 |
|
|
|
1,567 |
|
|
|
1,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
29,222 |
|
|
$ |
3,992 |
|
|
$ |
102,182 |
|
|
$ |
67,326 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
1.27 |
|
|
$ |
0.18 |
|
|
$ |
1.06 |
|
|
$ |
0.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$ |
1.26 |
|
|
$ |
0.17 |
|
|
$ |
1.06 |
|
|
$ |
0.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
23,000,100 |
|
|
|
22,700,100 |
|
|
|
96,800,000 |
|
|
|
96,800,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
100,625,824 |
|
|
|
100,491,409 |
|
|
|
96,800,000 |
|
|
|
96,800,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-6
CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional | |
|
|
|
Accumulated | |
|
|
|
|
Common | |
|
Paid-in | |
|
Retained | |
|
Comprehensive | |
|
|
(in thousands) |
|
Stock | |
|
Capital | |
|
Earnings | |
|
Income | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Balance at December 31, 2002
|
|
$ |
|
|
|
$ |
2,274 |
|
|
$ |
21,971 |
|
|
$ |
771 |
|
|
$ |
25,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
67,326 |
|
|
|
|
|
|
|
67,326 |
|
Changes in unrealized gains on available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,274 |
|
|
|
1,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,600 |
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
(47,203 |
) |
|
|
|
|
|
|
(47,203 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2003
|
|
|
|
|
|
|
2,274 |
|
|
|
42,094 |
|
|
|
2,045 |
|
|
|
46,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
102,182 |
|
|
|
|
|
|
|
102,182 |
|
Changes in unrealized gains on available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,854 |
|
|
|
1,854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,036 |
|
Additional capital contributions, in cash
|
|
|
|
|
|
|
3,300 |
|
|
|
|
|
|
|
|
|
|
|
3,300 |
|
Classification of EAU liability to additional paid-in-capital
|
|
|
|
|
|
|
6,679 |
|
|
|
|
|
|
|
|
|
|
|
6,679 |
|
Compensation expense recognized under stock incentive plans
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
33 |
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
(57,581 |
) |
|
|
|
|
|
|
(57,581 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at November 1, 2004
|
|
|
|
|
|
|
12,286 |
|
|
|
86,695 |
|
|
|
3,899 |
|
|
|
102,880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassify historical retained earnings to additional
paid-in-capital
|
|
|
|
|
|
|
86,695 |
|
|
|
(86,695 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at November 2, 2004 after reclassification
|
|
|
|
|
|
|
98,981 |
|
|
|
|
|
|
|
3,899 |
|
|
|
102,880 |
|
Allocation of 77% to minority interest
|
|
|
|
|
|
|
(76,215 |
) |
|
|
|
|
|
|
(3,002 |
) |
|
|
(79,217 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at November 2, 2004 before proceeds of IPO
|
|
|
|
|
|
|
22,766 |
|
|
|
|
|
|
|
897 |
|
|
|
23,663 |
|
23% of net proceeds from IPO
|
|
|
230 |
|
|
|
11,231 |
|
|
|
|
|
|
|
|
|
|
|
11,461 |
|
Impact of overallotment option on allocated income
|
|
|
|
|
|
|
88 |
|
|
|
|
|
|
|
|
|
|
|
88 |
|
Initial deferred tax asset
|
|
|
|
|
|
|
119,934 |
|
|
|
|
|
|
|
|
|
|
|
119,934 |
|
Net income
|
|
|
|
|
|
|
|
|
|
|
3,992 |
|
|
|
|
|
|
|
3,992 |
|
Changes in unrealized gains on available-for-sale securities,
net of minority interest and income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
847 |
|
|
|
847 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,839 |
|
Compensation expense recognized under stock incentive plans, net
of minority interest
|
|
|
|
|
|
|
137 |
|
|
|
|
|
|
|
|
|
|
|
137 |
|
Dividend equivalent accrued under stock incentive plans, net of
minority interest
|
|
|
|
|
|
|
|
|
|
|
(18 |
) |
|
|
|
|
|
|
(18 |
) |
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
(1,610 |
) |
|
|
|
|
|
|
(1,610 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2004
|
|
|
230 |
|
|
|
154,156 |
|
|
|
2,364 |
|
|
|
1,744 |
|
|
|
158,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
29,222 |
|
|
|
|
|
|
|
29,222 |
|
Changes in unrealized gains on available-for-sale securities,
net of minority interest and income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,188 |
|
|
|
1,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,410 |
|
Compensation expense recognized under stock incentive plans, net
of minority interest
|
|
|
|
|
|
|
946 |
|
|
|
|
|
|
|
|
|
|
|
946 |
|
Dividend equivalent accrued under stock incentive plans, net of
minority interest
|
|
|
|
|
|
|
|
|
|
|
(58 |
) |
|
|
|
|
|
|
(58 |
) |
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
(4,830 |
) |
|
|
|
|
|
|
(4,830 |
) |
Net effect of corrections on initial deferred tax asset
|
|
|
|
|
|
|
1,172 |
|
|
|
|
|
|
|
|
|
|
|
1,172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
$ |
230 |
|
|
$ |
156,274 |
|
|
$ |
26,698 |
|
|
$ |
2,932 |
|
|
$ |
186,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-7
CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended | |
|
November 2 to | |
|
January 1 to | |
|
Year Ended | |
|
|
December 31, | |
|
December 31, | |
|
November 1, | |
|
December 31, | |
|
|
| |
|
| |
|
| |
|
| |
(in thousands) |
|
2005 | |
|
2004 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
(Predecessor) | |
|
(Predecessor) | |
Cash and cash equivalents at beginning of period
|
|
$ |
149,768 |
|
|
$ |
132,976 |
|
|
$ |
5,073 |
|
|
$ |
2,648 |
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
29,222 |
|
|
|
3,992 |
|
|
|
102,182 |
|
|
|
67,326 |
|
|
Adjustments to reconcile income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in partnership investments
|
|
|
5,161 |
|
|
|
1,322 |
|
|
|
|
|
|
|
|
|
|
|
Minority interest in Calamos Holdings LLC
|
|
|
163,009 |
|
|
|
22,609 |
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred sales commissions
|
|
|
31,431 |
|
|
|
5,109 |
|
|
|
24,315 |
|
|
|
19,879 |
|
|
|
Other depreciation and amortization
|
|
|
4,772 |
|
|
|
295 |
|
|
|
1,220 |
|
|
|
973 |
|
|
|
Unrealized appreciation on investment securities
|
|
|
(231 |
) |
|
|
(297 |
) |
|
|
(124 |
) |
|
|
(770 |
) |
|
|
Unrealized appreciation on partnership investments
|
|
|
(8,752 |
) |
|
|
(2,515 |
) |
|
|
(77 |
) |
|
|
(202 |
) |
|
|
Management fees received in partnership units
|
|
|
(151 |
) |
|
|
(27 |
) |
|
|
(134 |
) |
|
|
(155 |
) |
|
|
Stock-based compensation
|
|
|
4,114 |
|
|
|
595 |
|
|
|
32 |
|
|
|
|
|
|
|
Deferred taxes
|
|
|
9,326 |
|
|
|
1,297 |
|
|
|
|
|
|
|
|
|
|
|
(Gain) loss on disposal of property
|
|
|
408 |
|
|
|
|
|
|
|
(1,989 |
) |
|
|
|
|
|
|
Non-cash donation of equipment
|
|
|
139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliates and affiliated mutual funds
|
|
|
(3,448 |
) |
|
|
(8,466 |
) |
|
|
6,395 |
|
|
|
(12,360 |
) |
|
|
|
|
Customers
|
|
|
(3,794 |
) |
|
|
6,663 |
|
|
|
(8,733 |
) |
|
|
(1,423 |
) |
|
|
|
Deferred sales commissions
|
|
|
(28,404 |
) |
|
|
(7,164 |
) |
|
|
(34,441 |
) |
|
|
(41,203 |
) |
|
|
|
Other assets
|
|
|
(74 |
) |
|
|
549 |
|
|
|
(865 |
) |
|
|
(396 |
) |
|
|
Increase (decrease) in liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
5,251 |
|
|
|
(16 |
) |
|
|
7,229 |
|
|
|
727 |
|
|
|
|
Accrued compensation and benefits and deferred compensation
|
|
|
9,146 |
|
|
|
5,017 |
|
|
|
1,212 |
|
|
|
2,120 |
|
|
|
|
Other liabilities and accrued expenses
|
|
|
6,467 |
|
|
|
(7,628 |
) |
|
|
15,810 |
|
|
|
2,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
223,592 |
|
|
|
21,335 |
|
|
|
112,032 |
|
|
|
36,825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net additions to property and equipment
|
|
|
(40,679 |
) |
|
|
(909 |
) |
|
|
(9,090 |
) |
|
|
(6,535 |
) |
|
Net purchases of securities and partnership investments
|
|
|
(31,885 |
) |
|
|
(48,942 |
) |
|
|
(48,409 |
) |
|
|
(1,368 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(72,564 |
) |
|
|
(49,851 |
) |
|
|
(57,499 |
) |
|
|
(7,903 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in) financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings (payments) on bank debt
|
|
|
|
|
|
|
|
|
|
|
(30,199 |
) |
|
|
16,629 |
|
|
Net borrowings (payments) on mortgage payable
|
|
|
|
|
|
|
|
|
|
|
(152 |
) |
|
|
4,077 |
|
|
Net borrowings on debt offering
|
|
|
|
|
|
|
|
|
|
|
148,003 |
|
|
|
|
|
|
Capital contributions received
|
|
|
|
|
|
|
|
|
|
|
3,300 |
|
|
|
|
|
|
Net proceeds from issuance of common stock
|
|
|
|
|
|
|
382,131 |
|
|
|
|
|
|
|
|
|
|
Proceeds from issuances of common stock used to purchase
membership units in Calamos Holdings LLC
|
|
|
|
|
|
|
(332,300 |
) |
|
|
|
|
|
|
|
|
|
Cash dividends paid to minority shareholders
|
|
|
(83,887 |
) |
|
|
(4,523 |
) |
|
|
(47,582 |
) |
|
|
(47,203 |
) |
|
Cash dividends paid to common shareholders
|
|
|
(6,440 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(90,327 |
) |
|
|
45,308 |
|
|
|
73,370 |
|
|
|
(26,497 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
60,701 |
|
|
|
16,792 |
|
|
|
127,903 |
|
|
|
2,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$ |
210,469 |
|
|
$ |
149,768 |
|
|
$ |
132,976 |
|
|
$ |
5,073 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$ |
10,960 |
|
|
$ |
1,356 |
|
|
$ |
1,161 |
|
|
$ |
479 |
|
|
|
Interest
|
|
$ |
7,860 |
|
|
$ |
|
|
|
$ |
4,432 |
|
|
$ |
1,052 |
|
Supplement schedule of noncash activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of fixed assets and other assets distributed to
stockholders
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(18,354 |
) |
|
$ |
|
|
|
Fair value of mortgage payable and other liabilities assumed by
stockholders
|
|
$ |
|
|
|
$ |
|
|
|
$ |
8,355 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of distribution to stockholders
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(9,999 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-8
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
(1) |
Organization and Description of Business |
Calamos Asset Management, Inc. (CAM), together with its
subsidiaries (the Company), primarily provides investment
advisory services to individual and institutional investors as
well as investment advisory services to a family of open-end and
closed-end funds (the Funds and the Closed-End Funds,
respectively).
CAL refers to Calamos Advisors LLC, a Delaware
limited liability company, registered investment advisor and
wholly owned subsidiary of Calamos Holdings LLC;
CFS refers to Calamos Financial Services LLC, a
Delaware limited liability company, registered broker-dealer and
wholly owned subsidiary of Calamos Holdings LLC;
CPM refers to Calamos Property Management LLC, a
Delaware limited liability company and wholly owned subsidiary
of Calamos Holdings LLC;
CPL refers to Calamos Partners LLC, a Delaware
limited liability company, registered investment advisor and
wholly owned subsidiary of Calamos Holdings LLC.
|
|
(2) |
Reorganization and Formation |
The Company completed an initial public offering (Offering) of
its Class A common stock on November 2, 2004. Prior to
the offering, on October 15, 2004, Calamos Family Partners,
Inc. (formerly known as Calamos Holdings, Inc.) (CFP),
contributed all of its assets and liabilities, including all
equity interests in its wholly owned subsidiaries, to Calamos
Holdings LLC (Holdings) in exchange for 96,800,000 of the
membership units of Holdings. In October 2004, Holdings issued
200,000 new membership units for cash to John P.
Calamos, Sr. In November 2004, CAM applied the net proceeds
of the Offering to acquire 3,000,000 newly issued membership
units directly from Holdings and 20,000,000 membership units
from CFP to become the sole manager of Holdings. As the sole
manager, CAM operates and controls all of the business and
affairs of Holdings, and as a result of this control, CAM
consolidates the financial results of Holdings with its own
financial results. CAM is now conducting the business previously
conducted by CFP. Accordingly, reported results for the periods
prior to November 2, 2004 reflect the operations for CFP
and its subsidiaries (Predecessor). Reported results for the
period from November 2, 2004 through December 31, 2004
and for the year ended December 31, 2005 reflect the
results of operations for the Company.
|
|
(3) |
Summary of Accounting Policies |
|
|
|
Principles of Consolidation and Use of Estimates |
The consolidated financial statements include the financial
statements of the Company, its wholly owned subsidiaries and its
interests in Calamos Hedge Fund, L.P. and Calamos Equity
Opportunities Fund LP. All significant intercompany
balances and transactions have been eliminated. Certain amounts
for prior periods have been reclassified to conform to the
current years presentation.
In November 2004, the Company sold 23,000,000 shares of
Class A Common Stock in its Offering. The Company used net
proceeds of $382.1 million from the Offering to acquire its
interest in Holdings. The acquisition of the ownership interest
in Holdings was treated as a reorganization of entities under
common control in a manner similar to a pooling of interests,
analogous to the type of transaction described in Emerging
Issues Task Force Issue (EITF) 94-2, Treatment of
Minority Interest in Certain Real Estate Investment Trusts.
Accordingly, the net assets of Holdings purchased by the Company
were reported in the consolidated financial statements at
Holdings historical cost, and the minority interests in
the Company are based on the net book equity of Holdings (after
contribution of the proceeds from the Offering) multiplied by
the ownership percentages of CFP and John P. Calamos, Sr.
F-9
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The historical financial information of Holdings business,
which previously was conducted by CFP, is included in the
accompanying financial statements as predecessor information.
CFPs and John P. Calamos, Sr.s combined 77%
interest in Holdings is represented as a minority interest in
the Companys financial statements.
CPL is the general partner of Calamos Equity Opportunities
Fund LP, an unregistered investment partnership, which
invests substantially all of its assets in partnership units of
a master fund which is primarily comprised of highly liquid
marketable securities. As of December 31, 2005, the Company
and its affiliates had 41.9% and a 52.2% interests in this
partnership, respectively (94.1% combined). As of
December 31, 2004, the Company and its affiliates had a
45.5% and a 54.5% interest in this partnership, respectively
(100.0% combined). The Company consolidates the financial
results of this partnership into its results. The combined
minority interests totaled 58.1% and 54.5% as December 31,
2005 and 2004, respectively.
The Company had a 99% interest in Calamos Hedge Fund, L.P. as of
December 31, 2003. In April 2004, the Company liquidated
the Calamos Hedge Fund, L.P.
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 those estimates.
All highly liquid financial instruments with maturities of three
months or less from date of purchase, consisting primarily of
investments in money market funds, commercial paper and
U.S. government securities, are considered to be cash
equivalents. At December 31, 2005, the Company had
$2.7 million in a restricted escrow account to fund the
completion of leasehold improvements for the new office facility
at 2020 Calamos Court in Naperville, Illinois.
The carrying value of cash and cash equivalents and receivables
approximate fair value due to the short maturities of these
financial instruments.
The fair value of long-term debt, which has a carrying value of
$150.0 million, was approximately $151.4 million at
December 31, 2005. Fair value estimates are calculated
using discounted cash flows based on the Companys
incremental borrowing rates for the debt and market prices for
similar bonds at the measurement date. All methods of assessing
fair value result in an estimate of value that may never be
realized.
|
|
|
Receivables from Customers |
Receivables from customers represent balances arising from
contractual investment advisory services provided to separate
account customers. During each of the periods presented, bad
debt expense and allowance for doubtful accounts were not
material.
The Company carries its investment securities at fair value,
which are determined based upon market prices. For a substantial
majority of the Companys investments, fair values are
determined based upon market prices. If quoted market prices are
not available, the Company uses matrix, model or other similar
pricing methods to determine fair value. For the periods
presented, non-readily marketable securities represent less than
1% of all investment securities. The Company records investment
securities on a trade date basis.
The Company records all securities owned by Holdings, CAL and
CPM as available-for-sale under SFAS No. 115,
Accounting for Certain Investments in Debt and Equity
Securities, as the Company does not
F-10
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
intend to sell these securities in the near term. Unrealized
gains and losses on available-for-sale securities are excluded
from earnings and are reported, net of minority interest and
income tax, as a separate component of stockholders equity
until realized. Realized gains and losses from the sale of
available-for-sale securities are determined on a specific
identification basis.
As a registered broker-dealer, CFS is required to mark to market
all investment securities it owns and record all market
fluctuations through current earnings. These securities are
considered broker-dealer securities for reporting purposes.
Unrealized gains and losses on other securities are included in
investment and other income in the consolidated statements of
income.
On a quarterly basis, the Company conducts regular reviews to
assess whether other-than-temporary impairment exists. Changing
economic conditions, global, regional, or changes related to
specific issuers or industries could adversely affect these
values.
|
|
|
Investment in Partnerships |
As of December 31, 2005 and 2004, the Company had a
$32.1 million and $26.1 million interest in Calamos
Equity Opportunities Fund LP, respectively. As previously
discussed, the Company consolidates the financial results of
this partnership into its results. The Company carries its
investment in partnerships at fair value.
The Company had a $3.1 million (23.5%) and
$3.1 million (18.8%) interest in the Calamos
Multi-Strategy, L.P. as of December 31, 2005 and 2004,
respectively. This investment is accounted for using the equity
method and is carried at the net asset value of the partnership
units held by the Company.
The Company had a $1.1 million (99%) interest in the
Calamos Hedge Fund, L.P. as of December 31, 2003. In April
2004, the Company liquidated the Calamos Hedge Fund, L.P., which
resulted in a realized gain of approximately $109,000, as well
as the elimination of the minority interest related to this
investment. This investment was consolidated into the operations
of the Company.
Property and equipment are recorded at cost less accumulated
depreciation. Depreciation is provided on a straight-line basis
over the estimated useful lives of the assets, ranging from
three years to twenty years. Leasehold improvements are
amortized over the shorter of their estimated useful lives or
the remaining term of the lease.
|
|
|
Internally Developed Software |
In accordance with AICPA Statement of Position 98-1
Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use (SOP 98-1), certain internal
and external development costs incurred in connection with
developing or obtaining software for internal use are
capitalized. These capitalized costs are included in property
and equipment, net on the Consolidated Statement of Financial
Condition and are amortized using the straight-line method over
their estimated useful life. On a quarterly basis, the Company
conducts regular reviews to assess whether an impairment of
these assets exists. Impairments of these assets, if any, are
charged against net income in the period in which the impairment
occurs.
Effective January 1, 2004, the Company adopted the fair
value recognition provisions of SFAS No. 123
Accounting for Stock-Based Compensation (SFAS 123).
Prior to 2004, the Company accounted for its long-term Equity
Appreciation Plan (EAU Plan), using the accounting methods
prescribed by the FASBs Financial Interpretation
No. 28, Accounting for Stock Appreciation Rights and
Other Variable Stock Option or
F-11
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Award Plans, an Interpretation of APB Opinions No. 15
and 25 (FIN 28), and its related interpretations. Under
the modified prospective method of adoption selected by the
Company under the provisions of SFAS 148, Accounting for
Stock-Based Compensation Transition and
Disclosure, compensation expense recognized in 2005 and 2004
is the same as that which would have been recognized had the
fair value recognition provisions of SFAS 123 been applied
from its original effective date.
During 2004, the Company established an incentive stock plan
that provides for grants of restricted stock unit
(RSU) awards and stock option awards for certain employees
of the Company. RSUs are convertible on a one-for-one basis into
shares of the Companys common stock. Stock option awards
are based on shares of the Companys common stock. The
Company records compensation expense on a straight-line basis
over the service period.
Prior to establishing the incentive stock plans, the Company had
a long-term Equity Appreciation Unit plan (EAU Plan) for certain
individuals of the Company. The EAU Plan was terminated in
October 2004 in connection with the Offering. In accordance with
both SFAS 123 and FIN 28, compensation expense was
accrued over the periods in which employees performed services.
As such, any change in the value of the EAU Plan (based upon the
enterprises estimated market value over the originating
value at grant date) was multiplied by the actual number of
service periods divided by the total number of service periods
in the vesting period. This change, whether an increase or
decrease, was recorded as expense.
The Company earns revenue by providing investment management
services to the Funds, the Closed-End Funds and to separate
accounts. This revenue is earned pursuant to the terms of the
underlying advisory contract and is based on a contractual
investment advisory fee applied to the assets in each portfolio.
Any fees collected in advance are deferred and recognized over
the period earned. Performance-based advisory fees earned from
certain separate accounts are recognized annually upon
completion of the contract year and based upon either
(1) the positive difference between the investment returns
on a clients portfolio compared to a benchmark index or
(2) the absolute percentage of gain in the clients
account.
Distribution and underwriting fees consist primarily of
Rule 12b-1
distribution and/or service fees from the Funds, contingent
deferred sales charges (CDSC) on the redemption of Fund
shares and sales charges that are primarily earned on the
distribution of mutual fund shares.
12b-1 fees are accrued
monthly as services are performed and are based on the average
daily assets of the Funds. CDSC fees are recorded on a trade
date basis when earned, and sales charges are recorded on the
settlement date. The use of settlement date rather than trade
date does not have a material effect on the Companys
financial statements.
|
|
|
Investment and Other Income |
Investment and other income includes (1) gains (losses) on
investment securities (2) gains (losses) on investment in
partnerships, net of minority interest, (3) interest and
dividend income and (4) gains (losses) on sales of real
estate and fixed assets. Dividend and interest income are
recognized when earned.
|
|
|
Deferred Sales Commissions |
Deferred sales commissions are commissions advanced by the
Company on the sale of Class B and Class C shares of
the Funds. Deferred sales commissions are amortized on a
straight-line basis over the period in which
12b-1 fees are
received. Because 12b-1
fees cease upon redemption of shares, amortization expense is
accelerated when shares are redeemed, resulting in the reduction
of the deferred sales commission asset. These redemptions
results in an amortization period not to exceed 12 months
for Class C shares and 96 months (eight years) for
Class B shares.
F-12
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company evaluates the carrying value of its deferred sales
commissions on a quarterly basis. In its impairment analysis,
the Company compares the carrying value of the deferred sales
commission asset to the undiscounted cash flow expected to be
generated by the asset over its remaining useful life to
determine whether impairment has occurred. If the carrying value
of the asset exceeds the undiscounted cash flow, the asset is
written down to fair value based on discounted cash flows.
Impairment adjustments are recognized in the statement of income
as a component of amortization of deferred sales commissions. As
of each reporting period presented, the Company determined that
no impairment of the deferred commission asset existed.
Prior to the Offering, CFP elected to be taxed as an
S corporation under the Internal Revenue Code. Therefore,
the income and expenses of CFP were included in the income tax
returns of its stockholders. CFP was subject to only Illinois
replacement tax and other state taxes of $1.1 million and
$1.6 million for the years ended December 31, 2003 and
the period ended November 1, 2004, respectively.
Replacement taxes are recorded as income taxes in the
consolidated statements of income.
Effective with the Offering, the Company accounts for income
taxes under the liability method prescribed by
SFAS No. 109, Accounting for Income Taxes.
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to the temporary
differences between the financial statement carrying amount of
existing assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered
or settled. Although valuation allowances may be established,
when necessary, to reduce the amounts expected to be realized,
there were no deferred tax asset valuation allowances at
December 31, 2005 or 2004.
Earnings per share are calculated in accordance with
SFAS No. 128, Earnings per Share, which
requires that both basic and diluted earnings per share be
presented. Basic earnings per share is computed by dividing net
income available to common stockholders by the weighted average
number of shares of Class A and Class B common stock
outstanding during each year. Shares issued during the year are
weighted for the portion of the year that they were outstanding.
Diluted earnings per share reflects the potential dilution that
would occur if securities, stock options or membership units
held by CFP were exercised or converted into common stock.
|
|
(4) |
Related-Party Transactions |
CAL provides investment management and portfolio accounting
services to the Funds and the Closed-end Funds. CFS acts as the
sole distributor of the Funds. The Company earns management,
distribution and portfolio accounting fees for these services
that are accrued and settled monthly. Subsidiaries of the
Company receive fees for their management services to private
investment pools, which are paid on a monthly basis in
F-13
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the form of additional investment units in the pools. The table
below summarizes the total fees earned from affiliates
identified above during the years ended December 31, 2005,
2004 and 2003:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Investment management fees from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Funds
|
|
$ |
174,374 |
|
|
$ |
123,264 |
|
|
$ |
61,913 |
|
|
The Closed-End Funds
|
|
|
50,022 |
|
|
|
39,439 |
|
|
|
10,204 |
|
|
Private investment pools
|
|
|
149 |
|
|
|
162 |
|
|
|
155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$ |
224,545 |
|
|
$ |
162,865 |
|
|
$ |
72,272 |
|
|
|
|
|
|
|
|
|
|
|
Distribution and underwriting fees from the Funds
|
|
$ |
115,790 |
|
|
$ |
84,666 |
|
|
$ |
43,972 |
|
|
|
|
|
|
|
|
|
|
|
Portfolio accounting fees from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Funds
|
|
$ |
2,628 |
|
|
$ |
1,478 |
|
|
$ |
|
|
|
The Closed-End Funds
|
|
|
675 |
|
|
|
410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$ |
3,303 |
|
|
$ |
1,888 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Dragon Leasing Corporation (Dragon) is an affiliated company
controlled by John P. Calamos, Sr. CAL is party to an
aircraft lease agreement with Dragon whereby CAL has use of an
airplane for business travel. Under this agreement CAL agrees to
pay for its maintenance and transportation services which are
reflected in general and administrative expense. During 2003,
CAL provided a loan to Dragon to allow Dragon the ability to
purchase an aircraft. The borrowings to finance the aircraft
purchase were subject to interest that accrued at LIBOR plus
1.75%. This loan was repaid in full during 2004. The table below
summarizes total service fees incurred during the years ended
December 31, 2005, 2004 and 2003 and the net receivable
(payable) balance as of December 31, 2005, 2004 and
2003.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
General and administrative
|
|
$ |
777 |
|
|
$ |
459 |
|
|
$ |
242 |
|
|
|
|
|
|
|
|
|
|
|
Net receivable from/(payable to) Dragon
|
|
$ |
(30 |
) |
|
$ |
(2 |
) |
|
$ |
3,332 |
|
|
|
|
|
|
|
|
|
|
|
Beginning in November 2004, CAL has been party to a joint use
and management agreement with Aspen Executive Air, LLC (AEA), a
company in which John P. Calamos, Sr. maintains an indirect
beneficial interest. Under this agreement, CAL has agreed to pay
for aircraft management services from AEA as well as other
aircraft related expenses. The table below summarizes total
service fees incurred during the twelve months ended
December 31, 2005 and 2004 and the net payable balance as
of December 31, 2005 and 2004.
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
General and administrative
|
|
$ |
672 |
|
|
$ |
1,039 |
|
|
|
|
|
|
|
|
Net payable to AEA
|
|
$ |
(7 |
) |
|
$ |
(50 |
) |
|
|
|
|
|
|
|
Effective January 2005, Holdings has been party to a six-year
lease with 1111 Warrenville Road LLC, a subsidiary of Calamos
Property Holdings LLC (CPH). Under this lease and as of August
2005, Holdings is obligated to pay monthly base rents and
operating expenses of approximately $38,000, which will increase
3% annually beginning January 1, 2006. Due to the
Companys move to its new headquarters during 2005 and the
resulting decrease in required square footage, this agreement
replaced a previous
month-by-month
agreement under which CAL was obligated to pay monthly base
rents and operating expenses of approximately $84,000 that was
terminable by either party with 30 days notice.
F-14
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In October 2004, Holdings entered into a
20-year lease with 2020
Calamos Court LLC, a subsidiary of CPH, with respect to the new
corporate headquarters constructed for the Companys
occupancy. Rent under the lease commenced in April 2005 and will
end on May 31, 2025. Initial monthly base rent payments are
approximately $237,000 through May 1, 2006 and will
increase 3% annually, beginning June 1, 2006 for the
remaining term of the lease. Holdings may not terminate the
lease unless a casualty, condemnation or material temporary
taking affects all or a substantial portion of the leased
premises. 2020 Calamos Court LLC may only terminate the lease
upon specified events of default, which are subject to
applicable grace periods.
In August 2005, Holdings entered into a
20-year lease with 2020
Calamos Court Annex LLC, a subsidiary of CPH, with respect
to the cafeteria in the new corporate headquarters. Rent under
the lease commenced in December 2005 and will end on
May 31, 2025. Initial monthly base rent payments are
approximately $14,000 and will increase 3% annually, beginning
in December 2006.
CFP, CPH and Dragon have each entered into a separate Management
Services Agreement with CAM. Pursuant to these agreements, as
amended, the Company provides certain services, including
furnishing office space and equipment, providing insurance
coverage, overseeing the administration of their businesses and
providing personnel to perform certain management and
administrative services. The agreements each have a term of one
year and are renewable annually. The agreements are terminable
on 30 days notice by either party. In the agreements, each
party has agreed to indemnify the other for any damages suffered
as a result of the indemnifying partys breach of the
contract, negligence, willful misconduct or reckless disregard
of its duties. In accordance with the terms of the agreements,
CFP, CPH and Dragon have each agreed to pay the Company an
amount equal to Direct Cost (as defined below) plus an expense
allocation component. Direct Cost means, with
respect to each service provided, the direct
out-of-pocket expenses
paid or incurred to third parties in connection with providing
such service, including, without limitation, shipping, handling,
travel expenses, payments to third parties (including, without
limitation, all professional fees), printing and postage.
In April 2005, the Company entered into a Management Services
Agreement with CPH. Under this service agreement, CPH provides
property, facilities and development management services to the
Company. The Company pays CPH an amount equal to Direct Cost and
an expense allocation component. The table below summarizes
total management service fees incurred during the twelve months
ended December 31, 2005 and 2004 and the net receivable
(payable) balance as of December 31, 2005 and 2004.
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Expense allocated from the Company to Dragon
|
|
$ |
139 |
|
|
$ |
48 |
|
Expense allocated from the Company to CFP
|
|
|
479 |
|
|
|
30 |
|
Expense allocated from the Company to CPH
|
|
|
712 |
|
|
|
124 |
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,330 |
|
|
|
202 |
|
Expense allocated from CPH to the Company
|
|
|
561 |
|
|
|
65 |
|
|
|
|
|
|
|
|
|
Net expense allocated from the Company
|
|
$ |
769 |
|
|
$ |
137 |
|
|
|
|
|
|
|
|
Net receivable for management services from Dragon
|
|
$ |
14 |
|
|
$ |
48 |
|
|
|
|
|
|
|
|
Net receivable for management services from CFP
|
|
$ |
65 |
|
|
$ |
30 |
|
|
|
|
|
|
|
|
Net receivable for management services from CPH
|
|
$ |
28 |
|
|
$ |
59 |
|
|
|
|
|
|
|
|
As a result of the control exercised by Calamos Family Partners,
Inc., none of our agreements with them and other companies
controlled by them are deemed to be negotiated on
arms length terms. However, any such
agreements since our initial public offering have been approved
in accordance with the Conflict of Interests Policy contained in
our Amended and Restated Certificate of Incorporation.
F-15
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(5) |
Investment Securities |
The following table provides a summary of investment securities
owned as of December 31, 2005 and 2004. Other investment
securities consist primarily of common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
|
| |
|
|
Available | |
|
Broker-Dealer | |
|
Total | |
(in thousands) |
|
for Sale | |
|
Securities | |
|
Securities | |
|
|
| |
|
| |
|
| |
Affiliated Mutual Funds
|
|
$ |
123,976 |
|
|
$ |
3,634 |
|
|
$ |
127,610 |
|
Other investment securities
|
|
|
479 |
|
|
|
176 |
|
|
|
655 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
124,455 |
|
|
$ |
3,810 |
|
|
$ |
128,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 | |
|
|
| |
|
|
Available | |
|
Broker-Dealer | |
|
Total | |
|
|
for Sale | |
|
Securities | |
|
Securities | |
|
|
| |
|
| |
|
| |
Affiliated Mutual Funds
|
|
$ |
86,689 |
|
|
$ |
3,359 |
|
|
$ |
90,048 |
|
Other investment securities
|
|
|
345 |
|
|
|
51 |
|
|
|
396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
87,034 |
|
|
$ |
3,410 |
|
|
$ |
90,444 |
|
|
|
|
|
|
|
|
|
|
|
The table below summarizes the proceeds from the sale of
available-for-sale securities, unrealized and realized gains
(losses) on available-for-sale securities, and unrealized gains
(losses) on broker-dealer securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months | |
|
|
|
|
|
Twelve Months | |
|
|
Ended | |
|
November 2 to | |
|
January 1 to | |
|
Ended | |
|
|
December 31, | |
|
December 31, | |
|
November 1, | |
|
December 31, | |
(in thousands) |
|
2005 | |
|
2004 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains
|
|
|
8,638 |
|
|
|
6,113 |
|
|
|
1,854 |
|
|
|
1,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broker-dealer securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains
|
|
|
231 |
|
|
|
297 |
|
|
|
124 |
|
|
|
770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The cumulative net unrealized gains (losses) on
available-for-sale securities consisted of the following as of
December 31, 2005 and 2004:
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Total cumulative unrealized gains on available-for-sale
securities with net gains:
|
|
|
|
|
|
|
|
|
|
Affiliated Mutual Funds
|
|
$ |
18,609 |
|
|
$ |
9,875 |
|
|
Other investment securities
|
|
|
190 |
|
|
|
143 |
|
|
|
|
|
|
|
|
|
|
Total gains
|
|
|
18,799 |
|
|
|
10,018 |
|
Total cumulative unrealized losses on available-for-sale
securities with net losses:
|
|
|
|
|
|
|
|
|
|
Affiliated Mutual Funds
|
|
|
(149 |
) |
|
|
(6 |
) |
|
|
|
|
|
|
|
Total cumulative unrealized gains (losses) on available-for-sale
securities
|
|
$ |
18,650 |
|
|
$ |
10,012 |
|
|
|
|
|
|
|
|
F-16
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company periodically evaluates its available-for-sale
investments for other-than-temporary declines in value.
Other-than-temporary declines in value may exist when the fair
value of an investment security has been below the carrying
value for an extended period of time. If an other-than-temporary
decline in value is determined to exist, the unrealized
investment loss, net of tax in accumulated other comprehensive
income is realized as a charge to net income in the period in
which the other-than-temporary decline in value occurs. At
December 31, 2005, for those investments that have
unrealized losses, the Company believes that all of these
unrealized losses are only temporary and are due to temporary
market conditions.
|
|
(6) |
Property and Equipment |
At December 31, 2005 and 2004, property and equipment and
related accumulated depreciation were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
|
| |
|
|
|
|
Accumulated | |
|
|
(in thousands) |
|
Cost | |
|
Depreciation | |
|
Net | |
|
|
| |
|
| |
|
| |
Furniture, fixtures, and equipment
|
|
$ |
46,904 |
|
|
$ |
6,357 |
|
|
$ |
40,547 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 | |
|
|
| |
|
|
|
|
Accumulated | |
|
|
|
|
Cost | |
|
Depreciation | |
|
Net | |
|
|
| |
|
| |
|
| |
Furniture, fixtures, and equipment
|
|
$ |
8,490 |
|
|
$ |
3,588 |
|
|
$ |
4,902 |
|
|
|
|
|
|
|
|
|
|
|
On June 30, 2004, Calamos Property Holdings, Inc., the
predecessor of CPM, distributed equity in all of its owned real
estate assets to its stockholders at that time. Land, building
and furniture, fixtures and equipment with a book value, net of
depreciation, of $16.0 million and a fair value of
$18.0 million as of June 30, 2004 were distributed,
resulting in a gain of $2.0 million, which was recorded as
other income on the Companys consolidated statement of
income.
The table below summarizes the outstanding debt balance at
December 31, 2005 and 2004.
|
|
|
|
|
|
(in thousands) |
|
2005 |
|
2004 |
|
|
|
|
|
Senior unsecured notes
|
|
$150,000 |
|
$150,000 |
Less current portion
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$150,000 |
|
$150,000 |
|
|
|
|
|
On April 29, 2004, the Company refinanced its bank debt
with the issuance of $150 million aggregate principal
amount of 5.24% senior unsecured notes due April 29,
2011 to various note purchasers in a private placement. As of
December 31, 2005 and 2004, $150 million aggregate
principal senior unsecured notes were outstanding. These notes
are set to mature on April 29, 2011. As a result of the
$150 million debt offering, the Company incurred
approximately $2.0 million in debt issuance costs. The
deferred costs are recorded as a noncurrent asset, and the
amortization of the deferred costs is included in interest
expense and is recorded on a straight-line basis over the term
of the loan.
Under the note purchase agreement governing the terms of the
senior unsecured notes, the Company must maintain certain
consolidated net worth, leverage and interest coverage ratios.
The note purchase agreement also contains other covenants that,
among other things, restrict the ability of the Companys
F-17
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
subsidiaries to incur debt and restrict the Companys
ability and the ability of the Companys subsidiaries to
create liens and to merge or consolidate, or sell or convey all
or substantially all of the Companys assets. As of
December 31, 2005, the Company was in compliance with all
covenants.
As of December 31, 2005 and 2004, the Company had no
mortgages outstanding. At December 31, 2003, the Company
financed its office building via a mortgage. The Company made
quarterly principal payments of $76 and monthly interest
payments at a fixed rate equal to 5.77%. In addition, the
Company financed undeveloped land with a mortgage at
December 31, 2003. The Company made quarterly interest
payments at a variable rate equal to LIBOR plus 1.75% for the
undeveloped land. The land mortgage had a final principal
payment of $4.4 million due at maturity. In June 2004, both
mortgages were distributed to the stockholders through the
stockholders assumption of $8.3 million in debt.
To make payments of advanced commissions, the Company entered
into a financing agreement in 2002 with a commercial bank that
provided a $30 million credit facility. The facility was
comprised of two components: (i) term loans and
(ii) revolving loans. Interest was payable at rates equal
to: (a) the Prime Rate or (b) London Interbank
Offering Rate (LIBOR) plus a LIBOR margin, which varied
between 2.125% and 2.625% as the Companys credit quality
changed. Additionally, the Company paid an annual commitment fee
between of
1/4
of 1% and
3/8
of 1% on any unused portion of the commitment. The commitment
fee also varied with the Companys credit quality. The
Company repaid and terminated this credit facility in April 2004.
The term loans were to be repaid in 16 equal quarterly
installments. In addition to the $30 million credit
facility, the Company secured a revolving line of credit with a
commercial bank in the amount of $5 million. The Company
paid interest at a rate equal to: (a) the Prime Rate or
(b) London Interbank Offering Rate (LIBOR) plus a LIBOR
margin, which varied between 2.125% and 2.625% as the
Companys credit quality changed. The Company also paid an
annual commitment fee of between
1/4
of 1% and
3/8
of 1% on any unused portion of the commitment that varied with
the Companys credit quality.
|
|
(8) |
Minority Interest in Calamos Holdings LLC |
Minority interest represents CFP and John P.
Calamos, Sr.s aggregate ownership interest of 77% in
Holdings and is derived by multiplying the respective balances
of Holdings by their aggregate 77% ownership, except where
described below. Income before minority interest in Calamos
Holdings LLC and income taxes, which was $211.9 million for
the year ended December 31, 2005, included approximately
$0.2 million of investment income earned on cash and cash
equivalents held solely by CAM during the same period. This
F-18
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
investment income is not reduced by any minority interest;
therefore, the resulting minority interest is less than 77% for
the year ended December 31, 2005.
|
|
|
|
|
|
(in thousands) |
|
|
Minority interest at November 1, 2004
|
|
$ |
|
|
|
Historical shareholders equity as of November 1, 2004:
|
|
|
79,217 |
|
|
Net proceeds retained from the Offering
|
|
|
38,370 |
|
|
Income allocated to minority interests from November 2 to
December 31, 2004(1)
|
|
|
22,604 |
|
|
Impact of overallotment option on allocated income(2)
|
|
|
(88 |
) |
|
Compensation expense recognized under stock incentive plans
|
|
|
458 |
|
|
Changes in unrealized gains on available-for-sale securities
|
|
|
4,707 |
|
|
Dividend equivalent accrued under stock incentive plans
|
|
|
(61 |
) |
|
Dividends paid and declared
|
|
|
(9,913 |
) |
|
|
|
|
Minority interest at December 31, 2004
|
|
|
135,294 |
|
|
|
|
|
|
Income allocated to minority interests
|
|
|
163,009 |
|
|
Compensation expense recognized under stock incentive plans
|
|
|
3,168 |
|
|
Changes in unrealized gains on available-for-sale securities
|
|
|
6,651 |
|
|
Dividend equivalent accrued under stock incentive plans
|
|
|
(196 |
) |
|
Dividends declared
|
|
|
(78,496 |
) |
|
|
|
|
Minority interest at December 31, 2005
|
|
$ |
229,430 |
|
|
|
|
|
|
|
(1) |
Because CAM owned 20% of Holdings from November 2, 2004
through November 7, 2004 and 23% from November 8, 2004
through December 31, 2004, the net income allocation of
77.3% is a result of the weighted average based upon the actual
number of days. |
|
(2) |
The subsequent purchase of 3,000,000 units on
November 8, 2004, resulting from the underwriters
exercise of the overallotment option, increased CAMs
ownership in Holdings by 3% to 23%. As a result, the 3% of
income from November 2, 2004 through November 7, 2004
is not allocated to CAM in the income statement. However, CAM
purchased 3% of the total equity of Holdings, including 3% of
income from November 2, 2004 through November 7, 2004,
which is reflected as an increase in equity and as a decrease to
minority interest. |
All shares of Class A Common Stock and Class B Common
Stock are identical and entitle the holders to the same rights
and privileges, except that the holders of Class B Voting
Common Stock possess super-voting rights in the Company, except
as otherwise required by law.
F-19
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(10) |
Effect of Initial Public Offering to Stockholders
Equity |
The table below summarizes the net proceeds retained by the
Company from the Offering on November 2, 2004 as presented
in the consolidated statements of changes in stockholders
equity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional | |
|
|
|
|
|
|
Paid-in- | |
|
|
(in thousands) |
|
Common | |
|
Capital | |
|
Total | |
|
|
| |
|
| |
|
| |
Net proceeds from issuance of common stock
|
|
$ |
230 |
|
|
$ |
381,901 |
|
|
$ |
382,131 |
|
Use of proceeds to purchase membership units from CFP
|
|
|
|
|
|
|
(332,300 |
) |
|
|
(332,300 |
) |
|
|
|
|
|
|
|
|
|
|
Net proceeds retained by the Company
|
|
|
230 |
|
|
|
49,601 |
|
|
|
49,831 |
|
Allocation of 77% to minority interest
|
|
|
|
|
|
|
(38,370 |
) |
|
|
(38,370 |
) |
|
|
|
|
|
|
|
|
|
|
|
23% of net proceeds from the Offering
|
|
$ |
230 |
|
|
$ |
11,231 |
|
|
$ |
11,461 |
|
|
|
|
|
|
|
|
|
|
|
The Company contributes to a defined contribution profit sharing
plan (the PSP Plan) covering substantially all employees.
Contributions to the PSP Plan are at the discretion of the
Company. For the years ended December 31, 2005, 2004 and
2003, the Company recorded expense for the contributions to the
PSP Plan in the amounts of $1.9 million, $1.4 million
and $1.8 million, respectively. This expense is included in
employee compensation and benefits on the consolidated
statements of income.
The Company accounts for the following compensation plans:
Incentive Stock Plans, which are comprised of restricted stock
units and stock options, a Supplemental Incentive Compensation
Award Plan (SICA) and the Equity Appreciation Units (EAUs).
Certain employees of the Company participate in equity
compensation plans, which are comprised of restricted stock
units and stock options and are designed to retain key
employees. A total of 10,000,000 shares of CAMs
common stock may be granted under the plans.
RSUs entitle each recipient to receive a share of Class A
common stock and a dividend equivalent to the actual dividends
declared on CAMs Class A common stock. RSUs are
granted with no strike price and, therefore, the Company
receives no proceeds when the RSUs vest. These awards, including
accrued dividends, vest at the end of the restriction period,
generally between four and six years after the grant date, and
are expensed on a straight line basis over the vesting period.
During 2005 and 2004, 103,656 and 1,350,212 restricted stock
units with an estimated fair value of $3.0 million and
$24.3 million, respectively, were awarded
F-20
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
to employees of the Company in accordance with the provisions of
the plan. A summary of the RSU activity follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted | |
|
|
|
|
Average | |
|
|
Number | |
|
Fair Value of | |
|
|
of | |
|
RSUs | |
|
|
Shares | |
|
Granted | |
|
|
| |
|
| |
Outstanding at October 26, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,350,212 |
|
|
$ |
18.00 |
|
|
Forfeited
|
|
|
(4,276 |
) |
|
$ |
18.00 |
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2004
|
|
|
1,345,936 |
|
|
$ |
18.00 |
|
|
|
|
|
|
|
|
|
Granted
|
|
|
103,656 |
|
|
$ |
28.78 |
|
|
Forfeited
|
|
|
(37,154 |
) |
|
$ |
18.00 |
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2005
|
|
|
1,412,438 |
|
|
$ |
18.79 |
|
|
|
|
|
|
|
|
Converted during the year ended December 31:
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
Stock options entitle each recipient to purchase a share of
Class A common stock in exchange for the stated exercise
price upon vesting of each award. Under the plan, the exercise
price of each option, which has a
10-year life, equals
the market price of the companys stock on the date of
grant. The weighted average fair value of options at the date of
grant for the years ended December 31, 2005 and 2004 was
$11.27 and $6.43 per option, respectively. These awards,
including accrued dividends, vest at the end of the restriction
period, generally between four and six years after the grant
date. The fair value of the award is expensed on a straight line
basis over the vesting period. The fair value of each option
grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Dividend yield
|
|
|
0.96%-0.97% |
|
|
|
1.56% |
|
Expected volatility
|
|
|
33.0% |
|
|
|
33.0% |
|
Risk-free interest rate
|
|
|
3.9%-4.2% |
|
|
|
3.7% |
|
Expected life
|
|
|
7.5 years |
|
|
|
7.5 years |
|
During 2005 and 2004, 313,467 and 727,727 stock options with an
estimated fair value of $3.5 million and $4.7 million,
respectively, were awarded to employees of the Company in
accordance with the provisions of the plan. Summarized
information on the Companys outstanding stock options at
December 31, 2005 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding | |
|
Options Exercisable | |
|
|
| |
|
| |
|
|
|
|
Average | |
|
Weighted | |
|
|
|
Weighted | |
Range of |
|
|
|
Remaining | |
|
Average | |
|
Number | |
|
Average | |
Exercise |
|
Number of | |
|
Contractual | |
|
Option | |
|
of | |
|
Option | |
Prices |
|
Shares | |
|
Life | |
|
Price | |
|
Shares | |
|
Price | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
$18.00
|
|
|
696,500 |
|
|
|
8.8 years |
|
|
$ |
18.00 |
|
|
|
|
|
|
|
|
|
$28.76-$29.11
|
|
|
313,467 |
|
|
|
9.3 years |
|
|
$ |
28.94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,009,967 |
|
|
|
9.1 years |
|
|
$ |
21.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-21
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of the stock option activity follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted | |
|
|
Number | |
|
Average | |
|
|
of | |
|
Exercise | |
|
|
Shares | |
|
Price | |
|
|
| |
|
| |
Outstanding at October 26, 2004
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
727,727 |
|
|
$ |
18.00 |
|
|
Forfeited
|
|
|
|
|
|
$ |
|
|
|
Exercised
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2004
|
|
|
727,727 |
|
|
$ |
18.00 |
|
|
|
|
|
|
|
|
|
Granted
|
|
|
313,467 |
|
|
$ |
28.78 |
|
|
Forfeited
|
|
|
(31,227 |
) |
|
$ |
18.00 |
|
|
Exercised
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2005
|
|
|
1,009,967 |
|
|
$ |
21.35 |
|
|
|
|
|
|
|
|
Exercisable at December 31:
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
$ |
|
|
|
2005
|
|
|
|
|
|
$ |
|
|
Expense recorded in connection with the RSU and stock option
plans was $4.1 million during the year ended
December 31, 2005 of which $946,300, net of the minority
interest, was credited as additional
paid-in-capital. During
the period from October 27, 2004 to November 1, 2004
and from November 1, 2004 to December, 31, 2004,
$32,400 and $594,800 was expensed in connection with the RSU and
stock option plans of which $136,800, net of the minority
interest, was credited to additional
paid-in-capital.
|
|
|
Supplemental Incentive Compensation Award Plan
Units |
Certain officers of the company participate in a long-term,
deferred Supplemental Incentive Compensation Award Plan (SICA).
SICA provides for additional cash compensation payable over a
period of three years beginning three years after granting of
each award. Compensation expense is recognized monthly on a
straight-line basis over the first three years immediately
following the granting of each award. Payouts from SICA will be
made from the general assets of the Company.
|
|
|
Equity Appreciation Units |
EAUs were a form of cash based compensation that were awarded in
accordance with the provisions of the EAU Plan, and were
intended to reflect a share in the growth of the equity value of
the Company. Because EAUs were purely a form of cash
compensation and had no conversion features to common stock,
EAUs did not have a dilutive effect on earnings per share.
Participants vested in the EAUs if employed by the Company on
the vesting date. Payouts from the Plan were made from the
general assets of the Company and were based on the value of the
awards on the vesting date.
The EAU Plan was terminated in November 2004 in connection with
the Offering. Upon termination of this plan one-half of each EAU
participants earned balance was paid in cash to the
participants. The remainder of each participants earned
balance was converted into restricted stock units (RSU) and the
corresponding liability of $6.7 million was recorded to
additional paid-in capital.
Compensation expense of $9.1 million and $2.8 million
was recognized for the period ended November 1, 2004 and
for the year ended December 31, 2003, respectively. No
liability was recorded at December 31, 2005 and 2004.
F-22
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The provision for income taxes for the years ended
December 31, 2005, 2004 and 2003 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 2 to | |
|
January 1 to | |
|
|
|
|
|
|
December 31, | |
|
November 1, | |
|
|
(in thousands) |
|
2005 | |
|
2004 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$ |
8,309 |
|
|
$ |
1,104 |
|
|
$ |
|
|
|
$ |
|
|
|
State
|
|
|
1,989 |
|
|
|
248 |
|
|
|
1,567 |
|
|
|
1,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current income taxes
|
|
|
10,298 |
|
|
|
1,352 |
|
|
|
1,567 |
|
|
|
1,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
7,537 |
|
|
|
1,059 |
|
|
|
|
|
|
|
|
|
|
State
|
|
|
1,789 |
|
|
|
238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred income taxes
|
|
|
9,326 |
|
|
|
1,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income taxes
|
|
$ |
19,624 |
|
|
$ |
2,649 |
|
|
$ |
1,567 |
|
|
$ |
1,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes reflect the expected future tax
consequences of temporary differences between carrying amounts
and tax bases of the Companys assets and liabilities. The
significant components of deferred income taxes at
December 31, 2005 and 2004 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
$ |
114,575 |
|
|
$ |
122,074 |
|
|
Other
|
|
|
1,520 |
|
|
|
603 |
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
116,095 |
|
|
|
122,677 |
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Unrealized net holding gains on investments on available for
sale securities
|
|
|
1,357 |
|
|
|
559 |
|
|
Deferred sales commission
|
|
|
4,699 |
|
|
|
3,700 |
|
|
Other
|
|
|
913 |
|
|
|
340 |
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
6,969 |
|
|
|
4,599 |
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$ |
109,126 |
|
|
$ |
118,078 |
|
|
|
|
|
|
|
|
Deferred tax assets and liabilities are reflected on the
Companys Consolidated Statements of Financial Condition as
a net deferred tax asset. The current and non-current portions
of the net deferred tax asset were $7.8 million and
$101.3 million, respectively, at December 31, 2005 and
$6.9 million and $111.2 million at December 31,
2004.
In November 2004, the Company recorded a net deferred tax asset
of $119.9 million as a result of the purchase of 20,000,000
membership units from CFP, whereby the Company made an election
under Section 754 of the Internal Revenue Code (IRC)
(Section 754) to mark to current market value all assets
that it purchased. However, the assets acquired in connection
with purchase of the 3,000,000 membership units directly from
Holdings do not qualify for
mark-to-market
treatment under Section 754. Most of the assets receiving
the stepped-up basis
for tax purposes are in the form of intangible assets, such as
management contracts, distribution contracts and intellectual
property. These intangible assets will generally be amortized
F-23
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
over 15 years, and this amortization will create a future
tax benefit of approximately $8.3 million per year,
expiring in fiscal year 2019. The Company believes that all
deferred income tax assets will be realized; therefore, no
valuation allowances have been established.
In 2004, the Company reported the deferred tax consequences of
its deferred sales commissions in aggregate as a net deferred
tax asset. In 2005, the Company bifurcated and reported
separately the intangible asset amortization, including the
portion relating to the Section 754 step up in tax basis,
as a deferred tax asset and the deferred sales commission
deduction arising from the timing difference in book and taxable
income as a deferred tax liability. The amounts for 2004 have
been reclassified to conform to the current years
presentation.
In 2005, the Company recorded an adjustment to correct the
income tax rate that was initially used in 2004 to establish the
net deferred tax asset, which resulted in a $0.8 million
increase in the net deferred tax asset as of December 31,
2005. In 2005, the Company established a deferred tax asset
related to certain offering costs, which resulted in a
$0.4 million increase to the net deferred tax asset as of
December 31, 2005. These corrections were recorded as an
increase in additional
paid-in-capital and did
not have any effect on net income.
The following table reconciles the statutory federal income tax
rate to the effective income tax rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve | |
|
|
|
|
|
Twelve | |
|
|
Months | |
|
|
|
|
|
Months | |
|
|
Ended | |
|
November 2 to | |
|
January 1 to | |
|
Ended | |
|
|
December 31, | |
|
December 31, | |
|
November 1, | |
|
December 31, | |
|
|
2005 | |
|
2004 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
Statutory U.S. federal income tax rate
|
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
35.0 |
% |
Income passed through to stockholders
|
|
|
|
|
|
|
|
|
|
|
(35.0 |
%) |
|
|
(35.0 |
%) |
State income taxes, net of federal tax benefits
|
|
|
5.0 |
% |
|
|
4.8 |
% |
|
|
1.5 |
% |
|
|
1.6 |
% |
Other non-deductible items
|
|
|
0.2 |
% |
|
|
0.1 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
40.2 |
% |
|
|
39.9 |
% |
|
|
1.5 |
% |
|
|
1.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the periods ended prior to November 2, 2004, CFP
elected to be taxed as an S corporation under the IRC.
Therefore, the income and expenses of CFP were included in the
income tax returns of its stockholders. CFP was subject to only
Illinois replacement tax and certain other state taxes.
F-24
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table reflects the calculation of basic and
diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 2 to | |
|
January 1 to | |
|
|
|
|
|
|
December 31, | |
|
November 1, | |
|
|
(in thousands, except per share amounts) |
|
2005 | |
|
2004 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
Earnings per share basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings available to common shareholders
|
|
$ |
29,222 |
|
|
$ |
3,992 |
|
|
$ |
102,182 |
|
|
$ |
67,326 |
|
|
Weighted average shares outstanding
|
|
|
23,000 |
|
|
|
22,700 |
|
|
|
96,800 |
|
|
|
96,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share basic
|
|
$ |
1.27 |
|
|
$ |
0.18 |
|
|
$ |
1.06 |
|
|
$ |
0.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest in Calamos Holdings LLC and
income taxes
|
|
$ |
211,855 |
|
|
$ |
29,250 |
|
|
|
|
|
|
|
|
|
|
Less: Impact of income taxes
|
|
|
85,102 |
|
|
|
11,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share available to common shareholders
|
|
|
126,753 |
|
|
|
17,582 |
|
|
$ |
102,182 |
|
|
$ |
67,326 |
|
|
Weighted average shares outstanding
|
|
|
23,000 |
|
|
|
22,700 |
|
|
|
96,800 |
|
|
|
96,800 |
|
|
Conversion of membership units for common stock
|
|
|
77,000 |
|
|
|
77,300 |
|
|
|
|
|
|
|
|
|
|
Dilutive impact of RSUs
|
|
|
577 |
|
|
|
491 |
|
|
|
|
|
|
|
|
|
|
Dilutive impact of stock options
|
|
|
49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares and potential dilutive shares outstanding
|
|
|
100,626 |
|
|
|
100,491 |
|
|
|
96,800 |
|
|
|
96,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share dilutive
|
|
$ |
1.26 |
|
|
$ |
0.17 |
|
|
$ |
1.06 |
|
|
$ |
0.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares outstanding for 2005 and for the period of
November 2, 2004 to December 31, 2004 are calculated
(a) assuming Calamos Family Partners, Inc. and John P.
Calamos, Sr. exchanged all of their membership units in
Calamos Holdings LLC for shares of the Companys
Class A common stock on a one-for-one basis and
(b) including the effect of outstanding restricted stock
unit and option awards. In calculating diluted earnings per
share for 2005 and for the period November 2, 2004 to
December 31, 2004, the effective tax rates of 40.2% and
39.9%, respectively, were applied to income before minority
interest in Calamos Holdings LLC and income taxes.
The Company uses the treasury stock method to reflect the
dilutive effect of unvested restricted stock units and
unexercised stock options in diluted earnings per share. As
such, the dilutive effect of such options and RSUs would result
in the addition of a net number of shares to the
weighted-average number of shares used in the calculation of
diluted earnings per share. Under the treasury stock method, if
the average market price of common stock increases above the
exercise price, the proceeds that would be assumed to be
realized would be assumed to be used to acquire outstanding
shares of common stock. However, pursuant to SFAS 123, the
awards may be anti-dilutive even when the market price of the
underlying stock exceeds the related 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.
Stock options for 313,467 shares and RSUs for
6,656 shares were excluded from the computation of diluted
earnings per share for the year ended December 31, 2005 as
they were anti-dilutive. Stock options for 727,727 shares
were excluded from the computation of diluted earnings per share
for the year ended
F-25
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
December 31, 2004 as they were anti-dilutive. No RSUs were
anti-dilutive in 2004. Prior to the offering, no options or
dilutive securities were outstanding.
|
|
(15) |
Commitments and Contingencies |
In the normal course of business, the Company enters into
agreements that include indemnities in favor of third parties,
such as engagement letters with advisors and consultants,
distribution agreements and service agreements. In accordance
with the Companys by-laws, the Company has also agreed to
indemnify its directors, officers, employees and agents in
certain cases. Certain agreements do not contain any limits on
the Companys liability and, therefore, it is not possible
to estimate the Companys potential liability under these
indemnities. In certain cases, the Company may have recourse
against third parties with respect to these indemnities.
Further, the Company maintains insurance policies that may
provide coverage against certain claims under these indemnities
In the normal course of business, the Company may be subject to
various legal proceedings from time to time. Currently, there
are no legal proceedings pending against the Company or the
Companys subsidiaries.
The Company leases office space and computer equipment under
long-term operating leases expiring at various dates throughout
fiscal year 2025. Lease expenses for years ended
December 31, 2005, 2004 and 2003 were $3.8 million,
$1.7 million and $0.9 million, respectively. At
December 31, 2005, the Companys aggregate future
minimum payments for operating leases having initial or
non-cancelable terms greater than one year were payable as
follows:
|
|
|
|
|
|
|
|
|
Minimum | |
(in thousands) |
|
Payments | |
|
|
| |
Year ended December 31:
|
|
|
|
|
2006
|
|
$ |
3,517 |
|
2007
|
|
|
3,541 |
|
2008
|
|
|
3,573 |
|
2009
|
|
|
3,617 |
|
2010
|
|
|
3,717 |
|
|
Thereafter
|
|
|
62,909 |
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$ |
80,874 |
|
|
|
|
|
|
|
(16) |
Regulatory and Net Capital Requirements |
As a broker/ dealer, CFS is subject to the Securities and
Exchange Commissions Uniform Net Capital Rule
(Rule 15c3-1),
which requires the maintenance of minimum net capital, as
defined, and requires that the ratio of aggregate indebtedness
to net capital (net capital ratio), as defined, shall not exceed
15 to 1. As of December 31, 2005 and 2004, the net capital,
the excess of the required net capital and the net capital ratio
were as follows:
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Net capital
|
|
$ |
6,574 |
|
|
$ |
6,453 |
|
Excess of required net capital
|
|
$ |
5,239 |
|
|
$ |
5,502 |
|
Net capital ratio
|
|
|
3.05 |
|
|
|
2.21 |
|
CFS is not required to compute the Reserve Requirements under
Exhibit A of Rule 15c3-3(k)(2)(i) or to include
Information Relating to the Possession or Control Requirements
under Rule 15c3-3, because the Registrant operates
primarily with the purpose of distributing mutual fund shares
and does not hold customer funds or safekeep customer securities.
F-26
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the years ended December 31, 2005, 2004 and 2003, total
revenues derived from services provided to two Company-sponsored
mutual funds, the Calamos Growth Fund and the Calamos Growth and
Income fund were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Calamos Growth Fund
|
|
|
47% |
|
|
|
40% |
|
|
|
32% |
|
Calamos Growth and Income Fund
|
|
|
16% |
|
|
|
16% |
|
|
|
15% |
|
|
|
(18) |
Recently Issued Accounting Pronouncements |
Effective January 1, 2004, the Company adopted the fair
value recognition provisions of SFAS 123. In December 2004,
the FASB revised SFAS 123 (SFAS 123(R)), requiring
public registrants to recognize the cost resulting from all
stock-based compensation transactions in their financial
statements. In April 2005, the Securities and Exchange
Commission deferred the compliance date of SFAS 123(R)
until 2006 for calendar-year companies. We intend to adopt
SFAS 123(R) in the first quarter of 2006 and do not believe
that the implementation will have a material effect on the
Companys financial statements.
In June 2005, the FASBs Emerging Issues Task Force
(EITF) ratified Issue No.
04-05, Determining
Whether a General Partner, or the General Partners as a Group,
Controls a Limited Partnership or Similar Entity When the
Limited Partners Have Certain Rights. EITF No. 04-05
provides a framework for determining whether a general partner
controls, and should consolidate, a limited partnership. The
presumption of control is overcome if the limited partners have
either substantive kick-out rights or substantive participating
rights, as defined. This guidance is applicable for limited
partnerships or similar entities that are not variable interest
entities under FASB Interpretation No. 46(R),
Consolidation of Variable Interest Entities. We have
evaluated the provisions of EITF
No. 04-05 and have
determined that the implementation of this guidance will not
have a material effect on our financial statements.
In June 2005, the FASB issued SFAS 154, Accounting
Changes and Error Corrections. SFAS 154 changes the
requirements for the accounting for and reporting of a change in
accounting principle. Previously, voluntary changes in
accounting principle were required to be recognized by including
the cumulative effect of the change in net income of the period
of the change. SFAS 154 requires companies to account for
and apply changes in accounting principles retrospectively to
prior periods financial statements, rather than recording
a cumulative effect adjustment within the period of the change,
unless it is impractical to determine the effects of the change
to each period being presented. The provisions of SFAS 154
are effective for accounting changes and corrections of errors
made in fiscal years beginning after December 15, 2005. The
adoption of SFAS 154 is not expected to have a material
effect on our financial statements.
F-27
|
|
Item 9. |
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure |
None
|
|
Item 9A. |
Controls and Procedures |
As of the end of the period covered by this Annual Report on
Form 10-K, an
evaluation was carried out under the supervision and with the
participation of our management, including our chief executive
officer and chief financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures
(as defined in
Rule 13a-15(e) and
15d-15(e) under the
Securities Exchange Act of 1934) (the Exchange Act). Based upon
that evaluation, the chief executive officer and chief
accounting officer concluded that the design and operation of
these disclosure controls and procedures were effective to
ensure that information required to be disclosed by the Company
in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange
Commissions rules and forms.
No significant changes were made in our internal control over
financial reporting during the Companys fourth quarter
that have materially affected, or are reasonably likely to
materially affect, the Companys internal control over
financial reporting.
Managements Report on Internal Control Over Financial
Reporting and KPMG LLPs Report of Independent Registered
Public Accounting Firm on Internal Control Over Financial
Reporting are included in Item 8 of Part II, Financial
Statements and Supplementary Data, of this Annual Report on
Form 10-K.
|
|
Item 9B. |
Other Information |
None
PART III
|
|
Item 10. |
Directors and Executive Officers of the Registrant |
|
|
|
|
|
Management
|
|
|
|
Directors |
John P. Calamos, Sr.
Chairman, Chief Executive
Officer and Co-Chief
Investment Officer
Nick P. Calamos
Senior Executive Vice President and
Co-Chief Investment Officer
Patrick H. Dudasik
Executive Vice President,
Chief Financial Officer and Treasurer
James S. Hamman, Jr.
Executive Vice President,
General Counsel and Secretary
Scott Craven Jones
Executive Vice President and
Chief Administrative Officer |
|
James F. Baka
Senior Vice President and
National Sales
Manager-Institutional
Services
Nimish S. Bhatt
Senior Vice President and
Director of Operations
Robert M. Kunimura
Senior Vice President and
Chief Technology Officer
Philip (Phipps) E. Moriarty
Senior Vice President and
National Sales
Manager-Intermediary
Channels |
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John P. Calamos, Sr.
Chairman, Chief Executive Officer and Co-Chief
Investment Officer
Nick P. Calamos
Senior Executive Vice President and
Co-Chief Investment Officer
G. Bradford Bulkley
Founder
Bulkley Capital, L.P.
Richard W. Gilbert
President
Gilbert Communications, Inc.
Arthur L. Knight
Private Investor and
Business Consultant
Former President and Chief
Executive Officer
Morgan Products, Ltd. |
Additional information regarding the Directors and Executive
Officers of the Company and compliance with Section 16(a)
of the Securities Exchange Act of 1934 is incorporated herein by
reference from our definitive proxy statement for our 2006
Annual Meeting of Stockholders (the Proxy Statement).
II-1
The Company has adopted a Code of Business Conduct and Ethics
(the Code of Conduct) that applies to our principal executive
officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions.
The Code of Conduct is posted on the Investor Relations section
of our website (www.calamos.com) and available in print free of
charge to any shareholder who requests a copy. Interested
parties may address a written request for a printed copy of the
Code of Conduct to: Secretary, Calamos Asset Management, Inc.,
2020 Calamos Court, Naperville, IL 60563. We intend to
satisfy the disclosure requirement regarding any amendment to,
or a waiver of, a provision of the Code of Conduct by posting
such information on our website.
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Item 11. |
Executive Compensation |
Information required for this Item is incorporated herein by
reference to the registrants proxy statement for its
annual meeting of shareholders to be held on June 1, 2006.
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Item 12. |
Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters |
Information required for this Item is incorporated herein by
reference to the registrants proxy statement for its
annual meeting of shareholders to be held on June 1, 2006.
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Item 13. |
Certain Relationships and Related Transactions |
Information required for this Item is incorporated herein by
reference to the registrants proxy statement for its
annual meeting of shareholders to be held on June 1, 2006.
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Item 14. |
Principal Accounting Fees and Services |
Information required for this Item is incorporated herein by
reference to the registrants proxy statement for its
annual meeting of shareholders to be held on June 1, 2006.
II-2
PART IV
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Item 15. |
Exhibits and Financial Statement Schedules |
(a) The following documents are filed as part of this
report.
1. Financial Statements: See Item 8 of Part II.
2. Financial Statement Schedules: None.
3. List of Exhibits:
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Exhibit |
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Number |
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Description of Exhibit |
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3(i) |
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Amended and Restated Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1 to the
Registrants Current Report on Form 8-K filed with the
Securities and Exchange Commission on November 2, 2004). |
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3(ii) |
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Amended and Restated By-Laws of the Registrant (incorporated by
reference to Exhibit 3.2 to the Registrants Current
Report on Form 8-K filed with the Securities and Exchange
Commission on April 26, 2005). |
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4 |
.1 |
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Stockholders Agreement among John P. Calamos, Sr.,
Nick P. Calamos and John P. Calamos, Jr., certain trusts
controlled by them, Calamos Family Partners, Inc. and the
Registrant (incorporated by reference to Exhibit 4.1 to the
Registrants Quarterly Report on Form 10-Q filed with
the Securities and Exchange Commission on December 3, 2004). |
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4 |
.2 |
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Registration Rights Agreement between Calamos Family Partners,
Inc., John P. Calamos, Sr. and the Registrant (incorporated
by reference to Exhibit 4.2 to the Registrants
Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on December 3, 2004). |
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10 |
.1 |
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Employment Agreement between the Registrant and John P.
Calamos, Sr. (incorporated by reference to
Exhibit 10.1 to the Registrants Quarterly Report on
Form 10-Q filed with the Securities and Exchange Commission
on December 3, 2004). |
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10 |
.2 |
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Employment Agreement between the Registrant and Nick P. Calamos
(incorporated by reference to Exhibit 10.2 to the
Registrants Quarterly Report on Form 10-Q filed with
the Securities and Exchange Commission on December 3, 2004). |
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10 |
.3 |
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Employment Agreement between the Registrant and James S.
Hamman, Jr. (incorporated by reference to Exhibit 10.3
to the Registrants Quarterly Report on Form 10-Q
filed with the Securities an Exchange Commission on
December 3, 2004). |
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10 |
.4 |
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Employment Agreement between the Registrant and Patrick H.
Dudasik (incorporated by reference to Exhibit 10.4 to the
Registrants Quarterly Report on Form 10-Q filed with
the Securities and Exchange Commission on December 3, 2004). |
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10 |
.5 |
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Calamos Asset Management, Inc. Incentive Compensation Plan
(incorporated by reference to Exhibit 10.5 to the
Registrants Quarterly Report on Form 10-Q filed with
the Securities and Exchange Commission on December 3, 2004). |
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10 |
.6 |
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Form of EAU-Based RSU Award Statement (incorporated by reference
to Exhibit 10.6 to the Registrants Quarterly Report
on Form 10-Q filed with the Securities and Exchange
Commission on December 3, 2004). |
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10 |
.7 |
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Form of IPO Equity Award Statement (incorporated by reference to
Exhibit 10.7 to the Registrants Quarterly Report on
Form 10-Q filed with the Securities and Exchange Commission
on December 3, 2004). |
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10 |
.8 |
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Form of Services-Based RSU Award Statement (incorporated by
reference to Exhibit 10.8 to the Registrants
Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on December 3, 2004). |
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10 |
.9 |
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Contribution Agreement between the Registrant and Calamos
Holdings LLC (incorporated by reference to Exhibit 10.9 to
the Registrants Quarterly Report on Form 10-Q filed
with the Securities and Exchange Commission on December 3,
2004). |
II-3
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Exhibit |
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Number |
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Description of Exhibit |
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10 |
.10 |
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Tax Indemnity Agreement among the Registrant, Calamos Family
Partners, Inc. and Calamos Holdings LLC (incorporated by
reference to Exhibit 10.10 to the Registrants
Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on December 3, 2004). |
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10 |
.11 |
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Second Amended and Restated Limited Liability Company Agreement
of Calamos Holdings LLC effective as of November 2, 2004,
by and among Calamos Family Partners, Inc., John P.
Calamos, Sr. and the Registrant (incorporated by reference
to Exhibit 10.11 to the Registrants Quarterly Report
on Form 10-Q filed with the Securities and Exchange
Commission on December 3, 2004). |
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10 |
.12 |
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Amendment No. 1 to the Second Amended and Restated Limited
Liability Company Agreement of Calamos Holdings LLC. |
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10 |
.13 |
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Amendment Number 1 to Management Services Agreement between
the Registrant and Calamos Family Partners, Inc. (incorporated
by reference to Exhibit 10 to the Registrants
Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on August 12, 2005). |
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10 |
.14 |
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Lease between 2020 Calamos Court LLC and Calamos Holdings LLC
(formerly with Calamos Holdings, Inc.) (incorporated by
reference to Exhibit 10 to the Registrants Quarterly
Report on Form 10-Q filed with the Securities and Exchange
Commission on November 10, 2005). |
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21 |
.1 |
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Subsidiaries of the Company (incorporated by reference to
Exhibit 21.1 to the Registrants Annual Report on
Form 10-K filed with the Securities and Exchange Commission
on March 31, 2005). |
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23 |
.1 |
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Consent of Independent Registered Public Accounting Firm, KPMG
LLP. |
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31 |
.1 |
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Certification of Principal Executive Officer pursuant to
Rule 13a-14(a). |
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31 |
.2 |
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Certification of Principal Financial Officer pursuant to
Rule 13a-14(a). |
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32 |
.1 |
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Certification of Principal Executive Officer pursuant to
18 U.S.C. Section 1350. |
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32 |
.2 |
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Certification of Principal Financial Officer pursuant to
18 U.S.C. Section 1350. |
Upon written request by a stockholder to our Secretary,
James S. Hamman, Jr., at 2020 Calamos Court,
Naperville, Illinois 60563, any exhibit shall be available
at a reasonable charge (which will be limited to our reasonable
expenses in furnishing such exhibits).
II-4
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on March 10, 2006.
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CALAMOS ASSET MANAGEMENT, INC. |
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By: |
/s/ Patrick H. Dudasik |
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Title: |
Executive Vice President, Chief Financial Officer and Treasurer |
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons in
the capacities and on the dates indicated.
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Signature |
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Title | |
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Date |
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/s/ John P. Calamos, Sr.
John P. Calamos, Sr. |
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Chairman of the Board, Chief Executive Officer and Co-Chief Investment Officer (Principal Executive Officer) |
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March 10, 2006 |
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/s/ Patrick H. Dudasik
Patrick H. Dudasik |
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Executive Vice President, Chief Financial Officer and Treasurer |
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March 10, 2006 |
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/s/ Nick P. Calamos
Nick P. Calamos |
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Senior Executive Vice President, Co-Chief Investment Officer and Director |
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March 10, 2006 |
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/s/ G. Bradford Bulkley
G. Bradford Bulkley |
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Director |
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March 10, 2006 |
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/s/ Richard W. Gilbert
Richard W. Gilbert |
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Director |
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March 10, 2006 |
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/s/ Arthur L. Knight
Arthur L. Knight |
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Director |
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March 10, 2006 |
II-5