FORM 10-K
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, 2008
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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
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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
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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2020 Calamos Court,
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60563
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Naperville, Illinois
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(Zip Code)
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(Address of principal executive
offices)
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Registrants telephone number, including area code:
630-245-7200
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each
class
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Name of each exchange on
which registered
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Class A Common Stock, $0.01 par value
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The NASDAQ Stock Market LLC
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Securities registered pursuant to Section 12(g) of the
Act:
None
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. þ
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):
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Large accelerated
filer o
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Accelerated
filer þ
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Non-accelerated
filer o
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Smaller reporting
company o
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(Do not check if smaller reporting company)
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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, 2008, the last
business day of the registrants most recently completed
second fiscal quarter, was $330.7 million.
At February 28, 2009, there were 19,621,037 shares of
Class A common stock and 100 shares of Class B
common stock outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Part III Portions of the definitive proxy
statement for our Annual Meeting of Shareholders on May 22,
2009, as specifically described herein.
PART I
Unless the context otherwise requires, references to
we, us, our and
our company refer to Calamos Asset
Management, Inc., a Delaware corporation incorporated on
July 23, 2004, and its consolidated subsidiaries, including
Calamos Holdings LLC and the operating company subsidiaries of
Calamos Holdings LLC.
Calamos Advisors refers to Calamos Advisors
LLC, a Delaware limited liability company, an investment advisor
registered with the U.S. Securities and Exchange Commission
(SEC) and wholly owned subsidiary of Calamos Holdings LLC.
Calamos Advisors acts as an investment advisor in managing our
separate accounts and mutual funds;
Calamos Family Partners refers to Calamos
Family Partners, Inc., a Delaware corporation, and our
predecessor holding company. Calamos Family Partners is a
private firm owned by members of the Calamos family and owns all
the outstanding shares of our Class B common stock;
Calamos Global Funds and Offshore
Funds refer to Calamos Global Funds PLC, an
Ireland-domiciled open-end umbrella company consisting of
Undertakings for Collective Investment in Transferable
Securities (UCITS), which are registered in the Republic of
Ireland;
Calamos Financial Services refers to Calamos
Financial Services LLC, a Delaware limited liability company and
broker-dealer registered under the Securities Exchange Act of
1934, as amended, and a wholly owned subsidiary of Calamos
Holdings LLC. Calamos Financial Services acts as the sole
distributor of our family of open-end mutual funds and of the
Offshore Funds; and
Calamos Interests refers to Calamos Family
Partners and John P. Calamos, Sr., our Chairman of the
Board, chief executive officer and co-chief investment officer.
Mr. Calamos also holds the controlling interest in Calamos
Family Partners.
The other operating company subsidiaries of Calamos Holdings LLC
are Calamos Partners LLC, a registered investment advisor that
provides investment management services primarily related to
alternative investment products, and Calamos Wealth Management
LLC, a registered investment advisor that provides wealth
management services, including asset allocation and investment
advisory services, to high net worth individuals, family offices
and foundations. Calamos Property Management LLC is also a
subsidiary of Calamos Holdings LLC and was established to
provide real estate investment services.
The assets under management and other financial data presented
in this report with respect to the mutual funds that 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
For more than 30 years, we have provided investment
advisory services to institutions and individuals, managing
$24.0 billion in client assets at December 31, 2008.
We have consistently applied an investment philosophy and
proprietary process centered on risk management across a range
of investment strategies, including equity, balanced,
convertible, high yield, alternative, fixed income and money
market investments. We believe this disciplined adherence to our
investment philosophy and process has enabled us to deliver
superior risk-adjusted returns over the long term, which we
define as investment returns that are superior to performance
benchmarks with an equal or lower level of assumed risk.
We seek institutional and individual clients with long-term
investment horizons. We make our range of investment strategies
and services available to these clients, directly and through
intermediaries, by offering an array of investment products
designed to suit their investment needs, such as open-end funds,
closed-end funds and separate accounts. We plan to continue to
introduce new investment strategies and supporting services that
will provide the opportunity for attractive risk-adjusted
returns.
We believe our investment performance, broad range of investment
strategies, diverse product offerings, emphasis on client
service and sales efforts have allowed us to grow our assets
under management and revenues historically throughout the years.
In the fourth quarter of 2008, the severe distress in the
capital markets resulting from a global credit crisis and loss
of investor confidence drove security valuations significantly
lower across nearly every asset class. This severe
2
distress had an adverse impact on our business by driving down
our assets under management. In response to the continuing
market turmoil, we implemented a series of cost savings
initiatives and also prepaid a considerable portion of our
outstanding indebtedness. While we recognized losses in 2008
from the liquidation of a significant portion of our investment
portfolio to repay this indebtedness, we believe this action was
prudent during these turbulent markets. We have delivered and
strengthened our balance sheet while still maintaining capital
to continue to grow our business.
Despite the unprecedented turmoil in the global markets,
Standard & Poors affirmed its investment-grade
rating of BBB+ for Calamos Holdings LLC in February 2009,
further evidence of the positive impact that our efforts to
strengthen our balance sheet and right-size our cost structure
had on our business.
We provide additional information about Calamos Asset
Management, Inc. on the Investor Relations section of our
website at
http://investors.calamos.com.
This information includes corporate governance documents, press
releases, investor presentations, SEC filings and assets under
management reports. We encourage you to visit and review our
website.
Business
Strategy
Our investment philosophy and process strives to deliver
superior risk-adjusted returns over the long term and drive
significant growth in assets under management. Our business
strategy is designed to ensure we maintain and build upon our
investment focus. We apply a team approach to investment
research and portfolio management, which allows us to
significantly leverage our investment talent.
Our goal is to continue to grow our business by diversifying the
assets we manage by investment strategy, product, service and
type of client within our core competencies. We have selectively
created complementary investment products over the years in
order to take advantage of market opportunities for attractive
risk-adjusted returns. Key to executing this strategy is our
emphasis on building our capabilities in order to support
growth, improving client responsiveness and positioning our
business for long-term expansion. In 2008, we continued to
improve the caliber and scope of our capabilities in portfolio
management, sales, marketing and other functions.
In executing our business strategy, managing historical growth
and planning for future growth, we have been, and will continue
to be, guided by the following principles:
Maintain
Superior Investment Performance
We have developed proprietary research capabilities, including
an expertise in valuing companies, taking into consideration
their total capital structure. As a result, we have a record of
achieving high, risk-adjusted returns over the long term for the
mutual funds and separate accounts that we manage. As of
December 31, 2008, Lipper ranked our Growth Fund as the
number 3 multi-cap growth fund for 10 years among 144
funds, our Convertible Fund as the number 2 convertible
securities fund for 10 years among 41 funds, our Growth and
Income Fund the number 9 flexible portfolio fund for
10 years among 48 funds, and our Market Neutral Income Fund
as the number 1 equity market-neutral fund for 10 years
among 11
funds.(1) Our
strategy is to maintain our performance by consistently applying
our investment philosophy and process while actively managing
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 assets during changing market
conditions. Accordingly, we have chosen to expand our product
offerings selectively and have closed, and expect to continue to
close, products to new investments or discontinue products
during periods when we do not believe satisfactory risk-adjusted
returns can be achieved with additional client funds.
In 2008, the global capital markets faced unprecedented
challenges emanating from the global credit crisis and a loss of
confidence in the financial system. Systemic risk and panic
selling created extraordinary conditions in the global capital
markets, and nearly every asset class came under extreme
pressure. Our performance in 2008 was
(1) Source:
Lipper: As of
12/31/08:
Growth Fund: #475 for 1 year and #238 for
5 years among 506 and 238 multi-cap growth funds,
respectively; Convertible Fund: #4 for 1 year
and #5 for 5 years among 70 and 59 convertible funds,
respectively; Growth and Income Fund: #121 for
1 year and #56 for 5 years among 169 and 83
flexible portfolio funds, respectively. Market Neutral Income
Fund: #35 for 1 year and #17 for 5 years
among 46 and 23 equity market-neutral funds, respectively;
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 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
annual report on
Form 10-K
are subject to change without notice and are based on past
performance, which may not be predictive of future results.
3
reflective of this environment. However, we continue to maintain
conviction in our investment capabilities, and believe that we
have positioned our portfolios advantageously for a return to
more normalized market conditions.
Focus
on Clients, With an Emphasis on Serving Long-Term
Investors
A guiding principle is to have our clients best interests
in mind and to work diligently and professionally to exceed
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.
In particular, we seek to attract, develop and maintain
long-term client relationships by providing excellent client
service, including educating investors about our investment
philosophy and process.
Selectively
Expand Our Investment Strategies
Since the introduction of our first convertible strategy in
1977, we have expanded our product offerings. In 1990, we
introduced our first equity strategy and in subsequent years
broadened our investment offerings to include high yield, large
cap, total return, international, equity-oriented alternative
and fixed income investment strategies. Each expansion has
leveraged our core competency in investment research and
portfolio management, which generally is based on internal
expertise, but may from time to time require us to recruit
investment talent in other areas, such as fixed income. In 2008,
we introduced a
130/30
growth equity fund, and an emerging markets growth fund. We will
continue to expand our investment strategies selectively in
areas where we determine we can produce attractive risk-adjusted
returns over the long term, including alternative investment
offerings. We believe that by doing so, we can enhance our
ability to increase assets under management and revenues.
To ensure we are aligned with our clients, our practice has been
to invest with our clients. At December 31, 2008, we had a
total of $189 million of our own assets invested in our
investment strategies. We also view managing our corporate
investment portfolio, which is part of our broader strategy to
expand and diversify our business, as a way to produce
alternative sources of revenue that in turn allows us to invest
in and expand our company.
Expand
Our Distribution Relationships and Client Base
Our first institutional account mandate was initiated in 1981
for a pension fund account. In the late 1980s, we became one of
the first participants in the broker-sponsored managed account
business. In 2002, we launched the first of our five closed-end
funds. As we have done in the past, 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. In recent years, we
have placed greater emphasis on institutional investors,
including private pension funds, public funds, endowment funds,
banks and insurance companies; 401(k) platforms, broker
consultants, broker-dealers, registered investment advisers,
financial planners and other channels for mutual funds and
managed account products; and family offices, private
foundations and high net worth investors.
In 2008, we increased our focus on institutional distribution
through additions to staff in both direct institutional sales
and consultant relations. Additionally, within the
U.S. defined contribution channel, we increased our sales
staff and were successful in establishing relationships with a
number of significant partners delivering full-service
retirement products to plan sponsors. While we continued to
focus on our large strategic distribution partnerships with
national and large regional broker-dealers domestically, we also
increased our sales and marketing efforts in both the
independent broker-dealer and registered investment adviser
channels to better position us to serve the growing number of
financial advisors in those channels. This initiative was
accelerated in 2008 due the significant changes in the
U.S. distribution landscape. With respect to
non-U.S. markets,
we initiated relationships with distribution and marketing firms
based in Europe during 2008 and are working with certain of our
large strategic partners domestically to gain access to their
offshore platforms. We believe that such relationships will help
us extend our reach into
non-U.S. markets.
In 2009, as part of our ongoing efforts to expand our
distribution opportunities and client base, we plan to focus on
the institutional market, retirement platforms and high net
worth opportunities, and selectively increase the number of
intermediaries that distribute Calamos products domestically and
abroad. We will also seek to further build our
non-U.S. distribution
capabilities through other strategic relationships.
4
We also see opportunities to expand our wealth management
business, which dates back to 1977.
Capitalize
on Our Recognized and Respected Brand
We believe that brand awareness can lead to asset growth and
help expand our client base. Over the years, we have been
recognized for producing superior long-term investment
performance across a range of investment strategies. For
example, Investors Business Daily (April
2008) ranked the Calamos Growth Fund the top growth
fund since April 4, 1994s market low and since
January 31, 1994s market peak. Fortune named
Calamos Growth and Income Fund as one of six strong,
steady performers that delivered both profits and peace of
mind in its Funds That Let You Sleep at Night
article (May 2008). Morningstar favorably commented upon the
long-term performance of Calamos Convertible Fund (October
2008) and Calamos Market Neutral Income Fund (Bond
Funds: Separating the Wheat from the Chaff, January 2008).
The Wall Street Journal wrote of Calamos Market Neutral
Income Funds strong track record and reasonable
expenses among long-short funds (March 2008).
We have also raised brand awareness through strategic
sponsorships. These included sponsorship of conferences in the
United States and Europe which targeted leading financial
professionals.
Our co-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.
They frequently discuss their investment insights on CNBC and
Bloomberg TV, among others. We believe that as a public company,
we have been able to strengthen the Calamos brand and awareness
of our investment philosophy.
Investment
Philosophy, Management and Process
Investment
Philosophy
We believe that a successful investment philosophy must be
consistent and long-term oriented. Our investment philosophy is
based on our views about the longer-term trends and economic
conditions that affect financial markets. We assume there will
always be unforeseen events that will continually test
conventional wisdom. We believe we can achieve favorable
investment results over the long term based on our experience in
many market environments, our continued study of economics and
financial markets, and our application of a sound investment
process that can cope with volatility and risk associated with
financial markets. Because of this 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 investment returns.
We seek to provide our clients with superior risk-adjusted
returns over the long term. While seeking to achieve strong
returns, we focus first 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 make decisions on individual securities in the context of our
perspective on macroeconomic themes in the U.S. and across
the globe. While the market may not always follow the same
pattern every economic cycle, history provides a valuable
context for evaluating the risks and opportunities of the
current investment environment. Our investment decision-makers
have years of experience managing through many market cycles.
Investment
Management
We employ a team approach to portfolio management and draw on
the experience and expertise of more than 50 investment
professionals. Our various investment teams are generally
comprised of senior strategy analysts, intermediate analysts and
junior analysts. The teams are led by our co-chief investment
officers John P. Calamos, Sr. and Nick P. Calamos. While
day-to-day management of the portfolios is a team effort, the
senior strategy analysts, along with our co-chief investment
officers, have primary and supervisory responsibility for the
portfolios and work with team members to develop and execute the
portfolios investment program. 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
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provides for more consistent investment performance over the
long term and provides for significant leverage of our
investment talent.
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 the long-term component of our
incentive compensation plan. Through this plan, investment team
members can share in the overall success of our company. As of
year-end 2008, our investment management team included 68
members focused on portfolio management and research, trading,
portfolio administration and developing analytical models. To
accommodate the diversification and growth of our investment
strategies, we intend over the long term to continue hiring
investment professionals who can complement and add to our core
competencies.
Investment
Process
Our investment process combines our insights about economic
conditions and broader investment themes with our analysis of
individual securities. We use a proprietary, integrated research
and monitoring process that leverages our years of experience
and application, as well as long-standing principles and current
academic research. Risk management is integrated fully
throughout all aspects of our investment approach. Our process
relies on qualitative research and also employs a variety of
quantitative tools.
Our investment process incorporates top-down analysis of the
global macroeconomic environment, sectors and (as appropriate)
regions and countries. We also identify long-term secular themes
that we believe will influence opportunities for decades to
come. Our experience has shown that these secular themes provide
a powerful tailwind to select companies, particularly during
periods of slower economic growth and less hospitable business
environments. Our top-down analysis is paired with our
comprehensive security research. We first determine the
intrinsic value of the company, and then utilize quantitative
and qualitative inputs to value the various securities within
its capital structure. We believe the thorough understanding of
a company from both a debt and equity security perspective
allows us to gain a truer understanding of a companys
potential and its risks. The key steps in this
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.
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Investment candidates emerge from the intersection of top-down
and
bottom-up
analysis. These securities are vetted more extensively within
the context of the overall portfolio. Continual monitoring and
risk management analysis is intended to ensure that each
portfolio maintains appropriate diversification and risk/reward
characteristics.
Moreover, in addition to our 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 operating officer investments and
information technology. We have consistently sought
technological advantages to improve the investment process and
continue to devote significant resources in this area.
In 2008, our investment portfolios struggled amid a severe loss
of confidence in the global financial system. However, we
believe that 2008 was an extraordinary period, as systemic risk
caused virtually every asset class (other than
U.S. Government securities) to significantly decline. Based
on our extensive experience investing through more typical
market cycles, we remain confident in our process and its
ability to create wealth for clients over the long term.
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Investment
Strategies
The following table describes our investment strategies and
corresponding assets under management at December 31, 2008
(in billions).
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Equity
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$
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9.5
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Invests in a range of global companies of various market
capitalization under both growth and value disciplines
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Balanced
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7.4
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Invests in dynamic blend of convertible securities, equities and
high yield securities, globally
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Convertible .
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4.1
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Invests primarily in convertible securities
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High Yield
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1.6
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Invests in high yield securities or junk bonds, as
well as higher-yielding convertible securities
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Alternative
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1.2
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Invests in non-traditional strategies, including market neutral,
convertible arbitrage and leveraged equity, among others
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Fixed Income
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0.2
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Invests in U.S. investment-grade bond market, international and
high-yield securities, U.S. Government Agency obligations and
repurchase agreements collateralized by U.S. Government Agency
obligations.
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Total
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$
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24.0
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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 four types of investment products that
fall into the categories of mutual funds and separate accounts.
Mutual
Funds
Mutual funds are pools of funds collected from many investors
and include open-end funds and closed-end funds registered under
the Investment Company Act of 1940, as amended, as well as our
Offshore Funds. We include the Offshore Funds in open-end funds
for reporting purposes.
Open-End
Funds
At December 31, 2008, we had $13.6 billion of assets
under management in open-end funds, representing approximately
57% 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 Calamos Convertible
Fund, in 1985. We have since expanded our open-end fund products
and services to invest in securities worldwide and to include
equity, balanced, high yield, convertible, alternative, fixed
income and money market strategies that we believe offer
attractive risk-adjusted return potential. In 2007, we
introduced a global equity fund, a government money market fund
and a total return bond fund. Additionally, in 2007, we
established Calamos Global Funds PLC, an Ireland-domiciled
open-end umbrella company consisting of Undertakings for
Collective Investment in Transferable Securities (UCITS), also
referred to as Offshore Funds, which are registered in the
Republic of Ireland.
In 2008, we introduced a
130/30
equity fund and an evolving world-growth fund. Also, in October
2008, we reopened our convertible fund, which had been closed
since 2003. We had closed the fund because we believed doing so
was in the best interest of current shareholders, based on our
analysis of the supply and demand trends in the convertible
market. In 2008, the broad sell-off in the convertible markets
created what we believe to be unprecedented opportunities for
long-term investors.
As of year-end 2008, we acted as the investment advisor to 15
open-end funds and four Offshore Funds offered to customers
primarily through financial intermediaries. 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.
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Calamos Advisors manages the strategies of each of the open-end
funds with the goal of achieving higher returns than their
respective benchmarks over the long term, but 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 following table provides the assets under management
for each open-end fund managed as of December 31, 2008:
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Assets Under
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Fund and
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Management at
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Ticker Symbol
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December 31, 2008
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Year of
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(A Shares)
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(in billions)
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Inception
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Description
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Growth
CVGRX
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$
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6.7
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1990
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Seeks long-term capital growth by investing in U.S. equities
identifying companies with higher growth relative to peers
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Blue Chip
CBCAX
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0.1
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2003
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Seeks long-term capital growth by investing in equities of
larger, established U.S. companies with balance sheet strength,
which can help mitigate downside risk
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Value
CVAAX
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0.1
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2002
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Seeks long-term capital growth by investing in the equities of
U.S. companies that are trading well below their intrinsic
values but possess identifiable potential catalysts that can
spur them to normal levels
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International Growth
CIGRX
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0.2
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|
|
|
2005
|
|
|
Seeks long-term capital growth by targeting securities of
non-U.S. companies that demonstrate acceleration in revenue
growth, earnings growth and return on capital
|
Global Equity
CAGEX
|
|
|
0.1
|
|
|
|
2007
|
|
|
Seeks long-term capital growth by investing in global securities
of companies with balance sheet strength
|
Global Growth and Income
CVLOX
|
|
|
0.6
|
|
|
|
1996
|
|
|
Seeks high long-term total return through capital appreciation
and current income, while offering a defensive approach to
equity exposure by strategically allocating stocks, convertible
and fixed-income securities among countries and security types
|
Multi-Fund Blend
CMQAX
|
|
|
n/a
|
|
|
|
2006
|
|
|
As a fund of three Calamos funds, seeks long-term capital growth
and, secondarily, current income by investing in the I shares of
the Growth Fund, Global Growth and Income Fund, and Value Fund
|
Growth and Income
CVTRX
|
|
|
3.2
|
|
|
|
1988
|
|
|
Seeks high long-term total return through growth and current
income by allocating investments among equity, convertible and
fixed-income securities
|
130/30 Equity
CELSX
|
|
|
0.1
|
|
|
|
2008
|
|
|
Seeks long-term capital growth by investing approximately 80% of
managed assets in U.S. equities and 30% of net assets in
short-selling securities
|
Evolving World Growth
CNWGX
|
|
|
0.1
|
|
|
|
2008
|
|
|
Seeks long-term capital growth by investing in securities of
companies based in developing countries or with ties to emerging
economies
|
High Yield
CHYDX
|
|
|
0.1
|
|
|
|
1999
|
|
|
Seeks the highest level of current income obtainable with
reasonable risk, with a secondary objective of capital
appreciation, by combining higher-yielding fixed income and
convertible securities to achieve greater equity sensitivity
than a traditional non-convertible fixed income allocation
|
Total Return Bond
CTRAX
|
|
|
0.1
|
|
|
|
2007
|
|
|
Seeks total return, consistent with preservation of capital, by
investing across the broad sectors of the U.S. investment-grade
bond market, as well as international and high-yield securities
|
Convertible (1)
CCVIX
|
|
|
0.8
|
|
|
|
1985
|
|
|
Seeks current income, with a secondary objective of capital
growth, by investing in convertible securities issued by U.S.
and foreign companies
|
Market Neutral Income
CVSIX
|
|
|
1.2
|
|
|
|
1990
|
|
|
Seeks high current income consistent with stability of principal
by dynamically combining complementary income-producing
strategies such as convertible arbitrage and covered call writing
|
Government Money Market.
CGIXX
|
|
|
0.1
|
|
|
|
2007
|
|
|
Seeks current income, consistent with liquidity and stability of
capital, by investing exclusively in U.S. Government Agency
obligations and repurchase obligations collateralized by U.S.
Government Agency obligations
|
Calamos Global Funds
|
|
|
0.1
|
|
|
|
2007
|
|
|
Four offshore funds offered to non U.S. investors, including the
Calamos Growth Fund, the Calamos U.S. Opportunities Fund, the
Calamos Global Opportunities Fund and the Calamos Global Equity
Fund
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
13.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Re-opened to new investments effective October 8, 2008
after being closed since April 2003. |
8
Closed-End
Funds
At December 31, 2008, we had $3.9 billion of assets
under management in closed-end funds, representing approximately
16% 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 and sell those shares to other
investors through an exchange or broker-dealer market.
We introduced our first closed-end fund, Calamos 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 five closed-end funds, each of which trades on the
New York Stock Exchange.
Each of the Calamos closed-end funds employs leverage in its
capital structure. With leverage, we seek to generate additional
dividend potential for the common shareholders based on
historical differences between short-term and long-term taxable
interest rates. Leverage involves borrowing at shorter-term
rates and investing the proceeds at longer-term rates of return,
which are typically higher. We continually assess our use of
leverage because certain market conditions are not conducive to
executing this strategy.
Historically, the Funds employed leverage through the issuance
of auction rate preferred securities (ARPS), which are
long-term, high-quality equity securities with interest rates
which are adjusted every seven or 28 days through an
auction process. In early 2008, the auction process for the ARPS
market ceased to function and the ARPS became illiquid. As a
result, potential sellers were not able to liquidate their
positions. This problem affected the entire ARPS market and was
not unique to the Calamos funds.
We recognized that the lack of liquidity created both
uncertainty and frustration for our preferred shareholders. In
keeping with our commitment to all of the funds
shareholders, the closed-end funds redeemed at par the majority
of each funds outstanding preferred securities with
proceeds from various debt-based financing programs. Across our
closed-end funds, we redeemed approximately 81% of outstanding
ARPS financing. Our ability to refinance all preferred shares
with debt was constrained by regulations that require total
assets in closed-end funds to be at least three times the amount
of debt leverage, which is higher than the asset coverage the
fund must maintain when utilizing equity leverage such as
preferred shares. We remain committed to seeking financing
solutions for our closed-end funds that are consistent with the
best interests of all shareholders.
We currently believe that leverage strategies are accretive to
the common shareholders of our closed-end funds. In the case of
the Calamos closed-end funds, we have utilized three different
types of lending facilities, in addition to the remaining ARPS
outstanding.
Calamos closed-end funds can be grouped into two broad
categories: 1) enhanced fixed income portfolios
positioned to pursue high current income, from income and
capital gains; and 2) total return portfolios
9
positioned to seek current income, with increased emphasis on
capital appreciation. Funds in both groups seek to provide a
competitive stream of monthly dividends and invest in a variety
of asset classes.
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets Under
|
|
|
|
|
|
|
Management at
|
|
|
|
|
|
|
December 31, 2008
|
|
Year of
|
|
|
Fund and Ticker
|
|
(in billions)
|
|
Inception
|
|
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Opportunities and Income
CHI
|
|
$
|
0.6
|
|
|
|
2002
|
|
|
Enhanced fixed-income oriented. Seeks total return through a
combination of capital appreciation and current income by
investing in convertible and non-convertible fixed-income
securities
|
|
|
|
|
|
|
|
|
|
|
|
Convertible and High Income
CHY
|
|
|
0.9
|
|
|
|
2003
|
|
|
Enhanced fixed-income oriented. Seeks total return through a
combination of capital appreciation and current income by
investing in convertible and high-yield fixed-income securities
|
|
|
|
|
|
|
|
|
|
|
|
Global Dynamic Income
CHW
|
|
|
0.6
|
|
|
|
2007
|
|
|
Enhanced fixed-income oriented. Seeks total return through high
level of current income and capital appreciation by investing in
equity and fixed-income securities, and alternative investments
around the world
|
|
|
|
|
|
|
|
|
|
|
|
Strategic Total Return
CSQ
|
|
|
1.7
|
|
|
|
2004
|
|
|
Total return oriented. Seeks total return through a combination
of capital appreciation and current income by investing in
equity, convertible and high-yield fixed-income securities
|
|
|
|
|
|
|
|
|
|
|
|
Global Total Return
CGO
|
|
|
0.1
|
|
|
|
2005
|
|
|
Total return oriented. 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 fixed-income securities
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate
Accounts
Separate accounts are individual portfolios of securities
managed to meet clients unique needs and include
institutional accounts and managed accounts.
Institutional
Accounts
At December 31, 2008, we had $3.5 billion of assets
under management in institutional accounts, representing
approximately 15% of our total assets under management.
Institutional accounts are separately managed accounts for
certain investors, such as private pension funds, public funds,
endowment funds and private investment funds, offered through
consultants, broker-dealer intermediaries and directly by us. We
have approximately 360 institutional accounts, including
commingled funds and sub-advised relationships. Despite the
extreme volatility in the markets in 2008, our institutional
client base remains healthy.
Our first institutional account mandate was initiated in 1981
for a pension fund account. 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. We reopened select
convertible strategies to new investors in 2008, having
identified significant opportunities that we believe are
advantageous for both new and existing investors. Due to the
broad sell-off in the markets in 2008, the valuations of
convertible securities reached what we believe are unprecedented
levels of undervaluation. We believe these valuations levels are
principally due to sentiment-driven factors and deleveraging by
hedge funds and other large investors, rather than fundamental
factors. As such, we see the investment environment as offering
compelling prospects for our long-term approach.
In recent years, our consultant calling team and business
development officers have targeted private pension funds, public
funds, endowment funds, banks and insurance companies, and
focused on educating institutional prospects about our
investment process and performance. Our institutional marketing
efforts center on identifying potential new investors,
developing relationships with institutional consultants and
providing ongoing client service
10
to existing institutional accounts. We focus on growing our
institutional business through equity and fixed income mandates,
managed under both domestic and global objectives.
Managed
Accounts
At December 31, 2008, we had $3.0 billion of assets
under management in managed accounts, representing approximately
13% of our total assets under management. Our more than 18,350
managed accounts are individual portfolios of securities offered
primarily through 14 national and regional broker-dealer
platforms. We first introduced managed accounts 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. We
reopened select convertible strategies to new investors in 2008,
in response to the opportunities we believe have emerged in the
convertible markets.
Other
Advisory Services
Wealth
Management
At December 31, 2008, we had approximately 555 wealth
management clients representing more than $547 million of
assets under management, which are reported in their respective
underlying investment products. We provide wealth management
services, including asset allocation, to high net worth
individuals, family offices and foundations. Our wealth
management group offers customized asset allocation advice under
the guidance of our investment management team. Our
individualized services include offering managed portfolios of
mutual funds and separate accounts in both taxable and
tax-deferred accounts; developing and executing
multi-generational investment policies, asset management and
income distribution plans; managing retirement, profit sharing
and deferred compensation plans; providing asset allocation and
investment management for foundations and endowments; and
integrating alternative investments into a comprehensive
financial plan. Additionally, our wealth strategy professionals
are available to consult with clients on a wide variety of
issues associated with the accumulation, preservation and
transfer of family wealth.
We support our wealth management clients with a dedicated team
of relationship managers and client servicing staff. In
addition, we have business development officers engaged in
cultivating new business opportunities through a national
network of high net worth professional advisors, family offices,
private foundations and select referral platforms.
Investor
Services
Calamos Financial Services offers investment guidance and
account support to self-directed investors who hold more than
$105 million of Calamos open-end funds. Our investor
services center within our headquarters assists investors in
answering questions about their accounts and Calamos investment
products.
Distribution
Relationships
We distribute the Calamos open-end funds, closed-end funds and
managed accounts primarily through financial intermediaries. We
have developed an extensive network of third-party financial
intermediaries, and our products are structured to meet their
needs and those of their clients. Our sales professionals are
located across the United States, and they act in a consultative
role to provide our clients with value-added services. In recent
years, they have focused on 401(k) platforms, broker
consultants, broker-dealers, financial planners and other
channels for mutual funds and managed account products. We
intend to grow our intermediary business through selective
intermediary relationships, and we opportunistically seek to
introduce new products that best deliver our investment
strategies to investors through these distribution channels.
Client accounts held at our top ten financial intermediaries
represented approximately 59% of our assets under management as
of December 31, 2008.
11
Other
Considerations
Technology
and Intellectual Property
We consider technology to be a competitive advantage in the
investment process. Our investment approach demands tailored
outputs for all aspects of the investment process, including
risk management, security analysis and trade processing. As a
result, our use of in-house developed and third-party technology
and software enables customization of systems across our
company. Our quantitative investment tools, including our
proprietary Calamos Corporate System, or CCS, continue to be
enhanced by our separate research development team, which
reports to our chief operating officer investments
and information technology. Our internal investment-related
systems are geared to the principles that guide our investment
process, allowing for a more seamless integration of security
analysis, trade processing, accounting and portfolio
administration of our more than 18,700 accounts at
December 31, 2008. In other areas of our business, where
competitive advantages do not exist, such as trade order
processing and portfolio accounting, we look to leverage
third-party applications or service providers for cost
efficiency.
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
marks in the United States, France, Germany, Ireland,
Switzerland and the United Kingdom, and will continue to do so
as new marks are developed or acquired. We have taken, and will
continue to take, action to protect our interest in these marks.
Competition
We compete in all aspects of our business with a large number of
investment management firms, commercial banks, broker-dealers
and insurance companies. 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 arrangements 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;
consolidation within the investment management industry, which
is increasing the size and strength of certain competitors;
relatively few barriers to entry, which 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 may have a
materially adverse affect on our business.
Regulatory
Environment
Virtually all aspects of our businesses are subject to extensive
regulation, both with respect to United States laws in
connection with our domestic business lines and with respect to
certain offshore jurisdictional laws, particularly in Europe, in
connection with our international business lines. In the United
States, regulations exist 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 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 registrations,
censures and fines. Calamos Global Funds PLC, an Undertaking for
Collective Investment in Transferable Securities, or UCITS,
advised by Calamos Advisors is subject to the Irish Financial
Services Regulatory Authority.
Calamos Advisors, Calamos Partners and Calamos Wealth Management
are registered as investment advisors with the Securities and
Exchange Commission, or SEC. As registered advisors, they are
subject to the requirements of the Investment Advisers Act, and
the SECs regulations thereunder, as well as to examination
by the SECs staff.
12
The Investment Advisers Act imposes substantive regulation on
virtually all aspects of their 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. Calamos Asset Management is not an
investment company; however, 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, Calamos Partners, Calamos Wealth Management or
the registered funds advised by Calamos Advisors to comply with
the requirements of the SEC could have a material adverse effect
on us.
We are also subject to the federal and state laws affecting
corporate governance, including the Sarbanes-Oxley Act of 2002
and rules promulgated by the SEC. In addition, because our
Class A Common Stock is listed on the NASDAQ Global Select
Market, we are subject to the rules of NASDAQ, including the
corporate governance listing standards approved by the SEC.
In its capacity as a broker-dealer, Calamos Financial Services
is subject to regulations that cover all aspects of its
business, including sales practices, 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.
Under the rules and regulations of the SEC promulgated pursuant
to the federal securities laws, Calamos Advisors, Calamos
Partners, Calamos Financial Services and Calamos Wealth
Management are subject to periodic examination by the SEC.
Calamos Financial Services also is subject to periodic
examination by the Financial Industry Regulatory Authority or
FINRA.
Calamos Advisors is subject to the Employee Retirement Income
Security Act of 1974, as amended, or ERISA, and to regulations
promulgated there under, 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, 2007 and 2008, we had 430 and
368 full-time employees, respectively. At January 31,
2009, we had 320 full-time employees.
SEC
Filings
Our SEC filings are available through the Investor Relations
section of our website at
http://investors.calamos.com.
We encourage our readers to view our SEC filings as well as
other important information, including corporate governance
documents, press releases, investor presentations, assets under
management reports and other documents, on our website.
13
Business
Risks
We caution the reader that the following business risks and
those risks described elsewhere in this report and our other SEC
filings, could cause our actual results to differ materially
from expectations stated in our forward-looking statements.
Risks
Related to Our Industry
A
general or prolonged decline in the prices of securities may
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 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 our assets under
management. Accordingly, a general or prolonged decline in the
prices of securities usually has caused (i) 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 (ii) clients to withdraw funds in favor of
investments they perceive to offer greater opportunity or lower
risk, which would also result in lower fees. We have also
experienced a decline in our assets under management from
leverage reductions in our closed-end funds. The securities
markets are highly volatile and securities prices may increase
or decrease for many reasons beyond our control, including
economic and political events and acts of terrorism. Since
mid-2008 the financial services industry and the securities
markets have been materially and adversely affected by
significant declines in the values of nearly all asset classes.
The decline in securities prices we are experiencing have
materially and adversely affected our revenues, and depending on
the severity and duration of current market conditions, the
decline could have a further material adverse effect on our
earnings.
The
increased potential of changes in laws or regulations or in
governmental policies due to the state of the economy and the
current political climate 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 which directly
affects our cost of doing business. 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. Most of the regulations to which we
are subject are not designed to protect our stockholders. The
increased potential of changes in laws or regulations or in
governmental policies due to the state of the economy and
current political climate 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.
Further, 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.
The
asset management business is intensely
competitive.
We are subject to competition in all aspects of our business
from asset management firms, mutual fund companies, commercial
banks and thrift institutions, insurance companies, hedge funds,
exchange traded funds, brokerage and investment banking firms,
and other financial institutions including multinational firms
and subsidiaries of diversified conglomerates.
Many of these financial institutions have substantially greater
resources than we do and may offer a broader range of financial
products across more markets. Some operate in a different
regulatory environment than we do which may provide certain
competitive advantages to their investment products and
portfolio structures. We compete primarily based on the
availability and objectives of the investment portfolios
offered, investment performance, and the scope and quality of
investment advice and other client services. Some institutions
have
14
proprietary products and distribution channels that make it more
difficult for us to compete with them. We believe that
competition within the investment management industry has and
will increase as a result of the state of the economy, the
failure of financial institutions and consolidation and
acquisition activity. Most of our investment portfolios have
sales or redemption fees, which means that investors may be more
willing to invest assets in competing funds.
If current or potential customers decide to use one of our
competitors, we could face a significant decline in market
share, assets under management, revenues, and net income. If we
are required to lower our fees in order to remain competitive,
our net income could be significantly reduced because some of
our expenses are fixed, especially over shorter periods of time,
and others may not decrease in proportion to the decrease in
revenues.
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 service, 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 trustees 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
services 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 revenues and results of
operations.
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
trustees 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 independent members of such funds
board of trustees and, in certain cases, by its stockholders, as
required by law. These investment management agreements may be
terminated or not renewed for any number of reasons, including
investment performance, advisory fee rates and financial market
performance. Further, we may not be able to replace terminated
or non-renewed agreements on favorable terms. The decrease in
revenues that could result from any such termination could have
a material adverse effect on our business.
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. 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 may
adversely affect our revenues, which are substantially dependent
upon the assets under management in our funds.
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.
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
15
vendors that 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
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, 2008, the Calamos Interests owned
approximately 79% of 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 second amended and restated
certificate of incorporation, Calamos Family Partners, Inc.
retains a majority of the combined voting power of our common
stock until its ownership interest in Calamos Holdings LLC falls
below 15%, 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 common stock and in Calamos Holdings LLC, they
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 second amended and restated certificate
of incorporation.
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. 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 long-term 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. The loss of the services of either of these
key executives may have a material adverse effect on our
business.
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 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. 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
16
will continue to be accessible to us. The inability to have such
access could have a material adverse effect on our assets under
management and ultimately our earnings.
As of December 31, 2008, a majority 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. While we continue to diversify and add new distribution
channels for mutual funds and managed accounts and a significant
portion of the growth in our assets under management in recent
years has been accessed through intermediaries, the
unprecedented market conditions have resulted in a consolidation
of and elimination of some financial service companies. The 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 potential. 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. A substantial reduction
in fees received from third-party intermediaries could have a
material adverse affect on our business.
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. For
example, we may need to add investment professionals if 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.
Further, we may be required to increase compensation, which
would decrease our net income. 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.
We
derive a substantial portion of our revenues from a limited
number of our products.
As of December 31, 2008, 28% of our assets under management
were concentrated in the Calamos Growth Fund, and 35% 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. Further,
given the size and prominence of the Growth Fund within our
company, the performance of the Growth Fund may also indirectly
affect the net purchases and redemptions in our other products,
which in turn may negatively affect our operating results.
We also may close funds and investment strategies to new
investors, which could inhibit our growth and could lead to
redemptions by existing investors, and could thereby cause a
decrease in our revenues.
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 ownership in Calamos Holdings
LLC is our primary asset. We have limited 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., and the Calamos Interests.
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. As the sole manager, 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.
17
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 a cash dividend each quarter and intend to
continue to pay dividends on a quarterly basis. However, we
reduced our third and fourth quarter dividend of 2008 due to the
effect of market conditions on our business. Our board of
directors has and in the future may, in its discretion, decrease
the level of dividends. Our board of directors also has
discretion to discontinue the payment of dividends entirely. The
ability of Calamos Holdings LLC to make 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 distribution restrictions and, among other items, 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.
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 trustees 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 in investment advisory fees. This restriction
may discourage potential purchasers from acquiring a controlling
interest in our company.
We
require specialized technology to operate our business and would
be adversely affected if our technology became inoperative or
obsolete.
We depend on highly specialized and, in many cases, proprietary
technology to support our business functions, including, among
other functions, securities analysis, securities trading,
portfolio management, customer service, accounting and internal
financial processes and controls and regulatory compliance and
reporting.
All of our technology systems are vulnerable to disability or
failures due to hacking, viruses, natural disasters, power
failures, acts of war or terrorism, and other causes. Some of
our software is licensed from and supported by outside vendors
upon whom we rely to prevent operating system failure. A
suspension or termination of these licenses or the related
support, upgrades and maintenance could cause system delays or
interruption. If our technology systems were to fail and we were
unable to recover in a timely way, we would be unable to fulfill
critical business functions, which could lead to a loss of
customers and could harm our reputation. Technological breakdown
could also interfere with our ability to comply with financial
reporting and other regulatory requirements, exposing us to
disciplinary action and to liability to our customers.
In addition, our continued success depends on our ability to
adopt new or adapt existing technologies to meet client,
industry and regulatory demands. We might be required to make
significant capital expenditures to maintain
18
competitive technology. If we are unable to upgrade our
technology in a timely fashion, we might lose customers and fail
to maintain regulatory compliance, which could affect our
results of operations and severely damage our reputation.
Damage
to our reputation could adversely affect our
business.
We have developed our reputation through excellent client
services, strong long-term risk-adjusted investment performance,
comprehensive product offerings, superior distribution and a
stalwart brand image. 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 range from regulatory issues to
unsubstantiated accusations and managing such matters may be
expensive, time-consuming and difficult.
Improper
disclosure of personal data could result in liability and harm
our reputation.
We store and process personal client information. It is possible
that our security controls, training and other processes over
personal data may not prevent the improper disclosure of client
information. Such disclosure could harm our reputation as well
and subject us to liability, resulting in increased costs or
loss of revenue.
Risks
Related to the Company
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 be
detrimental to the value of the Class A common stock.
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, 2008, we had 19,497,687 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., 78.7% of Calamos Holdings LLC. Our second amended and
restated certificate of incorporation provides for the exchange
of ownership interests 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 ownership interests in Calamos Holdings LLC for shares of
our Class A common stock and sell any or all of those
shares.
The Calamos Interests are party to a registration rights
agreement with us. Under that agreement, the Calamos Interests
have the right to require us to effect the registration of
shares of our Class A common stock that the Calamos
Interests could acquire upon conversion of their Class B
common shares or exchange of their ownership interests in
Calamos Holdings LLC.
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.
19
The
Calamos familys beneficial ownership of our Class B
common stock, as well as anti-takeover provisions in our second
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 second 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 second
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 second amended and restated certificate of
incorporation and bylaws, discourage potential takeover attempts
that our stockholders may favor.
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, such
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, such action could have a material
adverse effect on our business. The Internal Revenue Service
completed its audit of Calamos Holdings LLC for its 2004 tax
year and has proposed certain adjustments as more fully
described in note 14 of the consolidated financial
statements. Such adjustments do not relate to the
section 754 election and we anticipate that the audit and
the 2004 tax year will ultimately be closed without an
adjustment to the election.
The
inability for Calamos Holdings LLC to maintain compliance with
its financial covenants could have a material adverse effect on
our Company.
Calamos Holdings LLC currently has $125 million of
aggregate principal amount of senior unsecured notes
outstanding. Note purchase agreements between Calamos Holdings
and its noteholders govern the terms of the unsecured notes.
Under these agreements, Calamos Holdings LLC must maintain
certain consolidated net worth, leverage and interest coverage
ratios. The note purchase agreements also contain other
covenants that, among other provisions, restricts the ability of
Calamos Holdings subsidiaries to incur debt and restricts
the ability of Calamos Holdings or its subsidiaries to make
distributions, create liens and to merge or to consolidate, or
sell or convey all or substantially all of Calamos
Holdings assets. In December 2008, Calamos Holdings LLC
prepaid $400 million of its unsecured debt and entered into
amendments to the note purchase agreements. The amendments
revised several of the existing financial covenants and also
added additional covenants, including an investment coverage
ratio requirement, certain limitations on distributions and
redemption of equity interests and an interest rate adjustment
provision. The inability of Calamos Holdings to maintain
compliance with any of these covenants could lead to an event of
default and result in various remedies to the noteholders
including the acceleration of all the notes outstanding and the
payment of a make whole amount. In such an event, our liquidity
and results from operations would be negatively impacted.
20
Significant
changes in market conditions and the economy may require a
modification to our business plan.
Our revenues are primarily driven by assets under management and
declines in the financial markets will directly and negatively
affect our investment advisory fee revenues as well as our
non-operating income and net income. As such, significant
changes in market conditions and the economy may require a
modification to our business plan. Modification to our business
plan may include: the reopening or elimination of product
offerings or efforts, realignment of sales and marketing
resources to adapt to changing market demand and the changing
competitive landscape, and the implementation of expense control
measures, inclusive of staff reductions, to streamline our
infrastructure and reduce capital expenditures.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None.
Our principal executive offices are located at 2020 Calamos
Court, Naperville, Illinois 60563, where we occupy approximately
151,000 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 58,000 square feet of additional office space
at different locations in Naperville, Illinois under separate
lease agreements with subsidiaries of Calamos Property Holdings
LLC.
|
|
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.
|
|
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, 2008.
21
PART II
|
|
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) trades on
the NASDAQ Global Select Market under the symbol
CLMS. 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 for
2008 and 2007 were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Price Range
|
|
|
Cash Dividends
|
|
|
|
2008
|
|
|
2007
|
|
|
per Share
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
2008
|
|
|
2007
|
|
|
First Quarter
|
|
$
|
29.67
|
|
|
$
|
14.46
|
|
|
$
|
28.75
|
|
|
$
|
21.89
|
|
|
$
|
0.11
|
|
|
$
|
0.11
|
|
Second Quarter
|
|
$
|
23.28
|
|
|
$
|
14.69
|
|
|
$
|
26.31
|
|
|
$
|
21.98
|
|
|
$
|
0.11
|
|
|
$
|
0.11
|
|
Third Quarter
|
|
$
|
24.00
|
|
|
$
|
13.13
|
|
|
$
|
28.53
|
|
|
$
|
20.08
|
|
|
$
|
0.11
|
|
|
$
|
0.11
|
|
Fourth Quarter
|
|
$
|
19.43
|
|
|
$
|
2.55
|
|
|
$
|
34.61
|
|
|
$
|
25.88
|
|
|
$
|
0.055
|
|
|
$
|
0.11
|
|
On February 25, 2009, there were approximately 61 holders
of record of our outstanding Class A common stock and one
holder of record of our outstanding Class B common stock.
Shares of our Class A common stock are primarily held in
street name through various brokers.
Calamos Asset Management, Inc. expects to declare and pay
quarterly cash dividends during 2009.
Equity
Compensation Plan Information
As of December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available
|
|
|
|
|
|
|
|
|
|
for Future Issuance
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|
|
|
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)
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|
|
(b)
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(c)
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|
|
Equity compensation plans approved by security holders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
2,588,326
|
|
|
$
|
24.01
|
|
|
|
N/A (1
|
)
|
Restricted stock units
|
|
|
1,043,081
|
|
|
|
|
|
|
|
N/A (1
|
)
|
Equity compensation plans not approved by security holders
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,631,407
|
|
|
$
|
17.11
|
|
|
|
5,657,541
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
A combined total of 10,000,000 shares of Calamos Asset
Management, Inc.s common stock may be issued under the
stock option and restricted stock unit plans. During the twelve
months ended December 31, 2008, 2007 and 2006,
246,204 shares, 231,249 shares and
233,599 shares, respectively, were exercised under the
restricted stock unit plan. |
22
The following graph compares the percentage change in cumulative
shareholder return on the companys common stock with the
Standard & Poors 500 Index and SNL Asset Manager
Index since October 28, 2004 (assuming a $100 investment on
October 28, 2004, and the reinvestment of any dividends).
Performance
Graph
Total
Return Performance
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Period Ending
|
|
Index
|
|
10/28/04
|
|
|
12/31/04
|
|
|
12/31/05
|
|
|
12/31/06
|
|
|
12/31/07
|
|
|
12/31/08
|
|
Calamos Asset Management, Inc.
|
|
|
100.00
|
|
|
|
135.54
|
|
|
|
159.57
|
|
|
|
137.76
|
|
|
|
155.42
|
|
|
|
39.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SNL Asset Manager
|
|
|
100.00
|
|
|
|
114.57
|
|
|
|
145.71
|
|
|
|
168.98
|
|
|
|
192.36
|
|
|
|
91.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S&P 500
|
|
|
100.00
|
|
|
|
107.85
|
|
|
|
113.15
|
|
|
|
131.02
|
|
|
|
138.22
|
|
|
|
87.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
for the period indicated. The selected historical consolidated
income statement data for the period January 1, 2004 to
November 1, 2004 has been derived from the audited
consolidated financial statements of Calamos Family Partners,
Inc. (formerly known as Calamos Holdings, Inc.).
Calamos Family Partners, Inc. operated as an S corporation
through November 1, 2004 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
Year Ended December 31,
|
|
|
Nov. 2 to
|
|
|
Jan. 1 to
|
|
|
Year Ended
|
|
(in thousands, except share data)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Dec. 31, 2004
|
|
|
Nov. 1, 2004
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Predecessor)
|
|
|
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fees
|
|
$
|
274,174
|
|
|
$
|
325,395
|
|
|
$
|
329,383
|
|
|
$
|
284,951
|
|
|
$
|
41,787
|
|
|
$
|
168,938
|
|
|
$
|
210,725
|
|
Distribution and underwriting fees
|
|
|
114,023
|
|
|
|
143,994
|
|
|
|
151,760
|
|
|
|
129,250
|
|
|
|
19,350
|
|
|
|
79,578
|
|
|
|
98,928
|
|
Other
|
|
|
3,392
|
|
|
|
4,088
|
|
|
|
4,029
|
|
|
|
3,366
|
|
|
|
633
|
|
|
|
1,861
|
|
|
|
2,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
391,589
|
|
|
|
473,477
|
|
|
|
485,172
|
|
|
|
417,567
|
|
|
|
61,770
|
|
|
|
250,377
|
|
|
|
312,147
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits
|
|
|
74,483
|
|
|
|
91,039
|
|
|
|
73,382
|
|
|
|
61,029
|
|
|
|
12,537
|
|
|
|
53,170
|
|
|
|
65,707
|
|
Distribution and underwriting expenses
|
|
|
84,884
|
|
|
|
104,227
|
|
|
|
100,935
|
|
|
|
79,446
|
|
|
|
11,040
|
|
|
|
39,517
|
|
|
|
50,557
|
|
Amortization of deferred sales commissions
|
|
|
23,417
|
|
|
|
27,249
|
|
|
|
32,924
|
|
|
|
31,431
|
|
|
|
5,109
|
|
|
|
24,315
|
|
|
|
29,424
|
|
Marketing and sales promotion
|
|
|
11,908
|
|
|
|
40,833
|
|
|
|
15,631
|
|
|
|
14,738
|
|
|
|
2,263
|
|
|
|
16,881
|
|
|
|
19,144
|
|
General and administrative
|
|
|
37,800
|
|
|
|
37,036
|
|
|
|
31,272
|
|
|
|
24,829
|
|
|
|
2,587
|
|
|
|
11,258
|
|
|
|
13,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
232,492
|
|
|
|
300,384
|
|
|
|
254,144
|
|
|
|
211,473
|
|
|
|
33,536
|
|
|
|
145,141
|
|
|
|
178,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
159,097
|
|
|
|
173,093
|
|
|
|
231,028
|
|
|
|
206,094
|
|
|
|
28,234
|
|
|
|
105,236
|
|
|
|
133,470
|
|
Non-operating income (loss)
|
|
|
(291,899
|
)
|
|
|
29,901
|
|
|
|
12,381
|
|
|
|
5,761
|
|
|
|
1,016
|
|
|
|
(1,487
|
)
|
|
|
(471
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority interest in Calamos Holdings LLC
and income taxes
|
|
|
(132,802
|
)
|
|
|
202,994
|
|
|
|
243,409
|
|
|
|
211,855
|
|
|
|
29,250
|
|
|
|
103,749
|
|
|
|
132,999
|
|
Minority interest in Calamos Holdings LLC
|
|
|
(104,494
|
)
|
|
|
156,583
|
|
|
|
186,631
|
|
|
|
163,009
|
|
|
|
22,609
|
|
|
|
|
|
|
|
22,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(28,308
|
)
|
|
|
46,411
|
|
|
|
56,778
|
|
|
|
48,846
|
|
|
|
6,641
|
|
|
|
103,749
|
|
|
|
110,390
|
|
Income taxes
|
|
|
(3,787
|
)
|
|
|
18,666
|
|
|
|
22,770
|
|
|
|
19,624
|
|
|
|
2,649
|
|
|
|
1,567
|
|
|
|
4,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(24,521
|
)
|
|
$
|
27,745
|
|
|
$
|
34,008
|
|
|
$
|
29,222
|
|
|
$
|
3,992
|
|
|
$
|
102,182
|
|
|
$
|
106,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.24
|
)
|
|
$
|
1.24
|
|
|
$
|
1.47
|
|
|
$
|
1.27
|
|
|
$
|
0.18
|
|
|
$
|
1.06
|
|
|
|
|
|
Diluted(1)
|
|
$
|
(1.24
|
)
|
|
$
|
1.22
|
|
|
$
|
1.45
|
|
|
$
|
1.26
|
|
|
$
|
0.17
|
|
|
$
|
1.06
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
19,752,972
|
|
|
|
22,297,170
|
|
|
|
23,161,998
|
|
|
|
23,000,100
|
|
|
|
22,700,100
|
|
|
|
96,800,000
|
(2)
|
|
|
|
|
Diluted(1)
|
|
|
97,449,228
|
|
|
|
99,760,872
|
|
|
|
100,805,030
|
|
|
|
100,625,824
|
|
|
|
100,491,409
|
|
|
|
96,800,000
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Balance Sheet Data (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
59,425
|
|
|
$
|
108,441
|
|
|
$
|
328,841
|
|
|
$
|
210,469
|
|
|
$
|
149,315
|
|
Investment securities
|
|
|
187,443
|
|
|
|
535,476
|
|
|
|
142,675
|
|
|
|
128,265
|
|
|
|
90,444
|
|
Partnership investments and offshore funds
|
|
|
28,471
|
|
|
|
353,004
|
|
|
|
86,846
|
|
|
|
79,662
|
|
|
|
60,506
|
|
Total assets
|
|
|
475,873
|
|
|
|
1,217,672
|
|
|
|
791,788
|
|
|
|
665,309
|
|
|
|
516,445
|
|
Long-term debt
|
|
|
125,000
|
|
|
|
525,000
|
|
|
|
150,000
|
|
|
|
150,000
|
|
|
|
150,000
|
|
Total liabilities
|
|
|
164,826
|
|
|
|
602,553
|
|
|
|
208,848
|
|
|
|
205,292
|
|
|
|
191,335
|
|
Minority interests
|
|
|
160,274
|
|
|
|
401,382
|
|
|
|
368,363
|
|
|
|
273,883
|
|
|
|
166,616
|
|
Total stockholders equity
|
|
|
150,773
|
|
|
|
213,737
|
|
|
|
214,577
|
|
|
|
186,134
|
|
|
|
158,494
|
|
Assets Under Management (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
|
|
17,498
|
|
|
|
34,835
|
|
|
|
33,704
|
|
|
|
32,244
|
|
|
|
27,275
|
|
Separate accounts
|
|
|
6,542
|
|
|
|
11,373
|
|
|
|
11,021
|
|
|
|
11,561
|
|
|
|
10,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets under management
|
|
$
|
24,040
|
|
|
$
|
46,208
|
|
|
$
|
44,725
|
|
|
$
|
43,805
|
|
|
$
|
37,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In calculating diluted earnings per share for 2007, 2006, 2005
and for the period November 2, 2004 to December 31,
2004, the effective tax rates of 40.2%, 40.1%, 40.2% and 39.9%,
respectively, were applied to income (losses) before minority
interest in Calamos Holdings LLC and income taxes. Diluted
shares outstanding for the periods after November 1, 2004
are calculated (a) assuming the Calamos Interests 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. Because the Company
generated a loss in 2008, diluted per share results equal basic
per share results as the economic impact of the Calamos
Interests exchange and the effect of stock-based
compensation results in anti-dilution. |
|
(2) |
|
Basic shares for the period January 1, 2004 through
November 2, 2004 reflect the 96,800,000 membership units
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 membership units of
Calamos Holdings LLC. |
|
|
Item 7.
|
Managements
Discussion And Analysis Of Financial Condition And Results Of
Operation
|
We provide investment advisory services to institutions and
individuals, managing $24.0 billion in client assets at
December 31, 2008 through a variety of investment products
designed to suit their investment needs.
25
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 four types of investment product types we offer in the
mutual fund and separate account categories, at
December 31, 2008, 2007 and 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Mutual Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
Open-end funds
|
|
$
|
13,594
|
|
|
$
|
27,434
|
|
|
$
|
27,303
|
|
Closed-end funds
|
|
|
3,904
|
|
|
|
7,401
|
|
|
|
6,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mutual funds
|
|
|
17,498
|
|
|
|
34,835
|
|
|
|
33,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutional accounts
|
|
|
3,483
|
|
|
|
5,193
|
|
|
|
5,203
|
|
Managed accounts
|
|
|
3,059
|
|
|
|
6,180
|
|
|
|
5,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total separate accounts
|
|
|
6,542
|
|
|
|
11,373
|
|
|
|
11,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets under management
|
|
$
|
24,040
|
|
|
$
|
46,208
|
|
|
$
|
44,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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:
|
|
|
|
|
purchases and redemptions of shares of the open-end funds and
other investment products;
|
|
|
|
the amount of non-reinvested capital gain distributions;
|
|
|
|
fluctuations in the financial markets around the world that
result in appreciation or depreciation of assets under
management;
|
|
|
|
the use of leverage within the closed-end funds;
|
|
|
|
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
|
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our introduction of new investment strategies and products and
our decision to close strategies when deemed in the best
interests of our clients.
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Investment
Products
Mutual
Funds
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, including performance-based fees, are our
principal source of revenue from open-end mutual funds and are
26
primarily derived from assets under management. We offer several
share classes in each open-end fund to provide investors with
alternatives to pay for commissions, distribution and service
fees.
In 2007, we established Calamos Global Funds PLC, also referred
to as Offshore Funds, which is included in open-end funds for
reporting purposes.
Closed-End Funds. Closed-end funds typically
sell a finite number of shares to investors through underwritten
public offerings. 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 of
the closed-end funds that we manage currently use leverage by
issuing preferred securities, as well as more traditional bank
financing, which 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 the 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
Separate accounts include institutional accounts and managed
accounts for high net worth investors. 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 performance-based fees where applicable.
Provided below is a brief differentiation of these accounts:
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Institutional accounts are separately managed accounts
for institutional investors, such as public and private pension
funds, public funds, endowment funds and private investment
funds, and are offered directly by us through institutional
consultants and through national and regional broker-dealers.
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Managed accounts are separately managed accounts for high
net worth investors offered primarily through national and
regional broker-dealers.
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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:
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total value and composition of our assets under management;
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the amount of non-reinvested capital gain distributions;
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market appreciation or depreciation;
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the use of leverage within our products;
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investment performance relative to benchmarks and competitors;
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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;
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a determination by the independent trustees of the mutual funds
to terminate or significantly alter the funds investment
management agreements with us; and
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increased competition.
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27
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:
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total value and composition of our assets under management
generally and by share class;
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market appreciation or depreciation; and
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the level of purchases and redemptions.
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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 value 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
investment advisory services.
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 the open-end funds pay us
over time pursuant to distribution plans adopted under
provisions of
Rule 12b-1
of 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 record as revenue only the portion that we
retain. We retain the entire sales charge earned on accounts
where Calamos Financial Services acts as the broker-dealer.
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.
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.
Other
Revenues
Other revenues 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 accruals and tax calculations. The
fees were calculated based on the average daily assets of the
open-end and closed-end funds.
Operating
Expenses
Our operating expenses, which consist of employee compensation
and benefits, distribution and underwriting expenses,
amortization of deferred sales commissions, marketing and sales
promotion expenses, and general and administrative expenses,
fluctuate due to a number of factors, including the following:
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variations in the level of total compensation expense due to,
among other things, incentive compensation, changes in our
employee count and mix, and competitive factors;
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28
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changes in distribution and underwriting expense as a result of
fluctuations in mutual fund sales, level of redemptions and
market appreciation or depreciation of assets under management;
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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;
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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; and
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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.
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We have and will continue to monitor our level of expenses
relative to business income and make adjustments as appropriate.
Employee
Compensation and Benefits
Employee compensation and benefits expense includes salaries,
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. In normal circumstances, as we grow, we expect to
experience a general rise in employee compensation and benefits
expenses over the long term.
We use a fair value method in recording compensation expense for
restricted stock units and stock options granted under our
incentive stock plan. 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.
Distribution
and Underwriting Expense
Distribution and underwriting expense includes payments that 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 a reduction of the deferred sales commission asset.
Other
Operating Expenses
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
the open-end mutual funds that we manage have grown in size and
recognition over time and in normal circumstances, 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 fluctuate with changes in assets under management.
In connection
29
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 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, depreciation
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 and Underwriting Activities
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 firms and the amortization of deferred sales
commissions as expenses in the consolidated statements of
operations. However, when analyzing our business, we consider
the result of these distribution activities as a net amount of
revenue as they are typically a result of a single open-end
mutual fund share purchase. Hence, the result of presenting this
information in accordance with generally accepted accounting
principles is a reduction to our overall operating margin, as
the margin on distribution activities is generally lower than
the margins on the remainder of our business. The following
table summarizes the net distribution fee margin for the years
ended December 31, 2008 and 2007:
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2008
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2007
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Distribution and underwriting fees
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$
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114,023
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$
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143,994
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Distribution and underwriting expense
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(84,884
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)
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(104,227
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)
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Amortization of deferred sales commissions
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(23,417
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)
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(27,249
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)
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Net distribution fees
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$
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5,722
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$
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12,518
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Net distribution fee margin
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5
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%
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9
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%
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Net distribution fee margin varies by share class because each
share class has different distribution and underwriting
activities, which are described below.
Class A shares represented $7.8 billion of our
assets under management as of December 31, 2008. 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. We retained underwriting fees of
$1.7 million for the year ended December 31, 2008. 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 and
record these fees as distribution and underwriting fee revenue.
These fees are generally offset by a 0.25% fee paid to
third-party selling agents that is recorded as a distribution
expense. For the year ended December 31, 2008, we received
Class A share
Rule 12b-1
fees of $33.7 million. For the same period, we made
Class A share
Rule 12b-1
payments to selling firms of $31.0 million.
The distribution fee margin that we earn on Class A shares
is largely driven by the distribution fees that we earn as
broker of record and by the portion of front-end sales charges
that we retain, which fluctuate with both the total Class A
share sales and the mix of Class A share sales with and
without a sales charge. Recently, the percentage of Class A
share sales made without a sales charge has been increasing. If
this trend continues, we expect that our Class A share net
distribution fee margin will decrease.
Class B shares represented $1.1 billion of our
assets under management as of December 31, 2008. 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 advanced payment is capitalized as a
deferred sales commission asset when paid and is amortized on a
straight-line basis over eight years. For the year ended
December 31, 2008, we made Class B share commission
payments to selling firms of $2.4 million. If the investor
redeems shares within the first six years of investment, we
receive a contingent deferred sales charge, often referred to as
a CDSC, of between 5.0% (during the first year) declining to
1.0% (during the sixth year) of the lesser of the redemption
price or purchase price. For the year ended December 31,
2008, we received Class B share CDSC payments of
$4.5 million.
30
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
Rule 12b-1
service fee payments to the selling firm at a rate of 0.25% of
Class B share assets under management and record these
payments as a distribution expense. We retain a 0.75%
distribution fee to 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, 2008, we received Class B
share
Rule 12b-1
fees of $18.0 million. For the same period, we made
Class B share
Rule 12b-1
payments to selling firms of $4.5 million.
The net distribution fee margin that we earn on Class B
shares is primarily the result of the difference between the
annual 0.75% distribution fee revenue that we receive on the
average Class B share assets under management and the
amortization of the 4.0% upfront commission over the eight-year
life of the asset. This differential creates a component of net
distribution fee margin unique to Class B shares that will
remain constant before giving consideration to market
appreciation or depreciation. Further, the net distribution fee
margin on Class B shares fluctuates due to the appreciation
or depreciation of the underlying assets. We expect our
distribution fee margin to increase as the underlying
Class B share assets appreciate and to decrease as these
assets depreciate.
Class C shares represented $3.5 billion of our
assets under management as of December 31, 2008. 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 advanced payment is capitalized as a
deferred sales commission asset when paid and is amortized on a
straight-line basis over 12 months. For the year ended
December 31, 2008, we made commission payments to selling
firms of $5.0 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. For the year ended
December 31, 2008, we received Class C share CDSC
payments of $0.8 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. For the year ended
December 31, 2008 we received Class C share
12b-1 fees
of $55.2 million. For the same period, we made Class C
share
Rule 12b-1
payments to selling firms of $49.0 million.
The first years
Rule 12b-1
fees help us to recoup the upfront commission we paid to the
selling firm, resulting in a net distribution fee margin on
Class C shares that is generally zero, before giving
consideration to market appreciation or depreciation. However,
during the first 12 months following the sale of
Class C shares, this margin will fluctuate due to the
appreciation or depreciation of Class C share assets.
Appreciation or depreciation of the assets from the time of sale
will result in a corresponding increase or decrease in the
distribution fee revenues. We expect our distribution fee margin
to increase as the underlying Class C share assets
appreciate and to decrease as these assets depreciate.
Class I shares represented $1.1 billion of our
assets under management as of December 31, 2008. These
shares do not provide for a front-end sales charge or
Rule 12b-1
fees and are generally offered to individual and institutional
investors making initial investments of $1 million or more;
therefore, no distribution fee margin exists for this share
class.
Class R shares were introduced in the first quarter
of 2007 for purchase through certain tax-exempt retirement plans
held in plan level or omnibus accounts and represented
$6.2 million of our assets under management as of
December 31, 2008. Investors in Class R shares do not
pay a front-end sales charge at the time of investment. We
receive
Rule 12b-1
fees on Class R shares at a rate of 0.50% of Class R
share assets under management and record these fees as
distribution and underwriting fee revenue. These fees are
generally offset by a 0.50% fee paid to third party selling
agents that is recorded as a distribution expense. For the year
ended December 31, 2008, the Class R share
12b-1 fees
that we received and the Class R share
Rule 12b-1
payments that we made to selling firms were insignificant.
31
Class X shares were introduced in the fourth quarter
of 2007 and represented $36.7 million of our assets under
management as of December 31, 2008. These shares do not
provide for a front-end sales charge or
Rule 12b-1
fees and are generally offered to individual and institutional
investors making initial investments of $10 million or
more; therefore, no distribution fee margin exists for this
share class. Currently, these shares are available only through
our Calamos Global Funds to foreign investors.
The net distribution fee margin varies by share class so the mix
of Class A, Class B, Class C and Class R
share sales and assets affects the overall net distribution fee
margin. The Class A share margin is significantly greater
than the Class B, Class C and Class R margins;
therefore, we expect that our net distribution fee margin will
continue to decline and negatively impact our operating margins.
Non-Operating
Income (Loss)
Non-operating income (loss) 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 capital gain
distributions, dividends and net interest income or expense. As
we continue to invest a significant portion of our operating
cash inflow into investment securities, we expect that the
impact of non-operating income (loss) will continue to be
significant in future periods. For more information, see
Liquidity and Capital Resources.
Minority
Interest
Minority
Interest in Calamos Holdings LLC
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. and John P.
Calamos, Sr.s collective ownership of approximately
79% in Calamos Holdings LLC as of December 31, 2008 and
2007, we reflect their ownership as a minority interest in our
consolidated statements of financial condition and consolidated
statements of operations. As a result, outstanding shares of our
Class A common stock represent approximately 21% of the
outstanding ownership of Calamos Holdings LLC for the years
ended December 31, 2008 and 2007.
Minority interest in Calamos Holdings LLC is derived by
multiplying the historical equity of Holdings by Calamos Family
Partners, Inc. and John P. Calamos, Sr.s collective
ownership percentage for the periods presented. Issuances and
repurchases of our Class A common stock result in changes
to Calamos Asset Management, Inc.s ownership percentage
and to the minority interests ownership percentage of
Calamos Holdings LLC. The 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. As a result, our income before income taxes, excluding
Calamos Family Partners, Inc. and John P.
Calamos, Sr.s minority interest, represent
approximately 21% and 22% of Calamos Holdings LLCs net
income for the years ended December 31, 2008 and 2007,
respectively. Income before minority interest in Calamos
Holdings LLC and income taxes includes investment and dividend
income earned on cash and cash equivalents and investments held
solely by Calamos Asset Management, Inc. during the same period.
This investment income is not reduced by any minority interest;
therefore, the resulting minority interest is less than 79% and
78% for the years ended December 31, 2008 and 2007,
respectively. We expect that as we generate and invest cash held
solely by Calamos Asset Management, Inc. the minority interest
will continue to decline as a percentage of income before
minority interest in Calamos Holdings LLC and income taxes.
Minority
Interest in Partnership Investments and Offshore
Funds
Calamos Partners LLC is the general partner of Calamos Market
Neutral Opportunities Fund LP and was the general partner
of Calamos Equity Opportunities Fund LP, private investment
partnerships. At December 31, 2008, we and our affiliates
had 91% and 3% interests in Calamos Market Neutral Opportunities
Fund LP, respectively (94% combined). At December 31,
2007, we and our affiliates had 97% and 1% interests in Calamos
Market Neutral Opportunities Fund LP, respectively (98%
combined). During the second quarter of 2008, Calamos Equity
32
Opportunities Fund LP was liquidated. At December 31,
2007, we and our affiliates had 44% and 54% interests in Calamos
Equity Opportunities Fund LP, respectively (98% combined).
During 2008 and 2007, we consolidated the financial results of
these partnerships into our results. The combined interests of
the investments in these partnerships not owned by us are
presented as minority interest in partnership investments and
offshore funds in our financial statements.
In the fourth quarter of 2007, we established Calamos Global
Funds PLC (Offshore Funds), which is comprised of four
Ireland-based offshore mutual funds. Until December 2008, we
owned a majority of the Offshore Funds and consolidated its
results with ours. However, we no longer own a majority of the
Offshore Funds , and therefore, we no longer consolidate the
financial results of the Offshore Funds into our results. At
December 31, 2008 and 2007, we had 30% and 100% interests
in the Offshore Funds, respectively.
As we launch new products, we as well as our affiliates may
invest in these entities, and these products may be required to
be consolidated into our results as well. We expect the
consolidation of these new products may be temporary as new
customers invest in the products and as our resulting ownership
percentage decreases.
Income
Taxes
In 2008, developments in the Illinois tax statutes resulted in
modifications to the Companys state tax apportionment
methodology that lowered the Companys statutory income tax
rate from 40 percent to 37 percent. For the years
ended December 31, 2008, 2007 and 2006, our effective tax
rate not taking into account the one-time charge to income
resulting from the revaluation of our net deferred tax asset to
reflect the decrease in our Illinois statutory tax rate that
occurred in the second quarter of 2008 was 37.3%, 40.2% and
40.1%, respectively.
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 may experience
dilution with regard to their indirect ownership interest in the
equity of Calamos Holdings LLC.
33
Operating
Results
Year
Ended December 31, 2008 Compared to Year Ended
December 31, 2007
Assets
Under Management
Assets under management decreased by $22.2 billion, or 48%,
to $24.0 billion at December 31, 2008 from
$46.2 billion at December 31, 2007. Average assets
under management decreased by $7.7 billion, or 17%, to
$37.1 billion for the year ended December 31, 2008
from $44.8 billion for the year ended December 31,
2007. At December 31, 2008 and 2007, our assets under
management consisted of 73% mutual funds and 27% separate
accounts.
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Year Ended
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|
|
|
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|
|
December 31,
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|
|
Change
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|
(in millions)
|
|
2008
|
|
|
2007
|
|
|
Amount
|
|
|
Percent
|
|
|
Mutual Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
$
|
34,835
|
|
|
$
|
33,704
|
|
|
$
|
1,131
|
|
|
|
3
|
%
|
Net redemptions
|
|
|
(3,859
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)
|
|
|
(2,469
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)
|
|
|
(1,390
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)
|
|
|
(56
|
)
|
Market appreciation (depreciation)
|
|
|
(13,478
|
)
|
|
|
3,600
|
|
|
|
(17,078
|
)
|
|
|
|
*
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management
|
|
|
17,498
|
|
|
|
34,835
|
|
|
|
(17,337
|
)
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
|
27,569
|
|
|
|
33,892
|
|
|
|
(6,323
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
|
11,373
|
|
|
|
11,021
|
|
|
|
352
|
|
|
|
3
|
|
Net redemptions
|
|
|
(661
|
)
|
|
|
(1,152
|
)
|
|
|
491
|
|
|
|
43
|
|
Market appreciation (depreciation)
|
|
|
(4,170
|
)
|
|
|
1,504
|
|
|
|
(5,674
|
)
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management
|
|
|
6,542
|
|
|
|
11,373
|
|
|
|
(4,831
|
)
|
|
|
(42
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
|
9,497
|
|
|
|
10,877
|
|
|
|
(1,380
|
)
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets Under Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
|
46,208
|
|
|
|
44,725
|
|
|
|
1,483
|
|
|
|
3
|
|
Net redemptions
|
|
|
(4,520
|
)
|
|
|
(3,621
|
)
|
|
|
(899
|
)
|
|
|
(25
|
)
|
Market appreciation (depreciation)
|
|
|
(17,648
|
)
|
|
|
5,104
|
|
|
|
(22,752
|
)
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management
|
|
|
24,040
|
|
|
|
46,208
|
|
|
|
(22,168
|
)
|
|
|
(48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
$
|
37,066
|
|
|
$
|
44,769
|
|
|
$
|
(7,703
|
)
|
|
|
(17
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual fund net redemptions were $3.9 billion in 2008, an
unfavorable change of $1.4 billion from $2.5 billion
of net redemptions in 2007. Market depreciation was
$13.5 billion in 2008 and was $3.6 billion in
appreciation in 2007, and was the primary contributor to the
deterioration in assets under management for 2008.
Our open-end funds had $2.9 billion of net redemptions
during 2008. We believe that the net redemptions were largely
due to the global financial market meltdown which led to large,
industry-wide flight to safety by investors. Net redemptions
were affected by $247 million of redemptions by the Company
used to pre-pay debt. In the fourth quarter of 2008, we
re-opened our Convertible Fund for the first time since 2003 to
take advantage of the broad sell-off in the convertible markets
that created unprecedented opportunities for long-term
investors. Immediately following the opening, the Convertible
Fund started generating significant net purchases. In addition
to the Convertible Fund, we experienced net purchases in a
number of our mutual funds, including our Total Return Bond Fund
and the newly launched 130/30 Equity Fund and Evolving World
Growth Fund. Market depreciation of $13.5 billion was the
main driver of asset depletion in 2008, while market
appreciation of $3.6 billion helped offset net redemptions
in 2007.
The liquidity crisis in the auction rate securities market
during the first quarter of 2008 led to the refinancing of the
equity securities issued by the closed-end funds to leverage
those portfolios, with more traditional debt financing. While
the proceeds of those debt financings remain a component of
assets under management, certain regulatory and contractual
constraints require total assets in closed-end funds to be at
least three times the amount of
34
debt leverage, which is higher than the asset coverage required
when using equity leverage. The global meltdown that affected
security values required us to reduce $1.0 billion of
leverage used by our closed-end funds during 2008 that we
reported as net redemptions.
Separate accounts had net redemptions of $661 million in
2008, an improvement of nearly $500 million when compared
to $1.2 billion in net redemptions during 2007. We believe
that the net redemptions during 2008 were primarily due to the
significant market decline which occurred in the fourth quarter
of 2008. Separate account net redemptions were also affected by
$40 million in redemptions by the Company used to pre-pay
debt in the fourth quarter. Market depreciation of
$4.2 billion in 2008 also contributed to the deterioration
in assets under management for the period while market
appreciation of $1.5 billion in 2007 offset net redemptions.
One-Time
Items
Results of operations for 2008 and 2007 were significantly
impacted by certain one-time expenses. In 2008, developments in
the Illinois tax statutes resulted in modifications to the
Companys state tax apportionment methodology that lowered
the Companys 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 period was
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 11 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.
We consider results adjusted for these one-time expenses, as
presented below, to provide a better indication of our
operations. These adjusted items are considered non-GAAP
financial measures as defined by the rules of the
Securities and Exchange Commission. In evaluating operating
performance, we consider operating expenses, operating income,
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, we believe
that excluding these items better enables us to evaluate our
operating performance relative to the prior periods. We consider
these non-GAAP financial measures when evaluating our
performance believe the presentation of these amounts provides
the reader with information necessary to analyze our operations
for the periods compared. Reconciliations of these measurements
from the most
35
directly comparable GAAP financial measures for the twelve
months ended December 31, 2008 and 2007 are provided in the
table below and should be carefully evaluated by the reader:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
(in thousands)
|
|
|
|
|
|
|
|
Operating expenses
|
|
$
|
232,492
|
|
|
$
|
300,384
|
|
Termination of closed-end fund compensation agreements
|
|
|
|
|
|
|
19,500
|
|
Closed-end fund structuring fees
|
|
|
|
|
|
|
6,904
|
|
|
|
|
|
|
|
|
|
|
Operating expenses, as adjusted
|
|
$
|
232,492
|
|
|
$
|
273,980
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
159,097
|
|
|
$
|
173,093
|
|
Termination of closed-end fund compensation agreements
|
|
|
|
|
|
|
19,500
|
|
Closed-end fund structuring fees
|
|
|
|
|
|
|
6,904
|
|
|
|
|
|
|
|
|
|
|
Operating income, as adjusted
|
|
$
|
159,097
|
|
|
$
|
199,497
|
|
|
|
|
|
|
|
|
|
|
Operating margin
|
|
|
40.6
|
%
|
|
|
36.6
|
%
|
Termination of closed-end fund compensation agreements
|
|
|
|
|
|
|
4.1
|
|
Closed-end fund structuring fees
|
|
|
|
|
|
|
1.4
|
|
|
|
|
|
|
|
|
|
|
Operating margin, as adjusted
|
|
|
40.6
|
%
|
|
|
42.1
|
%
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(24,521
|
)
|
|
$
|
27,745
|
|
Termination of closed-end fund compensation agreements
|
|
|
|
|
|
|
2,634
|
|
Closed-end fund structuring fees
|
|
|
|
|
|
|
933
|
|
Net deferred tax assets revaluation
|
|
|
6,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss), as adjusted
|
|
$
|
(17,750
|
)
|
|
$
|
31,312
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
|
|
$
|
(1.24
|
)
|
|
$
|
1.22
|
|
Termination of closed-end fund compensation agreements
|
|
|
|
|
|
|
0.11
|
|
Closed-end fund structuring fees
|
|
|
|
|
|
|
0.04
|
|
Net deferred tax assets revaluation
|
|
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share, as adjusted
|
|
$
|
(0.90
|
)
|
|
$
|
1.37
|
|
|
|
|
|
|
|
|
|
|
Results
of Operations
Operating
Income
Operating income was $159.1 million for 2008, compared to
$173.1 million for 2007.
Operating income, as adjusted, was $159.1 million for 2008,
compared to $199.5 million for the year-earlier period.
Revenues
Total revenues decreased by $81.9 million, or 17%, to
$391.6 million for the year ended December 31, 2008
from $473.5 million for the prior year. The decrease was
primarily due to lower investment management fees and
distribution and underwriting fees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
(in thousands)
|
|
2008
|
|
|
2007
|
|
|
Amount
|
|
|
Percent
|
|
|
Investment management fees
|
|
$
|
274,174
|
|
|
$
|
325,395
|
|
|
$
|
(51,221
|
)
|
|
|
(16
|
)%
|
Distribution and underwriting fees
|
|
|
114,023
|
|
|
|
143,994
|
|
|
|
(29,971
|
)
|
|
|
(21
|
)
|
Other
|
|
|
3,392
|
|
|
|
4,088
|
|
|
|
(696
|
)
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
391,589
|
|
|
$
|
473,477
|
|
|
$
|
(81,888
|
)
|
|
|
(17
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
Compared to the prior year, investment management fees decreased
16% in 2008 primarily due to a $7.7 billion decrease in
average assets under management across all products. Investment
management fees from open-end funds decreased to
$165.6 million for the year ended December 31, 2008
from $205.2 million for the prior year, primarily due to
decreases in open-end fund average assets under management of
$5.5 billion for 2008 compared to the prior year.
Investment management fees from our separately managed accounts
decreased to $54.0 million from $60.0 million
primarily due to an approximate $1.4 billion decrease in
average assets under management. Investment management fees from
our closed-end funds decreased to $54.5 million for 2008
from $60.2 million for 2007 as a result of a
$781 million decrease in closed-end fund average assets
under management mainly attributable to the deleveraging in the
third and fourth quarters of 2008. Investment management fees,
in total, as a percentage of average assets under management
were 0.74% and 0.73% for the years ended December 31, 2008
and 2007, respectively.
Distribution and underwriting fees decreased to
$114.0 million for the year ended December 31, 2008
from $144.0 million for the year ended December 31,
2007. The decrease was primarily due to a $27.0 million
decrease in distribution fees as a result of a 21% decrease in
open-end fund average assets under management and a
$2.2 million decrease CDSC fees, when compared to the prior
year.
Operating
Expenses
Operating expenses decreased to $232.5 million for the year
ended December 31, 2008 from $300.4 million for the
prior year. This change was due to two significant one-time
marketing and sales promotion charges totaling
$26.4 million that were incurred in the second quarter of
2007 and to lower employee compensation and benefits, and
distribution and underwriting expenses.
Operating expenses, as adjusted, decreased to
$232.5 million for the year ended December 31, 2008
from $274.0 million for the prior year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
(in thousands)
|
|
2008
|
|
|
2007
|
|
|
Amount
|
|
|
Percent
|
|
|
Employee compensation and benefits
|
|
$
|
74,483
|
|
|
$
|
91,039
|
|
|
$
|
(16,556
|
)
|
|
|
(18
|
)%
|
Distribution and underwriting expense
|
|
|
84,884
|
|
|
|
104,227
|
|
|
|
(19,343
|
)
|
|
|
(19
|
)
|
Amortization of deferred sales commissions
|
|
|
23,417
|
|
|
|
27,249
|
|
|
|
(3,832
|
)
|
|
|
(14
|
)
|
Marketing and sales promotion
|
|
|
11,908
|
|
|
|
40,833
|
|
|
|
(28,925
|
)
|
|
|
(71
|
)
|
General and administrative
|
|
|
37,800
|
|
|
|
37,036
|
|
|
|
764
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
232,492
|
|
|
$
|
300,384
|
|
|
$
|
(67,892
|
)
|
|
|
23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2008, we initiated a series of cost containment efforts
seeking to align the size and costs of our operations with a
shrinking asset base, revenues and capital structure. These
efforts began early in 2008 with the reduction of 29 associates.
Additional efforts have been made to contain costs through staff
reductions in November 2008 of 31 associates with the
reorganization of our information technology function and
finally in January 2009 with the reduction of more than 40
associates across all aspects of our business, other than our
core investment management team. Compensation expenses were not
the only focus of our cost cutting initiatives; rather, we have
focused on further reducing our cost structure by delaying or
canceling information technology projects, reducing capitalized
costs, transforming fixed costs to variable by exploring
outsourcing alternatives and limiting discretionary spending.
These efforts have continued into 2009, and we expect that our
expenses unrelated to our assets under management will continue
to decrease from past levels.
Employee compensation and benefits expense decreased by
$16.6 million for the year ended December 31, 2008
when compared to the prior year primarily reflecting reductions
in performance related expenses, such as incentive compensation
and benefit plan contributions. This decrease also reflects the
impact of staff reductions described above to right size the
company in response to support reduced asset levels.
Distribution and underwriting expense decreased by
$19.3 million for 2008 when compared to the prior year,
primarily due to an decrease of $9.2 million resulting from
the reduction in the Class C share assets older than one
year. This decrease was compounded by a decrease of
$10.1 million in
12b-1
expenses due to a decrease in average
37
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. However, Class C share assets do generate a
distribution expense in subsequent years, as we pass along 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
2007 did not change from the rates paid in the prior year, we
expect distribution expense to vary with the change in open-end
fund assets under management and with the age of the
Class C share assets.
Amortization of deferred sales commissions decreased
$3.8 million for the twelve months ended December 31,
2008 when compared to the prior-year period, due to a decrease
in Class C share sales during 2008 and to the decrease in
the acceleration of amortization associated with Class B
share redemptions which were lower in 2008.
Marketing and sales promotion expense decreased by
$28.9 million for the year ended December 31, 2008,
when compared to the year ended December 31, 2007. This
decrease was mainly due to two one-time expenses totaling
$26.4 million in 2007. During the second quarter of 2007,
we incurred a one-time expense of $19.5 million by
terminating our remaining two agreements that required annual
payments based on the assets of two closed-end funds and a
one-time $6.9 million structuring fee in connection with
the CHW initial public offering. Marketing and sales promotion
expenses during 2008 were also reduced by lower supplemental
distribution payments resulting from the decrease in assets
under management.
General and administrative expense increased by
$0.8 million for the year ended December 31, 2008,
when compared to the prior-year period. Occupancy- related and
depreciation expenses to support our expansion of office
facilities, which we contracted for in November 2007, increased
by $3.3 million in 2008 when compared to 2007. Significant
reductions in expense were realized in the second half of 2008,
a result of our expense control efforts as previously discussed.
For instance, professional services expenses were reduced by
more than $2.5 million.
Non-Operating
Income (Loss)
Non-operating income (loss) reduced income by
$291.9 million for the year ended December 31, 2008,
compared to adding $29.9 million of income for the prior
year.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
Interest income
|
|
$
|
2,334
|
|
|
$
|
16,706
|
|
|
$
|
(14,372
|
)
|
Interest expense
|
|
|
(32,010
|
)
|
|
|
(19,555
|
)
|
|
|
(12,455
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (expense)
|
|
|
(29,676
|
)
|
|
|
(2,849
|
)
|
|
|
(26,827
|
)
|
Capital gain (loss) and dividend income
|
|
|
(162,977
|
)
|
|
|
21,460
|
|
|
|
(184,437
|
)
|
Unrealized appreciation (depreciation)
|
|
|
(132,834
|
)
|
|
|
11,953
|
|
|
|
(144,787
|
)
|
Miscellaneous other income
|
|
|
(1,070
|
)
|
|
|
935
|
|
|
|
(2,005
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment and other income (loss)
|
|
|
(296,881
|
)
|
|
|
34,348
|
|
|
|
(331,229
|
)
|
Debt extinguishment costs
|
|
|
(37,498
|
)
|
|
|
|
|
|
|
(37,498
|
)
|
Minority interest in partnership investments
|
|
|
72,156
|
|
|
|
(1,598
|
)
|
|
|
73,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (loss)
|
|
$
|
(291,889
|
)
|
|
$
|
29,901
|
|
|
$
|
(321,800
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income decreased $14.4 million for the twelve
months ended December 31, 2008, when compared to the
prior-year period, as a result of lower balances in our cash and
cash equivalents balances earning lower interest rates as
compared to 2007. Interest expense increased $12.5 million
for the year ended December 31, 2008 due to a full year of
financing costs resulting from the private debt issuance of
$375 million aggregate principal senior unsecured notes in
July 2007.
Consistent with our efforts to align our cost and capital
structures and to alleviate potential debt covenant concerns, we
voluntarily prepaid $400 million of our long-term debt in
December 2008. To fund this prepayment, we sold securities in
our investment portfolio. In doing so, we recognized
approximately $179 million in realized losses and incurred
a $34.9 million make-whole payment, which is included in
debt extinguishment costs.
38
Investment and other income (loss) includes capital gain
distributions, of realized gains and losses on our investments,
of dividend income earned on our investment portfolio and of
unrealized gains and losses on securities that are owned by
Calamos Financial Services LLC (CFS Securities) and by our
consolidated partnerships. Capital gain and dividend income
decreased $184.4 million for the year ended
December 31, 2008, as compared to the prior year, mainly
due to the capital losses incurred in the fourth quarter of 2008
resulting from the sale of securities from our investment
portfolio to generate the cash needed for our debt pre-payment.
Additionally, a realized loss of $14.6 million was recorded
in the fourth quarter 2008 for other-than-temporary impairment
on available for sale securities that are not expected to
recover in the near term. Unrealized appreciation decreased
$144.8 million for 2008, when compared to 2007, due to net
unrealized depreciation in the market value of the CFS
Securities and the consolidated partnership investments that we
own.
Minority interest in partnership investments represents the
corresponding minority interests portion of the changes in
market value from our consolidated partnership investments.
Income
Taxes
Our effective tax rate was 37.3% for the year ended
December 31, 2008 net of the one-time charge described
immediately following and 40.2% for the year ended
December 31, 2007. In 2008, developments in the Illinois
tax statutes resulted in modifications to the Companys
state tax apportionment methodology that lowered the
Companys statutory income tax rate from 40 percent to
37 percent. In the second quarter of 2008, we recorded a
one-time, non-cash income tax expense of $6.8 million, or
$0.34 per diluted share, to revalue our net deferred tax assets
to reflect the new statutory income tax rate. Deferred tax
assets represent the estimated future benefits attributed to
temporary differences and, as a result, are based on the current
enacted tax laws, a decrease in tax rates decreases the value of
the deferred tax assets and increases the current period income
tax expense. Conversely, an increase in tax rates increases the
value of the deferred tax assets and decreases the current
period income tax expense.
Net
Income (loss)
Net loss was $24.5 million for 2008 compared to net income
of $27.7 million for 2007.
Net loss, as adjusted, was $17.8 million for 2008 compared
to net income of $31.3 million for the year-earlier period.
39
Year
Ended December 31, 2007 Compared to Year Ended
December 31, 2006
Assets
Under Management
Assets under management increased by $1.5 billion, or 3%,
to $46.2 billion at December 31, 2007 from
$44.7 billion at December 31, 2006. Average assets
under management decreased by $911 million, or 2%, to
$44.8 billion for the year ended December 31, 2007
from $45.7 billion for the year ended December 31,
2006. At December 31, 2007 and 2006, our assets under
management consisted of 75% mutual funds and 25% separate
accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
Change
|
|
(in millions)
|
|
2007
|
|
|
2006
|
|
|
Amount
|
|
|
Percent
|
|
|
Mutual Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
$
|
33,704
|
|
|
$
|
32,244
|
|
|
$
|
1,460
|
|
|
|
5
|
%
|
Net purchases (redemptions)
|
|
|
(2,469
|
)
|
|
|
288
|
|
|
|
(2,757
|
)
|
|
|
*
|
|
Market appreciation
|
|
|
3,600
|
|
|
|
1,172
|
|
|
|
2,428
|
|
|
|
207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management
|
|
|
34,835
|
|
|
|
33,704
|
|
|
|
1,131
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
|
33,892
|
|
|
|
34,075
|
|
|
|
(183
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
|
11,021
|
|
|
|
11,561
|
|
|
|
(540
|
)
|
|
|
5
|
|
Net redemptions
|
|
|
(1,152
|
)
|
|
|
(1,107
|
)
|
|
|
(45
|
)
|
|
|
4
|
|
Market appreciation
|
|
|
1,504
|
|
|
|
567
|
|
|
|
937
|
|
|
|
165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management
|
|
|
11,373
|
|
|
|
11,021
|
|
|
|
352
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
|
10,877
|
|
|
|
11,605
|
|
|
|
(728
|
)
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets Under Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
|
44,725
|
|
|
|
43,805
|
|
|
|
920
|
|
|
|
2
|
|
Net redemptions
|
|
|
(3,621
|
)
|
|
|
(819
|
)
|
|
|
(2,802
|
)
|
|
|
342
|
|
Market appreciation
|
|
|
5,104
|
|
|
|
1,739
|
|
|
|
3,365
|
|
|
|
194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management
|
|
|
46,208
|
|
|
|
44,725
|
|
|
|
1,483
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
$
|
44,769
|
|
|
$
|
45,680
|
|
|
$
|
(911
|
)
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual fund net redemptions were $2.5 billion in 2007, an
unfavorable change of $2.8 billion from $288 million
of net purchases in 2006. Market appreciation was
$3.6 billion in 2007 and was $1.2 billion in 2006,
contributing to the rise in assets under management for both
years.
Our open-end funds had $3.5 billion of net redemptions
during the first half of 2007 and $141 million of net
redemptions during the last half of 2007. The net redemptions
during the first six months of 2007 were primarily due to lower
purchases and higher redemptions of our Growth Fund and our
Growth and Income Fund. During 2007, we experienced net
purchases in a number of our mutual funds, including our Market
Neutral Income Fund, Global Growth and Income Fund and
International Growth Fund. Net purchases were also positively
impacted by the launch of the Global Equity Fund, the Government
Money Market Fund, the Total Return Bond Fund and the Offshore
Funds during 2007.
Our closed-end funds had net purchases of $1.2 billion
during 2007, an increase of $1.1 billion from 2006,
primarily due to the launch of the Calamos Global Dynamic Income
Fund (CHW) during 2007.
Separate accounts had net redemptions of $1.2 billion and
$1.1 billion in 2007 and 2006, respectively, primarily due
to separate account outflows in our equity and convertible
strategies. The net outflows during the
40
period were primarily from our growth strategies, as well as
convertible strategies, which remain closed to new investors.
Separate accounts had net redemptions of $1.2 billion for
the six months ended June 30, 2007 and net purchases of
$67 million during the six months ended December 31,
2007. Market appreciation of $1.5 billion in 2007
contributed to the growth in assets under management for the
period while market appreciation of $600 million in 2006
offset net redemptions.
One-Time
Activities
Results of operations for 2007 were significantly impacted by
two one-time marketing and sales promotion expenses, incurred in
the second quarter of 2007, that we believe will benefit our
long-term financial performance. First, we incurred a one-time
expense of $19.5 million, or 11 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. When evaluating whether or not to terminate
the future payments made under distribution agreements, we
compared the net present value of the future cash flows for
on-going payments to the negotiated one-time payments. We based
our decision on the expectation that the termination of the
agreements during the second quarter of 2007 would result in the
reduction of future marketing and sales promotion expenses of
approximately $650,000 per quarter, or $2.6 million
annually, beginning in the quarter ended September 30, 2007.
Second, we incurred a $6.9 million, or 4 cents per diluted
share, one-time structuring fee related to CHW. Our decision to
introduce a new closed-end fund is generally a function of the
receptiveness of the capital markets, our investment strategies
and capabilities, and the financial viability of a proposed
product. If a new closed-end fund is introduced, we will
negotiate with each underwriter the fees and services prior to
the public offering. If any non-traditional fees are negotiated,
the payments may: not extend to each underwriter that
participates in the offering, vary among the underwriters
receiving such a fee, and differ in form. Structuring fees are
upfront non-traditional fees paid by us in excess of sales loads
or underwriters commissions. When structuring fees are
paid, we recognize a marketing and sales promotion expense at
the time of the offering.
We consider results adjusted for these one-time expenses, as
presented below, to provide a better indication of the
companys 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 expense,
operating income and net income, 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 terminating the two
closed-end fund additional compensation agreements and the CHW
closed-end fund structuring fees during the second quarter of
2007. As these items are not expected to recur, management
believes that excluding these items better enables it to
evaluate the companys 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 companys
operations for the periods compared. Reconciliations of these
measurements to their most directly comparable GAAP financial
41
measures for the twelve months ended December 31, 2007 and
2006 are provided in the table below and should be carefully
evaluated by the reader:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2007
|
|
|
2006
|
|
|
Operating expenses
|
|
$
|
300,384
|
|
|
$
|
254,144
|
|
Termination of closed-end fund compensation agreements
|
|
|
19,500
|
|
|
|
|
|
Closed-end fund structuring fees
|
|
|
6,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses, as adjusted
|
|
$
|
273,980
|
|
|
$
|
254,144
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
173,093
|
|
|
$
|
231,028
|
|
Termination of closed-end fund compensation agreements
|
|
|
19,500
|
|
|
|
|
|
Closed-end fund structuring fees
|
|
|
6,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income, as adjusted
|
|
$
|
199,497
|
|
|
$
|
231,028
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
27,745
|
|
|
$
|
34,008
|
|
Termination of closed-end fund compensation agreements
|
|
|
2,634
|
|
|
|
|
|
Closed-end fund structuring fees
|
|
|
933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, as adjusted
|
|
$
|
31,312
|
|
|
$
|
34,008
|
|
|
|
|
|
|
|
|
|
|
Results
of Operations
Operating
Income
Operating income was $173.1 million for 2007, compared to
$231.0 million for 2006.
Operating income, as adjusted for the one-time marketing and
sales promotion expenses, was $199.5 million for 2007,
compared to $231.0 million for the year-earlier period.
Revenues
Total revenues decreased by $11.7 million, or 2%, to
$473.5 million for the year ended December 31, 2007
from $485.2 million for the prior year. The decrease was
primarily due to lower distribution and underwriting fees and
investment management fees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
(in thousands)
|
|
2007
|
|
|
2006
|
|
|
Amount
|
|
|
Percent
|
|
|
Investment management fees
|
|
$
|
325,395
|
|
|
$
|
329,383
|
|
|
$
|
(3,988
|
)
|
|
|
1
|
%
|
Distribution and underwriting fees
|
|
|
143,994
|
|
|
|
151,760
|
|
|
|
(7,766
|
)
|
|
|
5
|
|
Other
|
|
|
4,088
|
|
|
|
4,029
|
|
|
|
59
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
473,477
|
|
|
$
|
485,172
|
|
|
$
|
(11,695
|
)
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compared to the prior year, investment management fees decreased
1% in 2007 primarily due to a $911 million decrease in
average assets under management. The overall decline in
investment management fees was due to a decrease in fees from
open-end funds and separately managed accounts, partially offset
by higher investment management fees from closed-end funds.
Investment management fees from open-end funds decreased to
$205.2 million for the year ended December 31, 2007
from $212.7 million for the prior year, primarily due to
decreases in open-end fund average assets under management of
$934 million for 2007 compared to the prior year.
Investment management fees from our separately managed accounts
decreased to $60.0 million from $64.2 million
primarily due to an approximate $728 million decrease in
average assets under management. These decreases were partially
offset by higher investment management fees from our closed-end
funds, which increased to $60.2 million for 2007 from
$52.5 million for 2006 as a result of a $751 million
increase in closed-end fund average assets under management
mainly attributable to the assets raised from the launch of the
Calamos Global Dynamic Income Fund
42
(CHW) in 2007. Investment management fees, in total, as a
percentage of assets under management were 0.73% and 0.72% for
the years ended December 31, 2007 and 2006, respectively.
Distribution and underwriting fees decreased to
$144.0 million for the year ended December 31, 2007
from $151.8 million for the year ended December 31,
2006. The decrease was primarily due to a $4.2 million
decrease in distribution fees as a result of a 3% decrease in
open-end fund average assets under management and a
$3.7 million decrease in front-end sales charges on the
sale of Class A shares of open-end funds, when compared to
the prior year.
Operating
Expenses
Operating expenses increased to $300.4 million for the year
ended December 31, 2007 from $254.1 million for the
prior year. This increase was largely due to two significant
one-time marketing and sales promotion charges totaling
$26.4 million that were incurred in the second quarter of
2007. Additionally, 2007 was impacted by higher employee
compensation and benefits, and general and administrative
expenses.
Operating expenses, as adjusted for the one-time marketing and
sales promotion expenses, increased to $274.0 million for
the year ended December 31, 2007 from $254.1 million
for the prior year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
(in thousands)
|
|
2007
|
|
|
2006
|
|
|
Amount
|
|
|
Percent
|
|
|
Employee compensation and benefits
|
|
$
|
91,039
|
|
|
$
|
73,382
|
|
|
$
|
17,657
|
|
|
|
24
|
%
|
Distribution and underwriting expense
|
|
|
104,227
|
|
|
|
100,935
|
|
|
|
3,292
|
|
|
|
3
|
|
Amortization of deferred sales commissions
|
|
|
27,249
|
|
|
|
32,924
|
|
|
|
(5,675
|
)
|
|
|
17
|
|
Marketing and sales promotion
|
|
|
40,833
|
|
|
|
15,631
|
|
|
|
25,202
|
|
|
|
161
|
|
General and administrative
|
|
|
37,036
|
|
|
|
31,272
|
|
|
|
5,764
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
300,384
|
|
|
$
|
254,144
|
|
|
$
|
46,240
|
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits expense increased by
$17.7 million for the year ended December 31, 2007
when compared to the prior year. This increase largely reflects
the impact of staff additions to support the following
initiatives: expand our wealth management and institutional
sales capabilities; diversify our product offering by adding
complementary fixed income and cash management strategies; and
strengthen our information technology infrastructure. In
addition, employee compensation and benefits expense increased
by $2.3 million for the year ended December 31, 2007
due to the transition payments for two executive officers.
Distribution and underwriting expense increased by
$3.3 million for 2007 when compared to the prior year,
primarily due to an increase of $5.5 million resulting from
the growth in the Class C share assets older than one year.
This increase was partially offset by a decrease of
$2.2 million due to a decrease in 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. However, Class C share assets 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
2007 did not change from the rates paid in the prior year, we
expect distribution expense to vary with the change in open-end
fund assets under management and with the age of the
Class C share assets.
Amortization of deferred sales commissions decreased
$5.7 million for the twelve months ended December 31,
2007 when compared to the prior-year period, due primarily to a
decrease in Class C share sales during 2007. This decrease
was partially offset by an increase in the amortization of
deferred sales commissions on Class B shares due to an
increase in redemptions.
Marketing and sales promotion expense increased by
$25.2 million for the year ended December 31, 2007,
when compared to the year ended December 31, 2006. This
increase was mainly due to two one-time expenses totaling
$26.4 million that we believe will continue to have a
positive impact on our future results. During the second quarter
of 2007, we incurred a one-time expense of $19.5 million by
terminating our remaining two agreements that required annual
payments based on the assets of two closed-end funds and a
one-time $6.9 million
43
structuring fee in connection with the CHW initial public
offering. The year-to-date increase resulting from these
one-time expenses was partially offset by a $1.4 million
reduction in expense that resulted from terminating the
remaining two closed-end fund agreements. Other factors that
contributed to the increase in marketing and sales promotion
expenses during 2007 included $0.5 million of higher costs
incurred on our corporate branding initiative.
General and administrative expense increased by
$5.8 million for the year ended December 31, 2007,
when compared to the prior-year period, of which
$3.4 million was attributable to occupancy, depreciation
and business services related to: supporting additional staff
and implementing our new trade order management and portfolio
accounting systems to support our new fixed income strategies.
Further, an increase of $1.4 million for the same period
was attributable to professional services, including our
decision to outsource certain facility-related functions, which
were historically reflected in employee compensation and
benefits expense.
Non-Operating
Income (Loss)
Non-operating income (loss) was $29.9 million for the year
ended December 31, 2007, compared to $12.4 million for
the prior year, and was comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2007
|
|
|
2006
|
|
|
Change
|
|
|
Interest income
|
|
$
|
16,706
|
|
|
$
|
13,149
|
|
|
$
|
3,557
|
|
Interest expense
|
|
|
(19,555
|
)
|
|
|
(8,145
|
)
|
|
|
(11,410
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (expense)
|
|
|
(2,849
|
)
|
|
|
5,004
|
|
|
|
(7,853
|
)
|
Capital gain and dividend income
|
|
|
21,460
|
|
|
|
4,352
|
|
|
|
17,108
|
|
Unrealized appreciation
|
|
|
11,953
|
|
|
|
1,979
|
|
|
|
9,974
|
|
Miscellaneous other income
|
|
|
935
|
|
|
|
1,072
|
|
|
|
(137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment and other income (loss)
|
|
|
34,348
|
|
|
|
7,403
|
|
|
|
26,945
|
|
Minority interest in partnership investments
|
|
|
(1,598
|
)
|
|
|
(26
|
)
|
|
|
(1,572
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (loss)
|
|
$
|
29,901
|
|
|
$
|
12,381
|
|
|
$
|
17,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income increased $3.6 million for the twelve
months ended December 31, 2007, when compared to the
prior-year period, as a result of higher interest rates earned
on our cash and cash equivalents balances. Interest expense
increased $11.4 million for the year ended
December 31, 2007 due to interest expense resulting from a
private debt issuance of $375 million aggregate principal
senior unsecured notes in July 2007.
Investment and other income (loss) is primarily comprised of
capital gain distributions, including realized gains and losses
on our investments, of dividend income earned on our investment
portfolio and of unrealized gains and losses on securities that
are owned by Calamos Financial Services LLC (CFS Securities) and
of the consolidated partnerships that we own. Capital gain and
dividend income increased $17.1 million for the year ended
December 31, 2007, as compared to the prior year, mainly
due to large capital gain and dividend distributions that
occurred in the fourth quarter of 2007 as a result of our
increased investment portfolio and its strong performance.
Unrealized appreciation increased $10.0 million for 2007,
when compared to 2006, due to net unrealized appreciation in the
market value of the CFS Securities and the consolidated
partnership investments that we own.
Minority interest in partnership investments represents the
corresponding minority interests portion of the changes in
market value from our consolidated partnership investments.
Further, the unrealized gains and losses on a significant
portion of our investment securities were not recorded to net
income; rather, these unrealized gains and losses were
recognized as changes to accumulated other comprehensive income,
a component of stockholders equity. These unrealized gains
and losses are only recognized in our consolidated statements of
operations when they are realized, which occurs upon the sale of
the securities and upon the receipt of capital gains
distributions, which typically occur during the fourth quarter
of the calendar year. For the years ended December 31, 2007
and 2006, net unrealized gains generated by our investment
securities were $9.7 million and $10.1 million,
respectively, of which $1.6 million and $1.4 million,
net of minority interest and taxes, respectively, were
recognized as increases to accumulated other comprehensive
income.
44
Income
Taxes
Our effective tax rate was 40.2% and 40.1% for the years ended
December 31, 2007 and 2006.
Net
Income
Net income was $27.7 million for 2007 compared to
$34.0 million for 2006.
Net income, as adjusted for the one-time marketing and sales
promotion expenses, was $31.3 million for 2007 compared to
$34.0 million for the year-earlier period.
Quarterly
Results of Operations
Unaudited quarterly results of operations for the years ended
December 31, 2007 and 2008 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the Quarter Ended
|
|
(in thousands, except
|
|
2007
|
|
|
2008
|
|
share data)
|
|
March 31
|
|
|
June 30
|
|
|
Sept. 30
|
|
|
Dec. 31
|
|
|
March 31
|
|
|
June 30
|
|
|
Sept. 30
|
|
|
Dec. 31
|
|
|
Assets under management
(in millions)
|
|
$
|
42,550
|
|
|
$
|
43,811
|
|
|
$
|
46,746
|
|
|
$
|
46,208
|
|
|
$
|
40,906
|
|
|
$
|
41,210
|
|
|
$
|
33,329
|
|
|
$
|
24,040
|
|
Total revenue
|
|
|
115,700
|
|
|
|
114,767
|
|
|
|
118,484
|
|
|
|
124,526
|
|
|
|
110,693
|
|
|
|
112,238
|
|
|
|
101,807
|
|
|
|
66,851
|
|
Total operating expenses
|
|
|
65,545
|
|
|
|
93,835
|
|
|
|
69,045
|
|
|
|
71,959
|
|
|
|
66,264
|
|
|
|
63,127
|
|
|
|
57,696
|
|
|
|
45,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
50,155
|
|
|
|
20,932
|
|
|
|
49,439
|
|
|
|
52,567
|
|
|
|
44,429
|
|
|
|
49,111
|
|
|
|
44,111
|
|
|
|
21,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
7,534
|
|
|
$
|
3,805
|
|
|
$
|
7,127
|
|
|
$
|
9,279
|
|
|
$
|
449
|
|
|
$
|
1,896
|
|
|
$
|
(799
|
)
|
|
$
|
(26,067
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share(1)
|
|
$
|
0.32
|
|
|
$
|
0.16
|
|
|
$
|
0.32
|
|
|
$
|
0.42
|
|
|
$
|
0.02
|
|
|
$
|
0.09
|
|
|
$
|
(0.05
|
)
|
|
$
|
(1.34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares outstanding(2)
|
|
|
100,764,966
|
|
|
|
100,289,411
|
|
|
|
99,320,380
|
|
|
|
98,786,281
|
|
|
|
97,621,495
|
|
|
|
97,051,708
|
|
|
|
96,829,687
|
|
|
|
98,551,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In calculating 2008 per share results for the quarters ended
March 31, 2008, June 30, 2008 and September 30,
2008, the effective tax rates applied to income before minority
interest in Calamos Holdings LLC and income taxes were 40.3%,
36.9% and 33.0%, respectively. Because the Company generated a
loss in the quarter ended December 31, 2008, diluted per
share results equal basic per share results as the economic
impact of the Calamos Interests exchange and the effect of
stock-based compensation results in anti-dilution. |
|
|
|
In calculating 2007 per share results for the quarters ended
March 31, 2007, June 30, 2007, September 30, 2007
and December 31, 2007, the effective tax rates applied to
income before minority interest in Calamos Holdings LLC and
income taxes were 40.1%, 40.7%, 40.0% and 40.2%, respectively. |
|
(2) |
|
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 the diluted results for the quarter ended
December 31, 2008, the number of outstanding shares equals
basic shares outstanding as the economic impact of the Calamos
Interests exchange and the effect of stock-based
compensation results in anti-dilution. |
Liquidity
and Capital Resources
Despite the unfavorable impact of the economic downturn on our
financial results, the Company remains highly liquid. Our
principal sources of liquidity are cash flows from operating
activities and our corporate investment portfolio, which is
comprised of cash and cash equivalents, investment securities,
partnership investments and offshore funds, and which makes up a
majority of our assets. We anticipate utilizing our cash and
cash equivalent balances to develop and invest in our products
as opportunities arise, to invest in property and equipment for
our facility and to support our operations. Investment
securities and offshore funds are principally comprised of
company-sponsored mutual funds. In addition, the underlying
partnership investments are typically comprised of highly liquid
exchange-traded securities. Our working capital requirements
historically have been met through cash
45
generated by operations. We believe cash generated from
operations will be sufficient over the foreseeable future to
meet our working capital requirements with respect to the
foregoing activities and to support future growth. The Company
maintains sufficient liquidity to meet all of its obligations.
Calamos Asset Management, Inc. and Calamos Family Partners, Inc.
made capital contributions to Calamos Holdings LLC during the
third quarter of 2008 that helped offset shares repurchased
under our Class A common stock repurchase plan. Further, in
early October, we initiated a series of hedges to help protect
the value of our portfolio. Additionally, we reduced our
dividend in October as a result of a decline in assets under
management and income, as well as to conserve capital. During
the fourth quarter of 2008, we reduced our outstanding long term
debt by $400 million leaving a balance of $125 million
outstanding at December 31, 2008. We generated cash through
the sale of $379 million of investments from our corporate
investment portfolio. In negotiating this prepayment, our goals
were to alleviate concerns with respect to meeting certain
financial covenants going forward and to align our capital
structure with the size of our business. Another important goal
for us was to maintain sufficient liquidity to provide us the
ongoing flexibility to seed new products and to execute our
long-term growth initiatives. We believe that we were successful
in our efforts. We were in compliance with our financial
covenants at December 31, 2008. An indication of our
success was received in February 2009 when Standard &
Poors affirmed its investment-grade BBB+/negative outlook
rating of Calamos Holdings LLC. We believe that a negative
outlook indicates an approximate
one-in-three
probability of a rating downgrade in the near term. We have
re-opened our convertible products and continue to look for ways
to take advantage of the broadly depressed security valuations
which we anticipate will add stability to our firm in the short
term.
To mitigate the impact of further declines in the valuation of
our investment portfolio, during the fourth quarter we initiated
a series of hedges specifically a low-cost option collar that is
comprised of selling (short) index-based call options and
purchasing (long) index-based put options. This hedge provided
the stability to our portfolio value as intended. We expect to
continue to use hedge strategies to protect our portfolio value
as we believe appropriate.
The following tables summarize key statements of financial
condition data relating to our liquidity and capital resources
at December 31, 2008 and 2007.
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2008
|
|
|
2007
|
|
|
Statements of financial condition data:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
59,425
|
|
|
$
|
108,441
|
|
Receivables
|
|
|
20,049
|
|
|
|
39,340
|
|
Investment securities
|
|
|
187,443
|
|
|
|
535,476
|
|
Partnership investments and offshore funds
|
|
|
28,471
|
|
|
|
353,004
|
|
Deferred tax assets, net
|
|
|
95,606
|
|
|
|
90,284
|
|
Deferred sales commissions
|
|
|
18,414
|
|
|
|
34,076
|
|
Long-term debt
|
|
|
125,000
|
|
|
|
525,000
|
|
The deferred tax assets above include 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 be utilized solely for the benefit of the
shareholders of our common stock.
Cash flows for the years ended December 31, 2008, 2007 and
2006 are shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Cash flow data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
125,228
|
|
|
$
|
226,475
|
|
|
$
|
249,181
|
|
Net cash provided by (used in) investing activities
|
|
|
323,296
|
|
|
|
(654,152
|
)
|
|
|
(16,441
|
)
|
Net cash provided by (used in) financing activities
|
|
|
(497,540
|
)
|
|
|
207,277
|
|
|
|
(114,368
|
)
|
Net cash provided by operating activities was
$125.2 million, $226.5 million and $249.2 million
for the years ended December 31, 2008, 2007 and 2006,
respectively, and was primarily comprised of income (loss)
before
46
minority interest and income taxes of ($132.8) million,
$203.0 million and $243.4 million, respectively, as
well as net unrealized gains (losses) and net changes in working
capital.
The payment of deferred sales commissions by us to financial
intermediaries who sell Class B and C shares of our
open-end funds is a significant use of our operating cash flows.
Use of cash for deferred sales commissions was
$7.8 million, $11.4 million and $24.4 million for
the years ended December 31, 2008, 2007 and 2006,
respectively. 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.
For the year ended December 31, 2008, net cash provided by
investing activities was $323.3 million, principally
comprised of investments sold during the fourth quarter 2008, of
$379 million to fund the repayment of our debt. Net changes
in partnership during the year primarily represent the
liquidation of the Calamos Equity Opportunities Fund LP,
the reduction in our investment in Calamos Market Neutral
Opportunities Fund LP and unrealized depreciation of the
underlying securities held by the partnerships. For the year
ended December 31, 2007, net cash used in investing
activities was $654.2 million, principally comprised of
products managed by us. During 2007, we made investments of
$382 million in investment securities, including
$30 million into our new Calamos Global Equity Fund and
$55.2 million into our new Calamos Total Return Bond Fund.
We made an additional aggregate investment of $200 million
into our newly launched Offshore Funds. Net changes in
partnership investments during the year ended December 31,
2007 of $48.8 million was primarily the result of our
investment in Calamos Market Neutral Opportunities Fund LP
of $50 million. For the year ended December 31, 2006,
net cash used in investing activities was $16.4 million and
was primarily comprised of our $10.0 million investment in
property and equipment as we continued the initial build-out of
our new office facility and investments of $6.0 million in
products managed by us.
Net cash used in financing activities was $497.5 million
for the twelve months ended December 31, 2008. During the
fourth quarter of 2008, we prepaid $400 million in
aggregate principal of our outstanding debt. Further, we made
distributions to minority shareholders of $86.8 million,
including distributions for their tax liabilities of
$57.1 million, as well as dividends paid to common
shareholders of $7.6 million. Net cash provided by
financing activities was $207.3 million for the twelve
months ended December 31, 2007. During the third quarter of
2007, we received net proceeds of $373.0 million after debt
offering costs from our issuance of $375 million aggregate
principal senior unsecured notes, which were issued to develop
and invest in our products, including new and existing mutual
funds and alternative products, and for general corporate
purposes. This was partially offset by distributions to minority
shareholders of $95.5 million, including distributions for
their tax liabilities of $61.6 million, as well as
dividends paid to common shareholders of $9.8 million.
Additionally, the Company repurchased 2,452,100 shares of
its Class A common stock at an aggregated cost of
$60.6 million during 2007. Net cash used in financing
activities was $114.4 million for the year ended
December 31, 2006 and was primarily comprised of
distributions to minority shareholders of $106.3 million,
including distributions for their tax liabilities of
$78.6 million, as well as the dividends paid to common
shareholders of $8.3 million.
In July 2007, Calamos Holdings LLC (Holdings) completed a
private debt offering of $375 million aggregate principal
amount of senior unsecured notes in three series, consisting of
$197 million of 6.33% notes due July 15, 2014,
$85 million of 6.52% notes due July 15, 2017 and
$93 million of 6.67% notes due July 15, 2019. The
aggregate average interest rate on the notes is 6.46% for the
first seven years and 6.49% over the life of the notes. Under
the note purchase agreement governing the terms of these notes,
Holdings 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 Holdings subsidiaries to incur debt and
restrict the ability of Holdings or its subsidiaries to create
liens and to merge or consolidate, or sell or convey all or
substantially all of Holdings assets. We entered into
amendments to these note agreements in December 2008. The
amendments revised several of the existing financial covenants
and also added additional covenants, including an investment
coverage ratio requirement, certain limitations on distributions
and redemption of equity interests and an interest rate
adjustment provision.
We expect our cash and liquidity requirements will be met with
the cash on hand, the sale of investment securities and through
cash generated by operations.
47
Contractual
Obligations
The following table contains supplemental information regarding
our total contractual cash obligations as of December 31,
2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, including
interest(1)
|
|
$
|
174,293
|
|
|
$
|
7,677
|
|
|
$
|
47,090
|
|
|
$
|
11,908
|
|
|
$
|
107,618
|
|
Operating lease
obligations(2)
|
|
|
74,913
|
|
|
|
4,534
|
|
|
|
8,861
|
|
|
|
8,713
|
|
|
|
52,805
|
|
Other long-term
obligations(3)
|
|
|
754
|
|
|
|
304
|
|
|
|
357
|
|
|
|
87
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
249,960
|
|
|
$
|
12,515
|
|
|
$
|
56,308
|
|
|
$
|
20,708
|
|
|
$
|
160,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Companys senior unsecured notes, which aggregate to
$125 million, have series maturing in 2011, 2014, 2017 and
2019. |
|
(2) |
|
In accordance with generally accepted accounting principles in
the United States, these obligations are not reflected in the
accompanying consolidated statements of financial condition. |
|
(3) |
|
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 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 to the
selling firm upon 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 on an annual 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, 2008, we used average
market return assumptions ranging from 7% to 10% 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 23% and 29%,
respectively, at
48
December 31, 2008. 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 annually, or 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 consolidated statements of operations 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.
Compensation
Plans
We have 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. We estimate the fair
value of the stock options as of the grant date using the
Black-Scholes option-pricing model, and recognize the cost of
stock-based compensation based on the grant-date fair value of
the award. Further, we estimate the number of forfeited awards
at the grant date. Actual forfeitures may vary from our
assumptions, which will result in modifications to future
expenses.
Income
Taxes
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,
2008, we have not recorded a valuation allowance on deferred tax
assets, which principally related 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 and to our net capital loss carryforward. In the
event that sufficient taxable income of the same character does
not result in future years, among other things, a valuation
allowance for certain of our deferred tax assets may be required.
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 us for any business combination with an
acquisition date that is on or after January 1, 2009. We
have evaluated the impact that the adoption of SFAS 141(R)
will have on our financial statements and concluded it to be
immaterial.
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 we currently refer to as minority
interest. SFAS 160 requires 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 us
beginning January 1, 2009, after which our presentation of
minority interest will change accordingly.
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 us beginning
January 1, 2009. We have evaluated the impact that the
adoption of SFAS 161 will have on our financial statements
and concluded it to be immaterial.
49
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
operations or liquidity; projections, predictions, expectations,
estimates or forecasts of 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 anticipate, assume,
believe, continue, could,
estimate, expect, future,
intend, may, opportunity,
potential, predict, seek,
should, trend, will,
would, 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; the inability to maintain
compliance with financial covenants; the performance of our
investment portfolio; our ownership and organizational
structure; general and prolonged declines in the prices of
securities; significant changes in market conditions and the
economy that require a modification to our business plan;
catastrophic or unpredictable events; the loss of key
executives; the unavailability, consolidation and elimination of
third-party retail distribution channels; increased costs of and
timing of payments related to distribution; failure to recruit
and retain qualified personnel; a loss of assets, and thus
revenues; fluctuation in the level of our expenses; poor
performance of our largest funds; damage to our reputation; and
the extent and timing of any share repurchases. 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 both the underlying value and liquidity of the
financial markets around the world that result in appreciation
or depreciation of assets under management; mutual fund capital
gain distributions; our ability to access capital markets; 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 open or close products and
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.
|
|
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 98.2% for the year ended December 31, 2008,
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 we manage. At
December 31, 2008, the fair value of these
50
investment securities was $187 million. Assuming a 10%
increase or decrease in the value of these investments, the fair
value would increase or decrease by $19 million at
December 31, 2008.
Additionally, we are subject to market risk due to a decline in
the value of our partnership investments, 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,
2008, the fair value of these partnerships was $28 million.
Assuming a 10% increase or decrease in the value of these
partnerships, the fair value would increase or decrease by
$2.8 million at December 31, 2008.
At December 31, 2008, we had an aggregate of
$125 million of long-term debt outstanding, which consisted
of senior unsecured notes of $32.9 million of
5.24% notes due April 29, 2011, $46.1 million of
6.33% notes due July 15, 2014, $22.1 million of
6.52% notes due July 15, 2017 and $23.9 million
of 6.67% notes due July 15, 2019. As these notes have
fixed interest rates, we do not believe that they 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.
51
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
52
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Calamos Asset Management, Inc.:
We have audited the accompanying consolidated statements of
financial condition of Calamos Asset Management, Inc. (the
Company) as of December 31, 2008 and 2007, and the related
consolidated statements of operations, changes in
stockholders equity and cash flows for each of the years
in the three-year period ended December 31, 2008. We also
have audited the Companys internal control over financial
reporting as of December 31, 2008, 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 these consolidated
financial statements, for maintaining effective internal control
over financial reporting, and for their assessment of the
effectiveness of internal control over financial reporting,
included in the accompanying managements report on
internal control over financial reporting. Our responsibility is
to express an opinion on these consolidated financial statements
and an opinion on the Companys internal control over
financial reporting 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 audits to obtain
reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal
control over financial reporting was maintained in all material
respects. Our audits of the consolidated financial statements
included examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial
reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our
opinions.
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, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
condition of Calamos Asset Management, Inc. as of
December 31, 2008 and 2007, and the results of their
operations and their cash flows for each of the years in the
three-year period ended December 31, 2008, in conformity
with U.S. generally accepted accounting principles. Also in
our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of
December 31, 2008, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission.
Chicago, Illinois
March 13, 2009
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, 2008
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, 2008.
The effectiveness of internal control over financial reporting
as of December 31, 2008, 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.
Chairman, Chief Executive Officer and
Co-Chief
Investment Officer
|
|
/s/ Cristina
Wasiak Cristina
Wasiak
Senior Vice President,
Chief Financial Officer
|
March 13, 2009
F-2
CALAMOS
ASSET MANAGEMENT, INC.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(in thousands, except share data)
|
|
2008
|
|
|
2007
|
|
|
ASSETS:
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
59,425
|
|
|
$
|
108,441
|
|
Receivables:
|
|
|
|
|
|
|
|
|
Affiliates and affiliated funds
|
|
|
13,187
|
|
|
|
27,641
|
|
Customers
|
|
|
6,862
|
|
|
|
11,699
|
|
Investment securities
|
|
|
187,443
|
|
|
|
535,476
|
|
Partnership investments and offshore funds
|
|
|
28,471
|
|
|
|
353,004
|
|
Prepaid expenses
|
|
|
2,607
|
|
|
|
3,139
|
|
Deferred tax assets, net
|
|
|
11,837
|
|
|
|
6,926
|
|
Other assets
|
|
|
21,766
|
|
|
|
2,184
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
331,598
|
|
|
|
1,048,510
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Deferred tax assets, net
|
|
|
83,769
|
|
|
|
83,358
|
|
Deferred sales commissions
|
|
|
18,414
|
|
|
|
34,076
|
|
Property and equipment, net
|
|
|
41,058
|
|
|
|
48,420
|
|
Other non-current assets
|
|
|
1,034
|
|
|
|
3,308
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
144,275
|
|
|
|
169,162
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
475,873
|
|
|
|
1,217,672
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY:
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable:
|
|
|
|
|
|
|
|
|
Brokers
|
|
|
10,239
|
|
|
|
19,950
|
|
Affiliates and affiliated funds
|
|
|
283
|
|
|
|
372
|
|
Accrued compensation and benefits
|
|
|
10,419
|
|
|
|
26,462
|
|
Interest payable
|
|
|
3,025
|
|
|
|
12,636
|
|
Accrued expenses and other current liabilities
|
|
|
5,889
|
|
|
|
9,257
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
29,855
|
|
|
|
68,677
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
125,000
|
|
|
|
525,000
|
|
Other long-term liabilities
|
|
|
9,971
|
|
|
|
8,876
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
134,971
|
|
|
|
533,876
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
164,826
|
|
|
|
602,553
|
|
|
|
|
|
|
|
|
|
|
Minority interest in partnership investments
|
|
|
1,289
|
|
|
|
49,177
|
|
Minority interest in Calamos Holdings LLC
|
|
|
158,985
|
|
|
|
352,205
|
|
Stockholders equity
|
|
|
|
|
|
|
|
|
Class A Common Stock, $0.01 par value; authorized
600,000,000 shares; 23,497,687 shares issued and
19,497,687 shares outstanding at December 31, 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
|
|
|
207,844
|
|
|
|
198,924
|
|
Retained earnings
|
|
|
38,010
|
|
|
|
70,102
|
|
Accumulated other comprehensive income (loss)
|
|
|
(101
|
)
|
|
|
5,081
|
|
Treasury stock at cost; 4,000,000 shares at
December 31, 2008; 2,452,100 shares at
December 31, 2007
|
|
|
(95,215
|
)
|
|
|
(60,603
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
150,773
|
|
|
|
213,737
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, minority interest and stockholders
equity
|
|
$
|
475,873
|
|
|
$
|
1,217,672
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-3
CALAMOS
ASSET MANAGEMENT, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except share data)
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fees
|
|
$
|
274,174
|
|
|
$
|
325,395
|
|
|
$
|
329,383
|
|
Distribution and underwriting fees
|
|
|
114,023
|
|
|
|
143,994
|
|
|
|
151,760
|
|
Other
|
|
|
3,392
|
|
|
|
4,088
|
|
|
|
4,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
391,589
|
|
|
|
473,477
|
|
|
|
485,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits
|
|
|
74,483
|
|
|
|
91,039
|
|
|
|
73,382
|
|
Distribution and underwriting expense
|
|
|
84,884
|
|
|
|
104,227
|
|
|
|
100,935
|
|
Amortization of deferred sales commissions
|
|
|
23,417
|
|
|
|
27,249
|
|
|
|
32,924
|
|
Marketing and sales promotion
|
|
|
11,908
|
|
|
|
40,833
|
|
|
|
15,631
|
|
General and administrative
|
|
|
37,800
|
|
|
|
37,036
|
|
|
|
31,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
232,492
|
|
|
|
300,384
|
|
|
|
254,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
159,097
|
|
|
|
173,093
|
|
|
|
231,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (expense)
|
|
|
(29,676
|
)
|
|
|
(2,849
|
)
|
|
|
5,004
|
|
Investment and other income (loss)
|
|
|
(296,881
|
)
|
|
|
34,348
|
|
|
|
7,403
|
|
Minority interest in partnership investments
|
|
|
72,156
|
|
|
|
(1,598
|
)
|
|
|
(26
|
)
|
Debt extinguishment costs
|
|
|
(37,498
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-operating income (loss)
|
|
|
(291,899
|
)
|
|
|
29,901
|
|
|
|
12,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority interest in Calamos Holdings LLC
and income taxes
|
|
|
(132,802
|
)
|
|
|
202,994
|
|
|
|
243,409
|
|
Minority interest in Calamos Holdings LLC
|
|
|
(104,494
|
)
|
|
|
156,583
|
|
|
|
186,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(28,308
|
)
|
|
|
46,411
|
|
|
|
56,778
|
|
Income taxes
|
|
|
(3,787
|
)
|
|
|
18,666
|
|
|
|
22,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(24,521
|
)
|
|
$
|
27,745
|
|
|
$
|
34,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.24
|
)
|
|
$
|
1.24
|
|
|
$
|
1.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(1.24
|
)
|
|
$
|
1.22
|
|
|
$
|
1.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
19,752,972
|
|
|
|
22,297,170
|
|
|
|
23,161,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted(1)
|
|
|
97,449,228
|
|
|
|
99,760,872
|
|
|
|
100,805,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share
|
|
$
|
0.385
|
|
|
$
|
0.44
|
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The number of diluted shares outstanding used in calculating
diluted per share results for 2008 represent basic shares
outstanding as the use of actual diluted shares outstanding
would result in anti-dilution. |
See accompanying notes to consolidated financial statements.
F-4
CALAMOS
ASSET MANAGEMENT, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
|
|
(in thousands)
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Stock
|
|
|
Total
|
|
|
Balance at December 31, 2005
|
|
$
|
230
|
|
|
$
|
156,274
|
|
|
$
|
26,698
|
|
|
$
|
2,932
|
|
|
$
|
|
|
|
$
|
186,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
34,008
|
|
|
|
|
|
|
|
|
|
|
|
34,008
|
|
Changes in unrealized gains on available-for-sale securities,
net of minority interest and income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,405
|
|
|
|
|
|
|
|
1,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,413
|
|
Issuance of common stock (161,898 Class A common shares)
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative impact of changes in ownership of Calamos Holdings LLC
|
|
|
|
|
|
|
115
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
138
|
|
Compensation expense recognized under stock incentive plans, net
of minority interest
|
|
|
|
|
|
|
1,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,337
|
|
Dividend equivalent accrued under stock incentive plans, net of
minority interest
|
|
|
|
|
|
|
|
|
|
|
(107
|
)
|
|
|
|
|
|
|
|
|
|
|
(107
|
)
|
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
(8,338
|
)
|
|
|
|
|
|
|
|
|
|
|
(8,338
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
232
|
|
|
|
157,724
|
|
|
|
52,261
|
|
|
|
4,360
|
|
|
|
|
|
|
|
214,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
27,745
|
|
|
|
|
|
|
|
|
|
|
|
27,745
|
|
Changes in unrealized gains on available-for-sale securities,
net of minority interest and income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,561
|
|
|
|
|
|
|
|
1,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,306
|
|
Issuance of common stock (162,184 Class A common shares)
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of Calamos Holdings LLC membership units
(2,452,100 units)
|
|
|
|
|
|
|
47,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,493
|
|
Repurchase of common stock (2,452,100 Class A common shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(60,603
|
)
|
|
|
(60,603
|
)
|
Cumulative impact of changes in ownership of Calamos Holdings LLC
|
|
|
|
|
|
|
(7,814
|
)
|
|
|
23
|
|
|
|
(840
|
)
|
|
|
|
|
|
|
(8,631
|
)
|
Compensation expense recognized under stock incentive plans, net
of minority interest
|
|
|
|
|
|
|
1,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,522
|
|
Dividend equivalent accrued under stock incentive plans, net of
minority interest
|
|
|
|
|
|
|
|
|
|
|
(120
|
)
|
|
|
|
|
|
|
|
|
|
|
(120
|
)
|
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
(9,807
|
)
|
|
|
|
|
|
|
|
|
|
|
(9,807
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
$
|
233
|
|
|
$
|
198,924
|
|
|
$
|
70,102
|
|
|
$
|
5,081
|
|
|
$
|
(60,603
|
)
|
|
$
|
213,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
(24,521
|
)
|
|
|
|
|
|
|
|
|
|
|
(24,521
|
)
|
Changes in unrealized gains (losses) on available-for-sale
securities, net of minority interest and income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,502
|
)
|
|
|
|
|
|
|
(24,502
|
)
|
Less: reclassification adjustment for realized losses on
available-for-sale securities included in net income, net of
minority interest and income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,014
|
|
|
|
|
|
|
|
20,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29,009
|
)
|
Issuance of common stock (173,605 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
|
|
Capital contribution
|
|
|
|
|
|
|
13,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,762
|
|
Cumulative impact of changes in ownership of Calamos Holdings LLC
|
|
|
|
|
|
|
(33,781
|
)
|
|
|
|
|
|
|
(694
|
)
|
|
|
|
|
|
|
(34,475
|
)
|
Compensation expense recognized under stock incentive plans, net
of minority interest
|
|
|
|
|
|
|
1,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,472
|
|
Dividend equivalent accrued under stock incentive plans, net of
minority interest
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
(7,591
|
)
|
|
|
|
|
|
|
|
|
|
|
(7,591
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
$
|
235
|
|
|
$
|
207,844
|
|
|
$
|
38,010
|
|
|
$
|
(101
|
)
|
|
$
|
(95,215
|
)
|
|
$
|
150,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-5
CALAMOS
ASSET MANAGEMENT, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Cash and cash equivalents at beginning of period
|
|
$
|
108,441
|
|
|
$
|
328,841
|
|
|
$
|
210,469
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(24,521
|
)
|
|
|
27,745
|
|
|
|
34,008
|
|
Adjustments to reconcile income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in Calamos Holdings LLC
|
|
|
(104,494
|
)
|
|
|
156,583
|
|
|
|
186,631
|
|
Minority interest in partnership investments and offshore funds
|
|
|
(72,156
|
)
|
|
|
1,598
|
|
|
|
26
|
|
Amortization of deferred sales commissions
|
|
|
23,417
|
|
|
|
27,249
|
|
|
|
32,924
|
|
Other depreciation and amortization
|
|
|
12,222
|
|
|
|
9,015
|
|
|
|
7,179
|
|
Loss on write-off of fixed assets
|
|
|
2,031
|
|
|
|
|
|
|
|
|
|
Unrealized depreciation (appreciation) on CFS securities,
partnership investments and offshore funds
|
|
|
158,636
|
|
|
|
(9,733
|
)
|
|
|
(489
|
)
|
Net realized (gain) loss on sale of investment securities
|
|
|
172,413
|
|
|
|
|
|
|
|
|
|
Deferred taxes
|
|
|
(2,610
|
)
|
|
|
7,843
|
|
|
|
8,742
|
|
Stock-based compensation
|
|
|
7,099
|
|
|
|
6,785
|
|
|
|
5,780
|
|
Employee taxes paid on vesting under stock incentive plans
|
|
|
(1,796
|
)
|
|
|
(1,853
|
)
|
|
|
(2,255
|
)
|
(Increase) decrease in assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliates and affiliated mutual funds
|
|
|
14,454
|
|
|
|
(1,129
|
)
|
|
|
(1,902
|
)
|
Customers
|
|
|
4,837
|
|
|
|
(1,481
|
)
|
|
|
(412
|
)
|
Deferred sales commissions
|
|
|
(7,755
|
)
|
|
|
(11,434
|
)
|
|
|
(24,425
|
)
|
Other assets
|
|
|
(19,401
|
)
|
|
|
(3,492
|
)
|
|
|
(318
|
)
|
Increase (decrease) in liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
(9,800
|
)
|
|
|
(911
|
)
|
|
|
2,655
|
|
Accrued compensation and benefits
|
|
|
(16,043
|
)
|
|
|
3,740
|
|
|
|
3,591
|
|
Other liabilities and accrued expenses
|
|
|
(11,305
|
)
|
|
|
15,950
|
|
|
|
(2,554
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
125,228
|
|
|
|
226,475
|
|
|
|
249,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in) investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net additions to property and equipment
|
|
|
(4,616
|
)
|
|
|
(13,414
|
)
|
|
|
(9,962
|
)
|
Net sales (purchases) of investment securities
|
|
|
203,264
|
|
|
|
(382,297
|
)
|
|
|
(4,350
|
)
|
Net changes in partnership investments and offshore funds
|
|
|
124,648
|
|
|
|
(258,441
|
)
|
|
|
(2,129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
323,296
|
|
|
|
(654,152
|
)
|
|
|
(16,441
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in) financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from issuance of debt
|
|
|
|
|
|
|
372,963
|
|
|
|
|
|
Net repayment of debt
|
|
|
(400,000
|
)
|
|
|
|
|
|
|
|
|
Capital contribution received
|
|
|
31,317
|
|
|
|
|
|
|
|
|
|
Deferred tax benefit on vesting under stock incentive plans
|
|
|
144
|
|
|
|
209
|
|
|
|
289
|
|
Repurchase of common stock
|
|
|
(34,612
|
)
|
|
|
(60,603
|
)
|
|
|
|
|
Cash dividends paid to minority shareholders
|
|
|
(86,798
|
)
|
|
|
(95,485
|
)
|
|
|
(106,319
|
)
|
Cash dividends paid to common shareholders
|
|
|
(7,591
|
)
|
|
|
(9,807
|
)
|
|
|
(8,338
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(497,540
|
)
|
|
|
207,277
|
|
|
|
(114,368
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(49,016
|
)
|
|
|
(220,400
|
)
|
|
|
118,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
59,425
|
|
|
$
|
108,441
|
|
|
$
|
328,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
11,807
|
|
|
$
|
8,401
|
|
|
$
|
14,950
|
|
Interest
|
|
$
|
41,077
|
|
|
$
|
7,860
|
|
|
$
|
7,860
|
|
See accompanying notes to consolidated financial statements.
F-6
CALAMOS
ASSET MANAGEMENT, INC.
|
|
(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 (the Funds), closed-end funds (the
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.
CAL refers to Calamos Advisors LLC, a Delaware
limited liability company, registered investment advisor and
wholly owned subsidiary of Holdings. CFS refers to
Calamos Financial Services LLC, a Delaware limited liability
company, registered broker-dealer and wholly owned subsidiary of
Holdings. CPL refers to Calamos Partners LLC, a
Delaware limited liability company, registered investment
advisor and wholly owned subsidiary of Holdings. CPM
refers to Calamos Property Management LLC, a Delaware limited
liability company and wholly owned subsidiary of Holdings.
The Calamos Interests refers to Calamos
Family Partners, Inc. (CFP), a Delaware corporation, and John P.
Calamos, Sr., the chairman, chief executive officer and
co-chief investment officer of the Corporation. Mr. Calamos
holds the controlling interest in CFP.
|
|
(2)
|
Summary
of Significant 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
interest in Calamos Equity Opportunities Fund LP and
Calamos Market Neutral Opportunities Fund LP. Additionally,
the consolidated statements included the financial results of
Calamos Global Funds PLC for a portion of the periods presented,
as discussed below. All significant intercompany balances and
transactions have been eliminated. Certain amounts for prior
periods have been reclassified to conform to the current
years presentation.
The Calamos Interests combined 78.7% interest in Holdings
at December 31, 2008 and 2007, is represented as a minority
interest in the Companys financial statements. Income
(loss) before minority interest in Calamos Holdings LLC and
income taxes, which was $(132.8) million and
$203.0 million for the years ended December 31, 2008
and 2007, respectively, included approximately $0.3 million
and $1.3 million of investment income during the same
periods on cash, cash equivalents and investments held solely by
CAM. This portion of CAMs investment income is not reduced
by any minority interests.
CPL is the general partner of Calamos Market Neutral
Opportunities Fund LP and was the general partner of
Calamos Equity 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. Until December 2008 the
Offshore Funds were majority-owned by the Company and, as a
result, the Company consolidated the results of the Offshore
Funds with its own results. During December 2008, the Offshore
Funds were no longer majority-owned by the Company; therefore,
the Company no longer consolidates the financial results of the
Offshore Funds with its own results.
The assets and liabilities of the Partnerships and of the
Offshore Funds, when consolidated, 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
F-7
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
consolidated are described in note 5. The minority
interests of the Partnerships and of the Offshore Funds, when
consolidated, are presented as minority interest in partnership
investments and offshore funds in the respective financial
statements.
Beginning in December 2008, the Companys investment in the
Offshore Funds is classified as an available-for-sale security
and reported as investment securities in the consolidated
statement of financial condition, and unrealized gains and
losses attributable to the Offshore Funds are excluded from
earnings and are reported, net of minority interest and income
tax, as a separate component of stockholders equity until
realized.
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.
Financial
Instruments
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.
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
$125.0 million, was approximately $131.5 million at
December 31, 2008. 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. This method of assessing
fair value may differ from the actual amount 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.
Investment
Securities
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. The Company records
investment securities on a trade date basis.
From time to time the Company enters into derivative contracts
to mitigate the negative impact changes in security prices have
on our investment portfolio. Typically, the Company does not
measure effectiveness or meet the criteria for hedge accounting
under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities and therefore,
changes in the fair value of these instruments are recorded in
investment and other income in the consolidated statements of
operations.
The Company classifies derivative securities owned by Holdings
as trading securities as the Company intends to close these
positions in the near term. Unrealized gains and losses on
trading securities are included in investment and other income
in the consolidated statements of operations. All other
securities owned by Holdings and all securities owned by CAL and
CPM are recorded as available-for-sale securities as the Company
does not 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
F-8
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 (CFS Securities) and record
all changes in the value of its securities in current earnings.
As such, unrealized gains and losses on these securities are
included in investment and other income in the consolidated
statements of operations.
On a quarterly basis, the Company conducts reviews to assess
whether other-than-temporary impairment exists on its
available-for-sale investment securities. Changing economic
conditions, global, regional, or changes related to specific
issuers or industries could adversely affect these values.
Impairment adjustments are recognized in the consolidated
statements of operations as a realized loss within investment
and other income with a corresponding change to accumulated
other comprehensive income, as applicable.
Property
and Equipment
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 statements of
financial condition and are amortized using the straight-line
method over their estimated useful lives. On a quarterly basis,
the Company conducts 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.
Compensation
Plans
The Company has 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 estimates the fair
value of the options as of the grant date using the
Black-Scholes option-pricing model and recognizes the cost of
stock-based compensation based on the grant-date fair value of
the award. The Company records compensation expense on a
straight-line basis over the service period.
Revenue
Recognition
The Company earns investment management fees by providing
services pursuant to the terms of the underlying advisory
contract. Fees are 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 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. Performance-based advisory fees from
Mutual Funds are recognized monthly when earned and are based
upon the positive difference between the investment returns on a
clients portfolio compared to a benchmark index.
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 earned
on 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
F-9
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
settlement date. The use of settlement date rather than trade
date does not have a material effect on the Companys
financial statements.
Net
Interest Income (Expense)
Net interest income (expense) represents interest expense
incurred on debt and interest income generated from cash and
cash equivalents. Interest income is recognized when earned, and
interest expense is recorded when incurred.
Investment
and Other Income
Investment and other income is primarily comprised of realized
gains (losses) and unrealized gains (losses) on (1) trading
securities, (2) CFS securities, (3) partnership
investments and (4) Offshore Funds when consolidated, as
well as dividend income. Dividend income is recognized on the
record date.
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, not to exceed 12 months for Class C
shares and 96 months (8 years) for Class B
shares. 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.
The Company evaluates the carrying value of its deferred sales
commissions on an annual 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 consolidated
statements of operations as a component of amortization of
deferred sales commissions. As of each reporting period
presented, the Company determined that no impairment of the
deferred sales commission asset existed.
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 to
reduce the amounts expected to be realized, there were no
deferred tax asset valuation allowances at December 31,
2008 or 2007.
Future interest or penalties related to uncertain tax positions
are recognized in income tax expense when determined. The
Company did not have any accrued interest or penalties related
to uncertain tax positions at December 31, 2008
Earnings
(Losses) Per Share
Basic earnings (losses) per share is computed by dividing net
income (loss) 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 and
repurchased during the year are weighted for the portion of the
year that they were outstanding. Diluted earnings (losses) per
share reflects the potential dilution that would occur if
restricted stock units (RSUs) and stock options granted to
participants of our incentive compensation plan and membership
units held by Calamos Interests were exercised or converted into
common stock. In periods when using actual diluted shares
results in anti-
F-10
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
dilution, income (loss) available to common stockholders and the
number of shares outstanding used for basic earnings (losses)
per share is used in calculating diluted per share results.
|
|
(3)
|
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. The Company receives fees
for its management services to private investment pools, which
are paid on a monthly basis in 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, 2008, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Investment management fees from:
|
|
|
|
|
|
|
|
|
|
|
|
|
The Funds
|
|
$
|
165,638
|
|
|
$
|
205,171
|
|
|
$
|
209,799
|
|
The Closed-End Funds
|
|
|
54,492
|
|
|
|
60,186
|
|
|
|
52,462
|
|
Private investment pools
|
|
|
|
|
|
|
57
|
|
|
|
279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
220,130
|
|
|
$
|
265,414
|
|
|
$
|
262,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution and underwriting fees from the Funds
|
|
$
|
106,316
|
|
|
$
|
134,017
|
|
|
$
|
138,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio accounting fees from:
|
|
|
|
|
|
|
|
|
|
|
|
|
The Funds
|
|
$
|
2,516
|
|
|
$
|
3,074
|
|
|
$
|
3,154
|
|
The Closed-End Funds
|
|
|
701
|
|
|
|
784
|
|
|
|
700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
3,217
|
|
|
$
|
3,858
|
|
|
$
|
3,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dragon Leasing Corporation (Dragon) is an affiliated company
controlled by an executive officer of the Company. CAL is party
to a non-exclusive aircraft lease agreement with Dragon whereby
CAL has use of an airplane for business travel. Under this
agreement CAL agrees to pay for maintenance and transportation
services which are reflected in general and administrative
expense. The table below summarizes total service fees incurred
during the years ended December 31, 2008, 2007 and 2006 and
the net payable balance as of December 31, 2008, 2007 and
2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
General and administrative
|
|
$
|
1,042
|
|
|
$
|
876
|
|
|
$
|
934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net payable to Dragon
|
|
$
|
(125
|
)
|
|
$
|
(39
|
)
|
|
$
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning in November 2004, CAL had been party to a Joint Use
and Management Agreement (JUMA) with Aspen Executive Air, LLC
(AEA), a company in which an executive officer of the company
had maintained an indirect beneficial interest. Under the JUMA,
CAL had agreed to pay for aircraft management services from AEA
as well as other aircraft related expenses. These expenses are
included in general and administrative expense in the
consolidated statements of operations. Effective in January
2006, the JUMA was amended to provide for the Companys
delivery of pilot services to AEA at an established rate per
flight hour. These services are classified as other income and
included in investment and other income (loss) in the
consolidated statements of operations. The JUMA was terminated
as of November 13, 2008. The table below summarizes total
fees paid to AEA and income
F-11
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
earned from AEA during the twelve months ended December 31,
2008, 2007 and 2006 and the net payable balance as of
December 31, 2008, 2007 and 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
General and administrative
|
|
$
|
489
|
|
|
$
|
648
|
|
|
$
|
386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
$
|
95
|
|
|
$
|
285
|
|
|
$
|
354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net payable to AEA
|
|
$
|
|
|
|
$
|
(101
|
)
|
|
$
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings is party to a six-year lease with 1111 Warrenville Road
LLC, a subsidiary of Calamos Property Holdings LLC (CPH). Rent
under the lease commenced in August 2005 and will end
December 31, 2010. Annual base rent payments were
approximately $466,000 for the year ended December 31, 2008
and will increase 3% annually.
Holdings is party to a
20-year
lease with 2020 Calamos Court LLC, a subsidiary of CPH, with
respect to the corporate headquarters constructed for the
Companys occupancy. Rent under the lease commenced in
April 2005 and will end on May 31, 2025. Annual base rent
payments were approximately $3.1 million for the year ended
December 31, 2008 and will increase 3% annually 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.
Holdings is party to an agreement with Primacy Business Center
LLC (Primacy), a subsidiary of CFP, where office space is
subleased to Primacy. During 2008, Holdings recognized sublease
rental income of approximately $818,000 which is classified as
other income and included in investment and other income (loss)
in the consolidated statements of operations.
Holdings is party to a
20-year
lease with 2020 Calamos Court Annex LLC, a subsidiary of
CPH, with respect to the cafeteria in the corporate
headquarters. Rent under the lease commenced in December 2005
and will end on May 31, 2025. Annual base rent and
operating expenses were approximately $280,000 for the year
ended December 31, 2008 and will increase 3% annually.
Holdings is party to an agreement with CF Restaurant Enterprises
LLC (CFR), a subsidiary of CFP, where CFR provides lunch and
food services through an independent manager to Holdings.
Holdings guarantees minimum daily revenues and CFR agrees that
certain quantities and combinations of food and beverage will be
available at a predetermined price. During 2008, Holdings
incurred expense of $980,000 related to this agreement which is
included in general and administrative expense in the
consolidated statements of operations.
Holdings is party to a 7.5 year lease with CityGate Centre
I LLC, a subsidiary of CPH, with respect to office space located
in Naperville, Illinois. Rent under the lease commenced in May
2008 and will end on April 30, 2015. Initial monthly base
rent and operating expenses were approximately $73,000, which
increase 2.5% annually beginning in November 2008. Holdings has
been granted two options to extend the term of the lease for
five years each, and has a right of first offer to lease
additional contiguous space in the building.
CFP and CPH have entered into a Management Services and
Resources Agreement with CAM, and Dragon has entered into a
Management Services Agreement with CAM. Pursuant to these
agreements, as amended, the parties provide to each other
certain services and resources, 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. These
agreements have a term of one year and are renewable annually.
The agreements are terminable on 30 days notice by either
party. In accordance with the terms of the agreements, the
parties have agreed to pay each other an amount equal to the
direct out-of-pocket expenses paid or incurred plus an
allocation of indirect expenses such as employee compensation
and benefits.
F-12
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes total management service fees
incurred, as expense allocations, during the twelve months ended
December 31, 2008, 2007 and 2006 and the net receivable
(payable) balance as of December 31, 2008, 2007 and 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Expense allocated from the Company to Dragon
|
|
$
|
54
|
|
|
$
|
61
|
|
|
$
|
73
|
|
Expense allocated from the Company to CFP
|
|
|
2,011
|
|
|
|
2,106
|
|
|
|
1,394
|
|
Expense allocated from the Company to CPH
|
|
|
431
|
|
|
|
237
|
|
|
|
229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses allocated from the Company to affiliates
|
|
|
2,496
|
|
|
|
2,404
|
|
|
|
1,696
|
|
Expense allocated from CPH to the Company
|
|
|
1,653
|
|
|
|
1,859
|
|
|
|
1,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net expense allocated from the Company to affiliates
|
|
$
|
843
|
|
|
$
|
545
|
|
|
$
|
486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net receivable for management services from Dragon
|
|
$
|
6
|
|
|
$
|
4
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net receivable (payable) for management services from CFP
|
|
$
|
48
|
|
|
$
|
27
|
|
|
$
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net receivable for management services from CPH
|
|
$
|
26
|
|
|
$
|
19
|
|
|
$
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a result of the control exercised by CFP, 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 Second Amended and Restated Certificate
of Incorporation.
|
|
(4)
|
Investment
Securities
|
The following table provides a summary of investment securities
owned as of December 31, 2008 and 2007. Other investment
securities consist primarily of common stock and put options on
equity securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
Available-
|
|
|
Trading
|
|
|
CFS
|
|
|
Total
|
|
(in thousands)
|
|
for-Sale
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
Mutual Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
$
|
66,947
|
|
|
$
|
|
|
|
$
|
32,671
|
|
|
$
|
99,618
|
|
Balanced
|
|
|
436
|
|
|
|
|
|
|
|
|
|
|
|
436
|
|
Fixed income
|
|
|
72,418
|
|
|
|
|
|
|
|
|
|
|
|
72,418
|
|
High yield
|
|
|
380
|
|
|
|
|
|
|
|
|
|
|
|
380
|
|
Other
|
|
|
172
|
|
|
|
|
|
|
|
|
|
|
|
172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mutual funds
|
|
|
140,353
|
|
|
|
|
|
|
|
32,671
|
|
|
|
173,024
|
|
Other investment securities
|
|
|
|
|
|
|
14,288
|
|
|
|
131
|
|
|
|
14,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
140,353
|
|
|
$
|
14,288
|
|
|
$
|
32,802
|
|
|
$
|
187,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-13
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
Available-
|
|
|
CFS
|
|
|
Total
|
|
(in thousands)
|
|
for-Sale
|
|
|
Securities
|
|
|
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 $173.0 million and $534.8 million investments
in mutual funds at December 31, 2008 and 2007,
respectively, $140.9 million and $364.3 million was
invested in affiliated mutual funds.
During 2008, the Company sold $368.2 million of investment
securities and, based on the specific identification of the cost
basis, realized a net loss of $134.2 million. The following
table provides a summary of changes in and results from certain
investment activities for the years ended December 31,
2008, 2007 and 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale
|
|
$
|
368,233
|
|
|
$
|
7
|
|
|
$
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized gains on sales
|
|
|
21,022
|
|
|
|
3
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized losses on sales
|
|
|
(155,174
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses)
|
|
|
(724
|
)
|
|
|
9,683
|
|
|
|
10,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) reclassified out of accumulated other
comprehensive income to earnings
|
|
|
(148,729
|
)
|
|
|
3
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses)
|
|
|
3,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CFS securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses)
|
|
|
(17,680
|
)
|
|
|
385
|
|
|
|
(63
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-14
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The cumulative net unrealized gains (losses) on
available-for-sale securities consisted of the following as of
December 31, 2008 and 2007:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2008
|
|
|
2007
|
|
|
Total cumulative unrealized gains on available-for-sale
securities with net gains:
|
|
|
|
|
|
|
|
|
Mutual Funds
|
|
|
|
|
|
|
|
|
Equity
|
|
$
|
160
|
|
|
$
|
39,461
|
|
Balanced
|
|
|
|
|
|
|
5,860
|
|
Fixed income
|
|
|
678
|
|
|
|
1,022
|
|
Other
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Total mutual funds
|
|
|
838
|
|
|
|
46,348
|
|
Other investment securities
|
|
|
|
|
|
|
297
|
|
|
|
|
|
|
|
|
|
|
Total gains
|
|
|
838
|
|
|
|
46,645
|
|
Total cumulative unrealized losses on available-for-sale
securities with net losses:
|
|
|
|
|
|
|
|
|
Mutual Funds
|
|
|
|
|
|
|
|
|
Equity
|
|
|
(75
|
)
|
|
|
(7,073
|
)
|
Balanced
|
|
|
(346
|
)
|
|
|
(17
|
)
|
Fixed income
|
|
|
|
|
|
|
(334
|
)
|
High yield
|
|
|
(272
|
)
|
|
|
(272
|
)
|
Other
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mutual funds
|
|
|
(739
|
)
|
|
|
(7,696
|
)
|
Other investment securities
|
|
|
|
|
|
|
(475
|
)
|
|
|
|
|
|
|
|
|
|
Total losses
|
|
|
(739
|
)
|
|
|
(8,171
|
)
|
|
|
|
|
|
|
|
|
|
Total cumulative net unrealized gains (losses) on
available-for-sale securities
|
|
$
|
99
|
|
|
$
|
38,474
|
|
|
|
|
|
|
|
|
|
|
The aggregate fair value of available-for-sale investment
securities that were in an unrealized loss position at
December 31, 2008 and 2007 was $1.1 million and
$226.2 million, respectively. The cumulative losses on
securities that had been in a continuous loss position for
12 months or longer were immaterial as of December 31,
2008 and 2007.
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.
The Company determined that an other-than temporary impairment
on certain of its investment securities existed at
December 31, 2008 and, as a result, recorded a realized
loss on its investment portfolio of $14.6 million, or
$1.9 million net of minority interests and income taxes, in
the fourth quarter of 2008.
F-15
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(5)
|
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 as partnership investments and offshore funds in its
consolidated statements of financial condition as of
December 31, 2008 and 2007.
|
|
|
|
|
|
|
|
|
(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
|
|
|
27,038
|
|
|
|
81,361
|
|
Securities sold but not yet purchased
|
|
|
(5,697
|
)
|
|
|
(22,372
|
)
|
Accrued expenses and other current liabilities
|
|
|
(7,525
|
)
|
|
|
(5,178
|
)
|
Other current assets
|
|
|
886
|
|
|
|
1,028
|
|
|
|
|
|
|
|
|
|
|
Calamos Market Neutral Opportunities Fund LP securities, net
|
|
|
14,702
|
|
|
|
54,839
|
|
Calamos Global Funds PLC:
|
|
|
|
|
|
|
|
|
Securities owned
|
|
|
|
|
|
|
200,196
|
|
Other current assets
|
|
|
|
|
|
|
5,107
|
|
Accrued expenses and other liabilities
|
|
|
|
|
|
|
(2,045
|
)
|
|
|
|
|
|
|
|
|
|
Calamos Global Funds PLC
|
|
|
|
|
|
|
203,258
|
|
Investment in other partnerships
|
|
|
13,769
|
|
|
|
10,061
|
|
|
|
|
|
|
|
|
|
|
Partnership investments and offshore funds
|
|
$
|
28,471
|
|
|
$
|
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 losses of
$18.9 million for the twelve months ended December 31,
2008, which were offset by the minority interests portion
of $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 owned
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 December 31, 2008 and 2007, the Company had a net
interest of $13.4 million (91.2%) and $53.3 million
(97.2%) in Calamos Market Neutral Opportunities Fund LP,
respectively. The minority interests owned 8.8% and 2.8% of
Calamos Market Neutral Opportunities Fund LP at
December 31, 2008 and 2007, and are presented in the
consolidated statements of financial condition as minority
interest in partnership investments and offshore funds. During
2008, the Company sold $30.0 million of its investment in
the partnership and realized a loss of $6.1 million.
As of December 31, 2007, the Company had a net interest of
$203.3 million (100%) in Calamos Global Funds PLC. As of
December 31, 2007, the Companys investment in
Offshore Funds is presented in the consolidated statement of
financial condition as partnerships and offshore funds. In
December 2008, the Company sold $81.9 million of its
investment in the Offshore Funds and, based on a specific
identification of the cost basis, realized a loss of
$56.1 million. Following this sale, the Company is no
longer the majority owner of the Offshore Funds. As a result, as
of December 31, 2008 the Companys investment in
Offshore Funds is recorded at the net asset
F-16
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
value of its investment and is classified as an
available-for-sale security in investment securities in the
consolidated statement of financial condition.
As of December 31, 2008 and 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.
|
|
(6)
|
Fair
Value Measurements
|
Effective January 1, 2008, the Company adopted the
provisions of the Financial Accounting Standards Boards
(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
Companys 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
December 31, 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 Companys investment securities,
securities owned by the Partnership Investments and securities
sold but not yet purchased as of December 31, 2008. Foreign
currency contracts are included in securities owned by
partnership investments on a net basis where the right of offset
exists. There was no net impact of these positions at
December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
|
|
|
Quoted Prices in
|
|
|
|
Significant
|
|
|
|
|
Active Markets for
|
|
Significant Other
|
|
Unobservable
|
(in thousands)
|
|
December 31,
|
|
Identical Assets
|
|
Observable Inputs
|
|
Inputs
|
Description
|
|
2008
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Investment securities (note 4)
|
|
|
$187,443
|
|
|
|
$187,443
|
|
|
|
$
|
|
|
|
$
|
|
Securities owned by Partnership Investments (note 5)
|
|
|
27,038
|
|
|
|
9,278
|
|
|
|
17,760
|
|
|
|
|
|
Securities sold but not yet purchased (note 5)
|
|
|
(5,697
|
)
|
|
|
(5,446
|
)
|
|
|
(251
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$208,784
|
|
|
|
$191,275
|
|
|
|
$17,509
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7)
|
Property
and Equipment
|
At December 31, 2008 and 2007, property and equipment and
related accumulated depreciation were as follows:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2008
|
|
|
2007
|
|
|
Furniture, fixtures, and equipment
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
72,777
|
|
|
$
|
70,261
|
|
Accumulated depreciation
|
|
|
31,719
|
|
|
|
21,841
|
|
|
|
|
|
|
|
|
|
|
Furniture, fixtures, and equipment, net
|
|
$
|
41,058
|
|
|
$
|
48,420
|
|
|
|
|
|
|
|
|
|
|
F-17
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In April 2004, Holdings issued $150 million aggregate
principal amount of 5.24% senior unsecured notes due
April 29, 2011 to various note purchasers in a private
placement. In July 2007, Holdings completed a private debt
offering of $375 million aggregate principal senior
unsecured notes, with three series consisting of
$197 million of 6.33% notes due July 15, 2014,
$85 million of 6.52% notes due July 15, 2017 and
$93 million of 6.67% notes due July 15, 2019. The
aggregate average interest rate on the notes is 6.46% for the
first seven years and 6.49% over the life of the notes.
In December 2008, the Company prepaid $400 million of its
outstanding long-term debt and negotiated modifications to its
debt covenants. The Company recorded $37.5 million of debt
extinguishment costs in the consolidated statements of
operations that was comprised of make-whole payments of
$34.9 million, unamortized debt offering costs of
$1.8 million and other expenses of $0.8 million.
Under the amended note purchase agreements governing the terms
of these notes, Holdings must maintain certain consolidated net
worth in addition to leverage, investment and interest coverage
ratios. The amended note purchase agreements also contains other
covenants that, among other things, restrict the ability of
Holdings subsidiaries to incur debt and restrict the
ability of Holdings or its subsidiaries to create liens and to
merge or consolidate, or sell or convey all or substantially all
of Holdings assets and places certain limitations on
distributions and redemptions of equity interests. As of
December 31, 2008, the Company was in compliance with all
covenants.
The table below summarizes the outstanding debt balance at
December 31, 2008 and 2007.
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2008
|
|
|
2007
|
|
|
Senior unsecured notes
|
|
|
|
|
|
|
|
|
5.24% notes due April 29, 2011
|
|
$
|
32,886
|
|
|
$
|
150,000
|
|
6.33% notes due July 15, 2014
|
|
|
46,160
|
|
|
|
197,000
|
|
6.52% notes due July 15, 2017
|
|
|
22,100
|
|
|
|
85,000
|
|
6.67% notes due July 15, 2019
|
|
|
23,854
|
|
|
|
93,000
|
|
|
|
|
|
|
|
|
|
|
Total senior unsecured notes
|
|
|
125,000
|
|
|
|
525,000
|
|
Less current portion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
125,000
|
|
|
$
|
525,000
|
|
|
|
|
|
|
|
|
|
|
F-18
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(9)
|
Minority
Interest in Calamos Holdings LLC
|
Minority interest in Calamos Holdings LLC represents the Calamos
Interests aggregate ownership interest of 78.7% in
Holdings at December 31, 2008 and 2007, and is derived by
multiplying the historical equity of Holdings by their aggregate
ownership percentage for the periods presented. Issuances and
repurchases of CAMs common stock result in changes to
CAMs ownership percentage and to the minority
interests ownership percentage of Holdings. The
Companys 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 years ended December 31, 2007 and 2008 is
presented below:
|
|
|
|
|
(in thousands)
|
|
|
|
|
Minority interest at December 31, 2006
|
|
$
|
319,513
|
|
|
|
|
|
|
Income allocated to minority interests
|
|
|
156,583
|
|
Changes in unrealized gains on available-for-sale securities
|
|
|
7,242
|
|
Sale of membership units to Calamos Holdings LLC
|
|
|
(47,493
|
)
|
Cumulative impact of changes in ownership of Calamos Holdings
LLC units
|
|
|
6,985
|
|
Compensation expense recognized under stock incentive plans
|
|
|
5,264
|
|
Dividend equivalent accrued under stock incentive plans
|
|
|
(404
|
)
|
Tax distributions
|
|
|
(61,605
|
)
|
Equity distributions
|
|
|
(33,880
|
)
|
|
|
|
|
|
Minority interest at December 31, 2007
|
|
$
|
352,205
|
|
Income (loss) allocated to minority interests
|
|
|
(104,494
|
)
|
Changes associated with available-for-sale securities
|
|
|
(30,029
|
)
|
Sale of membership units to Calamos Holdings LLC
|
|
|
(27,469
|
)
|
Capital contribution
|
|
|
50,853
|
|
Cumulative impact of changes in ownership of Calamos Holdings
LLC units
|
|
|
(989
|
)
|
Compensation expense recognized under stock incentive plans
|
|
|
5,627
|
|
Dividend equivalent accrued under stock incentive plans
|
|
|
79
|
|
Tax distributions
|
|
|
(57,057
|
)
|
Equity distributions
|
|
|
(29,741
|
)
|
|
|
|
|
|
Minority interest at December 31, 2008
|
|
$
|
158,985
|
|
|
|
|
|
|
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, unless
otherwise required by law.
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, 2008, 2007 and
2006, the Company recorded expense for the contributions to the
PSP Plan in the amounts of $1.8 million, $3.4 million
and $2.2 million, respectively. This expense is included in
employee compensation and benefits on the consolidated
statements of operations.
F-19
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(12)
|
Stock
Based Compensation
|
Under the Companys incentive compensation plan, which is
designed to retain key employees, certain employees of the
Company receive stock based compensation comprised of restricted
stock units (RSUs) and stock options. A total of
10,000,000 shares of CAMs common stock may be granted
under the plan. 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, issue new
shares or purchase shares of CAMs Class A common
stock as part of its share repurchase program upon the exercise
of stock options and upon conversion of RSUs.
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 this period. During
2008 and 2007, 358,722 and 256,469 restricted stock units with
an estimated fair value of $7.1 million and
$7.1 million, respectively, were awarded to employees of
the Company in accordance with the provisions of the plan. A
summary of the RSU activity follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Number
|
|
|
Average Fair
|
|
|
|
Of
|
|
|
Value of RSUs
|
|
|
|
Shares
|
|
|
Granted
|
|
|
Outstanding at December 31, 2005
|
|
|
1,414,862
|
|
|
$
|
18.79
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
134,117
|
|
|
|
35.08
|
|
Forfeited
|
|
|
(26,940
|
)
|
|
|
24.33
|
|
Exercised upon vesting
|
|
|
(233,599
|
)
|
|
|
18.00
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2006
|
|
|
1,288,440
|
|
|
|
20.51
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
256,469
|
|
|
|
27.58
|
|
Forfeited
|
|
|
(267,390
|
)
|
|
|
20.44
|
|
Exercised upon vesting
|
|
|
(231,249
|
)
|
|
|
18.00
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2007
|
|
|
1,046,270
|
|
|
|
22.82
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
358,722
|
|
|
|
19.92
|
|
Forfeited
|
|
|
(115,707
|
)
|
|
|
22.81
|
|
Exercised upon vesting
|
|
|
(246,204
|
)
|
|
|
18.00
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2008
|
|
|
1,043,081
|
|
|
|
22.96
|
|
|
|
|
|
|
|
|
|
|
Converted during the year ended December 31:
|
|
|
|
|
|
|
|
|
2006
|
|
|
161,898
|
|
|
|
18.00
|
|
2007
|
|
|
162,184
|
|
|
|
18.00
|
|
2008
|
|
|
173,605
|
|
|
|
18.00
|
|
At December 31, 2008, the Company had 1,043,081 RSUs
outstanding with a weighted average remaining contractual life
of 3.8 years and an aggregate intrinsic value of
$7.7 million. The weighted average fair value of RSUs at
the date of grant for the years ended December 31, 2008 and
2007 was $19.92 and $27.58 per share, respectively. The
aggregate intrinsic value and the fair value of RSUs exercised
and vested during 2008 and 2007 were $5.8 million and
$6.2 million, respectively.
During 2008, 246,204 RSUs were exercised and, after
72,599 units were withheld for taxes, 173,605 RSUs were
converted, on a one-for-one basis, for shares of CAMs
Class A common stock. The total intrinsic value and the
fair value of the converted shares was $4.0 million. The
total tax benefit realized in connection with the exercise
F-20
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
of the RSUs during 2008 was $527,000, as the Company receives
tax benefits based upon the portion of Holdings income
that it recognizes. During 2007, 231,249 RSUs were exercised
and, after 69,065 units were withheld for taxes, 162,184
RSUs were converted, on a one-for-one basis, into shares of
CAMs Class A common stock. The total intrinsic value
and the fair value of the converted shares was
$4.4 million. The total tax benefit realized in connection
with the exercise of the RSUs during 2007 was $588,000.
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, 2008 and
2007 was $6.66 and $10.70 per option, respectively. These awards
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:
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
2006
|
|
Dividend yield
|
|
2.10%-2.27%
|
|
1.67%
|
|
1.02%-1.42%
|
Expected volatility
|
|
35%
|
|
35%
|
|
33%-35%
|
Risk-free interest rate
|
|
3.3%-4.7%
|
|
4.7%
|
|
4.6%-5.0%
|
Expected life
|
|
7.5 years
|
|
7.5 years
|
|
7.5 years
|
During 2008 and 2007, 1,076,166 and 769,407 stock options with
an estimated fair value of $7.2 million and
$8.2 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, 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
Range of
|
|
Number
|
|
|
Remaining
|
|
|
Average
|
|
|
Number
|
|
|
Average
|
|
Exercise
|
|
of
|
|
|
Contractual
|
|
|
Option
|
|
|
of
|
|
|
Option
|
|
Prices
|
|
Shares
|
|
|
Life
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
$18.00
|
|
|
516,164
|
|
|
|
5.8 years
|
|
|
$
|
18.00
|
|
|
|
173,655
|
|
|
$
|
18.00
|
|
$19.79-$29.11
|
|
|
1,770,890
|
|
|
|
8.4 years
|
|
|
|
23.82
|
|
|
|
|
|
|
|
|
|
$35.43
|
|
|
301,272
|
|
|
|
7.1 years
|
|
|
|
35.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,588,326
|
|
|
|
7.7 years
|
|
|
|
24.01
|
|
|
|
173,655
|
|
|
$
|
18.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 December 31, 2005
|
|
|
1,009,967
|
|
|
$
|
21.35
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
402,349
|
|
|
|
35.08
|
|
Forfeited
|
|
|
(77,218
|
)
|
|
|
24.63
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2006
|
|
|
1,335,098
|
|
|
|
25.30
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
769,407
|
|
|
|
27.58
|
|
Forfeited
|
|
|
(290,920
|
)
|
|
|
24.73
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2007
|
|
|
1,813,585
|
|
|
|
26.35
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,076,166
|
|
|
|
19.92
|
|
Forfeited
|
|
|
(301,425
|
)
|
|
|
23.54
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2008
|
|
|
2,588,326
|
|
|
|
24.01
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31:
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
2008
|
|
|
173,655
|
|
|
|
18.00
|
|
At December 31, 2008, the Company had 2,588,326 stock
options outstanding with a weighted average remaining
contractual life of 7.7 years and no intrinsic value as the
exercise price exceeded the market value of the stock for all
outstanding options. As of December 31, 2008, 173,655 stock
options granted under this plan were exercisable.
During the year ended December 31, 2008, compensation
expense recorded in connection with the RSUs and stock options
was $7.1 million of which $1.5 million, after giving
effect to the minority interests, was credited as additional
paid-in capital. For the twelve months ended December 31,
2007, compensation expense recorded in connection with the RSUs
and stock options was $6.8 million of which
$1.5 million, net of minority interest, was credited as
additional paid-in capital. The amount of deferred tax asset
created was $545,000, $608,000 and $535,000 during the years
ended December 31, 2008, 2007 and 2006, respectively. At
December 31, 2008, approximately $57.4 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 3.9 years.
F-22
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(13)
|
Non-Operating
Income (Loss)
|
Non-operating income (loss) was comprised of the following for
the years ended December 31, 2008, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Interest income
|
|
$
|
2,334
|
|
|
$
|
16,706
|
|
|
$
|
13,149
|
|
Interest expense
|
|
|
(32,010
|
)
|
|
|
(19,555
|
)
|
|
|
(8,145
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (expense)
|
|
|
(29,676
|
)
|
|
|
(2,849
|
)
|
|
|
5,004
|
|
Capital gain (loss) and dividend income
|
|
|
(162,977
|
)
|
|
|
21,460
|
|
|
|
4,352
|
|
Unrealized appreciation (depreciation)
|
|
|
(132,834
|
)
|
|
|
11,953
|
|
|
|
1,979
|
|
Miscellaneous other income (loss)
|
|
|
(1,070
|
)
|
|
|
935
|
|
|
|
1,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment and other income (loss)
|
|
|
(296,881
|
)
|
|
|
34,348
|
|
|
|
7,403
|
|
Debt extinguishment cost
|
|
|
(37,498
|
)
|
|
|
|
|
|
|
|
|
Minority interest in partnership investments
|
|
|
72,156
|
|
|
|
(1,598
|
)
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-operating income (loss)
|
|
$
|
(291,899
|
)
|
|
$
|
29,901
|
|
|
$
|
12,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The provision for income taxes for the years ended
December 31, 2008, 2007 and 2006 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(1,090
|
)
|
|
$
|
8,404
|
|
|
$
|
10,860
|
|
State
|
|
|
(355
|
)
|
|
|
2,001
|
|
|
|
2,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current income taxes
|
|
|
(1,445
|
)
|
|
|
10,405
|
|
|
|
13,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(8,444
|
)
|
|
|
6,672
|
|
|
|
7,531
|
|
State
|
|
|
6,102
|
|
|
|
1,589
|
|
|
|
1,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred income taxes
|
|
|
(2,342
|
)
|
|
|
8,261
|
|
|
|
9,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income taxes
|
|
$
|
(3,787
|
)
|
|
$
|
18,666
|
|
|
$
|
22,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2008, developments in the Illinois tax statutes resulted in
modifications to the Companys state tax apportionment
methodology that lowered the Companys 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 Company files income tax returns in the U.S. federal
jurisdiction and various states. The Company is no longer
subject to U.S. federal, state and local examinations by
tax authorities for years before 2004. The Internal Revenue
Service (IRS) completed its examination of the Companys
U.S. income tax returns for years 2004 2006 in
the third quarter of 2008. The IRS has proposed adjustments that
increase Holdings taxable income by $1.3 million
(plus additional amounts that may be asserted by the IRS as
penalties), approximately 23% of which will be attributed to
CAM. Holdings proposed penalties are currently under
appeal. The proposed adjustments have not been appealed and will
be recorded as a tax liability when known.
F-23
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 years ended
December 31, 2008, 2007 and 2006, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Statutory U.S. federal income tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Effect of higher tax rates in carryback period
|
|
|
0.6
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
State income taxes, net of federal tax benefits
|
|
|
2.0
|
%
|
|
|
5.0
|
%
|
|
|
5.0
|
%
|
Other non-deductible items
|
|
|
(0.3
|
)%
|
|
|
0.2
|
%
|
|
|
0.1
|
%
|
Impact on net deferred tax assets from change in statutory
income tax rate
|
|
|
(23.9
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
13.4
|
%
|
|
|
40.2
|
%
|
|
|
40.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2008 and 2007 are as follows:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2008
|
|
|
2007
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
$
|
82,006
|
|
|
$
|
97,290
|
|
Capital loss carryforward
|
|
|
10,850
|
|
|
|
|
|
Other
|
|
|
4,918
|
|
|
|
984
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
97,774
|
|
|
|
98,274
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Unrealized net holding gains on investments of
available-for-sale securities
|
|
|
96
|
|
|
|
3,191
|
|
Deferred sales commission
|
|
|
1,360
|
|
|
|
2,808
|
|
Other
|
|
|
712
|
|
|
|
1,991
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
2,168
|
|
|
|
7,990
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
95,606
|
|
|
$
|
90,284
|
|
|
|
|
|
|
|
|
|
|
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 $11.8 million and
$83.8 million, respectively, at December 31, 2008 and
$6.9 million and $83.4 million at December 31,
2007.
In November 2004, the Company recorded a net deferred income 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
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 over 15 years, and this amortization will create
a future tax benefit of approximately $8.3 million per
year, expiring in fiscal year 2019.
In 2008, the Company recorded a net deferred income tax asset of
$10.8 million as a result of a net recognized capital loss
of $34.7 million. The Company intends to file amended
returns for tax years 2005 through 2007 to carry back
$5.4 million of the capital losses. The remaining
$29.3 million is a capital loss carryforward that will
expire in 2013 if not used prior to that time. The Company
believes that all deferred income tax assets will be realized;
therefore, no valuation allowances have been established.
F-24
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
At December 31, 2008, the Company had no material
unrecognized tax benefits and it does not anticipate any
unrecognized tax benefits arising in the next 12 months
that would result in a material change to its financial
position. A reconciliation is not provided, as the beginning and
ending amounts of unrecognized benefits are zero with no interim
additions, reductions or settlements.
|
|
(15)
|
Earnings
(Losses) Per Share
|
The following table reflects the calculation of basic and
diluted earnings (losses) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Earnings (losses) per share basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) available to common shareholders
|
|
$
|
(24,521
|
)
|
|
$
|
27,745
|
|
|
$
|
34,008
|
|
Weighted average shares outstanding
|
|
|
19,753
|
|
|
|
22,297
|
|
|
|
23,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) per share
|
|
$
|
(1.24
|
)
|
|
$
|
1.24
|
|
|
$
|
1.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) per share diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority interest in Calamos Holdings LLC
and income taxes
|
|
$
|
(132,802
|
)
|
|
$
|
202,994
|
|
|
$
|
243,409
|
|
Less: Impact of revaluation of net deferred tax assets
|
|
|
32,888
|
|
|
|
|
|
|
|
|
|
Less: Impact of income taxes
|
|
|
(49,535
|
)
|
|
|
81,644
|
|
|
|
97,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) available to common
shareholders (1)
|
|
$
|
(116,155
|
)
|
|
$
|
121,350
|
|
|
$
|
145,802
|
|
Weighted average shares outstanding
|
|
|
19,753
|
|
|
|
22,297
|
|
|
|
23,162
|
|
Conversion of membership units for common stock
|
|
|
77,444
|
|
|
|
77,000
|
|
|
|
77,000
|
|
Dilutive impact of RSUs
|
|
|
252
|
|
|
|
386
|
|
|
|
523
|
|
Dilutive impact of stock options
|
|
|
|
|
|
|
78
|
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding (2)
|
|
|
97,449
|
|
|
|
99,761
|
|
|
|
100,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) per
share (1)(2)
|
|
$
|
(1.24
|
)
|
|
$
|
1.22
|
|
|
$
|
1.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
To determine the diluted earnings (losses) available to common
shareholders, an effective tax rate of 37.3%, 40.2% and 40.1%
was applied to income before minority interest in Calamos
Holdings LLC and income taxes for 2008, 2007 and 2006,
respectively. The losses available to common shareholders for
2008 presented above reflects the economic impact that the
exchange of all Calamos Interests membership units in
Holdings for shares of the Companys Class A common
stock on a one-for-one basis would have on the Company. In
calculating diluted results per share for 2008 losses available
to common shareholders for basic earnings per share of
$24.5 million was used as the economic impact of the
Calamos Interests exchange and the effect of stock-based
compensation results in anti-dilution. |
|
(2) |
|
Diluted shares outstanding for 2008, 2007 and 2006 are
calculated (a) assuming that Calamos Interests exchanged
all of their membership units in Holdings for shares of the
Companys 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. The number of diluted shares outstanding for 2008
presented above reflects the economic impact that (a) and
(b) would have on the Company diluted shares
outstanding. Because the Company generated a loss in 2008, the
number of diluted shares outstanding used in calculating diluted
results per share was 19.8 million, representing weighted
average basic shares outstanding as the economic impact of the
Calamos Interests exchange and the effect of stock-based
compensation results in anti-dilution. |
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 options exercise price, the
proceeds that would be assumed to be
F-25
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
The following table shows the number of shares which were
excluded from the computation of diluted earnings per share as
they were anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Exchange of Calamos Interests membership units in Holdings
for shares of Class A common stock on a one-for-one basis
|
|
|
77,444,069
|
|
|
|
|
|
|
|
|
|
Restricted stock units
|
|
|
755,876
|
|
|
|
|
|
|
|
127,493
|
|
Stock options
|
|
|
2,588,326
|
|
|
|
1,282,721
|
|
|
|
671,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
80,788,271
|
|
|
|
1,282,721
|
|
|
|
799,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16)
|
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, 2008, 2007 and 2006 were $4.9 million,
$4.6 million and $4.5 million respectively. At
December 31, 2008, 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:
|
|
|
|
|
2009
|
|
$
|
4,535
|
|
2010
|
|
|
4,636
|
|
2011
|
|
|
4,224
|
|
2012
|
|
|
4,304
|
|
2013
|
|
|
4,409
|
|
Thereafter
|
|
|
52,805
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
74,913
|
|
|
|
|
|
|
F-26
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(17)
|
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, 2008 and 2007, the net capital,
the excess of the required net capital and the net capital ratio
were as follows:
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
2008
|
|
|
2007
|
|
|
Net capital
|
|
$
|
26,240
|
|
|
$
|
9,175
|
|
Excess of required net capital
|
|
$
|
25,342
|
|
|
$
|
7,352
|
|
Net capital ratio
|
|
|
0.51
|
|
|
|
2.98
|
|
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.
For the years ended December 31, 2008, 2007 and 2006, 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Calamos Growth Fund
|
|
|
40
|
%
|
|
|
43
|
%
|
|
|
48
|
%
|
Calamos Growth and Income Fund
|
|
|
16
|
%
|
|
|
17
|
%
|
|
|
16
|
%
|
|
|
(19)
|
Common
Stock Repurchase and Capital Contribution
|
The Board of Directors authorized the Company to repurchase up
to 4 million shares of Class A common stock, all of
which have been repurchased. During 2007, the Company
repurchased 2,452,100 shares at an aggregated cost of
$60.6 million. During 2008, the Company repurchased
1,547,900 shares at an aggregated cost of
$34.6 million. In order 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 CAMs ownership in Holdings. The
net impact of these transactions is presented in the
consolidated statements of changes in stockholders equity.
During the third quarter of 2008, CAM contributed
$33.3 million of investment securities to Holdings in
exchange for 1,858,113 membership units and the Calamos
Interests contributed $31.3 million of investment
securities to Holdings in exchange for 1,747,628 membership
units. The consolidated impact of the $64.6 million capital
contribution was an increase of $13.8 million in additional
paid-in capital and an increase of $50.9 million in
minority interest in Holdings. The net effect of these
contributions increased CAMs ownership in Holdings by
1.1%. CAM did not issue shares of its Class A common stock
in connection with these contributions. As a result, the
membership units owned by CAM exceeds the shares of Class A
common stock outstanding.
Effective March 1, 2009, stockholders holding a majority of
the combined voting power of the outstanding shares of
CAMs Class A and Class B common stock consented
to an amendment to its Amended and Restated Certificate of
Incorporation where the (1) formula pursuant to which the
Class B voting rights are determined was revised and
(2) exchange ratio governing the amount of Class A
shares issued upon exchange of the Calamos Interests
ownership of Holdings was amended. After giving effect to the
amendments, (i) the Class B stockholders are entitled to
the same or fewer votes per share given the relative ownership
interests in Holdings, and (ii) the exchange of
Calamos Interests ownership in Holdings for shares of
Class A common stock is based on a fair market
F-27
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
value approach and results in the Calamos Interests being
entitled to the same or fewer shares of Class A common
stock.
|
|
(21)
|
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 has evaluated the impact that the adoption of
SFAS 141(R) will have on its financial statements and
concluded it to be immaterial.
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 requires 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, after which the presentation of minority
interest will change accordingly.
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 has evaluated the impact that
the adoption of SFAS 161 will have on its financial
statements and concluded it to be immaterial.
F-28
(PAGE INTENTIONALLY LEFT BLANK)
|
|
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 are included in Item 8 of
Part II, Financial Statements and Supplementary Data, of
this Annual Report on
Form 10-K.
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Item 9B.
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Other
Information
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None
PART III
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Item 10.
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Directors
and Executive Officers of the Registrant
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Management
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Directors
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John P. Calamos, Sr.
Chairman, Chief Executive
Officer and Co-Chief
Investment Officer
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James J. Boyne
Senior Vice President,
General Counsel and Secretary
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John P. Calamos, Sr.
Chairman, Chief Executive Officer
and Co-Chief Investment Officer
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Nick P. Calamos
Senior Executive Vice President
and Co-Chief Investment Officer
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Gary J. Felsten
Senior Vice President
Director of Human Resources
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Nick P. Calamos
Senior Executive Vice President
and Co-Chief Investment Officer
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James F. Baka
Executive Vice President -
Wealth Management
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Cristina Wasiak
Senior Vice President,
Chief Financial Officer and Treasurer
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G. Bradford Bulkley
Founder
Bulkley Capital, L.P.
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Nimish S. Bhatt
Senior Vice President
and Director of Operations
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Mitchell S. Feiger
President and Chief Executive Officer
MB Financial, Inc.
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Richard W. Gilbert
President
Gilbert Communications, Inc.
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Arthur L. Knight
Private Investor and Business Consultant
Former President and Chief Executive Officer
Morgan Products, Ltd.
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II-1
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 2009
Annual Meeting of Stockholders (the Proxy Statement).
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 company posts its periodic filings as well as other
important communications and documents on the Investor Relations
section of our website at
(http://investors.calamos.com).
We encourage shareholders and investors to visit our website and
review such filings, communications and documents. The Code of
Conduct is posted on our website and is also 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.
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Executive
Compensation
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Information required for this Item is incorporated herein by
reference to the registrants proxy statement for its
annual meeting of shareholders on May 22, 2009.
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Item 12.
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Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
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Information required for this Item is incorporated herein by
reference to the registrants proxy statement for its
annual meeting of shareholders on May 22, 2009.
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Item 13.
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Certain
Relationships and Related Transactions
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Information required for this Item is incorporated herein by
reference to the registrants proxy statement for its
annual meeting of shareholders on May 22, 2009.
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Item 14.
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Principal
Accounting Fees and Services
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Information required for this Item is incorporated herein by
reference to the registrants proxy statement for its
annual meeting of shareholders on May 22, 2009.
II-2
PART IV
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Item 15.
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Exhibits and
Financial Statement Schedules
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(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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Second Amended and Restated Certificate of Incorporation of the
Registrant.
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3(ii)
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Second Amended and Restated By-laws of the Registrant.
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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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4.3
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Note Purchase Agreement, dated as of July 13, 2007, by and
among Calamos Holdings LLC and various institutional investors
(incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
July 18, 2007).
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4.4
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Waiver and First Amendment to 2007 Note Purchase Agreement,
dated as of December 22, 2008, between Calamos Holdings LLC
and various institutional investors (incorporated by reference
to Exhibit 4.5 to the Registrants Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
December 29, 2008).
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4.5
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Note Purchase Agreement, dated as of April 29, 2004,
between Calamos Holdings LLC and various institutional investors
(incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
December 29, 2008).
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4.6
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Amendment No. 1 to Note Purchase Agreement dated as of
October 15, 2004 (incorporated by reference to
Exhibit 4.2 to the Registrants Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
December 29, 2008).
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4.7
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Waiver and Second Amendment to 2004 Note Purchase Agreement,
dated as of December 22, 2008, between Calamos Holdings LLC
and various institutional investors (incorporated by reference
to Exhibit 4.4 to the Registrants Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
December 29, 2008).
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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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Amendment Number 1 to 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
August 9, 2007).
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10.4
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Employment Agreement between the Registrant and James F. Baka
(incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on
Form 10-Q
filed with the Securities an Exchange Commission on May 7,
2008).
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10.5
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Omnibus Amendment Relating to Code Section 409A.
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II-3
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Exhibit
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Number
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Description of Exhibit
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10.6
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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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10.7
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Form of Equity Award Statement.
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10.8
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Form of Non-Employee Equity Award Statement.
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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).
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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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Third Amended and Restated Limited Liability Company Agreement
of Calamos Holdings LLC by and among Calamos Family Partners,
Inc., John P. Calamos, Sr. and the Registrant.
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10.12
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Management Services and Resources Agreement by and among the
Registrant, Calamos Family Partners, Inc. and Calamos Property
Holdings LLC (incorporated by reference to Exhibit 10.1 to
the Registrants Quarterly Report on
Form 10-Q
filed with the Securities and Exchange Commission on
August 9, 2007).
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10.13
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Lease Agreement 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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10.14
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Lease Agreement between CityGate Centre I LLC and Calamos
Holdings LLC (incorporated by reference to Exhibit 99.1 to
the Registrants Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
November 20, 2007).
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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 3, 2008).
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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 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 13, 2009.
CALAMOS ASSET MANAGEMENT, INC.
Name: Cristina Wasiak
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|
|
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Title:
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Senior Vice President,
|
Chief Financial Officer
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 13, 2009
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/s/ Cristina
Wasiak
Cristina
Wasiak
|
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Senior Vice President, Chief Financial Officer (Principal
Financial Officer)
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March 13, 2009
|
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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 13, 2009
|
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/s/ G.
Bradford Bulkley
G.
Bradford Bulkley
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Director
|
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March 13, 2009
|
|
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/s/ Mitchell
S. Feiger
Mitchell
S. Feiger
|
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Director
|
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March 13, 2009
|
|
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/s/ Richard
W. Gilbert
Richard
W. Gilbert
|
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Director
|
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March 13, 2009
|
|
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/s/ Arthur
L. Knight
Arthur
L. Knight
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Director
|
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March 13, 2009
|
II-5