UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

or

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

Commission File Number: 000-51003

CALAMOS ASSET MANAGEMENT, INC.

(Exact Name of Registrant as Specified in its Charter)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

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

      Large accelerated filer o               Accelerated filer þ                         Non-accelerated filer o                         Smaller reporting company o

                                        (Do not check if a smaller reporting company)

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

At July 31, 2008, the company had 19,453,073 shares of Class A common stock and 100 shares of Class B common stock outstanding.

 

 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

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

		June 30,				December 31,
		2008				2007
		(unaudited)
ASSETS:
Current assets
Cash and cash equivalents		$	205,664			$	108,441
Receivables:
Affiliates and affiliated funds			24,222				27,641
Customers			9,918				11,699
Investment securities			404,035				535,476
Partnership investments and offshore funds			349,556				353,004
Prepaid expenses			4,225				3,139
Deferred tax assets, net			9,066				6,926
Other assets			2,782				2,206
Total current assets			1,009,468				1,048,532
Non-current assets
Deferred tax assets, net			77,605				83,358
Deferred sales commissions			27,160				34,076
Property and equipment, net of accumulated depreciation ($26,944 at 6/30/08 and $21,841 at 12/31/07)			46,821				48,420
Other non-current assets			3,226				3,286
Total non-current assets			154,812				169,140
Total assets			1,164,280				1,217,672
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities
Accounts payable:
Brokers			17,854				19,950
Affiliates and affiliated funds			302				372
Accrued compensation and benefits			9,115				26,462
Interest payable			12,452				12,636
Accrued expenses and other current liabilities			5,933				9,257
Total current liabilities			45,656				68,677
Long-term liabilities
Long-term debt			525,000				525,000
Other long-term liabilities			10,023				8,876
Total long-term liabilities			535,023				533,876
Total liabilities			580,679				602,553
Minority interest in partnership investments and offshore funds			108,324				49,177
Minority interest in Calamos Holdings LLC			283,284				352,205
Stockholders’ equity:
Class A Common Stock, $0.01 par value; authorized 600,000,000 shares; 23,453,073 shares issued and 19,453,073 shares outstanding at June 30, 2008; 23,324,082 shares issued and 20,871,982 shares outstanding at December 31, 2007			235				233
Class B Common Stock, $0.01 par value; authorized 1,000 shares; issued and outstanding 100 shares			0				0
Additional paid-in capital			222,562				198,924
Retained earnings			68,083				70,102
Accumulated other comprehensive income (loss)			(3,672	)			5,081
Treasury stock at cost; 4,000,000 shares at June 30, 2008 and 2,452,100 shares at December 31, 2007			(95,215	)			(60,603	)
Total stockholders’ equity			191,993				213,737
Total liabilities, minority interest and stockholders’ equity		$	1,164,280			$	1,217,672

See accompanying notes to consolidated financial statements.

CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months Ended June 30, 2008 and 2007
(in thousands, except share data)
(unaudited)

		Three Months Ended June 30,								Six Months Ended June 30,
		2008				2007				2008				2007
Revenues:
Investment management fees		$	78,449			$	78,313			$	155,723			$	156,788
Distribution and underwriting fees			32,818				35,560				65,288				71,741
Other			971				894				1,920				1,938
Total revenues			112,238				114,767				222,931				230,467
Expenses:
Employee compensation and benefits			19,994				22,512				43,454				43,278
Distribution and underwriting expense			24,875				25,196				49,033				50,223
Amortization of deferred sales commissions			5,966				7,278				12,086				15,156
Marketing and sales promotion			3,035				29,731				6,071				33,213
General and administrative			9,257				9,118				18,747				17,510
Total operating expenses			63,127				93,835				129,391				159,380
Operating income			49,111				20,932				93,540				71,087
Other income (expense):
Net interest income (expense)			(7,668	)			1,495				(14,922	)			3,489
Investment and other income (loss)			23,955				7,378				(22,819	)			7,770
Minority interest in partnership investments and offshore funds			810				(3,020	)			13,269				(2,269	)
Total other income (expense), net			17,097				5,853				(24,472	)			8,990
Income before minority interest in Calamos Holdings LLC and income taxes			66,208				26,785				69,068				80,077
Minority interest in Calamos Holdings LLC			52,477				20,367				54,585				61,075
Income before income taxes			13,731				6,418				14,483				19,002
Income taxes			11,835				2,613				12,138				7,663
Net income		$	1,896			$	3,805			$	2,345			$	11,339
Earnings per share
Basic		$	0.10			$	0.17			$	0.12			$	0.49
Diluted		$	0.09			$	0.16			$	0.11			$	0.48
Weighted average shares outstanding
Basic			19,742,736				22,846,901				20,039,887				23,084,223
Diluted			97,051,708				100,289,411				97,331,973				100,525,789
Cash dividends per share		$	0.11			$	0.11			$	0.22			$	0.22

See accompanying notes to consolidated financial statements.

CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Six Months Ended June 30, 2008
(in thousands)
(unaudited)

														Accumulated
						Additional								Other
		Common				Paid-in				Retained				Comprehensive				Treasury
		Stock				Capital				Earnings				Income (Loss)				Stock				Total
Balance at December 31, 2007		$	233			$	198,924			$	70,102			$	5,081			$	(60,603	)		$	213,737
Net income			—				—				2,345				—				—				2,345
Changes in unrealized gains (losses) on available-for-sale securities, net of minority interest and income taxes			—				—				—				(5,942	)			—				(5,942	)
Less: reclassification adjustment for realized gains on available-for-sale securities included in net income, net of minority interest and income taxes			—				—				—				(2,569	)			—				(2,569	)
Total comprehensive income (loss)																							(6,166	)
Issuance of common stock (128,991 Class A common shares)			2				(2	)			—				—				—				—
Repurchase of common stock (1,547,900 Class A common shares)			—				—				—				—				(34,612	)			(34,612	)
Sale of Calamos Holdings LLC membership units (1,547,900 units)			—				27,469				—				—				—				27,469
Cumulative impact of changes in ownership of Calamos Holdings LLC			—				(4,561	)			15				(242	)			—				(4,788	)
Compensation expense recognized under stock incentive plans, net of minority interest			—				732				—				—				—				732
Dividends declared			—				—				(4,379	)			—				—				(4,379	)
Balance at June 30, 2008		$	235			$	222,562			$	68,083			$	(3,672	)		$	(95,215	)		$	191,993

See accompanying notes to consolidated financial statements.

CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2008 and 2007
(in thousands)
(unaudited)

		2008				2007
Cash and cash equivalents at beginning of year		$	108,441			$	328,841
Cash flows from operating activities:
Net income			2,345				11,339
Adjustments to reconcile net income to net cash provided by operating activities:
Minority interest in Calamos Holdings LLC			54,585				61,075
Minority interest in partnership investments and offshore funds			(13,269	)			2,269
Amortization of deferred sales commissions			12,086				15,156
Other depreciation and amortization			5,300				4,024
Unrealized depreciation (appreciation) on CFS securities, partnership investments and offshore funds			49,123				(5,305	)
Net realized gain on sale of investment securities			(20,663	)			—
Deferred taxes			8,414				2,872
Stock-based compensation			3,561				3,478
Employee taxes paid on vesting under stock incentive plans			(1,715	)			(1,853	)
(Increase) decrease in assets:
Accounts receivable:
Affiliates and affiliated mutual funds			3,419				1,738
Customers			1,781				1,086
Deferred sales commissions			(5,170	)			(5,472	)
Other assets			(2,088	)			(4,946	)
Increase (decrease) in liabilities:
Accounts payable			(2,166	)			91
Accrued compensation and benefits			(17,347	)			(10,068	)
Other liabilities and accrued expenses			(1,880	)			31,702
Net cash provided by operating activities			76,316				107,186
Cash flows provided by (used in) investing activities:
Net additions to property and equipment			(3,504	)			(4,997	)
Net sales (purchases) of investment securities			85,886				(152,980	)
Net changes in partnership investments and offshore funds			28,123				(51,616	)
Net cash provided by (used in) investing activities			110,505				(209,593	)
Cash flows used in financing activities:
Deferred tax benefit on vesting under stock incentive plans			192				209
Repurchase of common stock			(34,612	)			(18,840	)
Cash dividends paid to minority shareholders			(50,799	)			(55,121	)
Cash dividends paid to common shareholders			(4,379	)			(5,078	)
Net cash used in financing activities			(89,598	)			(78,830	)
Net increase (decrease) in cash			97,223				(181,237	)
Cash and cash equivalents at end of period		$	205,664			$	147,604

See accompanying notes to consolidated financial statements.

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

(1) Organization and Description of Business

Calamos Asset Management, Inc. (CAM), together with its subsidiaries (the Company), primarily provides investment advisory services to individuals and institutional investors through open-end funds, closed-end funds, separate accounts, offshore funds and partnerships. CAM operates and controls all of the business and affairs of Calamos Holdings LLC (Holdings) and, as a result of this control, consolidates the financial results of Holdings with its own financial results.

(2) Basis of Presentation

The consolidated financial statements as of June 30, 2008 and for the six months ended June 30, 2008 and 2007 have not been audited by the Company’s independent registered public accounting firm. In the opinion of management, these statements contain all adjustments, including those of a normal recurring nature, necessary for fair presentation of the financial condition and results of operations. The results for the interim periods ended June 30 are not necessarily indicative of the results to be obtained for a full fiscal year. Certain amounts for the prior year have been reclassified to conform to the current year’s presentation.

Calamos Family Partners, Inc.’s (CFP) and John P. Calamos, Sr.’s (collectively, the Calamos Interests) combined 79.8% and 77.4% interest in Holdings at June 30, 2008 and 2007, respectively, is represented as minority interest in the Company’s financial statements. Income before minority interest in Calamos Holdings LLC and income taxes, which was $66.2 million and $69.1 million for the three and six months ended June 30, 2008, included approximately $238,100 and $507,600 of investment income earned on cash, cash equivalents and investments held solely by CAM during the same period. This portion of CAM’s investment income is not reduced by any minority interests.

Calamos Partners LLC, a subsidiary of Holdings, is the general partner of Calamos Equity Opportunities Fund LP and Calamos Market Neutral Opportunities Fund LP, private investment partnerships that are primarily comprised of highly liquid marketable securities. Substantially all the activities of these partnerships (collectively, the Partnerships) are conducted on behalf of the Company and its related parties, therefore, the Company consolidates the financial results of the Partnerships into its results. During the second quarter of 2008, Calamos Equity Opportunities Fund LP was liquidated.

In the fourth quarter of 2007, the Company established Calamos Global Funds PLC (Offshore Funds), which is comprised of four Ireland-based offshore mutual funds. The Offshore Funds are majority-owned by the Company, therefore, the Company consolidates the financial results of the Offshore Funds into its results.

The assets and liabilities of the Partnerships and Offshore Funds are presented on a net basis as partnership investments and offshore funds in the consolidated statements of financial condition, and the total income (loss) is included in investment and other income (loss) in the consolidated statements of operations. Partnerships and Offshore Funds are presented on a net basis in order to provide more transparency to the financial position and results of the core operations of the Company. The underlying assets and liabilities that are being consolidated are described in note 4. The minority interests are presented as minority interest in partnership investments and offshore funds in the respective financial statements.

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

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

(3) Investment Securities

The following table provides a summary of investment securities owned as of June 30, 2008 and December 31, 2007. Other investment securities consist of treasury bonds and common stock. As a registered broker-dealer, Calamos Financial Services LLC is required to mark to market all investment securities it owns (CFS Securities) and record all market fluctuations through current earnings. As such, unrealized gains and losses on these securities are included in investment and other income (loss) in the consolidated statements of operations.

		June 30, 2008
(in thousands)		Available-for-Sale				CFS Securities				Total Securities
Mutual Funds
Equity		$	217,286			$	27,348			$	244,634
Balanced			38,624				657				39,281
Fixed income			115,534				—				115,534
High yield			3,579				—				3,579
Other			233				214				447
Total mutual funds			375,256				28,219				403,475
Other investment securities			419				141				560
		$	375,675			$	28,360			$	404,035

		December 31, 2007
(in thousands)		Available-for-Sale				CFS Securities				Total Securities
Mutual Funds
Equity		$	322,344			$	3,095			$	325,439
Balanced			90,049				722				90,771
Fixed income			114,439				—				114,439
High yield			3,663				—				3,663
Other			245				227				472
Total mutual funds			530,740				4,044				534,784
Other investment securities			430				262				692
		$	531,170			$	4,306			$	535,476

Of the $403.5 million and $534.8 million investments in mutual funds at June 30, 2008 and December 31, 2007, respectively, $244.3 million and $364.3 million was invested in affiliated mutual funds.

During the second quarter of 2008, the Company sold $113.3 million of investment securities and realized a gain of $20.7 million, based on specific identification of securities sold. The table that follows summarizes the proceeds from the sale of available-for-sale securities, realized gains on available-for-sale securities, unrealized gains (losses) on available-for-sale

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

securities, gains (losses) reclassified out of accumulated other comprehensive income into earnings and unrealized gains (losses) on CFS securities for the three and six months ended June 30, 2008 and 2007.

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2008				2007				2008				2007
Available-for-sale securities:
Proceeds from sale		$	113,329			$	—			$	113,329			$	—
Realized gains			20,663				—				20,234				—
Unrealized gains (losses)			(4,957	)			12,694				(44,603	)			16,057
Gains reclassified out of accumulated other comprehensive income into earnings			20,663				—				20,234				—
CFS securities:
Unrealized gains (losses)			(380	)			310				(953	)			358

The cumulative net unrealized gains (losses) on available-for-sale securities consisted of the following as of June 30, 2008 and December 31, 2007:

		June 30,				December 31,
(in thousands)		2008				2007
Total cumulative unrealized gains on available-for-sale securities with net gains:
Mutual Funds
Equity		$	5,027			$	39,461
Balanced			8				5,860
Fixed income			560				1,022
Other			—				5
Total mutual funds			5,595				46,348
Other investment securities			242				297
Total gains			5,837				46,645
Total cumulative unrealized losses on available-for-sale securities with net losses:
Mutual Funds
Equity			(24,340	)			(7,073	)
Balanced			(6,302	)			(17	)
Fixed income			(1,135	)			(334	)
High yield			(413	)			(272	)
Other			(9	)			—
Total mutual funds			(32,199	)			(7,696	)
Other investment securities			—				(475	)
Total losses			(32,199	)			(8,171	)
Total cumulative net unrealized gains (losses) on available-for-sale securities		$	(26,362	)		$	38,474

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 is recognized as a charge to net income in the period in which the other-than-temporary decline in value occurs, as well as an accompanying permanent adjustment to accumulated other comprehensive income (loss). At June 30, 2008, the Company believes all unrealized losses to be only temporary and due to temporary market conditions.

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

(4) Partnership Investments and Offshore Funds

Presented below are the underlying assets and liabilities of the Partnerships and the Offshore Funds that the Company reports on a net basis and the investments accounted for under the equity method, collectively presented as partnership investments and offshore funds in its consolidated statements of financial condition as of June 30, 2008 and December 31, 2007.

		June 30,				December 31,
(in thousands)		2008				2007
Calamos Equity Opportunities Fund LP:
Securities owned		$	—			$	111,142
Securities sold but not yet purchased			—				(24,838	)
Accrued expenses and other current liabilities			—				(1,478	)
Other current assets			—				20
Calamos Equity Opportunities Fund LP securities, net			—				84,846
Calamos Market Neutral Opportunities Fund LP:
Securities owned			60,399				81,361
Securities sold but not yet purchased			(13,710	)			(22,372	)
Accrued expenses and other current liabilities			(490	)			(5,178	)
Other current assets			6,219				1,028
Calamos Market Neutral Opportunities Fund LP securities, net			52,418				54,839
Calamos Global Funds PLC:
Securities owned			283,955				200,196
Other current assets			8,807				5,107
Accrued expenses and other liabilities			(4,245	)			(2,045	)
Calamos Global Funds PLC			288,517				203,258
Investment in other partnerships			8,621				10,061
Partnership investments and offshore funds		$	349,556			$	353,004

During the second quarter of 2008, the Company liquidated Calamos Equity Opportunities Fund LP with total proceeds of $29.3 million. The Company recorded gains of $2.2 million and losses of $18.9 million for the three and six months ended June 30, 2008, respectively, which were offset by minority interests of $1.1 million and $10.8 million. As of December 31, 2007, the Company had a net interest of $37.2 million (43.9%) in Calamos Equity Opportunities Fund LP. The minority interests totaled 56.1% of Calamos Equity Opportunities Fund LP at December 31, 2007 and are presented in the consolidated statements of financial condition as minority interest in partnership investments and offshore funds.

As of June 30, 2008 and December 31, 2007, the Company had a net interest of $50.9 million (97.2%) and $53.3 million (97.2%) in Calamos Market Neutral Opportunities Fund LP, respectively. The minority interests totaled 2.8% of Calamos Market Neutral Opportunities Fund LP at June 30, 2008 and December 31, 2007 and are presented in the consolidated statements of financial condition as minority interest in partnership investments and offshore funds.

As of June 30, 2008 and December 31, 2007, the Company had a net interest of $181.7 million (63.0%) and $203.3 million (100%) in Calamos Global Funds PLC, respectively. The minority interests totaled 37.0% at June 30, 2008, and are presented in the consolidated statements of financial condition as minority interest in partnership investments and offshore funds.

As of June 30, 2008 and December 31, 2007, the Company held non-controlling interests in certain other partnerships, and therefore, accounted for these investments using the equity method. These investments are presented collectively as investment in other partnerships in the table above.

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

(5) Fair Value Measurements

Effective January 1, 2008, the Company adopted the provisions of the Financial Accounting Standards Board’s (FASB) Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value and requires additional disclosure regarding fair value measurement. The implementation of SFAS 157 had no effect on the Company’s financial position or results of operations.

SFAS No. 157 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows: Level 1 – observable inputs such as quoted prices in active markets; Level 2 – inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and Level 3 – unobservable inputs in which there is little or no market data, and require the reporting entity to develop its own assumptions. At June 30, 2008, the Company did not have any positions in Level 3 securities. For assets recorded at fair value, the Company uses a market approach.

The following provides the hierarchy of inputs used to derive the fair value of the Company’s investment securities, securities owned by the Partnership Investments and by the Offshore Funds and securities sold but not yet purchased as of June 30, 2008. Foreign currency contracts are presented on a net basis where the right of offset exists. There was no net impact of these positions at June 30, 2008.

						Fair Value Measurements at Reporting Date Using
						Quoted Prices				Significant
						in Active				Other				Significant
						Markets for				Observable				Unobservable
(in thousands)		June 30,				Identical Assets				Inputs				Inputs
Description		2008				(Level 1)				(Level 2)				(Level 3)
Investment securities (note 3)		$	404,035			$	404,035			$	—			$	—
Securities owned by Partnership Investments and Offshore Funds (note 4)			344,354				287,070				57,284				—
Securities sold but not yet purchased (note 4)			(13,710	)			(13,710	)			—				—
Total		$	734,679			$	677,395			$	57,284			$	—

(6) Minority Interest in Calamos Holdings LLC

Minority interest in Calamos Holdings LLC represents the Calamos Interests’ aggregate ownership interest of 79.8% and 78.7% in Holdings at June 30, 2008 and December 31, 2007 respectively, and is derived by multiplying the historical equity of Holdings by their aggregate ownership percentage for the periods presented. Issuances and repurchases of CAM’s common stock result in changes to CAM’s ownership percentage and to the minority interests’ ownership percentage of Holdings. The Company’s corresponding changes to stockholders’ equity are reflected in the consolidated statements of changes in stockholders’ equity. Income is allocated to minority interests based on the average ownership interest during the period in which the income is earned. A rollforward of minority interest for the six months ended June 30, 2008 is presented below:

(in thousands)
Minority interest at December 31, 2007		$	352,205
Income allocated to minority interests			54,585
Changes in unrealized gains (losses) on available-for-sale securities			(35,177	)
Reclassification adjustment for realized gains on sale of available-for-sale securities			(16,155	)
Sale of Calamos Holdings LLC membership units			(27,469	)
Cumulative impact of changes in ownership of Calamos Holdings LLC units			3,265
Compensation expense recognized under stock incentive plans			2,829
Tax distributions			(33,859	)
Equity distributions			(16,940	)
Minority interest at June 30, 2008		$	283,284

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

(7) Earnings Per Share

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

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(in thousands, except per share data)		2008				2007				2008				2007
Earnings per share – basic
Earnings available to common shareholders		$	1,896			$	3,805			$	2,345			$	11,339
Weighted average shares outstanding			19,743				22,847				20,040				23,084
Earnings per share – basic		$	0.10			$	0.17			$	0.12			$	0.49
Earnings per share – diluted
Income before minority interest in Calamos Holdings LLC and income taxes		$	66,208			$	26,785			$	69,068			$	80,077
Less: Impact of revaluation of net deferred tax assets			33,287				—				32,888				—
Less: Impact of income taxes			24,319				10,906				25,592				32,295
Earnings available to common shareholders		$	8,602			$	15,879			$	10,588			$	47,782
Weighted average shares outstanding			19,743				22,847				20,040				23,084
Conversion of membership units for common stock			77,000				77,000				77,000				77,000
Dilutive impact of restricted stock units			309				387				292				376
Dilutive impact of stock options			—				55				—				66
Weighted average diluted shares outstanding			97,052				100,289				97,332				100,526
Earnings per share – diluted		$	0.09			$	0.16			$	0.11			$	0.48

Diluted shares outstanding for the three and six months ended June 30, 2008 and 2007 are calculated (a) assuming that Calamos Interests exchanged all of their membership units in Holdings for shares of the Company’s Class A common stock on a one-for-one basis at the beginning of each period presented and (b) including the effect of outstanding restricted stock unit and stock option awards. In calculating diluted earnings per share, the Company assumes that the net deferred tax assets will increase at a rate commensurate with the Company’s increased ownership of Holdings at the time of Calamos Interests’ exchange. As a result of the reduction of the Company’s statutory income tax rate (see note 10), the net deferred tax assets would decrease by $33.3 million and $32.9 million for the three and six months ended June 30, 2008. Additionally, an effective tax rate of 36.9% and 37.1% was applied to income before minority interest in Calamos Holdings LLC and income taxes for the three and six months ended June 30, 2008. An effective tax rate of 40.7% and 40.3% was applied to income before minority interest in Calamos Holdings LLC and income taxes for the three and six months ended June 30, 2007.

The Company uses the treasury stock method to reflect the dilutive effect of unvested restricted stock units (RSUs) and unexercised stock options on diluted earnings per share. Under the treasury stock method, if the average market price of common stock increases above the option’s exercise price, the proceeds that would be assumed to be realized from the exercise of the option would be assumed to be used to acquire outstanding shares of common stock. However, pursuant to SFAS No. 123(R), Share-Based Payment, 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 upon exercise. 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. For the three months ended June 30, 2008, stock options for 2,586,892 shares and RSUs for 486,694 shares were excluded from the computation of diluted earnings per share as they were anti-dilutive. For the six months ended June 30, 2008, stock options for 2,586,892 shares and RSUs for 212,618 shares were excluded from the computation of diluted earnings per share as they were anti-dilutive. For the three and six months ended June 30, 2007, stock options for 1,434,011 shares and RSUs for 381,570 shares were excluded from the computation of diluted earnings per share as they were anti-dilutive.

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

(8) Stock Based Compensation

Under the Company’s incentive compensation plan, certain employees of the Company receive stock based compensation comprised of stock options and RSUs. Historically, RSUs have been settled with newly issued shares so that no cash was used by the Company to settle awards; however, the Company may use treasury shares. The Company’s Annual Report on Form 10-K for the year ended December 31, 2007 provides details of this plan and its provisions.

For the six months ended June 30, 2008, the Company granted 969,516 stock options and 323,172 RSUs. There were forfeitures of 196,209 stock options and 81,168 RSUs during the six months ended June 30, 2008. The weighted average fair value of stock options at the date of grant for the six months ended June 30, 2008 was $6.55, which was estimated on the date of grant using the Black-Scholes option-pricing model. The assumptions used were dividend yields of 2.27% and 2.19%, expected volatility of 35%, risk-free interest rates of 3.3% and 4.4%, and an expected life of 7.5 years.

During the first half of 2008, 188,321 RSUs were exercised and, after 59,330 units were withheld for taxes, 128,991 RSUs were converted, on a one-for-one basis, for shares of CAM’s Class A common stock. The total intrinsic value and the fair value of the converted shares was $3.7 million. The total tax benefit realized in connection with the exercise of the RSUs during the six months ended June 30, 2008 was $445,000, as the Company receives tax benefits based upon the portion of Holdings’ income that it recognizes.

During the six months ended June 30, 2008, expense recorded in connection with the RSUs and stock options was $3.6 million of which $732,000, after giving effect to the minority interests, was credited as additional paid-in capital. During the six months ended June 30, 2007, expense recorded in connection with the RSUs and stock options was $3.5 million of which $800,000, after giving effect to the minority interests, was credited as additional paid-in capital. The amount of deferred tax asset created was $271,000 and $320,000 during the six months ended June 30, 2008 and 2007, respectively. At June 30, 2008, approximately $26.1 million of total unrecognized compensation expense related to nonvested stock option and RSU awards is expected to be recognized over a weighted-average period of 4.2 years.

(9) Total Other Income (Expense), Net

Total other income (expense), net was comprised of the following for the three and six months ended June 30, 2008 and 2007:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(in thousands)		2008				2007				2008				2007
Interest income		$	494			$	3,532			$	1,341			$	7,562
Interest expense			(8,162	)			(2,037	)			(16,263	)			(4,073	)
Net interest income (expense)			(7,668	)			1,495				(14,922	)			3,489
Capital gains and dividend income			22,418				170				24,478				680
Unrealized appreciation (depreciation)			1,299				6,936				(47,786	)			6,496
Miscellaneous other income			238				272				489				594
Investment and other income (loss)			23,955				7,378				(22,819	)			7,770
Minority interest in partnership investments			810				(3,020	)			13,269				(2,269	)
Total other income (expense), net		$	17,097			$	5,853			$	(24,472	)		$	8,990

Total other income (expense), net, after giving effect to income taxes, added $0.11 to diluted earnings per share and reduced diluted earnings per share by $0.16 during the three and six months ended June 30, 2008. Total other income (expense), net, after giving effect to income taxes, added $0.04 and $0.06 to diluted earnings per share during the three and six months ended June 30, 2007.

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

(10) Income Taxes

In 2008, developments in the Illinois tax statutes resulted in modifications to the Company’s state tax apportionment methodology that lowered the Company’s statutory income tax rate from 40 percent to 37 percent. In the second quarter of 2008, the Company recorded a one-time, non-cash income tax expense of $6.8 million to revalue its net deferred tax assets to reflect the new statutory income tax rate.

The provision for income taxes for the three and six months ended June 30, 2008 and 2007 consist of the following:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(in thousands)		2008				2007				2008				2007
Current:
Federal		$	2,918			$	678			$	3,072			$	3,533
State			240				162				277				841
Total current income taxes			3,158				840				3,349				4,374
Deferred:
Federal			1,760				1,432				1,851				2,657
State			6,917				341				6,938				632
Total deferred income taxes			8,677				1,773				8,789				3,289
Total income taxes		$	11,835			$	2,613			$	12,138			$	7,663

Deferred income taxes reflect the expected future tax consequences of temporary differences between carrying amounts and tax bases of the Company’s assets and liabilities. The significant components of deferred income taxes at June 30, 2008 and December 31, 2007 are as follows:

(in thousands)		2008				2007
Deferred tax assets:
Intangible assets		$	84,649			$	97,290
Unrealized net holding losses on investments of available-for-sale securities			2,102				—
Other			2,231				984
Total deferred tax assets			88,982				98,274
Deferred tax liabilities:
Unrealized net holding gains on investments of available-for-sale securities			—				3,191
Deferred sales commission			1,490				2,808
Other			821				1,991
Total deferred tax liabilities			2,311				7,990
Net deferred tax assets		$	86,671			$	90,284

Deferred tax assets and liabilities are reflected on the Company’s consolidated statements of financial condition as a net deferred tax asset. The current and non-current portions of the net deferred tax asset were $9.1 million and $77.6 million, respectively, at June 30, 2008 and $6.9 million and $83.4 million at December 31, 2007.

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

The following table reconciles the statutory federal income tax rate to the effective income tax rate for the three and six months ended June 30, 2008 and 2007, respectively.

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(in thousands)		2008				2007				2008				2007
Statutory U.S. federal income tax rate			35.0	%			35.0	%			35.0	%			35.0	%
State income taxes, net of federal tax benefits			2.0	%			5.0	%			2.0	%			5.0	%
Other non-deductible items			(0.1	)%			0.7	%			0.1	%			0.3	%
Effective income tax rate			36.9	%			40.7	%			37.1	%			40.3	%

(11) Common Stock Repurchase

In 2007, the Board of Directors authorized the Company to repurchase up to 2 million shares of Class A common stock, all of which have been repurchased as of June 30, 2008. During the first half of 2008, the Company repurchased 1,547,900 shares at an aggregated cost of $34.6 million.

In order to maintain a one-for-one relationship between the Holdings’ membership units owned by CAM and CAM’s outstanding Class A common stock and to provide CAM with cash to repurchase shares, CAM sold membership units to Holdings equal to the number of shares of Class A common stock that it repurchased, thus reducing CAM’s ownership in Holdings. The net impact of these transactions is presented in the consolidated statements of changes in stockholders’ equity.

(12) Recently Issued Accounting Pronouncements

In December 2007, the FASB issued SFAS 141(R), Business Combinations, which establishes requirements for how the acquirer in a business combination recognizes, measures and discloses identified assets and goodwill acquired, liabilities assumed, and any noncontrolling interests. SFAS 141(R) is effective for the Company for any business combination with an acquisition date that is on or after January 1, 2009. The Company is currently evaluating the impact, if any, that the adoption of SFAS 141(R) will have on its financial statements.

In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51, which establishes accounting and reporting requirements for noncontrolling interest, which the Company currently refers to as minority interest. SFAS 160 would require noncontrolling interest to be reported as a component of equity on the consolidated statements of financial position and the amount of net income attributable to noncontrolling interest to be identified on the consolidated statements of income. SFAS 160 is effective for the Company beginning January 1, 2009. The Company is currently evaluating the impact, if any, that the adoption of SFAS 160 will have on its financial statements.

In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133, which requires additional disclosures for derivative instruments and hedging activities. SFAS 161 is effective for the Company beginning January 1, 2009. The Company is currently evaluating the impact, if any, that the adoption of SFAS 161 will have on its financial statements.

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

We provide investment advisory services to institutions and individuals, managing $41.2 billion in client assets at June 30, 2008. Our operating results fluctuate primarily due to changes in the total value and composition of our assets under management. The value and composition of our assets under management are, and will continue to be, influenced by a variety of factors, including purchases and redemptions of shares of mutual funds and separate accounts that we manage, 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.

We market our investment strategies to our clients through a variety of products designed to suit their investment needs. We currently offer five types of mutual fund and separate account investment products. The following table details our assets under management at June 30, 2008 and 2007.

		June 30,
(in millions)		2008				2007
Mutual Funds
Open-end funds		$	24,005			$	25,996
Closed-end funds			6,688				7,290
Total mutual funds			30,693				33,286
Separate Accounts
Institutional accounts			5,232				4,710
Managed accounts			5,232				5,677
Alternative investments			53				138
Total separate accounts			10,517				10,525
Total assets under management		$	41,210			$	43,811

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

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

Operating Results

Second Quarter and Six Months Ended June 30, 2008 Compared to Second Quarter and Six Months Ended June 30, 2007

Assets Under Management

Assets under management decreased by $2.6 billion, or 6%, to $41.2 billion at June 30, 2008 from $43.8 billion at June 30, 2007. At June 30, 2008, our assets under management consisted of 74% mutual funds and 26% separate accounts, compared to 76% mutual funds and 24% separate accounts at June 30, 2007.

		Three Months Ended June 30,																Six Months Ended June 30,
										Change																Change
($ in millions)		2008				2007				Amount				Percent				2008				2007				Amount				Percent
Mutual Funds
Beginning assets under management		$	30,658			$	32,086			$	(1,428	)			(4	)%		$	34,835			$	33,704			$	1,131				3	%
Net purchases (redemptions)			(282	)			(766	)			484				63				(732	)			(2,718	)			1,986				73
Market appreciation (depreciation)			317				1,966				(1,649	)			(84	)			(3,410	)			2,300				(5,710	)			*
Ending assets under management			30,693				33,286				(2,593	)			(8	)			30,693				33,286				(2,593	)			(8	)
Average assets under management			32,114				32,979				(865	)			(3	)			31,758				32,995				(1,237	)			(4	)
Separate Accounts
Beginning assets under management			10,248				10,464				(216	)			(2	)			11,373				11,021				352				3
Net purchases (redemptions)			83				(540	)			623				*				189				(1,219	)			1,408				*
Market appreciation (depreciation)			186				601				(415	)			(69	)			(1,045	)			723				(1,768	)			*
Ending assets under management			10,517				10,525				(8	)			0				10,517				10,525				(8	)			0
Average assets under management			10,834				10,565				269				3				10,728				10,696				32				0
Total Assets Under Management
Beginning assets under management			40,906				42,550				(1,644	)			(4	)			46,208				44,725				1,483				3
Net purchases (redemptions)			(199	)			(1,306	)			1,107				85				(543	)			(3,937	)			3,394				86
Market appreciation (depreciation)			503				2,567				(2,064	)			(80	)			(4,455	)			3,023				(7,478	)			*
Ending assets under management			41,210				43,811				(2,601	)			(6	)			41,210				43,811				(2,601	)			(6	)
Average assets under management		$	42,948			$	43,544			$	(596	)			(1	)%		$	42,486			$	43,692			$	(1,206	)			(3	)%

Mutual funds had net redemptions of $282 million and $732 million during the second quarter and first half of 2008, respectively, compared to net redemptions of $766 million and $2.7 billion in the prior-year periods. These decreases in net redemptions were primarily due to higher purchases and lower redemptions of our Growth Fund, which comprises a significant percentage of our total assets under management, as well as the introduction of our offshore funds that continue to accumulate assets. These improvements were partially offset by lower net sales in 2008 resulting from $802 million of Calamos Global Dynamic Income Fund (CHW) purchases during the second quarter of 2007 that did not recur in 2008. Mutual funds had market appreciation of $317 million and market depreciation of $3.4 billion during the three and six months ended June 30, 2008, respectively, compared to market appreciation of $2.0 billion and $2.3 billion during the 2007 periods.

Separate accounts had net purchases of $83 million and $189 million during the second quarter and year-to-date periods ended June 30, 2008, respectively, compared to net redemptions of $540 million and $1.2 billion during the prior-year periods, primarily due to significant improvements in the net flows of institutional accounts which has been a strategic focus. Separate accounts had market appreciation of $186 million and market depreciation of $1.0 billion during the three and six months ended June 30, 2008, respectively, compared to market appreciation of $601 million and $723 million during the 2007 periods.

Impact of One-Time Items

Results of operations for the three and six months ended June 30, 2008 and 2007 were significantly impacted by certain one-time expenses. In 2008, developments in the Illinois tax statutes resulted in modifications to the Company’s state tax apportionment methodology that lowered the Company’s statutory income tax rate from 40 percent to 37 percent. While we view this to be beneficial for the long term by reducing income taxes, we recorded a one-time, non-cash income tax expense of $6.8 million, or $0.34 per diluted share, in the second quarter of 2008 to revalue our net deferred tax assets to reflect the new statutory income tax rate. The 2007 periods were impacted by two one-time marketing and sales promotion expenses. During the second quarter of 2007, we incurred a one-time expense of $19.5 million, or 12 cents per diluted share, by terminating our remaining two additional compensation agreements that required us to make recurring payments of approximately $2.6 million annually based on the assets of Calamos Convertible Opportunities and Income Fund and Calamos Strategic Total Return Fund. Additionally, we incurred a $6.9 million, or 4 cents per diluted share, one-time structuring fee related to the launch of the Calamos Global Dynamic Income Fund (CHW) during the second quarter of 2007.

Management considers results adjusted for these one-time expenses, as presented below, to provide a better indication of the company’s operations. These adjusted items are considered “non-GAAP financial measures” as defined by Regulation S-K of the Securities and Exchange Commission. In evaluating operating performance, management considers operating expenses, operating income, operating income per diluted share, net of income taxes, operating margin, net income and diluted earnings per share, each calculated in accordance with accounting principles generally accepted in the United States (GAAP), and each item on an as-adjusted basis, which constitute non-GAAP financial measures. Items presented on an as-adjusted basis exclude the impact of the revaluation of the net deferred tax assets in the second quarter of 2008 and the impact of terminating the two closed-end fund additional compensation agreements and the CHW closed-end fund structuring fees in the second quarter of 2007. As these one-time items are not expected to recur, management believes that excluding these items better enables it to evaluate the company’s operating performance relative to the prior periods. Management considers these non-GAAP financial measures when evaluating the performance of the company and believes the presentation of these amounts provides the reader with information necessary to analyze the company’s operations for the periods compared. Reconciliations of these measurements from the most directly comparable GAAP financial measures for the three and six months ended June 30, 2008 and 2007 are provided in the table below and should be carefully evaluated by the reader:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
($ in thousands)		2008				2007				2008				2007
Operating expenses		$	63,127			$	93,835			$	129,391			$	159,380
Termination of closed-end fund compensation agreements			—				19,500				—				19,500
Closed-end fund structuring fees			—				6,904				—				6,904
Operating expenses, as adjusted		$	63,127			$	67,431			$	129,391			$	132,976
Operating income		$	49,111			$	20,932			$	93,540			$	71,087
Termination of closed-end fund compensation agreements			—				19,500				—				19,500
Closed-end fund structuring fees			—				6,904				—				6,904
Operating income, as adjusted		$	49,111			$	47,336			$	93,540			$	97,491
Operating income per diluted share, net of income taxes		$	0.32			$	0.12			$	0.61			$	0.42
Termination of closed-end fund compensation agreements			—				0.12				—				0.11
Closed-end fund structuring fees			—				0.04				—				0.04
Operating income per diluted share, net of income taxes, as adjusted		$	0.32			$	0.28			$	0.61			$	0.57
Operating margin			43.8	%			18.2	%			42.0	%			30.8	%
Termination of closed-end fund compensation agreements			—				17.0				—				8.5
Closed-end fund structuring fees			—				6.0				—				3.0
Operating margin, as adjusted			43.8	%			41.2	%			42.0	%			42.3	%
Net income		$	1,896			$	3,805			$	2,345			$	11,339
Termination of closed-end fund compensation agreements			—				2,634				—				2,634
Closed-end fund structuring fees			—				933				—				933
Net deferred tax assets revaluation			6,771				—				6,771				—
Net income, as adjusted		$	8,667			$	7,372			$	9,116			$	14,906
Diluted earnings per share		$	0.09			$	0.16			$	0.11			$	0.48
Termination of closed-end fund compensation agreements			—				0.12				—				0.11
Closed-end fund structuring fees			—				0.04				—				0.04
Net deferred tax assets revaluation			0.34				—				0.34				—
Diluted earnings per share, as adjusted		$	0.43			$	0.32			$	0.45			$	0.63