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,
2009
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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 whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes o 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, 2009, the last
business day of the registrants most recently completed
second fiscal quarter, was $275.6 million.
At March 1, 2010, there were 19,893,630 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 June 4,
2010, 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 wholly-owned 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. Calamos
International LLP, ultimately a wholly-owned subsidiary of
Calamos Holdings LLC, was established to facilitate the
distribution of company products globally.
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
Throughout our history, we have based our investment philosophy
around a single belief; that the key to consistent, long-term
success is achieving an optimal balance between enhancing return
and managing risk. For more than 30 years, we have provided
investment advisory services to institutions and individuals,
managing $32.7 billion in client assets at
December 31, 2009. We have consistently applied our
investment philosophy and a proprietary process centered on risk
management across a range of U.S. and global investment
strategies.
Our company began as a boutique investment manager, with an
emphasis on strategies that sought to maximize the potential of
convertible securities to manage risk and build wealth. Today,
we offer strategies to fulfill a range of asset allocation
goals. Our growth represents a logical expansion of our core
discipline and proprietary resources. Because our investment
process begins with a comprehensive understanding of a company
and the relative attractiveness of the securities within its
capital structure, we have been able to selectively expand our
capabilities across many strategies. Each portfolio benefits
from the insights of our entire team and collective knowledge we
have amassed over the decades.
2
As more fully described in the Investment Strategies
section, our strategies include equity, defensive equity,
convertible, alternative, enhanced fixed income, total return
and fixed income. We believe a disciplined adherence to our
investment philosophy and a 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, institutional 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 help our clients
create wealth over full market cycles, which, in turn, grew our
assets under management and revenues throughout the years.
Differentiated by a one-team, one-process approach, ours is a
culture of innovation, global perspective, and clear alignment
with our clients interests. Over the decades, we have
consistently demonstrated strength in developing strategies that
capitalize on the opportunities of the changing investment
landscape.
In 2009, we experienced significant growth in assets under
management, due primarily to strong investment performance
across most of our strategies. Although the global economy has
not returned to pre-recessionary conditions, the systemic risk
that roiled nearly every asset class in 2008 abated in 2009.
There were sharp rebounds in the equity, convertible and high
yield markets. During the downturn, we maintained our long-term
perspective and adhered to our investment discipline as we
sought to capitalize on valuation disparities. We believe that
our discipline and investment approach were instrumental to the
success of our strategies in 2009.
In 2009, we made significant progress in strengthening our
senior management structure. Nick P. Calamos, CFA, was promoted
to President of Investments and Co-Chief Investment Officer; and
James J. Boyne was promoted to President of Distribution and
Operations. Mr. Calamos previously served as Senior
Executive Vice President and Calamos Co-Chief Investment
Officer. Mr. Boyne previously served as Senior Vice
President and Chief Operating Officer for Distribution at
Calamos Financial Services LLC and as Senior Vice President and
General Counsel for Calamos Asset Management, Inc. and its
affiliates. We further strengthened the structure of our
investment team with the appointments of Jeff Scudieri, CFA, and
Jon Vacko, CFA, to the newly created roles of Co-heads of
Research and Investments. Mr. Scudieri and Mr. Vacko
have been with the firm since 1997 and 2000, respectively, and
continue to serve as senior strategy analysts.
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, among others. We encourage you to visit and
review our website.
Business
Strategy
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. While each of our
strategies reflects distinct risk-reward parameters, all are
managed according to our time-tested investment process and
leverage the expertise of our fully integrated investment team.
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, improve client responsiveness and position our business
for long-term expansion. In 2009, we continued to improve the
caliber and scope of our capabilities in portfolio management,
sales, marketing and other functions.
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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 globally, 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 our institutional clients and for the mutual funds
and separate accounts that we manage.
The past decade is often referred to as the lost
decade for investors. During the 10 years ended
December 31, 2009, the S&P 500 Index, a benchmark for
broad equity market performance, earned an average annualized
10-year
return of -0.95%. However, all six Calamos funds with
10-year
performance histories achieved positive performance. The average
annualized returns for these funds are as follows (Class A
shares at net asset value): Growth Fund, 5.49%; Global Growth
and Income Fund, 4.12%; Growth and Income Fund, 5.58%;
Convertible Fund, 4.89%; Market Neutral Income Fund, 4.98%; and
High Yield Fund,
6.82%.(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 for our clients.
Focus
on Clients, With an Emphasis on Serving Long-Term
Investors
We believe that managing our clients assets is an honor
and a responsibility. Client service is crucial to our ongoing
success. In all our activities, our goal 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 1988, we
introduced our first defensive equity strategy and our first
equity strategy in 1990. In subsequent years, we broadened our
investment offerings within our core competencies to include
high yield, global, international, total return and enhanced
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. More recently, our product introductions have
included an emerging markets growth fund and four
Ireland-domiciled UCITS Funds. 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.
In 2010, we intend to launch a small-/mid-cap growth fund which
we believe is a natural extension of our core competencies.
Through such strategic expansion efforts, we believe we can
enhance our ability to increase assets under management and
revenues.
(1) Source:
State Street Corporation and Lipper, Inc. The data that follows
is as of
12/31/09,
and reflects each Funds Class A Shares performance
inclusive of the maximum 4.75% sales charge. Growth Fund:
45.25%, -0.42%, and 4.98% for the 1-, 5- and
10-year
periods, respectively. Global Growth and Income Fund: 25.39%,
5.26%, and 3.61% for the 1-, 5- and
10-year
periods, respectively. Growth and Income Fund: 30.50%,
3.21%, and 5.07% for the 1-, 5- and
10-year
periods, respectively. Convertible Fund: 27.67%, 3.11%, and
4.38% for the 1-, 5- and
10-year
periods, respectively. Market Neutral Income Fund: 8.37%, 1.13%,
and 4.47% for the 1-, 5-and
10-year
periods, respectively. High Yield Fund: 39.48%, 3.51%, and 6.30%
for the 1-, 5- and
10-year
periods, respectively. The most recent month end performance
data is available at www.calamos.com and assumes
reinvestment of dividends and capital gains distributions as
well as an expense reimbursement that improved results.
Performance data is for Class A shares, other share classes
have different performance characteristics. The performance
included is subject to change without notice, based on past
performance, and may not be predictive of future results. Please
see the prospectus for expense ratio and other relevant
information. The S&P 500 Index returned 26.46%, 0.42% and
-0.95% for the 1, 5-, and
10-year
periods, respectively. The benchmark for the High Yield Fund,
the Credit Suisse High Yield Index returned 54.22%, 5.99%, and
7.07% for the 1, 5-, and
10-year
periods, respectively.
4
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 2009, as part of our ongoing efforts to expand our
distribution opportunities and client base, we enhanced our
focus on the institutional market and retirement platform
opportunities, and selectively increased the number of
intermediaries that distribute Calamos products globally. To
support our growing presence and continued expansion plans
outside the United States, we added staff and established a
U.K.-based office.
Intermediary
In 2009, we continued to focus on our large strategic
distribution partnerships with national and large regional
broker-dealers domestically. There has been extensive
consolidation within the U.S. broker-dealer segment since
the market downturn in 2008, and the industry landscape has been
significantly altered. Industry consolidation has increased our
ability to focus our key resources and personnel on a targeted
set of opportunities, with growing emphasis on fee-based mutual
fund platforms. In 2009, we utilized our strategic business team
to monitor and capitalize on industry consolidation. We retained
and grew our shelf space at many of our key partner firms as
consolidation occurred.
While maintaining our support of national broker-dealers, we
have also continued to increase our sales and marketing efforts
in both the independent broker-dealer and registered investment
adviser channels in the U.S. These segments were also
influenced by the consolidation in the national broker-dealers.
Our increased emphasis on business intelligence better
positioned us to serve the growing number of financial advisors
in those channels.
During 2009, we also hired a U.K.-based senior sales
professional to enhance our presence and awareness of our brand
in the United Kingdom and continental Europe and to increase
assets under management within our Offshore Funds. We also added
U.S.-based
sales staff to focus on the non-resident alien (NRA) channel and
Latin America. Our Offshore Funds also gained access to offshore
platforms of some of our domestic strategic partners, and we
continue to work with certain other of our large strategic
partners domestically to gain access to their offshore platforms
as well. We believe that these existing relationships will help
us expand our reach in
non-U.S. markets.
Defined contribution plans are a significant and rapidly growing
segment of the U.S. intermediary market and mutual fund
sales. We believe the defined contribution industry offers an
especially compelling area of opportunity for us, given our
focus on managing risk and seeking to generate outperformance
over full and multiple market cycles. Within the
U.S. defined contribution channel, we were successful in
establishing and growing relationships with a number of
significant partners by delivering our strategies on an
investment-only basis to sponsors. In 2009, we added strategic
business, targeted sales and marketing resources to support our
growing presence in the defined contribution channel.
The maturation of certain Calamos products, including
international equity, global equity, evolving world growth and
total return bond, provide other opportunities for us to build
our presence in this channel. We also believe that our defensive
equity strategies, both U.S. and global, will continue to
serve the needs of the intermediary channel as volatility
continues in the financial markets. We continue to align the
incentives of our sales teams to emphasize client service and
client retention.
Institutional
Over recent years, we have increased our focus on the
institutional business through additions to staff in direct
institutional sales, consultant relations and client
relationship management. Over the last two years, we established
a direct sales team in the U.S., added to our
U.S. consultant relations staff, hired a U.K.-based
institutional sales director to focus on business development
and also expanded our client relationship team. We believe these
additions will enhance our global client service and retention
efforts.
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In 2009, we saw expansion of clients and accelerating growth in
assets under management within the institutional channel. We
have significantly increased the number of clients in our
defensive equity strategies, particularly our global
opportunities strategy. Our defensive equity strategies seek to
outperform the equity markets, with less risk. This objective of
upside equity potential with downside protection has resonated
within the institutional marketplace.
In 2010, we see continued opportunity among a global
institutional client base for both our global and
U.S. defensive equity strategies, as well as for our global
and international equity strategies. Our international equity
and global equity strategies will surpass five years and three
years of history, respectively, which we believe will result in
increased attention within the institutional marketplace.
Capitalize
on Our Recognized and Respected Brand
We believe that brand awareness can lead to asset growth and
help expand our client base.
In 2009 and early 2010, many of our strategies were recognized
for producing solid long-term performance. For example:
Morningstar stated that Calamos International Growth Fund
easily outpace[ed] its peers and benchmark since the
funds inception (Analysis, January 13,
2010). Research Magazine highlighted Calamos Global
Growth and Income Fund for its category beating results
over the last decade (Guide to International Investing
Hedging Global Risk June 2009). Morningstar also
commented on Calamos Global Growth and Income Fund, It
easily tops the benchmark and is in the categorys top
quartile over three-, five-, and
10-year
periods (Morningstars Take, January 25, 2010).
Calamos Convertible Fund received many mentions over the last
year from numerous publications including: Wall Street
Journal, Investment Pensions Europe (I&PE) and
Pensions and Investments, to name a few.
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 networks
such as CNBC and Bloomberg, and have also been featured in
publications such as Investment and Pensions Europe
(I&PE), Investment News, Pension and Investments,
Barrons and Seeking Alpha, among others. Our
co-heads of research and investments, Jon Vacko and Jeff
Scudieri, have also shared their insights in interviews with
Research Magazine, Bloomberg.com, and Pension and
Investments. We believe that as a public company, we have
been able to strengthen the Calamos brand and awareness of our
investment philosophy through these activities.
We raise brand awareness through strategic sponsorships. In
2009, we sponsored the most prestigious event in womens
golf, the Solheim Cup, a trans-Atlantic tournament. As part of
our sponsorship, Calamos brand and logo placements were viewed
by more than 100,000 international attendees.
We continue to utilize integrated online and offline marketing
campaigns, targeted to specific client segments, including our
institutional, U.S. and
non-U.S. intermediary,
and wealth management channels.
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 manage the 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.
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
6
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
Our investment management team is guided, above all else, by the
long-term interests of our clients. This dedication to client
service extends across our organization and informs the
day-to-day
decision making of every individual within the firm.
We employ a team approach to portfolio management and draw on
the experience and expertise of 65 investment professionals
focused on portfolio management, research, trading, portfolio
administration and developing analytical models. Our investment
team is comprised of our co-heads of research and investments,
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 co-heads of
research and investments and 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 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 investment philosophy and
process 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.
In 2009, we strengthened the structure of our investment team
with the appointment of Nick P. Calamos, CFA, to the newly
created role of President of Investments. Jeff Scudieri, CFA,
and Jon Vacko, CFA, were appointed to the newly created roles of
Co-heads of Research and Investments. These promotions enhance
the stability and longevity of our investment management team.
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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7
Investment security selection results 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.
Investment
Strategies
The following table describes our investment strategies and
corresponding assets under management at December 31, 2009
(in billions):
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Equity
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$
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11.9
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Strategies that seek capital appreciation by investing in a
range of global companies of various market capitalization under
both growth and value disciplines
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Defensive Equity
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6.2
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Strategies that pursue equity market upside with less potential
downside than an all-equity portfolio, by investing in dynamic
blend of convertible securities, equities and high yield
securities, globally
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Convertible
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7.4
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|
Strategies that pursue equity market upside with less potential
downside than an all-equity portfolio, by investing primarily in
convertible securities
|
Enhanced Fixed Income
|
|
|
2.7
|
|
|
Closed-end portfolios that pursue high current income, from
income and capital gains, investing primarily in high yield
corporate bonds and convertible securities
|
Total Return
|
|
|
2.2
|
|
|
Closed-end portfolios that pursue current income, with increased
emphasis on capital appreciation, by investing primarily in high
yield corporate bonds, convertible securities and equities
|
Alternative
|
|
|
1.7
|
|
|
Strategies that invest in non-traditional strategies, including
market neutral and convertible arbitrage, among others
|
Fixed Income
|
|
|
0.6
|
|
|
Strategies that invest 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.
|
|
|
|
|
|
|
|
Total
|
|
$
|
32.7
|
|
|
|
|
|
|
|
|
|
|
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, 2009, we had $19.5 billion of assets
under management in open-end funds, representing approximately
60% 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, defensive equity, high yield, alternative, and fixed
income strategies that we believe offer attractive risk-adjusted
return potential. In recent years, much of our expansion efforts
have been focused on global opportunities. In 2007, we
introduced a global equity fund; and in 2008, we introduced an
emerging markets growth fund. Additionally, in 2007, we
established Calamos Global Funds PLC, an Ireland-domiciled
UCITS, which are also referred to as Offshore Funds.
8
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 2009, we acted as the investment advisor to 13
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.
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 tables provide the assets under management
for each open-end fund managed as of December 31, 2009:
U.S.-Domiciled
Mutual Funds
|
|
|
|
|
|
|
|
|
|
|
Assets Under
|
|
|
|
|
|
|
Management at
|
|
|
|
|
|
|
December 31, 2009
|
|
|
Year of
|
|
|
|
(in billions)
|
|
|
Inception
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Growth Fund
|
|
$
|
8.64
|
|
|
|
1990
|
|
International Growth Fund
|
|
|
0.24
|
|
|
|
2005
|
|
Global Equity Fund
|
|
|
0.04
|
|
|
|
2007
|
|
Value Fund
|
|
|
0.06
|
|
|
|
2002
|
|
Blue Chip
|
|
|
0.07
|
|
|
|
2003
|
|
Evolving World Growth Fund
|
|
|
0.05
|
|
|
|
2008
|
|
Multi-Fund Blend*
|
|
|
|
|
|
|
2006
|
|
Defensive Equity
|
|
|
|
|
|
|
|
|
Growth and Income
|
|
|
3.98
|
|
|
|
1988
|
|
Global Growth and Income
|
|
|
0.89
|
|
|
|
1996
|
|
Convertible
|
|
|
|
|
|
|
|
|
Convertible
|
|
|
3.17
|
|
|
|
1985
|
|
Alternative
|
|
|
|
|
|
|
|
|
Market Neutral Income Fund
|
|
|
1.69
|
|
|
|
1990
|
|
High Yield
|
|
|
|
|
|
|
|
|
High Yield Fund
|
|
|
0.30
|
|
|
|
1999
|
|
Fixed Income
|
|
|
|
|
|
|
|
|
Total Return Bond Fund
|
|
|
0.20
|
|
|
|
2007
|
|
Offshore Funds
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Growth Fund
|
|
|
0.14
|
|
|
|
2007
|
|
Global Equity Fund
|
|
|
0.02
|
|
|
|
2007
|
|
Defensive Equity
|
|
|
|
|
|
|
|
|
U.S. Opportunities Fund
|
|
|
0.02
|
|
|
|
2007
|
|
Global Opportunities Fund
|
|
|
0.02
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
A fund comprised of the following three Calamos funds invested I
shares: Growth Fund, Global Growth and Income Fund, and Value
Fund. Assets are reflected in the underlying funds. |
9
Closed-End
Funds
At December 31, 2009, we had $4.9 billion of assets
under management in closed-end funds, representing approximately
15% 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 over a longer-term, which
typically provides for higher returns. We continually assess our
use of leverage because certain market conditions are not
conducive to executing this strategy. We currently believe that
leverage strategies are accretive to the common shareholders of
our closed-end funds.
In 2009, we completed the refinancing of our auction rate
preferred securities (ARPS) financing. Historically, the Funds
employed leverage through the issuance of 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, we sought financing solutions for our closed-end
funds that were consistent with the best interests of all
shareholders. In 2008, we redeemed approximately 81% of
outstanding ARPS financing across our funds. We redeemed the
remainder of the outstanding ARPS financing in 2009. All of our
refinancing solutions utilized attractively-priced debt
facilities.
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
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.
Closed-end
Funds
|
|
|
|
|
|
|
|
|
|
|
Assets Under
|
|
|
|
|
|
|
Management at
|
|
|
|
|
|
|
December 31, 2009
|
|
|
Year of
|
|
|
|
(in billions)
|
|
|
Inception
|
|
|
Enhanced Fixed Income
|
|
|
|
|
|
|
|
|
Convertible Opportunities and Income Fund
|
|
$
|
0.87
|
|
|
|
2002
|
|
Convertible and High Income Fund
|
|
|
1.13
|
|
|
|
2003
|
|
Global Dynamic Income Fund
|
|
|
0.72
|
|
|
|
2007
|
|
Total Return
|
|
|
|
|
|
|
|
|
Strategic Total Return Fund
|
|
|
2.08
|
|
|
|
2004
|
|
Global Total Return Fund
|
|
|
0.15
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate
Accounts
Separate accounts are individual portfolios of securities
managed to meet clients unique needs and include
institutional accounts and managed accounts.
10
Institutional
Accounts
At December 31, 2009, we had $4.6 billion of assets
under management in institutional accounts, representing
approximately 14% of our total assets under management.
Institutional accounts are separately managed accounts for
certain investors, such as corporate pension funds, public
funds, endowment funds and
not-for-profit
institutions, offered through consultants, broker-dealer
intermediaries and directly by us. We have approximately 340
institutional accounts, including commingled funds and
sub-advised
relationships.
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. We also see
considerable opportunity for our global and U.S. defensive
equity and equity strategies.
In recent years, our business development team has targeted
institutional consultants and plan sponsors, 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 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, 2009, we had $3.6 billion of assets
under management in managed accounts, representing approximately
11% of our total assets under management. Our more than 14,600
managed accounts are individual portfolios of securities offered
primarily through 15 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
equity, enhanced fixed income and defensive equity investment
strategies.
Wealth
Management
At December 31, 2009, we had approximately 600 wealth
management clients representing more than $855.5 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.
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. In
2009, we added sales professionals based in the
United Kingdom to support our growing efforts in the
non-U.S. intermediary
and institutional markets and established a U.K.-based office.
11
Client accounts held at our top ten financial intermediaries
represented approximately 59.3% of our assets under management
as of December 31, 2009.
Other
Considerations
Technology
and Intellectual Property
We consider technology to be a competitive advantage in our
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 15,000 accounts at
December 31, 2009. 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
Our domestic and global lines of business are subject to
extensive regulation. 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. 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, a UCITS, advised by Calamos
Advisors is subject to the Irish Financial Services Regulatory
Authority.
12
Calamos Advisors, Calamos Partners LLC and Calamos Wealth
Management LLC 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, SEC regulations, and examination by the SECs
staff. The Investment Advisers Act imposes substantive
regulation on virtually all aspects of their business and its
relationship with its clients. Requirements include 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, Inc. 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. 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 LLC, Calamos Wealth
Management LLC 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, Calamos Asset
Management, Inc. is subject to the rules of NASDAQ, including
the corporate governance listing standards approved by the SEC.
In addition to being subject to the oversight and regulations of
the SEC, Calamos Financial Services as a broker-dealer is
subject to periodic examination by the Financial Industry
Regulatory Authority or FINRA. FINRA regulations cover all
aspects of its business, including sales practices, the minimum
net capital, 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 Advisors and Calamos Wealth Management LLC are subject
to the Employee Retirement Income Security Act of 1974, as
amended, or 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. Failure to comply with these requirements could
have a material adverse effect on our business.
Employees
At December 31, 2009 and 2008, we had 316 and
368 full-time employees, respectively.
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
The following business risks as well as 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 and Business
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. In 2008 and early
2009, 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.
In the second half of 2008 through the first quarter of 2009 the
securities markets materially and adversely affected our
revenues, and such volatile markets could recur in the future.
Changes
in laws or regulations or in governmental policies due to the
state of the economy 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. Due in
part to the credit and investment banking crises of 2008 as well
as high profile investment and trading scandals, the
U.S. government and federal agencies have increased
interest and oversight of the financial and investment industry.
Additional laws and regulations to strengthen controls are
expected and such changes 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 our competitors have substantially greater resources
than us and may offer a broader range of financial products and
services across more markets. Some financial institutions
operate in a more favorable regulatory environment and have
proprietary products and distribution channels which may provide
certain competitive advantages to them and their investment
products. We compete primarily based on the investment
performance of the investment portfolios offered, the scope and
quality of investment advice and client service. We believe that
competition within the investment management industry has and
will continue to 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 without such fees.
14
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.
Further, if we are required to lower our fees to remain
competitive, our revenues and net income could be significantly
reduced. Although we are moving to a more variable cost
structure, some of our expenses remain fixed, especially over
shorter periods of time, and other expenses may not decrease in
proportion to any 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 industry has relatively low barriers
to entry and to the extent we are forced to compete on the basis
of price, we may not be able to maintain our current fee
structure. In recent years, 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 affect
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 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. 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 affect 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 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 affect on
our business.
A terrorist attack, war, power failure, cyber-attack, natural
disaster, significant adverse climate change 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 affects of
all disaster scenarios. If our employees or 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
affect on revenues and net income.
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, 2009, the Calamos Interests owned
approximately 78.5% of Calamos Holdings LLC and all of our
Class B common stock, representing more than 97.5% 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
15
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 this control, none of
our agreements with Calamos Family Partners, Inc. or its
affiliates 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 our key executives; in
particular: John P. Calamos, Sr., our chairman, chief
executive officer and co-chief investment officer, and Nick P.
Calamos, our president of investments 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 earned 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 affect 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 consultants, financial planners and
other professional advisors, as well as from our existing
clients. We cannot assure you that these channels and client
bases will continue to be accessible to us. The inability to
have such access could have a material adverse affect on our
assets under management and ultimately our earnings.
As of December 31, 2009, 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.
16
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 existing or future
clients, which could have a material adverse affect on our
business.
We
derive a substantial portion of our revenues from a limited
number of our products.
As of December 31, 2009, 27% of our assets under management
were concentrated in the Calamos Growth Fund and 34% 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 are
dependent on Calamos Holdings LLC to distribute cash to us in
amounts sufficient to pay our tax liabilities and other
expenses.
Our ownership in Calamos Holdings LLC is our primary asset and
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
affect on our business, financial condition or results of
operations.
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, in the
past we have reduced our dividend due to the affect of market
conditions on our business. Our board of directors has and in
the future may, in its discretion, decrease the level of
dividends. Further, our board of directors 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.
17
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 this technology became inoperative or
obsolete.
Our business is dependent on highly specialized technology to
support our business functions, including: 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. Also, our back office and middle office operations
have been or are in the process of being outsourced to
third-party service providers who rely on technology systems as
well. If our technology systems or our service providers 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 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 affect 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 and our service providers store and process personal client
information. It is possible that the security controls, training
and other processes over personal data may not prevent the
improper disclosure of client
18
information. Such disclosure could harm our reputation as well
and subject us to liability, resulting in increased costs or
loss of revenue.
The
disparity in the voting rights among the classes of shares may
have a potential adverse affect 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, 2009, we had 19,668,583 outstanding shares
of Class A common stock.
The Calamos Interests own approximately 78.5% of Calamos
Holdings LLC and 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, the Calamos Interests 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 affect, 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.
The
Calamos Family Partners 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.
Calamos Family Partners owns all the outstanding shares of our
Class B common stock. As a result, the Calamos Interests
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 Interests 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 affect 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
19
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 affect on our business. The Internal Revenue
Service completed its audit of Calamos Holdings LLC for its 2004
through 2006 tax years and has proposed certain unrelated
adjustments. Such adjustments do not relate to the
section 754 election and we anticipate that the audit and
the 2004 through 2006 tax years 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 affect 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
LLC and its note holders 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, restrict the ability of
Calamos Holdings LLCs subsidiaries to incur debt and
restrict the ability of Calamos Holdings LLC 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 LLCs assets. The inability of Calamos
Holdings LLC to maintain compliance with any of its financial
covenants could lead to an event of default and result in
various remedies to the note holders 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.
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, programs 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.
Independent of market conditions, we also may modify our
business plan, affecting our revenues and net income.
Our
investment income may be negatively affected by fluctuation in
our corporate investment portfolio resulting in a material
adverse affect on our company.
A substantial portion of our assets are invested in Calamos
products which are subject to market risk. Prior to the use of
derivatives, our non-operating investment income was more
susceptible to a decline by the: realization of losses upon
disposition of corporate investments (as occurred in 2008),
performance of corporate investments, market conditions and
interest rates. Fluctuations in investment income are expected
to occur in the future but to a lesser magnitude with the use of
derivatives. Tangentially, our capital loss carry forwards
resulting from losses generated from the sale of investment
securities provide deferred tax assets, which are intangible
assets with realization dependent on positive performance of our
corporate investment portfolio. If market conditions deteriorate
and securities valuations are depressed for prolonged periods of
time, the recoverability of these deferred tax assets may be
adversely affected and become impaired. The occurrence of an
impairment may require a material non-cash charge to our
earnings.
20
As our
business expands globally, foreign currency fluctuations may
result in an adverse affect on the income of our
company.
We transact business in several foreign countries and have a
global operation in the United Kingdom. Our revenues from our
global business may be realized in U.S. dollars or foreign
currency. Currently we do not believe that foreign currency
fluctuations materially affect our income however this may
change in the future as we expand globally.
Insurance
coverage may be inadequate or not cover legal and regulatory
proceedings.
In addition to civil litigation and arbitration, we are subject
to regulatory inquiries and examinations which could result in
substantial penalties and awards against us if the outcome is
adverse. These types of proceedings have increased in the
financial services industry and there does not appear to be any
immediate reversal. We maintain insurance coverage in amounts
and terms we believe appropriate for such matters although we
cannot be certain that there will be adequate coverage, if at
all; nor can we be certain that coverage will always be
available. Finally, insurance premiums may rise for
substantially the same coverage amounts and terms which will
result in higher expenses and reduce our net income.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None.
Our principal executive offices are located at 2020 Calamos
Court, Naperville, Illinois 60563, where we occupy approximately
153,000 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 56,000 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.
[Reserved]
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
2009 and 2008 were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Price Range
|
|
Cash Dividends
|
|
|
2009
|
|
2008
|
|
per Share
|
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
2009
|
|
2008
|
|
First Quarter
|
|
$
|
8.26
|
|
|
$
|
2.74
|
|
|
$
|
29.67
|
|
|
$
|
14.46
|
|
|
$
|
0.055
|
|
|
$
|
0.11
|
|
Second Quarter
|
|
$
|
15.47
|
|
|
$
|
4.53
|
|
|
$
|
23.28
|
|
|
$
|
14.69
|
|
|
$
|
0.055
|
|
|
$
|
0.11
|
|
Third Quarter
|
|
$
|
15.01
|
|
|
$
|
10.75
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|
|
$
|
24.00
|
|
|
$
|
13.13
|
|
|
$
|
0.055
|
|
|
$
|
0.11
|
|
Fourth Quarter
|
|
$
|
14.32
|
|
|
$
|
9.90
|
|
|
$
|
19.43
|
|
|
$
|
2.55
|
|
|
$
|
0.055
|
|
|
$
|
0.055
|
|
On March 1, 2010, there were approximately 59 holders of
record of our outstanding Class A common stock and one
holder of record of our outstanding Class B common stock.
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 2010.
Equity
Compensation Plan Information
As of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
|
Equity compensation plans approved by security holders:
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|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
2,470,281
|
|
|
$
|
23.08
|
|
|
|
N/A
|
(1)
|
Restricted stock units
|
|
|
1,519,661
|
|
|
|
|
|
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|
N/A
|
(1)
|
Equity compensation plans not approved by security holders
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Total
|
|
|
3,989,942
|
|
|
$
|
14.29
|
|
|
|
5,095,313
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
A combined total of 10,000,000 shares of Calamos Asset
Management, Inc.s Class A common stock may be issued
under its incentive compensation plan. During the twelve months
ended December 31, 2009, 2008 and 2007,
203,693 shares, 246,204 shares and
231,249 shares, respectively, were exercised. |
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 December 31, 2004 (assuming a $100 investment
on December 31, 2004, and the reinvestment of any
dividends).
Performance
Graph
Total
Return Performance
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|
|
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|
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|
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|
|
|
|
Period Ending
|
|
Index
|
|
12/31/04
|
|
|
12/31/05
|
|
|
12/31/06
|
|
|
12/31/07
|
|
|
12/31/08
|
|
|
12/31/09
|
|
Calamos Asset Management, Inc.
|
|
|
100.00
|
|
|
|
117.73
|
|
|
|
101.63
|
|
|
|
114.67
|
|
|
|
29.19
|
|
|
|
46.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SNL Asset Manager
|
|
|
100.00
|
|
|
|
127.18
|
|
|
|
147.49
|
|
|
|
167.89
|
|
|
|
79.79
|
|
|
|
129.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S&P 500
|
|
|
100.00
|
|
|
|
104.91
|
|
|
|
121.48
|
|
|
|
128.16
|
|
|
|
80.74
|
|
|
|
102.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Information
Calamos Asset Management, Inc. (CAM) is comprised of two groups
of assets: a) CAMs 21.5% ownership interest in
Calamos Holdings LLC and b) a group of assets wholly-owned
by CAM, principally comprised of cash and deferred tax assets
with a combined book value of $107.8 million. Because CAM
controls the operations of Calamos Holdings LLC, CAM presents
their entire operations with its own in the consolidated
financial statements. The Calamos Interests 78.5% interest
in Calamos Holdings LLC is presented as non-controlling interest
in the consolidated financial statements. Prior to March 1,
2009, in addition to the approximately 20 million basic
Class A common shares, we added 77 million shares to
reflect the Calamos Interests 78.5% ownership in Calamos
Holdings LLC to the weighted average diluted shares outstanding
and this diluted share count provided a reasonable proxy for
determining the market capitalization of the fully consolidated
company.
Effective March 1, 2009, CAM
de-unitized
its ownership structure and as a result, the Calamos
Interests ownership in Calamos Holdings LLC is no longer
reflected in the diluted share count. Therefore, the
determination of the market capitalization of the fully
consolidated business cannot be easily determined by the product
of share price and weighted average shares. There is a
divergence within the financial community on how to calculate
CAMs market capitalization with some basing it solely on
the outstanding float of CAMs stock while others
gross-up
this amount by CAMs 21.5% ownership in Calamos Holdings
LLC to estimate the market capitalization of the fully
consolidated business. The following illustration and
accompanying table highlight the uniqueness of CAMs
ownership structure in determining the fully consolidated market
capitalization. This illustration is based on the closing price
of CAMs Class A common stock of $11.52 on
December 31, 2009.
As previously stated, in addition to the approximate 21.5%
ownership in Calamos Holdings LLC, CAM owns certain assets that
are wholly-owned by its Class A common shareholders. These
assets include cash equivalents and current income tax
receivables with a book value of $21.5 million, which
approximates fair value, as well as net
23
deferred tax assets with a book value of $86.3 million. The
most significant deferred tax asset relates to an election made
under section 754 of the Internal Revenue Code following
CAMs initial public offering that expires in 2019, which
allows CAM to reduce future income tax payments by approximately
$8.3 million annually. The net present value of the net
deferred tax assets would be approximately $52.3 million if
a hypothetical 12% cost of capital were applied over the
remaining life of the assets. Using this assumption, these
independently owned assets would collectively have a discounted
value of approximately $73.8 million, or $3.75 per share.
Assuming CAMs stock price fully reflects the discounted
value of the wholly-owned assets of $3.75 per share, the
remaining stock price of $7.77 would be attributed to the 21.5%
ownership interest in Calamos Holdings LLC.
With these assumptions, the market capitalization associated
with CAMs ownership in Calamos Holdings LLC can be
determined by multiplying the share price attributable to
Calamos Holdings LLC ($7.77) by the shares outstanding
(19.7 million) to yield a market capitalization of
$152.8 million. This result, however, must be divided by
CAMs 21.5% ownership of Calamos Holdings LLC to determine
the total implied market capitalization of Calamos Holdings LLC
of $710.8 million. By adding the discounted value of
CAMs wholly-owned assets ($73.8 million) to the fully
consolidated market capitalization of Holdings, the fully
consolidated market capitalization would be approximately
$784.6 million.
The above example assumes that CAMs stock price reflects
the entire discounted value of the wholly-owned assets. If,
however, no value were assigned to the wholly-owned assets, the
fully consolidated market capitalization would be estimated at
$1.1 billion as presented in the table below.
The following calculations summarize two ends of the spectrum in
determining the fully consolidated market capitalization as
described above: no recognition of value attributable to Calamos
Asset Management, Inc.s wholly-owned assets and full
recognition of the discounted value of these assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No Recognition of CAMs
|
|
|
100% Recognition of CAMs
|
|
|
|
Wholly-Owned Assets
|
|
|
Wholly-Owned Assets
|
|
|
|
Ownership in
|
|
|
Wholly-Owned
|
|
|
Ownership in
|
|
|
Wholly-Owned
|
|
(in thousands, except share data)
|
|
Holdings
|
|
|
Assets
|
|
|
Holdings
|
|
|
Assets
|
|
|
Divide:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted value of CAMs wholly-owned assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
73,757
|
|
Class A shares outstanding at December 31, 2009
|
|
|
|
|
|
|
19,668,583
|
|
|
|
|
|
|
|
19,668,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted value per share of CAMs wholly-owned assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3.75
|
|
Multiply:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share price attributed to assets
|
|
$
|
11.52
|
|
|
|
|
|
|
$
|
7.77
|
|
|
$
|
3.75
|
|
Class A shares outstanding at December 31, 2009
|
|
|
19,668,583
|
|
|
|
19,668,583
|
|
|
|
19,668,583
|
|
|
|
19,668,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market capitalization of outstanding shares
|
|
$
|
226,582
|
|
|
|
|
|
|
$
|
152,825
|
|
|
$
|
73,757
|
|
Divide by:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calamos Asset Management, Inc.s percentage ownership
|
|
|
21.5
|
%
|
|
|
100
|
%
|
|
|
21.5
|
%
|
|
|
100
|
%
|
Market capitalization associated with CAMs assets
|
|
$
|
1,053,870
|
|
|
|
|
|
|
$
|
710,813
|
|
|
$
|
73,757
|
|
|
|
|
|
|
|
|
|
|
|
Fully consolidated market capitalization
|
|
$1,053,870
|
|
$784,571
|
|
|
|
|
|
24
|
|
Item 6.
|
Selected
Financial Data
|
The following tables set forth our selected historical
consolidated financial and other data for each of the five years
in the period ended December 31, 2009. These tables should
be read 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands, except share data)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fees
|
|
$
|
200,790
|
|
|
$
|
274,174
|
|
|
$
|
325,395
|
|
|
$
|
329,383
|
|
|
$
|
284,951
|
|
Distribution and underwriting fees
|
|
|
78,430
|
|
|
|
114,023
|
|
|
|
143,994
|
|
|
|
151,760
|
|
|
|
129,250
|
|
Other
|
|
|
2,518
|
|
|
|
3,392
|
|
|
|
4,088
|
|
|
|
4,029
|
|
|
|
3,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
281,738
|
|
|
|
391,589
|
|
|
|
473,477
|
|
|
|
485,172
|
|
|
|
417,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits
|
|
|
67,413
|
|
|
|
74,483
|
|
|
|
91,039
|
|
|
|
73,382
|
|
|
|
61,029
|
|
Distribution and underwriting expenses
|
|
|
59,491
|
|
|
|
84,884
|
|
|
|
104,227
|
|
|
|
100,935
|
|
|
|
79,446
|
|
Amortization of deferred sales commissions
|
|
|
12,201
|
|
|
|
23,417
|
|
|
|
27,249
|
|
|
|
32,924
|
|
|
|
31,431
|
|
Marketing and sales promotion
|
|
|
10,762
|
|
|
|
11,908
|
|
|
|
40,833
|
|
|
|
15,631
|
|
|
|
14,738
|
|
General and administrative
|
|
|
33,813
|
|
|
|
37,800
|
|
|
|
37,036
|
|
|
|
31,272
|
|
|
|
24,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
183,680
|
|
|
|
232,492
|
|
|
|
300,384
|
|
|
|
254,144
|
|
|
|
211,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
98,058
|
|
|
|
159,097
|
|
|
|
173,093
|
|
|
|
231,028
|
|
|
|
206,094
|
|
Non-operating income (loss)
|
|
|
(4,910
|
)
|
|
|
(364,055
|
)
|
|
|
31,499
|
|
|
|
12,407
|
|
|
|
10,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax provision (benefit)
|
|
|
93,148
|
|
|
|
(204,958
|
)
|
|
|
204,592
|
|
|
|
243,435
|
|
|
|
217,016
|
|
Income tax provision (benefit)
|
|
|
7,879
|
|
|
|
(3,787
|
)
|
|
|
18,666
|
|
|
|
22,770
|
|
|
|
19,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
85,269
|
|
|
|
(201,171
|
)
|
|
|
185,926
|
|
|
|
220,665
|
|
|
|
197,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (income) loss attributable to non-controlling interest in
partnership investments
|
|
|
(336
|
)
|
|
|
72,156
|
|
|
|
(1,598
|
)
|
|
|
(26
|
)
|
|
|
(5,161
|
)
|
Net (income) loss attributable to non-controlling interest in
Calamos Holdings LLC
|
|
|
(72,509
|
)
|
|
|
104,494
|
|
|
|
(156,583
|
)
|
|
|
(186,631
|
)
|
|
|
(163,009
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Calamos Asset Management,
Inc.
|
|
$
|
12,424
|
|
|
$
|
(24,521
|
)
|
|
$
|
27,745
|
|
|
$
|
34,008
|
|
|
$
|
29,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.63
|
|
|
$
|
(1.24
|
)
|
|
$
|
1.24
|
|
|
$
|
1.47
|
|
|
$
|
1.27
|
|
Diluted(1)
|
|
$
|
0.62
|
|
|
$
|
(1.24
|
)
|
|
$
|
1.22
|
|
|
$
|
1.45
|
|
|
$
|
1.26
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
19,626,233
|
|
|
|
19,752,972
|
|
|
|
22,297,170
|
|
|
|
23,161,998
|
|
|
|
23,000,100
|
|
Diluted(1)
|
|
|
19,954,124
|
|
|
|
97,449,228
|
|
|
|
99,760,872
|
|
|
|
100,805,030
|
|
|
|
100,625,824
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Balance Sheet Data (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
145,431
|
|
|
$
|
59,425
|
|
|
$
|
108,441
|
|
|
$
|
328,841
|
|
|
$
|
210,469
|
|
Investment securities
|
|
|
207,886
|
|
|
|
173,155
|
|
|
|
535,476
|
|
|
|
142,675
|
|
|
|
128,265
|
|
Partnership investments and offshore funds
|
|
|
37,549
|
|
|
|
28,471
|
|
|
|
353,004
|
|
|
|
86,846
|
|
|
|
79,662
|
|
Total assets
|
|
|
557,078
|
|
|
|
475,873
|
|
|
|
1,217,672
|
|
|
|
791,788
|
|
|
|
665,309
|
|
Long-term debt
|
|
|
125,000
|
|
|
|
125,000
|
|
|
|
525,000
|
|
|
|
150,000
|
|
|
|
150,000
|
|
Total liabilities
|
|
|
177,252
|
|
|
|
164,826
|
|
|
|
602,553
|
|
|
|
208,848
|
|
|
|
205,292
|
|
Calamos Asset Management, Inc. stockholders equity
|
|
|
165,314
|
|
|
|
150,773
|
|
|
|
213,737
|
|
|
|
214,577
|
|
|
|
186,134
|
|
Non-controlling interests
|
|
|
214,512
|
|
|
|
160,274
|
|
|
|
401,382
|
|
|
|
368,363
|
|
|
|
273,883
|
|
Total stockholders equity
|
|
|
379,826
|
|
|
|
311,047
|
|
|
|
615,119
|
|
|
|
582,940
|
|
|
|
460,017
|
|
Assets Under Management (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
|
|
24,480
|
|
|
|
17,498
|
|
|
|
34,835
|
|
|
|
33,704
|
|
|
|
32,244
|
|
Separate accounts
|
|
|
8,234
|
|
|
|
6,542
|
|
|
|
11,373
|
|
|
|
11,021
|
|
|
|
11,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets under management
|
|
$
|
32,714
|
|
|
$
|
24,040
|
|
|
$
|
46,208
|
|
|
$
|
44,725
|
|
|
$
|
43,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Diluted shares outstanding for the periods 2005 through 2008 are
calculated (a) assuming the Calamos Interests exchanged all
of their membership units in Calamos Holdings LLC for shares of
Calamos Asset Management, Inc.s Class A common stock
on a
one-for-one
basis and (b) including the effect of outstanding
restricted stock unit and options 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 effect for the stock based
compensation results in anti-dilution. In 2009, the ownership
structure was
de-unitized
and the exchange, described above, is now based on a fair value
approach which results in the same or fewer shares of
Class A common stock being issued at the time of exchange.
The effects of the exchange are anti-dilutive and are therefore
excluded from the calculation of diluted weighted average shares
outstanding for 2009. |
26
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operation
|
We provide investment advisory services to institutions and
individuals, managing $32.7 billion in client assets at
December 31, 2009 through a variety of investment products
designed to suit their investment needs.
Assets
Under Management
Our operating results fluctuate primarily due to changes in the
total value and composition of our assets under management and
with our ability to manage variable expenses. 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, 2009, 2008
and 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Mutual Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
Open-end funds
|
|
$
|
19,531
|
|
|
$
|
13,594
|
|
|
$
|
27,434
|
|
Closed-end funds
|
|
|
4,949
|
|
|
|
3,904
|
|
|
|
7,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mutual funds
|
|
|
24,480
|
|
|
|
17,498
|
|
|
|
34,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutional accounts
|
|
|
4,619
|
|
|
|
3,483
|
|
|
|
5,193
|
|
Managed accounts
|
|
|
3,615
|
|
|
|
3,059
|
|
|
|
6,180
|
|
Total separate accounts
|
|
|
8,234
|
|
|
|
6,542
|
|
|
|
11,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets under management
|
|
$
|
32,714
|
|
|
$
|
24,040
|
|
|
$
|
46,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In order to increase our assets under management and expand our
business, we must develop and market investment products and
strategies that suit the 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
and retain clients will depend on a variety of factors,
including, among others:
|
|
|
|
|
purchases and redemptions of shares of the open-end funds and
other investment products;
|
|
|
|
the amount of non-reinvested capital gain and income
distributions;
|
|
|
|
fluctuations in the global financial markets 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 and volatility 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 introduction of new investment strategies and products, and
our decision to close strategies when deemed in the best
interests of our clients.
|
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
27
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 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. Since 2007 our open-end funds have included
our Dublin, Ireland- based Calamos Global Funds PLC, also
referred to as Offshore Funds.
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 which
increases 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:
|
|
|
|
|
Institutional accounts are separately managed accounts
for institutional investors, such as public and private pension
funds, public funds, endowment funds and private investment
funds. Institutional accounts also include
sub-advised
portfolios, such as registered investment companies, where we
act as investment advisor but for which we have no distribution
responsibilities. Institutional accounts are typically offered
directly by us through institutional consultants and through
national and regional broker-dealers.
|
|
|
|
Managed accounts are separately managed accounts for high
net worth investors offered primarily through national and
regional broker-dealers.
|
Revenues
Our revenues are substantially comprised of investment
management fees earned under contracts with the mutual funds and
separate accounts managed by us. The distribution of assets
under management among our investment products also will have an
impact on our investment management fees, as some products carry
different fees than others. Investment management fees may
fluctuate based on a number of factors, including the following:
|
|
|
|
|
total value and composition of our assets under management;
|
|
|
|
the amount of non-reinvested capital gain and income
distributions;
|
|
|
|
market appreciation or depreciation;
|
|
|
|
the use of leverage within our products;
|
|
|
|
relative investment performance and volatility of our investment
products and strategies compared to benchmarks and competitors;
|
|
|
|
level of net purchases and redemptions, which represent the sum
of new client assets, additional funding from existing clients,
withdrawals of assets from and termination of client accounts,
and purchases and redemptions of mutual fund shares;
|
28
|
|
|
|
|
a determination by the independent trustees of the mutual funds
to terminate or significantly alter the funds investment
management agreements with us; and
|
|
|
|
increased competition.
|
Our revenues also are comprised of distribution and underwriting
fees. Asset-based distribution
and/or
service fees received pursuant to
Rule 12b-1
plans, discussed below, are a significant component of
distribution and underwriting fees. Distribution and
underwriting fees may fluctuate based on a number of factors,
including the following:
|
|
|
|
|
total value and composition of our assets under management
generally and by share class;
|
|
|
|
market appreciation or depreciation; and
|
|
|
|
the level of purchases and redemptions.
|
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 generally computed quarterly, either in advance or
in arrears, based on the assets under management 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.
29
Operating
Expenses
Our operating expenses 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. These
expenses fluctuate due to a number of factors, including but not
limited to, the following:
|
|
|
|
|
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;
|
|
|
|
changes in distribution and underwriting expense and
amortization of the deferred sales commissions as a result of
fluctuations in mutual fund sales and level of redemptions;
|
|
|
|
market appreciation or depreciation of assets under management
which will directly impact distribution and underwriting
expenses;
|
|
|
|
the amount of
Rule 12b-1
distribution
and/or
service fees that we receive, as well as our continued ability
to receive those fees in the future, which would affect the
amortization expenses associated with the receipt of these fees;
|
|
|
|
changes in the level of our marketing and promotion expenses in
response to market conditions, including our efforts to further
penetrate our existing distribution channels; and
|
|
|
|
expenses and capital costs, such as technology assets,
professional services, depreciation, and research and
development, incurred to maintain and enhance our administrative
and operating services infrastructure.
|
We have and will continue to adjust the level of expenses
relative to business income and seek opportunities to implement
a more variable cost structure.
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. 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 these assets over either the
average remaining lives of the assets or 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
30
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.
Because we discontinued the sale of Class B shares during
2009, the deferred sales commission assets related to these
shares are no longer being replenished by new sales. In
conjunction with this decision, we evaluated the estimated
remaining lives on the portion of the deferred sales commission
assets related to Class B mutual fund shares and, as a
result, extended the expected lives of these assets. The impact
of this change reduced amortization expense for the year ended
December 31, 2009.
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 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 may be paid over time
based on the average daily net assets of such funds or 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. These expenses 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. We continue to explore ways to make these costs more
variable, such as outsourcing our middle and back-office
functions.
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 our core investment management business. The
following table summarizes the net distribution fee margin for
the years ended December 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
Distribution and underwriting fees
|
|
$
|
78,430
|
|
|
$
|
114,023
|
|
Distribution and underwriting expense
|
|
|
(59,491
|
)
|
|
|
(84,884
|
)
|
Amortization of deferred sales commissions
|
|
|
(12,201
|
)
|
|
|
(23,417
|
)
|
|
|
|
|
|
|
|
|
|
Net distribution fees
|
|
$
|
6,738
|
|
|
$
|
5,722
|
|
|
|
|
|
|
|
|
|
|
Net distribution fee margin
|
|
|
9
|
%
|
|
|
5
|
%
|
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 $16.3 billion of our
assets under management as of December 31, 2009. 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
$1.6 million for the year ended December 31, 2009. We
receive
Rule 12b-1
distribution and service fees on Class A shares at a rate
of 0.25%
31
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, 2009, we received Class A share
Rule 12b-1
fees of $23.2 million. For the same period, we made
Class A share
Rule 12b-1
payments to selling firms of $22.1 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. 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 $1.2 billion of our
assets under management as of December 31, 2009. During the
second quarter of 2009 we discontinued the sale of Class B
open-end mutual funds. Prior to us closing this share class to
new sales, investors in Class B shares did not pay a sales
charge at the time of investment; instead, we paid an upfront
commission equal to 4.0% of the amount invested directly to the
selling firm when the investment is made. This advanced payment
was capitalized as a deferred sales commission asset when paid
and is amortized on a straight-line basis over eight years
unless a redemption occurs at which time we write-off the
remaining asset by increasing amortization expense. For the year
ended December 31, 2009, we made Class B share
commission payments to selling firms of $1.0 million. If
the investor redeems shares within the first six years of
investment, we receive a contingent deferred sales charge 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, 2009, we
received Class B share contingent deferred sales charge
payments of $2.6 million.
We receive
Rule 12b-1
fees on Class B shares at the rate of 1.0% of Class B
share assets under management (consisting of a 0.75%
distribution fee and a 0.25% service fee) and record these fees
as distribution and underwriting fee revenue. We make
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, 2009, we received Class B
share
Rule 12b-1
fees of $11.6 million. For the same period, we made
Class B share
Rule 12b-1
payments to selling firms of $2.9 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 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 redemption activity or
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.
Class C shares represented $4.5 billion of our
assets under management as of December 31, 2009. 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, 2009, we made commission payments to selling
firms of $5.5 million. If the investor redeems Class C
shares within one year of investment, we receive from the
proceeds of the sale a contingent deferred sales charge payment
equal to 1.0% of the lesser of the redemption price or purchase
price. For the year ended December 31, 2009, we received
Class C share contingent deferred sales charge payments of
$0.5 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, 2009 we received Class C share
12b-1 fees
of $38.8 million. For the same period, we made Class C
share
Rule 12b-1
payments to selling firms of $34.1 million.
32
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 $2.4 billion of our
assets under management as of December 31, 2009. 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
$14.6 million of our assets under management as of
December 31, 2009. 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, 2009, 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.
Class X shares represented $52.2 million of our
assets under management as of December 31, 2009. 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 Offshore 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. For 2009, the Class B share margin is significantly
greater than the Class A, Class C and Class R
shares due to the reduction in amortization expense associated
with the change in the estimated remaining lives of the
Class B deferred sales commissions. The reduction in
amortization contributed to the increased net distribution
margin year over year. We expect this increase to be temporary
as the age of the assets under management increases and as the
Class C shares, with lower margins, continue to represent a
larger percentage of our asset base.
Non-operating
Income (Loss)
Non-operating income (loss) primarily represents net investment
gains or losses from a portion of our investment portfolio and
from the limited partnerships that we consolidate, net of
non-controlling interest in those partnerships. Capital gain
distributions, dividends and net interest income or expense are
also reported as components of non-operating income (loss). We
expect to continue to invest a portion of our operating cash
flow into investment securities, thus the impact of
non-operating income (loss) will continue to be meaningful in
future periods. For more information, see Liquidity and
Capital Resources.
Non-controlling
Interest
Non-controlling
Interest in Calamos Holdings LLC
As sole manager of Calamos Holdings LLC, we consolidate the
financial results of Calamos Holdings LLC with our own results.
In light of Calamos Family Partners, Inc. and John P.
Calamos, Sr.s collective ownership of 78.5% and 78.7%
in Calamos Holdings LLC as of December 31, 2009 and 2008,
respectively, we reflect their ownership as a non-controlling
interest in our consolidated statements of financial condition,
operations and changes in stockholders equity. As a
result, outstanding shares of our Class A common stock
represent 21.5% and 21.3% of the ownership of Calamos Holdings
LLC for the years ended December 31, 2009 and 2008,
respectively.
33
Non-controlling interest in Calamos Holdings LLC is derived by
multiplying the historical equity of Calamos Holdings LLC 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 may result in changes to Calamos Asset Management,
Inc.s ownership percentage and to the non-controlling
interests ownership percentage of Calamos Holdings LLC.
The corresponding changes in ownership are reflected in the
consolidated statements of changes in stockholders equity.
Income is allocated to non-controlling interests based on the
average ownership interest during the period in which the income
is earned. As a result, our income (loss) before income tax
provision (benefit), excluding Calamos Family Partners, Inc. and
John P. Calamos, Sr.s non-controlling interest,
represent 21.5% and 21.3% of Calamos Holdings LLCs net
income for the years ended December 31, 2009 and 2008,
respectively. Income (loss) before income tax provision
(benefit) 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 non-controlling interest;
therefore, the resulting non-controlling interest is less than
78.5% and 78.7% for the years ended December 31, 2009 and
2008, respectively.
Non-controlling
Interest in Partnership Investments and Offshore
Funds
Calamos Partners LLC is the general partner of Calamos Market
Neutral Opportunities Fund LP, a private investment
partnership comprised of highly liquid marketable securities. At
December 31, 2009, we and our affiliates had 91.5% and 2.8%
interests in Calamos Market Neutral Opportunities Fund LP
(94.3% combined). At December 31, 2008, we and our
affiliates had 91.2% and 2.8% interests in Calamos Market
Neutral Opportunities Fund LP (94.2% combined). Calamos
Partners LLC was also the general partner of Calamos Equity
Opportunities Fund LP, a private investment partnership,
until the partnership was liquidated during the second quarter
of 2008. 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 non-controlling interest in partnership investments in our
consolidated financial statements.
In the fourth quarter of 2007, we established Calamos Global
Funds PLC, 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 into 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, 2009 and
2008, we had 26.2% and 30.1% interests in the Offshore Funds,
respectively.
As we launch new products, we and our affiliates may invest in
these entities, which may require the consolidation of these
entities into our results as well. We expect the consolidation
of these new entities to be temporary until new customers invest
in the products and our resulting ownership percentage decreases.
Income
Taxes
For the years ended December 31, 2009, 2008 and 2007, our
effective tax rate was 37.8%, 37.3% and 40.2%, respectively. The
2008 tax rate does not give effect to 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.
Operating
Results
Year
Ended December 31, 2009 Compared to Year Ended
December 31, 2008
Assets
Under Management
Assets under management increased by $8.7 billion, or 36%,
to $32.7 billion at December 31, 2009 from
$24.0 billion at December 31, 2008. Average assets
under management decreased by $9.7 billion, or 26%, to
$27.4 billion for the year ended December 31, 2009
from $37.1 billion for the year ended December 31,
2008. At
34
December 31, 2009 and 2008, our assets under management
consisted of 75% and 73% mutual funds and 25% and 27%
institutional and managed accounts, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
Change
|
|
(in millions)
|
|
2009
|
|
|
2008
|
|
|
Amount
|
|
|
Percent
|
|
|
Mutual Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
$
|
17,498
|
|
|
$
|
34,835
|
|
|
$
|
(17,337
|
)
|
|
|
(50
|
)%
|
Net purchases (redemptions)
|
|
|
527
|
|
|
|
(3,859
|
)
|
|
|
4,386
|
|
|
|
*
|
|
Market appreciation (depreciation)
|
|
|
6,455
|
|
|
|
(13,478
|
)
|
|
|
19,933
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management
|
|
|
24,480
|
|
|
|
17,498
|
|
|
|
6,982
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
|
20,248
|
|
|
|
27,569
|
|
|
|
(7,321
|
)
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutional and Managed Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
|
6,542
|
|
|
|
11,373
|
|
|
|
(4,831
|
)
|
|
|
(42
|
)
|
Net redemptions
|
|
|
(638
|
)
|
|
|
(661
|
)
|
|
|
23
|
|
|
|
3
|
|
Market appreciation (depreciation)
|
|
|
2,330
|
|
|
|
(4,170
|
)
|
|
|
6,500
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management
|
|
|
8,234
|
|
|
|
6,542
|
|
|
|
1,692
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
|
7,111
|
|
|
|
9,497
|
|
|
|
(2,386
|
)
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets Under Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
|
24,040
|
|
|
|
46,208
|
|
|
|
(22,168
|
)
|
|
|
(48
|
)
|
Net redemptions
|
|
|
(111
|
)
|
|
|
(4,520
|
)
|
|
|
4,409
|
|
|
|
98
|
|
Market appreciation (depreciation)
|
|
|
8,785
|
|
|
|
(17,648
|
)
|
|
|
26,433
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management
|
|
|
32,714
|
|
|
|
24,040
|
|
|
|
8,674
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
$
|
27,359
|
|
|
$
|
37,066
|
|
|
$
|
(9,707
|
)
|
|
|
(26
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual fund net purchases were $0.5 billion in 2009, a
favorable change of $4.4 billion from $3.9 billion of
net redemptions in 2008. Market appreciation was
$6.5 billion in 2009 compared to $13.5 billion in
depreciation for 2008 reflecting the positive changes in market
conditions in 2009 versus 2008.
Our open-end funds had $0.5 billion of net purchases during
2009. In the fourth quarter of 2008, we re-opened our
Convertible Fund for the first time since 2003. Immediately
following the re-opening, the Convertible Fund started
generating significant net purchases and continued to generate
net purchases throughout 2009. Additionally, we generated net
purchases in 10 of our 17 mutual funds during 2009. The largest
contributors to the increase were the Convertible, Total Return
Bond, Market Neutral and High Yield Funds, as investors
continued to gravitate towards lower-risk and fixed income
investment strategies. Market appreciation of $6.5 billion
was the main driver of asset growth in 2009, while market
depreciation of $13.5 billion drove assets down in 2008.
Institutional and managed accounts had net redemptions of
$638 million in 2009, a slight improvement when compared to
$661 million in net redemptions during 2008. We believe
that the net redemptions during 2009 were primarily due to a
reduction in investors appetite to assume risk, leading to
a shift away from equity strategies. In addition, convertible
strategies remained closed to new investors through our managed
accounts. Market appreciation of $2.3 billion in 2009
contributed to the growth in assets under management for the
period while market depreciation of $4.2 billion in 2008
added to the net redemptions.
One-Time
Items
Results of operations for 2008 were impacted by a significant
one-time expense. 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
35
reducing income taxes, we recorded a one-time, non-cash income
tax expense of $6.8 million, or $0.34 per diluted share, in
the second quarter of 2008 to revalue our net deferred tax
assets to reflect the new statutory income tax rate.
We consider results adjusted for this one-time expense, as
presented below, to provide a better indication of our
operations. This adjusted item is considered a non-GAAP
financial measure as defined by the rules of the
Securities and Exchange Commission. In evaluating operating
performance, we consider operating expenses, operating income,
operating margin, net income and diluted earnings per share,
each calculated in accordance with accounting principles
generally accepted in the United States (GAAP), and each item on
an as-adjusted basis, which constitute non-GAAP financial
measures. Items presented on an as-adjusted basis exclude the
impact of the revaluation of the net deferred tax assets in the
second quarter of 2008. As this one-time item is not expected to
recur, we believe that excluding this item better enables us to
evaluate our operating performance relative to the prior
periods. We consider these non-GAAP financial measures when
evaluating our performance and believe the presentation of these
amounts provides the reader with information necessary to
analyze our operations for the periods compared. Reconciliations
of these measurements from the most directly comparable GAAP
financial measures for the twelve months ended December 31,
2008 is provided in the table below and should be carefully
evaluated by the reader:
|
|
|
|
|
($ in thousands)
|
|
2008
|
|
|
Net loss
|
|
$
|
(24,521
|
)
|
Net deferred tax assets revaluation
|
|
|
6,771
|
|
|
|
|
|
|
Net loss, as adjusted
|
|
$
|
(17,750
|
)
|
|
|
|
|
|
Diluted loss per share
|
|
$
|
(1.24
|
)
|
Net deferred tax assets revaluation
|
|
|
0.34
|
|
|
|
|
|
|
Diluted loss per share, as adjusted
|
|
$
|
(0.90
|
)
|
|
|
|
|
|
Financial
Review
Revenues
Total revenues decreased by $109.9 million, or 28%, to
$281.7 million for the year ended December 31, 2009
from $391.6 million for the prior year. The decrease was
primarily due to lower investment management fees and
distribution and underwriting fees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
Amount
|
|
|
Percent
|
|
|
Investment management fees
|
|
$
|
200,790
|
|
|
$
|
274,174
|
|
|
$
|
(73,384
|
)
|
|
|
(27
|
)%
|
Distribution and underwriting fees
|
|
|
78,430
|
|
|
|
114,023
|
|
|
|
(35,593
|
)
|
|
|
(31
|
)
|
Other
|
|
|
2,518
|
|
|
|
3,392
|
|
|
|
(874
|
)
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
281,738
|
|
|
$
|
391,589
|
|
|
$
|
(109,851
|
)
|
|
|
(28
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compared to the prior year, investment management fees decreased
27% in 2009 primarily due to a $9.7 billion, or 26%,
decrease in average assets under management across all products.
Investment management fees from open-end funds decreased to
$123.0 million for the year ended December 31, 2009
from $165.6 million for the prior year, primarily due to
decreases in open-end fund average assets under management of
$5.5 billion, or 26%, for 2009 compared to the prior year.
Investment management fees from our institutional and managed
accounts decreased to $39.3 million from $54.0 million
primarily due to an approximate $2.4 billion decrease in
average assets under management. Investment management fees from
our closed-end funds decreased to $38.5 million for 2009
from $54.5 million for 2008 as a result of a
$1.8 billion decrease in closed-end fund average assets
under management. Investment management fees, in total, as a
percentage of average assets under management were 0.73% and
0.74% for the years ended December 31, 2009 and 2008,
respectively.
Distribution and underwriting fees decreased to
$78.4 million for the year ended December 31, 2009
from $114.0 million for the year ended December 31,
2008. The decrease was primarily due to a $33.3 million
decrease in distribution fees resulting from a 26% decrease in
open-end fund average assets under management and a
$2.2 million decrease in contingent deferred sales charge
fees, which change with the levels of Class B and
Class C share redemptions.
36
Operating
Expenses
Operating expenses decreased to $183.7 million, or 21%, for
the year ended December 31, 2009 from $232.5 million
for the prior year. This change was primarily due to reduced
employee compensation and benefits, distribution and
underwriting expense, and reduced amortization of deferred sales
commission.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
Amount
|
|
|
Percent
|
|
|
Employee compensation and benefits
|
|
$
|
67,413
|
|
|
$
|
74,483
|
|
|
$
|
(7,070
|
)
|
|
|
(9
|
)%
|
Distribution and underwriting expense
|
|
|
59,491
|
|
|
|
84,884
|
|
|
|
(25,393
|
)
|
|
|
(30
|
)
|
Amortization of deferred sales commissions
|
|
|
12,201
|
|
|
|
23,417
|
|
|
|
(11,216
|
)
|
|
|
(48
|
)
|
Marketing and sales promotion
|
|
|
10,762
|
|
|
|
11,908
|
|
|
|
(1,146
|
)
|
|
|
(10
|
)
|
General and administrative
|
|
|
33,813
|
|
|
|
37,800
|
|
|
|
(3,987
|
)
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
183,680
|
|
|
$
|
232,492
|
|
|
$
|
(48,812
|
)
|
|
|
(21
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As part of the Company-wide cost containment efforts that began
in 2008, employee compensation and benefits expense decreased by
$7.0 million for the year ended December 31, 2009 when
compared to the prior year primarily reflecting the full-year
impact of the reduction in staffing levels that occurred
throughout 2008 and early 2009. Salary, severance pay and
related benefit expenses decreased by $12.5 million from
2008 to 2009, which was partially offset by a $5.5 million
increase in performance-related incentive compensation, which
remain significantly below potential payout levels.
Distribution and underwriting expense decreased by
$25.4 million for 2009 when compared to the prior year,
primarily due to a decrease of $25.5 million in
Rule 12b-1
expenses resulting from lower average open-end funds under
management of $5.5 billion, or 26%. Also contributing to
the lower expenses was a reduction in average Class C share
assets older than one year. 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
2009 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
$11.2 million for the twelve months ended December 31,
2009 when compared to the prior-year period resulting from the
Companys decision in the second quarter of 2009 to
discontinue the sale of Class B mutual funds. As a result
of our decision to discontinue Class B share sales, the
deferred sales commission assets will cease to be replenished by
new sales and, therefore, we evaluated the estimated useful
lives of the remaining assets. Based on this analysis, we
extended the lives, or period over which we will amortize the
remaining expense, effectively reducing the expense recorded in
each period. The impact of this change reduced the amortization
of deferred sales commissions by approximately $1.7 million
on a quarterly basis.
Marketing and sales promotion expense decreased by
$1.1 million for the year ended December 31, 2009,
when compared to the year ended December 31, 2008 primarily
due to a decrease of $1.3 million in supplemental
distribution payments to intermediaries. These fees are mostly
calculated based on assets under management and the decrease
correlates with the lower average assets under management for
2009 when compared to 2008.
General and administrative expense decreased by
$4.0 million for the year ended December 31, 2009,
when compared to the prior-year period. The overall decline in
these expenses reflects our continued focus on expense control
initiated in 2008 and mostly represents reduced expenses for
occupancy, professional services, and travel and entertainment.
The impact of our move towards a variable cost structure,
specifically the outsourcing of the middle and back-office
functions, will be more fully realized in future periods. We
expect that these increases in general and administrative
expenses will be generally reflected as reductions in employee
compensation and benefits expenses.
37
Non-Operating
Income (Loss)
Non-operating income (loss) reduced income by $5.2 million
for the year ended December 31, 2009, compared to a
reduction of $291.9 million for the prior year.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
Interest income
|
|
$
|
737
|
|
|
$
|
2,334
|
|
|
$
|
(1,597
|
)
|
Interest expense
|
|
|
(7,801
|
)
|
|
|
(32,010
|
)
|
|
|
24,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (expense)
|
|
|
(7,064
|
)
|
|
|
(29,676
|
)
|
|
|
22,612
|
|
Investment income (loss)
|
|
|
1,921
|
|
|
|
(295,793
|
)
|
|
|
297,714
|
|
Debt extinguishment costs
|
|
|
|
|
|
|
(37,498
|
)
|
|
|
37,498
|
|
Miscellaneous other income
|
|
|
233
|
|
|
|
(1,088
|
)
|
|
|
1,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment and other income (loss)
|
|
|
2,154
|
|
|
|
(334,379
|
)
|
|
|
336,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating loss
|
|
|
(4,910
|
)
|
|
|
(364,055
|
)
|
|
|
359,145
|
|
Net (income) loss attributable to non-controlling interest in
partnership investments
|
|
|
(336
|
)
|
|
|
72,156
|
|
|
|
(72,492
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating (loss)
|
|
$
|
(5,246
|
)
|
|
$
|
(291,899
|
)
|
|
$
|
286,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income decreased $1.6 million for the twelve
months ended December 31, 2009, when compared to the
prior-year period, principally a result of lower interest rates
throughout 2009 as compared to 2008. Interest expense decreased
$24.2 million for the year ended December 31, 2009 due
to the prepayment at the end of 2008 of $400 million of
debt to the current level of $125 million. To fund this
prepayment, we sold securities in our investment portfolio
during 2008 recognizing approximately $179 million in
realized losses and incurred a $34.9 million make-whole
payment, which is included in debt extinguishment costs.
Investment results improved for the year ended December 31,
2009, as compared to the prior year, primarily due to the broad
market rebound in 2009. Investment income (loss) primarily
includes capital gain distributions, realized gains and losses,
dividend income and unrealized gains and losses. Investment
income of $1.9 million for 2009 was $297.7 million
greater than the $295.8 million investment loss suffered in
2008.
Net (income) loss attributable to non-controlling interest in
partnership investments represents the corresponding
non-controlling interests portion of the changes in market
value from our consolidated partnership investments.
The following table provides a summary of our investment
portfolio returns, combining the investment income (loss)
portion of our non-operating results with the change in fair
value of certain of our investment securities recorded in
accumulated other comprehensive income (loss), a component of
stockholders equity, for the twelve months ended
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31, 2009
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Non-Operating
|
|
|
Comprehensive
|
|
|
|
|
(in thousands)
|
|
Income (Loss)
|
|
|
Income
|
|
|
Total
|
|
|
Mutual funds and common stock
|
|
$
|
14,484
|
|
|
$
|
34,778
|
|
|
$
|
49,262
|
|
Partnership investments
|
|
|
9,110
|
|
|
|
|
|
|
|
9,110
|
|
Equity option contracts
|
|
|
(21,673
|
)
|
|
|
|
|
|
|
(21,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income (loss)
|
|
|
1,921
|
|
|
|
34,778
|
|
|
|
36,699
|
|
Non-controlling interest in partnership investments
|
|
|
(336
|
)
|
|
|
|
|
|
|
(336
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment portfolio results
|
|
$
|
1,585
|
|
|
|
|
|
|
$
|
36,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Non-controlling interest in
|
|
|
|
|
|
|
|
|
|
|
|
|
Calamos Holdings LLC
|
|
|
|
|
|
|
(27,703
|
)
|
|
|
|
|
Deferred income taxes
|
|
|
|
|
|
|
(2,613
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in accumulated other comprehensive income
|
|
|
|
|
|
$
|
4,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
Our investment portfolio returned $36.4 million, or 16.4%
for the full year 2009. These results primarily reflect net
unrealized gains in investment securities, partially offset by
net realized and unrealized gains and losses on equity option
contracts used to hedge market value fluctuations in the
corporate investment portfolio.
Income
Tax Provision (Benefit)
Our effective tax rate was 37.8% for the year ended
December 31, 2009 and is consistent with the 2008 rate, as
adjusted.
Net
Income (loss)
Net income was $12.4 million for 2009 compared to net loss
of $24.5 million and net loss, as adjusted of $17.8 for
2008.
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
Change
|
|
(in millions)
|
|
2008
|
|
|
2007
|
|
|
Amount
|
|
|
Percent
|
|
|
Mutual Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
$
|
34,835
|
|
|
$
|
33,704
|
|
|
$
|
1,131
|
|
|
|
3
|
%
|
Net redemptions
|
|
|
(3,859
|
)
|
|
|
(2,469
|
)
|
|
|
(1,390
|
)
|
|
|
(56
|
)
|
Market appreciation (depreciation)
|
|
|
(13,478
|
)
|
|
|
3,600
|
|
|
|
(17,078
|
)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management
|
|
|
17,498
|
|
|
|
34,835
|
|
|
|
(17,337
|
)
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
|
27,569
|
|
|
|
33,892
|
|
|
|
(6,323
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutional and Managed 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
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
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, 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 had 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 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 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 supplemental 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
$6.9 million, or 4 cents per diluted share, one-time
structuring fee related to the launch of the Calamos Global
Dynamic Income Fund (CHW) during the second quarter of 2007.
We consider results adjusted for these one-time expenses, as
presented below, to provide a better indication of our
operations. These adjusted items are considered non-GAAP
financial measures as defined by the rules of the
Securities and Exchange Commission. In evaluating operating
performance, we consider operating expenses, operating income,
operating margin, net income and diluted earnings per share,
each calculated in accordance with accounting principles
generally accepted in the United States (GAAP), and each item on
an as-adjusted basis, which constitute non-GAAP financial
measures. Items presented on an as-adjusted basis exclude the
impact of the revaluation of the net deferred tax assets in the
second quarter of 2008 and the impact of terminating the two
closed-end fund additional compensation agreements and the CHW
closed-end fund structuring fees in the second quarter of 2007.
As these one-time items are not expected to recur, we believe
that excluding these items better enables us to evaluate our
operating performance relative to the prior periods. We consider
these non-GAAP financial measures
40
when evaluating our performance and believe the presentation of
these amounts provides the reader with information necessary to
analyze our operations for the periods compared. Reconciliations
of these measurements from the most directly comparable GAAP
financial measures for the twelve months ended December 31,
2008 and 2007 are provided in the table below and should be
carefully evaluated by the reader:
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
2008
|
|
|
2007
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
Financial
Review
Operating
Income
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
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41
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 within contingent deferred sales
charge 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 a decrease of $9.2 million resulting from
the reduction in the Class C share assets older than one
42
year. This decrease was compounded by a decrease of
$10.1 million in
12b-1
expenses 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 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
|
)
|
Investment income (loss)
|
|
|
(295,793
|
)
|
|
|
33,413
|
|
|
|
(329,206
|
)
|
Debt extinguishment costs
|
|
|
(37,498
|
)
|
|
|
|
|
|
|
(37,498
|
)
|
Miscellaneous other income
|
|
|
(1,088
|
)
|
|
|
935
|
|
|
|
(2,023
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment and other income (loss)
|
|
|
(334,379
|
)
|
|
|
34,348
|
|
|
|
(368,727
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating loss
|
|
|
(364,055
|
)
|
|
|
31,499
|
|
|
|
(395,554
|
)
|
Net (income) loss attributable to non-controlling interest in
partnership investments
|
|
|
72,156
|
|
|
|
(1,598
|
)
|
|
|
73,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (loss)
|
|
$
|
(291,899
|
)
|
|
$
|
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.
43
Investment and other income (loss) includes capital gain
distributions, realized gains and losses on our investments,
dividend income earned on our investment portfolio and
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
Tax Provision (Benefit)
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, are based on the current enacted tax
laws. A decrease in tax rates decreases the value of the
deferred tax assets which is reflected as an increase in current
period income tax provision (benefit). Conversely, an increase
in tax rates increases the value of the deferred tax assets
which is reflected as a decrease 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.
Liquidity
and Capital Resources
We manage our liquidity position to ensure adequate resources
are available to fund ongoing operations of the business,
provide seed money for new funds, or invest in other corporate
strategic initiatives. 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, derivatives and partnership
investments. Investment securities are principally comprised of
company-sponsored mutual funds. In addition, the individual
securities held within our partnership investments are typically
comprised of highly liquid exchange-traded securities. Our
working capital requirements historically have been met through
cash 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.
During the latter half of 2008, the Company took several
decisive steps to manage our liquidity and capital resources
through the severe economic crisis As such, Calamos Asset
Management, Inc. and Calamos Family Partners, Inc. each made
capital contributions of more than $30 million to Calamos
Holdings LLC during the third quarter of 2008. Further, during
the fourth quarter of 2008, we initiated a series of hedges to
help protect the value of our corporate portfolio. Additionally,
we reduced our dividend in October 2008 as a result of a decline
in assets under management and income, as well as to conserve
capital. Finally, 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 the cash to pre-pay the long-term debt
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.
44
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, 2009 and 2008. In January 2010
Standard & Poors affirmed its investment-grade
BBB+ rating and revised the outlook of Calamos Holdings LLC from
negative to stable.
The following table summarizes our principal sources of
liquidity as of December 31, 2009 and December 31,
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
Increase
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
Cash and cash equivalents
|
|
$
|
145,431
|
|
|
$
|
59,425
|
|
|
$
|
86,006
|
|
Investment securities
|
|
|
207,886
|
|
|
|
173,155
|
|
|
|
34,731
|
|
Derivatives, net
|
|
|
(1,730
|
)
|
|
|
14,288
|
|
|
|
(16,018
|
)
|
Partnership investments, net of non-controlling interests
|
|
|
35,924
|
|
|
|
27,182
|
|
|
|
8,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total corporate investment portfolio
|
|
$
|
387,511
|
|
|
$
|
274,050
|
|
|
$
|
113,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total corporate investment portfolio increased
$113.5 million during 2009. The following table summarizes
the primary components of the change in our liquidity position
during the year ending December 31, 2009:
|
|
|
|
|
|
|
Increase
|
|
(in thousands)
|
|
(Decrease)
|
|
|
Net realized and unrealized gains (losses) on investment
securities:
|
|
|
|
|
Mutual funds
|
|
$
|
44,830
|
|
Partnership investments
|
|
|
8,324
|
|
Equity option contracts
|
|
|
(21,673
|
)
|
Other net cash generated by business activities
|
|
|
81,980
|
|
|
|
|
|
|
|
|
$
|
113,461
|
|
|
|
|
|
|
To mitigate the impact of further declines in the value of our
investment portfolio, we continue to execute hedge strategies,
specifically an equity option collar that is comprised primarily
of selling index-based call options and purchasing index-based
put options. This hedge continued to provide 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.
Calamos Holdings LLC is the borrower of our $125 million in
long-term debt. The following is a summary of covenant
compliance as of December 31, 2009 with the defined terms
and covenants having the same meanings set forth under our
amended note purchase agreements:
|
|
|
|
|
|
|
|
|
Results as of
|
Covenant
|
|
Requirement
|
|
December 31, 2009
|
|
EBITDA/interest expense
|
|
Not less than 3.0
|
|
15.39
|
Debt/EBITDA
|
|
Not more than 3.0
|
|
1.04
|
Investment coverage ratio
|
|
Not less than 1.175
|
|
2.14
|
Net worth
|
|
Not less than $160 million
|
|
$271 million
|
45
The following tables summarize key statements of financial
condition data relating to our liquidity and capital resources:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
(in thousands)
|
|
2009
|
|
2008
|
|
Statements of financial condition data:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
145,431
|
|
|
$
|
59,425
|
|
Receivables
|
|
|
26,489
|
|
|
|
20,049
|
|
Investment securities and derivative options
|
|
|
209,606
|
|
|
|
187,443
|
|
Partnership investments
|
|
|
37,549
|
|
|
|
28,471
|
|
Deferred tax assets, net
|
|
|
85,256
|
|
|
|
95,606
|
|
Deferred sales commissions
|
|
|
12,705
|
|
|
|
18,414
|
|
Long-term debt
|
|
|
125,000
|
|
|
|
125,000
|
|
The deferred tax assets above include an annual reduction of
approximately $8.3 million in future taxes owed by us
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, 2009, 2008 and
2007 are shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
2008
|
|
2007
|
|
Cash flow data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
140,329
|
|
|
$
|
125,228
|
|
|
$
|
226,475
|
|
Net cash provided by (used in) investing activities
|
|
|
2,517
|
|
|
|
323,296
|
|
|
|
(654,152
|
)
|
Net cash provided by (used in) financing activities
|
|
|
(56,840
|
)
|
|
|
(497,540
|
)
|
|
|
207,277
|
|
Net cash provided by operating activities totaled
$140.3 million, $125.2 million and $226.5 million
for the years ended December 31, 2009, 2008 and 2007,
respectively. These net cash flows are primarily attributable to
investment management, distribution and underwriting fees
generated by core business activities, partially offset by
staff, distribution, underwriting and other operating expenses.
Investing activities for the year ended December 31, 2009
provided cash totaling $2.5 million. Sales of investment
securities partially offset by net negative cash flow from
related investment hedging activities and purchases of
investment securities comprised the majority of this net inflow.
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 investments 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 into 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.
Net cash used in financing activities totaled $56.8 million
for the year ended December 31, 2009, largely due to equity
and tax distributions to non-controlling interest owners, as
well as dividends paid to common shareholders. The distributions
in 2009 were to non-controlling interests of $52.7 million,
which includes distributions for their tax liabilities of
$21.2 million, as well as dividends paid to common
shareholders of $4.3 million. 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
non-controlling interests of $86.8 million, including
distributions for their tax liabilities of $57.1 million,
as well as
46
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 non-controlling interests 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.
We expect our cash and liquidity requirements will be met with
cash on hand and through cash generated by operations.
Contractual
Obligations
The following table contains supplemental information regarding
our total contractual cash obligations as of December 31,
2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
$
|
169,632
|
|
|
$
|
7,677
|
|
|
$
|
45,654
|
|
|
$
|
58,068
|
|
|
$
|
58,233
|
|
Operating lease
obligations(2)
|
|
|
70,448
|
|
|
|
4,665
|
|
|
|
8,568
|
|
|
|
8,947
|
|
|
|
48,268
|
|
Other long-term
obligations(3)
|
|
|
776
|
|
|
|
395
|
|
|
|
274
|
|
|
|
102
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
240,856
|
|
|
$
|
12,737
|
|
|
$
|
54,496
|
|
|
$
|
67,117
|
|
|
$
|
106,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 the incentive compensation plan. 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 represent amounts 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
47
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. As of our most recent analysis, we used average
market return assumptions ranging from 7% to 9% 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 average
annual 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 24% and 26%,
respectively. 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 compensation 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
Tax Provision (Benefit)
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,
2009, 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 June 2009, the FASB issued a new statement which modifies the
analysis required to determine whether a companys variable
interest(s) give it a controlling financial interest in a
variable interest entity (VIE). This analysis identifies the
primary beneficiary of a VIE as the enterprise that has both the
power to direct the activities of a VIE and the obligation to
absorb losses or the right to receive benefits of the VIE. The
standard is effective for fiscal years beginning after
November 15, 2009. In November 2009, the FASB issued a
proposed standard update which defers the requirements of this
new standard for asset managers interests in entities that
apply the specialized accounting guidance for investment
companies or that have the attributes of investment companies.
The proposed
48
standard update, once finalized, is expected to be effective for
fiscal years beginning after November 15, 2009. The Company
is evaluating the impact that this standard will have on its
consolidated financial statements, if any.
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 and financial performance, strategies,
expectations and competitive environment, and regulations. These
forward-looking statements may 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; market capitalization;
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: 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;
unsatisfactory service levels by third party vendors; 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; fluctuation
in foreign currency exchange rates with respect to our global
operations and business; changes in accounting estimates; 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; fluctuation 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, products
and programs; our ability to educate our clients about our
investment philosophy and provide them with
best-in-class
service; the relative investment performance of our 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;
our decision to open or close products and strategies; and our
ability to execute on our strategic plan to expand the business.
Item 1A of this report discusses some of these and other
important factors in detail under the caption Risk
Factors.
Forward-looking statements speak only as of the date the
statements are made. Readers should not place undue reliance on
any forward-looking statements. We assume no obligation to
update forward-looking statements to reflect actual results,
changes in assumptions or changes in other factors affecting
forward-looking information, except to the extent required by
applicable securities laws.
49
|
|
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 98.3% for the year ended December 31, 2009,
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 and partnership investments. We
own investment securities primarily comprised of products we
manage.
The following table provides a sensitivity analysis of changes
in fair value of our investment securities and partnership
investments assuming a 10% increase or decrease in the price of
these instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
|
Investment
|
|
Partnership
|
|
Investment
|
|
Partnership
|
(in thousands)
|
|
Securities
|
|
Investments
|
|
Securities
|
|
Investments
|
|
Fair value
|
|
$
|
207,886
|
|
|
$
|
37,549
|
|
|
$
|
173,155
|
|
|
$
|
28,471
|
|
Fair value assuming price changes of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10% increase
|
|
|
228,675
|
|
|
|
41,304
|
|
|
|
190,471
|
|
|
|
31,318
|
|
10% decrease
|
|
|
187,097
|
|
|
|
33,794
|
|
|
|
155,840
|
|
|
|
25,624
|
|
At December 31, 2009, 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.
50
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
51
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Calamos Asset Management, Inc.
We have audited the accompanying consolidated statement of
financial condition of Calamos Asset Management, Inc. and
subsidiaries (the Company) as of December 31, 2009, and the
related consolidated statements of operations, changes in
stockholders equity, and cash flows for the year then
ended. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Calamos Asset Management, Inc. and subsidiaries as
of December 31, 2009, and the results of their operations
and their cash flows for the year then ended, in conformity with
U.S. generally accepted accounting principles.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Calamos Asset Management, Inc.s and subsidiaries
internal control over financial reporting as of
December 31, 2009, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated March 5, 2010 expressed an
unqualified opinion on the effectiveness of the Companys
internal control over financial reporting.
/s/ McGladrey &
Pullen, LLP
Chicago, IL
March 5, 2010
F-1
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Calamos Asset Management, Inc.:
We have audited the accompanying consolidated statement of
financial condition of Calamos Asset Management, Inc. (the
Company) as of December 31, 2008, and the related
consolidated statements of operations, changes in
stockholders equity, and cash flows for each of the years
in the two-year period ended December 31, 2008. The
Companys management is responsible for these consolidated
financial statements. Our responsibility is to express an
opinion on these consolidated financial statements.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. Our audit 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 also
included performing such other procedures as we considered
necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
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 the results of its operations and
its cash flows for each of the years in the two-year period
ended December 31, 2008, in conformity with
U.S. generally accepted accounting principles.
Chicago, Illinois
March 13, 2009
F-2
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Calamos Asset Management, Inc.
We have audited Calamos Asset Management, Inc.s and
subsidiaries (the Company) internal control over financial
reporting as of December 31, 2009, based on criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. The Companys
management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting
included in the accompanying Managements Report on
Internal Control over Financial Reporting. Our responsibility is
to express an opinion on the Companys internal control
over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, 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 audit also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our
opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (a) pertain to the
maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the
assets of the company; (b) 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 (c) 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, Calamos Asset Management Inc. and subsidiaries
maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2009, based on
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated statement of financial condition of Calamos Asset
Management, Inc. and subsidiaries as of December 31, 2009,
and the related consolidated statements of operations, changes
in stockholders equity, and cash flows for the year then
ended and our report dated March 5, 2010 expressed an
unqualified opinion.
/s/ McGladrey &
Pullen, LLP
Chicago, IL
March 5, 2010
F-3
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, 2009
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, 2009.
The effectiveness of internal control over financial reporting
as of December 31, 2009, has been audited by
McGladrey & Pullen, 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 5, 2010
F-4
CALAMOS
ASSET MANAGEMENT, INC.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(in thousands, except share data)
|
|
2009
|
|
|
2008
|
|
|
ASSETS
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
145,431
|
|
|
$
|
59,425
|
|
Receivables:
|
|
|
|
|
|
|
|
|
Affiliates and affiliated funds
|
|
|
17,174
|
|
|
|
13,187
|
|
Customers
|
|
|
9,315
|
|
|
|
6,862
|
|
Investment securities
|
|
|
207,886
|
|
|
|
173,155
|
|
Derivative assets
|
|
|
1,720
|
|
|
|
14,288
|
|
Partnership investments
|
|
|
37,549
|
|
|
|
28,471
|
|
Prepaid expenses
|
|
|
2,741
|
|
|
|
2,607
|
|
Deferred tax assets, net
|
|
|
9,610
|
|
|
|
11,837
|
|
Other current assets
|
|
|
2,133
|
|
|
|
21,766
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
433,559
|
|
|
|
331,598
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Deferred tax assets, net
|
|
|
76,646
|
|
|
|
83,769
|
|
Deferred sales commissions
|
|
|
12,705
|
|
|
|
18,414
|
|
Property and equipment, net
|
|
|
32,912
|
|
|
|
41,058
|
|
Other non-current assets
|
|
|
1,256
|
|
|
|
1,034
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
123,519
|
|
|
|
144,275
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
557,078
|
|
|
|
475,873
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
Current liabilities
|
|
|
|
|
|
|
|
|
Payables to brokers
|
|
|
16,102
|
|
|
|
12,428
|
|
Accrued compensation and benefits
|
|
|
15,768
|
|
|
|
10,419
|
|
Derivative liabilities
|
|
|
3,450
|
|
|
|
|
|
Interest payable
|
|
|
3,026
|
|
|
|
3,025
|
|
Accrued expenses and other current liabilities
|
|
|
3,711
|
|
|
|
3,983
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
42,057
|
|
|
|
29,855
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
125,000
|
|
|
|
125,000
|
|
Deferred rent
|
|
|
9,419
|
|
|
|
9,217
|
|
Other long-term liabilities
|
|
|
776
|
|
|
|
754
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
135,195
|
|
|
|
134,971
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
177,252
|
|
|
|
164,826
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Class A Common Stock, $0.01 par value; authorized
600,000,000 shares; 23,668,583 shares issued and
19,668,583 shares outstanding at December 31, 2009;
23,497,687 shares issued and 19,497,687 shares
outstanding at December 31, 2008
|
|
|
237
|
|
|
|
235
|
|
Class B Common Stock, $0.01 par value; authorized
1,000 shares; 100 shares issued and outstanding at
December 31, 2009 and December 31, 2008
|
|
|
0
|
|
|
|
0
|
|
Additional paid-in capital
|
|
|
209,895
|
|
|
|
207,844
|
|
Retained earnings
|
|
|
46,035
|
|
|
|
38,010
|
|
Accumulated other comprehensive income (loss)
|
|
|
4,362
|
|
|
|
(101
|
)
|
Treasury stock at cost; 4,000,000 shares at
December 31, 2009 and December 31, 2008
|
|
|
(95,215
|
)
|
|
|
(95,215
|
)
|
|
|
|
|
|
|
|
|
|
Calamos Asset Management, Inc. stockholders equity
|
|
|
165,314
|
|
|
|
150,773
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interest in partnership investments
|
|
|
1,625
|
|
|
|
1,289
|
|
Non-controlling interest in Calamos Holdings LLC
|
|
|
212,887
|
|
|
|
158,985
|
|
|
|
|
|
|
|
|
|
|
Total non-controlling interest.
|
|
|
214,512
|
|
|
|
160,274
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
379,826
|
|
|
|
311,047
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
557,078
|
|
|
$
|
475,873
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-5
CALAMOS
ASSET MANAGEMENT, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands, except share data)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fees
|
|
$
|
200,790
|
|
|
$
|
274,174
|
|
|
$
|
325,395
|
|
Distribution and underwriting fees
|
|
|
78,430
|
|
|
|
114,023
|
|
|
|
143,994
|
|
Other
|
|
|
2,518
|
|
|
|
3,392
|
|
|
|
4,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
281,738
|
|
|
|
391,589
|
|
|
|
473,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits
|
|
|
67,413
|
|
|
|
74,483
|
|
|
|
91,039
|
|
Distribution and underwriting expense
|
|
|
59,491
|
|
|
|
84,884
|
|
|
|
104,227
|
|
Amortization of deferred sales commissions
|
|
|
12,201
|
|
|
|
23,417
|
|
|
|
27,249
|
|
Marketing and sales promotion
|
|
|
10,762
|
|
|
|
11,908
|
|
|
|
40,833
|
|
General and administrative
|
|
|
33,813
|
|
|
|
37,800
|
|
|
|
37,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
183,680
|
|
|
|
232,492
|
|
|
|
300,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
98,058
|
|
|
|
159,097
|
|
|
|
173,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest expense
|
|
|
(7,064
|
)
|
|
|
(29,676
|
)
|
|
|
(2,849
|
)
|
Investment and other income (loss)
|
|
|
2,154
|
|
|
|
(296,881
|
)
|
|
|
34,348
|
|
Debt extinguishment costs
|
|
|
|
|
|
|
(37,498
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-operating income (loss)
|
|
|
(4,910
|
)
|
|
|
(364,055
|
)
|
|
|
31,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax provision (benefit)
|
|
|
93,148
|
|
|
|
(204,958
|
)
|
|
|
204,592
|
|
Income tax provision (benefit)
|
|
|
7,879
|
|
|
|
(3,787
|
)
|
|
|
18,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
85,269
|
|
|
|
(201,171
|
)
|
|
|
185,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (income) loss attributable to non-controlling interest in
partnership investments
|
|
|
(336
|
)
|
|
|
72,156
|
|
|
|
(1,598
|
)
|
Net (income) loss attributable to non-controlling interest in
Calamos Holdings LLC
|
|
|
(72,509
|
)
|
|
|
104,494
|
|
|
|
(156,583
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Calamos Asset Management,
Inc.
|
|
$
|
12,424
|
|
|
$
|
(24,521
|
)
|
|
$
|
27,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.63
|
|
|
$
|
(1.24
|
)
|
|
$
|
1.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.62
|
|
|
$
|
(1.24
|
)
|
|
$
|
1.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
19,626,233
|
|
|
|
19,752,972
|
|
|
|
22,297,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
19,954,124
|
|
|
|
97,449,228
|
|
|
|
99,760,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share
|
|
$
|
0.22
|
|
|
$
|
0.385
|
|
|
$
|
0.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-6
CALAMOS
ASSET MANAGEMENT, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
Calamos Asset Management, Inc. Stockholders
|
|
|
Non-
|
|
|
Controlling
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Controlling
|
|
|
Interest in
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
Interest in
|
|
|
Calamos
|
|
|
|
|
|
|
Common
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
Partnership
|
|
|
Holdings
|
|
|
|
|
(in thousands)
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Stock
|
|
|
Investments
|
|
|
LLC
|
|
|
Total
|
|
|
Balance at Dec. 31, 2006
|
|
$
|
232
|
|
|
$
|
157,724
|
|
|
$
|
52,261
|
|
|
$
|
4,360
|
|
|
$
|
|
|
|
$
|
48,850
|
|
|
$
|
319,513
|
|
|
$
|
582,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
27,745
|
|
|
|
|
|
|
|
|
|
|
|
1,598
|
|
|
|
156,583
|
|
|
|
185,926
|
|
Changes in unrealized losses on
available-for-sale
securities, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,561
|
|
|
|
|
|
|
|
|
|
|
|
7,242
|
|
|
|
8,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
194,729
|
|
Issuance of common stock (162,184 Class A common shares)
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock (2,452,100 Class A common shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(60,603
|
)
|
|
|
|
|
|
|
|
|
|
|
(60,603
|
)
|
Sale of Calamos Holdings LLC membership units
(2,452,100 units)
|
|
|
|
|
|
|
47,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(47,493
|
)
|
|
|
|
|
Net purchase of non-controlling interest in partnership
investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,271
|
)
|
|
|
|
|
|
|
(1,271
|
)
|
Cumulative impact of changes in ownership of Calamos Holdings LLC
|
|
|
|
|
|
|
(7,814
|
)
|
|
|
23
|
|
|
|
(840
|
)
|
|
|
|
|
|
|
|
|
|
|
6,986
|
|
|
|
(1,645
|
)
|
Compensation expense recognized under stock incentive plans
|
|
|
|
|
|
|
1,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,263
|
|
|
|
6,785
|
|
Dividend equivalent accrued under stock incentive plans
|
|
|
|
|
|
|
|
|
|
|
(120
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(404
|
)
|
|
|
(524
|
)
|
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
(9,807
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(95,485
|
)
|
|
|
(105,292
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at Dec. 31, 2007
|
|
$
|
233
|
|
|
$
|
198,924
|
|
|
$
|
70,102
|
|
|
$
|
5,081
|
|
|
$
|
(60,603
|
)
|
|
$
|
49,177
|
|
|
$
|
352,205
|
|
|
$
|
615,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
(24,521
|
)
|
|
|
|
|
|
|
|
|
|
|
(72,156
|
)
|
|
|
(104,494
|
)
|
|
|
(201,171
|
)
|
Changes in unrealized losses on
available-for-sale
securities, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,502
|
)
|
|
|
|
|
|
|
|
|
|
|
(30,029
|
)
|
|
|
(54,531
|
)
|
Reclassification adjustment for realized losses on
available-for-sale
securities included in income, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(235,688
|
)
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,853
|
|
|
|
64,615
|
|
Net purchase of non-controlling interest in partnership
investments and Offshore Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145,304
|
|
|
|
|
|
|
|
145,304
|
|
De-consolidation of non-controlling interests in partnership
investments and Offshore Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(121,036
|
)
|
|
|
|
|
|
|
(121,306
|
)
|
Cumulative impact of changes in ownership of Calamos Holdings LLC
|
|
|
|
|
|
|
(33,781
|
)
|
|
|
|
|
|
|
(694
|
)
|
|
|
|
|
|
|
|
|
|
|
(989
|
)
|
|
|
(35,464
|
)
|
Compensation expense recognized under stock incentive plans
|
|
|
|
|
|
|
1,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,627
|
|
|
|
7,099
|
|
Dividend equivalent accrued under stock incentive plans
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79
|
|
|
|
99
|
|
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
(7,591
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(86,798
|
)
|
|
|
(94,389
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at Dec. 31, 2008
|
|
$
|
235
|
|
|
$
|
207,844
|
|
|
$
|
38,010
|
|
|
$
|
(101
|
)
|
|
$
|
(95,215
|
)
|
|
$
|
1,289
|
|
|
$
|
158,985
|
|
|
$
|
311,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
12,424
|
|
|
|
|
|
|
|
|
|
|
|
336
|
|
|
|
72,509
|
|
|
|
85,269
|
|
Changes in unrealized losses on
available-for-sale
securities, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,951
|
|
|
|
|
|
|
|
|
|
|
|
27,717
|
|
|
|
32,668
|
|
Reclassification of unrealized loss on securities contributed to
Holdings
|
|
|
|
|
|
|
501
|
|
|
|
|
|
|
|
(501
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117,937
|
|
Issuance of common stock (170,896 Class A common shares)
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative impact of changes in ownership of Calamos Holdings LLC
|
|
|
|
|
|
|
(303
|
)
|
|
|
(2
|
)
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
(153
|
)
|
|
|
(445
|
)
|
Compensation expense recognized under stock incentive plans
|
|
|
|
|
|
|
1,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,795
|
|
|
|
8,650
|
|
Dividend equivalent accrued under stock incentive plans
|
|
|
|
|
|
|
|
|
|
|
(79
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(293
|
)
|
|
|
(372
|
)
|
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
(4,318
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(52,673
|
)
|
|
|
(56,991
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at Dec. 31, 2009
|
|
$
|
237
|
|
|
$
|
209,895
|
|
|
$
|
46,035
|
|
|
$
|
4,362
|
|
|
$
|
(95,215
|
)
|
|
$
|
1,625
|
|
|
$
|
212,887
|
|
|
$
|
379,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-7
CALAMOS
ASSET MANAGEMENT, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Cash and cash equivalents at beginning of period
|
|
$
|
59,425
|
|
|
$
|
108,441
|
|
|
$
|
328,841
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
85,269
|
|
|
|
(201,171
|
)
|
|
|
185,926
|
|
Adjustments to reconcile income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred sales commissions
|
|
|
12,201
|
|
|
|
23,417
|
|
|
|
27,249
|
|
Other depreciation and amortization
|
|
|
10,281
|
|
|
|
12,222
|
|
|
|
9,015
|
|
Loss on write-off of property and equipment
|
|
|
|
|
|
|
2,031
|
|
|
|
|
|
Change in unrealized depreciation (appreciation) on trading
securities, derivative assets, derivative liabilities and
partnership investments, net
|
|
|
(22,848
|
)
|
|
|
158,636
|
|
|
|
(9,733
|
)
|
Net realized loss on sale of investment securities, derivative
assets and derivative liabilities
|
|
|
25,810
|
|
|
|
172,413
|
|
|
|
|
|
Deferred taxes
|
|
|
6,586
|
|
|
|
(2,610
|
)
|
|
|
7,843
|
|
Stock based compensation
|
|
|
8,650
|
|
|
|
7,099
|
|
|
|
6,785
|
|
Employee taxes paid on vesting under stock incentive plans
|
|
|
(293
|
)
|
|
|
(1,796
|
)
|
|
|
(1,853
|
)
|
(Increase) decrease in assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliates and affiliated funds, net
|
|
|
(3,987
|
)
|
|
|
14,454
|
|
|
|
(1,129
|
)
|
Customers
|
|
|
(2,453
|
)
|
|
|
4,837
|
|
|
|
(1,481
|
)
|
Deferred sales commissions
|
|
|
(6,493
|
)
|
|
|
(7,755
|
)
|
|
|
(11,434
|
)
|
Other assets
|
|
|
18,838
|
|
|
|
(19,401
|
)
|
|
|
(3,492
|
)
|
Increase (decrease) in liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Payables to brokers
|
|
|
3,674
|
|
|
|
(10,374
|
)
|
|
|
(1,538
|
)
|
Accrued compensation and benefits
|
|
|
5,349
|
|
|
|
(16,043
|
)
|
|
|
3,740
|
|
Accrued expenses and other liabilities
|
|
|
(255
|
)
|
|
|
(10,731
|
)
|
|
|
16,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
140,329
|
|
|
|
125,228
|
|
|
|
226,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in) investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net additions to property and equipment
|
|
|
(2,011
|
)
|
|
|
(4,616
|
)
|
|
|
(13,414
|
)
|
Purchases of investment securities
|
|
|
(4,472
|
)
|
|
|
(176,977
|
)
|
|
|
(382,297
|
)
|
Proceeds from sale of investment securities
|
|
|
15,073
|
|
|
|
370,344
|
|
|
|
|
|
Net (purchases) sales of derivatives
|
|
|
(5,655
|
)
|
|
|
9,897
|
|
|
|
|
|
Net changes in partnership investments
|
|
|
(418
|
)
|
|
|
124,648
|
|
|
|
(258,441
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
2,517
|
|
|
|
323,296
|
|
|
|
(654,152
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in) financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from issuance of debt
|
|
|
|
|
|
|
|
|
|
|
372,963
|
|
Repayment of debt
|
|
|
|
|
|
|
(400,000
|
)
|
|
|
|
|
Capital contribution received
|
|
|
|
|
|
|
31,317
|
|
|
|
|
|
Deferred tax benefit on vesting under stock incentive plans
|
|
|
151
|
|
|
|
144
|
|
|
|
209
|
|
Repurchase of common stock
|
|
|
|
|
|
|
(34,612
|
)
|
|
|
(60,603
|
)
|
Equity distributions paid to non-controlling interests
|
|
|
(31,523
|
)
|
|
|
(29,741
|
)
|
|
|
(33,880
|
)
|
Tax distributions paid to non-controlling interests
|
|
|
(21,150
|
)
|
|
|
(57,057
|
)
|
|
|
(61,605
|
)
|
Cash dividends paid to common stockholders
|
|
|
(4,318
|
)
|
|
|
(7,591
|
)
|
|
|
(9,807
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(56,840
|
)
|
|
|
(497,540
|
)
|
|
|
207,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
86,006
|
|
|
|
(49,016
|
)
|
|
|
(220,400
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
145,431
|
|
|
$
|
59,425
|
|
|
$
|
108,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
469
|
|
|
$
|
11,807
|
|
|
$
|
8,401
|
|
Interest
|
|
$
|
7,677
|
|
|
$
|
41,077
|
|
|
$
|
7,860
|
|
See accompanying notes to consolidated financial statements.
F-8
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.
Calamos Advisors LLC (CAL), a Delaware limited liability company
and registered investment advisor, Calamos Financial Services
LLC (CFS), a Delaware limited liability company and registered
broker-dealer, Calamos Partners LLC (CPL), a Delaware limited
liability company and registered investment advisor, and Calamos
Wealth Management LLC, a Delaware limited liability company, are
wholly-owned subsidiaries of Holdings. During 2009, Calamos
International LLP, ultimately a wholly-owned subsidiary of
Holdings, was established to facilitate the distribution of
Company products globally.
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 CAM.
Management has performed an assessment and has determined that
it operates as one business segment.
|
|
(2)
|
Summary
of Significant Accounting Policies
|
Basis
of Presentation
The consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United
States of America, which require the use of estimates and
assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, and the disclosure of
contingent assets and liabilities. Management believes the
accounting estimates are appropriate and reasonably stated;
however, due to the inherent uncertainties in making estimates,
actual amounts could differ from these estimates.
Certain comparative amounts for prior periods have been
reclassified to conform to the current years presentation.
Principles
of Consolidation
The Company consolidates investments in which the Companys
ownership exceeds 50% or the Company operates and controls all
of the business and affairs of the entity. As such, the
consolidated financial statements include the financial
statements of CAM, Holdings, and Calamos Market Neutral
Opportunities Fund LP, a 92% owned affiliate. Additionally,
the Company consolidated the financial results of Calamos Global
Funds PLC and Calamos Equity Opportunities Fund LP for a
portion of the periods presented, as discussed below. The equity
method of accounting is used for investments in which the
Companys ownership percentage is less than 50%. All
significant intercompany balances and transactions have been
eliminated.
The Calamos Interests combined 78.5% and 78.7% interest in
Holdings at December 31, 2009 and 2008, respectively, is
represented as a non-controlling interest in Calamos Holdings
LLC in the Companys consolidated financial statements.
Non-controlling interest in Holdings is derived by multiplying
the historical equity of Holdings by the Calamos Interests
aggregate ownership percentage for the periods presented.
Issuances and repurchases of CAMs common stock may result
in changes in CAMs ownership percentage and to the
non-controlling interests ownership percentage of Holdings
with resulting changes reflected in the consolidated statements
of changes in stockholders equity. Income is allocated
based on the average ownership interest during the period in
which the income is earned.
F-9
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CAM owns certain assets for which the non-controlling interests
have no rights. CAMs wholly-owned net assets include cash
and cash equivalents of $19.9 million, deferred tax assets
of $86.3 million and net current income taxes receivable of
$0.9 million that are reported together with Holdings
consolidated assets in the consolidated statements of financial
condition. Additionally, net income (loss) before income taxes,
which was $93.1 million and $(205.0) million loss for
the years ended December 31, 2009 and
2008, respectively, included approximately
$0.1 million of interest income and $0.3 million of
interest and investment income on cash, cash equivalents and
investments held solely by CAM. This portion of CAMs
income is not reduced by any non-controlling interests.
CPL is the general partner of Calamos Market Neutral
Opportunities Fund LP, a private investment partnership
comprised of highly liquid marketable securities. Substantially
all the activities of the partnership are conducted on behalf of
the Company and its related parties; therefore, the Company
consolidates the financial results of the partnership into its
results. CPL was also the general partner of Calamos Equity
Opportunities Fund LP, a private investment partnership,
until the partnership was liquidated during the second quarter
of 2008. Up to that point, the Company consolidated the
financial results of the partnership into its results. Both
partnerships are collectively referred to as the Partnership
Investments.
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 consolidated the financial results of the
Offshore Funds with its own results. Beginning in December 2008,
the Companys investment in the Offshore Funds is
classified as an
available-for-sale
security and is reported as investment securities in the
consolidated statements of financial condition. Unrealized gains
and losses attributable to the Offshore Funds are excluded from
earnings and are reported, net of income tax, as a separate
component of stockholders equity until realized.
The assets and liabilities of the Partnership Investments and of
the Offshore Funds, when consolidated, are presented on a net
basis as partnership investments in the consolidated statements
of financial condition, the net income or loss is included in
investment and other income (loss) in the consolidated
statements of operations, and the change in Partnership
Investments is included in the net changes in partnership
investments and offshore funds in the consolidated statements of
cash flows. Partnership Investments and Offshore Funds are
presented on a net basis in order to provide more clarity to the
financial position and results of the core operations of the
Company. The underlying assets and liabilities that are being
consolidated are described in note 6. The non-controlling
interests of the Partnership Investments and of the Offshore
Funds, when consolidated, are presented as non-controlling
interest in partnership investments in the respective
consolidated financial statements.
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 cash equivalents.
The fair value of long-term debt, which has a carrying value of
$125.0 million, was approximately $137.4 million at
December 31, 2009. Fair value estimates are calculated
using discounted cash flows based on the Companys
incremental borrowing rates for the debt and market prices for
similar instruments at the measurement date. This method of
assessing fair value may differ from the actual amount realized.
The carrying value of all other financial instruments
approximates fair value due to the short maturities of these
financial instruments.
F-10
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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. For
a substantial majority of the Companys investments, fair
values are determined based upon quoted prices in active
markets. If quoted market prices are not available, the Company
uses matrix, model or other similar pricing methods to determine
fair value. Investment securities transactions are recorded on a
trade date basis.
With the exception of the securities held by CFS, investment
securities are classified as
available-for-sale
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
income tax and non-controlling interest, as a separate component
of stockholders equity until realized.
Realized gains and losses from the sale of
available-for-sale
securities are determined on a specific identification basis and
are included in investment and other income (loss) in the
consolidated statements of operations.
As a registered broker-dealer, CFS is required to carry all
investment securities it owns (CFS Securities) at fair value and
record all changes in the value of its securities in current
earnings. As such, both realized and unrealized gains and losses
on these securities are included in investment and other income
(loss) 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.
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 in the consolidated
statements of operations 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.
Derivative
Assets and Liabilities
From time to time the Company enters into derivative contracts
to mitigate the negative impact changes in security prices may
have on the investment portfolio. The Company does not measure
effectiveness or meet the criteria for hedge accounting and,
therefore, changes in the fair value of these instruments are
recorded in investment and other income (loss) in the
consolidated statements of operations. The Company classifies
derivative securities owned as derivative assets and derivative
liabilities in the consolidated statements of financial
condition.
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 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
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
F-11
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
exists. Impairments of these assets, if any, are recognized in
the consolidated statements of operations 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
the 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 settlement date. The use of settlement date rather than
trade date does not have a material effect on the Companys
consolidated financial statements.
Net
Interest Expense
Net interest expense represents interest expense incurred on
debt net of 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 (Loss)
Investment and other income (loss) is primarily comprised of
realized gains (losses) and unrealized gains (losses) on trading
securities, CFS Securities, Partnership Investments and Offshore
Funds when consolidated, as well as dividend income. Dividend
income is recognized on the record date.
Deferred
Sales Commissions
Deferred sales commissions are amounts 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. During 2009, the Company
discontinued the sale of Class B shares; however, the
consolidated statements of financial condition reflect the
unamortized deferred sales commissions related to this share
class.
The Company performs an impairment analysis annually, whereby it
compares the carrying value of the deferred sales commission
asset to the undiscounted cash flow expected to be generated by
the asset over its
F-12
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
Separately, the Company periodically reviews and adjusts the
average remaining lives of these assets. Adjustments to shorten
or lengthen the lives results in an increase or decrease to the
amortization of deferred sales commissions in the consolidated
statements of operations.
During the second quarter of 2009 the Company changed the
estimated remaining lives on the portion of its deferred sales
commission assets related to Class B mutual fund shares.
This change in estimate extended the expected lives of these
assets thus reducing the quarterly amortization of deferred
sales commissions by approximately $1.7 million.
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,
2009 or 2008.
Future interest or penalties related to uncertain tax positions
are recognized in income tax provision (benefit) when
determined. The Company did not record any accrued interest or
penalties related to uncertain tax positions at
December 31, 2009.
Earnings
(Loss) Per Share
Basic earnings (loss) per share is computed by dividing net
income (loss) attributable to Calamos Asset Management, Inc. by
the weighted average number of shares of Class A and
Class B common stock outstanding during each year. Shares
issued or repurchased during the year are weighted for the
portion of the year that they were outstanding. Diluted earnings
(loss) per share reflects the potential dilution that would
occur if RSUs and stock options granted to participants of our
incentive compensation plan were exercised and if the Calamos
Interests exchanged all of their ownership interest in Holdings
and their Class B common stock for shares of Class A
common stock. Diluted shares which result in anti-dilution are
excluded from the diluted earnings (loss) per share calculation
and are detailed in note 15.
|
|
(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
F-13
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
investment units in the pools. The table below summarizes the
total fees earned from affiliates identified above during the
years ended December 31, 2009, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Investment management fees from:
|
|
|
|
|
|
|
|
|
|
|
|
|
The Funds
|
|
$
|
122,956
|
|
|
$
|
165,638
|
|
|
$
|
205,171
|
|
The Closed-End Funds
|
|
|
38,540
|
|
|
|
54,492
|
|
|
|
60,186
|
|
Private investment pools
|
|
|
|
|
|
|
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
161,496
|
|
|
$
|
220,130
|
|
|
$
|
265,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution fees from the Funds
|
|
$
|
73,686
|
|
|
$
|
106,316
|
|
|
$
|
134,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio accounting fees from:
|
|
|
|
|
|
|
|
|
|
|
|
|
The Funds
|
|
$
|
1,846
|
|
|
$
|
2,516
|
|
|
$
|
3,074
|
|
The Closed-End Funds
|
|
|
497
|
|
|
|
701
|
|
|
|
784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
2,343
|
|
|
$
|
3,217
|
|
|
$
|
3,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dragon Leasing Corporation (Dragon) is an affiliated company
controlled by a principal of the Company. Prior to February
2009, CAL was party to a non-exclusive aircraft lease agreement
with Dragon whereby CAL had use of an airplane for business
travel. Under this agreement CAL agreed to pay for maintenance
and transportation services which are reflected in general and
administrative expenses in the consolidated statements of
operations. The table below summarizes total service fees
incurred during the years ended December 31, 2009, 2008 and
2007 and the net payable balance as of December 31, 2008
and 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
General and administrative
|
|
$
|
135
|
|
|
$
|
1,042
|
|
|
$
|
876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net payable to Dragon
|
|
|
|
|
|
$
|
(125
|
)
|
|
$
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 and operating expense
payments were approximately $822,000 for the year ended
December 31, 2009 with base rent increasing 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 $3.2 million for the year ended
December 31, 2009 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 2009, Holdings recognized sublease
rental income of approximately $366,000 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 $283,000 for the year
ended December 31, 2009 with base rent increasing 3%
annually.
F-14
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Holdings is party to an agreement with CF Restaurant Enterprises
LLC (CFR), a subsidiary of CFP, where CFR provides lunch and
food services 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 2009, Holdings incurred expense of $815,000 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. Rent
payments under the lease commenced in May 2008 and will end on
April 30, 2015. Annual base rent and operating expenses
were $858,000 for the year ended December 31, 2009. Base
rents increase 2.5% annually. 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.
The following table summarizes management service fees that have
been recorded as expense allocations during the twelve months
ended December 31, 2009, 2008 and 2007 and the net
receivable balance as of December 31, 2009, 2008 and 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Expense allocated from the Company to Dragon
|
|
$
|
55
|
|
|
$
|
54
|
|
|
$
|
61
|
|
Expense allocated from the Company to CFP
|
|
|
579
|
|
|
|
2,011
|
|
|
|
2,106
|
|
Expense allocated from the Company to CPH
|
|
|
962
|
|
|
|
431
|
|
|
|
237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses allocated from the Company to affiliates
|
|
|
1,596
|
|
|
|
2,496
|
|
|
|
2,404
|
|
Expense allocated from CPH to the Company
|
|
|
975
|
|
|
|
1,653
|
|
|
|
1,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net expense allocated from the Company to affiliates
|
|
$
|
621
|
|
|
$
|
843
|
|
|
$
|
545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net receivable for management services from Dragon
|
|
$
|
4
|
|
|
$
|
6
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net receivable for management services from CFP
|
|
$
|
17
|
|
|
$
|
48
|
|
|
$
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net receivable for management services from CPH
|
|
$
|
50
|
|
|
$
|
26
|
|
|
$
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a result of the control exercised by CFP, none of our
agreements with CFP 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.
F-15
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(4)
|
Investment
Securities
|
The following table provides a summary of investment securities
owned as of December 31, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
Available-
|
|
|
CFS
|
|
|
Total
|
|
(in thousands)
|
|
for-Sale
|
|
|
Securities
|
|
|
Securities
|
|
|
Mutual Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
$
|
67,981
|
|
|
$
|
27,938
|
|
|
$
|
95,919
|
|
Fixed income
|
|
|
81,908
|
|
|
|
|
|
|
|
81,908
|
|
Defensive equity
|
|
|
28,736
|
|
|
|
|
|
|
|
28,736
|
|
Other
|
|
|
1,218
|
|
|
|
|
|
|
|
1,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mutual funds
|
|
|
179,843
|
|
|
|
27,938
|
|
|
|
207,781
|
|
Common stock
|
|
|
|
|
|
|
105
|
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
179,843
|
|
|
$
|
28,043
|
|
|
$
|
207,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
Available-
|
|
|
CFS
|
|
|
Total
|
|
(in thousands)
|
|
for-Sale
|
|
|
Securities
|
|
|
Securities
|
|
|
Mutual Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
$
|
45,992
|
|
|
$
|
32,671
|
|
|
$
|
78,663
|
|
Fixed income
|
|
|
72,418
|
|
|
|
|
|
|
|
72,418
|
|
Defensive equity
|
|
|
21,129
|
|
|
|
|
|
|
|
21,129
|
|
Other
|
|
|
814
|
|
|
|
|
|
|
|
814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mutual funds
|
|
|
140,353
|
|
|
|
32,671
|
|
|
|
173,024
|
|
Common stock
|
|
|
|
|
|
|
131
|
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
140,353
|
|
|
$
|
32,802
|
|
|
$
|
173,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of the $207.8 million and $173.0 million investments
in mutual funds at December 31, 2009 and 2008,
respectively, $169.5 million and $140.9 million was
invested in affiliated mutual funds. The defensive equity mutual
funds include the asset class pursuing equity market upside with
less potential downside than an all equity portfolio
accomplished through a blend of convertible, equity and high
yield instruments.
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,
2009, 2008 and 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale
|
|
$
|
|
|
|
$
|
368,233
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized gains on sales
|
|
|
|
|
|
|
21,022
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized losses on sales
|
|
|
|
|
|
|
(155,174
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses)
|
|
|
34,778
|
|
|
|
(724
|
)
|
|
|
9,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) reclassified out of accumulated other
comprehensive income to earnings
|
|
|
|
|
|
|
(148,729
|
)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CFS securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses)
|
|
|
9,808
|
|
|
|
(17,680
|
)
|
|
|
385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-16
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,
2009 and 2008:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
Total cumulative unrealized gains on
available-for-sale
securities with net gains:
|
|
|
|
|
|
|
|
|
Equity
|
|
$
|
21,965
|
|
|
$
|
90
|
|
Defensive equity
|
|
|
7,668
|
|
|
|
70
|
|
Fixed income
|
|
|
6,565
|
|
|
|
678
|
|
Other
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gains
|
|
|
36,200
|
|
|
|
838
|
|
Total cumulative unrealized losses on
available-for-sale
securities with net losses:
|
|
|
|
|
|
|
|
|
Equity
|
|
|
(26
|
)
|
|
|
(75
|
)
|
Defensive equity
|
|
|
(23
|
)
|
|
|
(81
|
)
|
Other
|
|
|
(270
|
)
|
|
|
(583
|
)
|
|
|
|
|
|
|
|
|
|
Total losses
|
|
|
(319
|
)
|
|
|
(739
|
)
|
|
|
|
|
|
|
|
|
|
Total cumulative net unrealized gains (losses) on
available-for-sale
securities
|
|
$
|
35,881
|
|
|
$
|
99
|
|
|
|
|
|
|
|
|
|
|
The aggregate fair value of
available-for-sale
investment securities that were in an unrealized loss position
at December 31, 2009 and 2008 was $1.5 million and
$1.1 million, respectively. The cumulative losses on
securities that had been in a continuous loss position for
12 months or longer were immaterial as of the end of each
reporting period.
At December 31, 2009, the Company believes all unrealized
losses to be only temporary and has the intent and ability to
hold these securities for a period of time sufficient to allow
for recovery of the market value. 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 non-controlling
interests and income taxes, in the fourth quarter of 2008.
|
|
(5)
|
Derivative
Assets and Liabilities
|
In order to reduce the volatility in fair value of the Calamos
corporate investment portfolio, the Company uses exchange traded
equity option contracts as an economic hedge against price
changes in its investment securities portfolio. The
Companys investment securities, totaling
$207.9 million at December 31, 2009, consists
primarily of positions in several Calamos equity, convertible
and fixed income mutual funds. The equity price risk in the
investment portfolio is hedged using exchange-traded put and
call option contracts on several major equity market indices
that correlate most closely with the change in value of the
portfolio being hedged. The use of both purchased put and sold
call options is part of a single strategy to minimize downside
risk in the hedged portfolio, while participating in a portion
of the upside of a market rally. The Company may adjust its
hedge position in response to movement and volatility in prices
and changes in the composition of the hedged portfolio, but
generally is not actively buying and selling derivative
contracts.
The fair value of purchased puts and sold call contracts are
reported in derivative assets and derivative liabilities,
respectively, in the consolidated statements of financial
condition. Net losses on these contracts of $21.7 million
and gains of $47.8 million for the years ended
December 31, 2009 and 2008, respectively, are reported in
investment and other income (loss) in the consolidated
statements of operations. The Company is using these derivatives
for risk management purposes but has not designated the
contracts as hedges for accounting purposes.
F-17
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(6)
|
Partnership
Investments
|
Presented below are the underlying assets and liabilities of
Calamos Market Neutral Opportunities Fund LP that the
Company reports on a net basis and the investments in other
partnerships, which are accounted for under the equity method.
Collectively, these investments are presented as partnership
investments in the consolidated statements of financial
condition as of December 31, 2009 and 2008.
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
Calamos Market Neutral Opportunities Fund LP:
|
|
|
|
|
|
|
|
|
Securities owned
|
|
$
|
21,976
|
|
|
$
|
27,038
|
|
Securities sold but not yet purchased
|
|
|
(10,934
|
)
|
|
|
(5,697
|
)
|
Accrued expenses and other current liabilities
|
|
|
(112
|
)
|
|
|
(7,525
|
)
|
Other current assets
|
|
|
8,222
|
|
|
|
886
|
|
|
|
|
|
|
|
|
|
|
Calamos Market Neutral Opportunities Fund LP securities, net
|
|
|
19,152
|
|
|
|
14,702
|
|
Investment in other partnerships
|
|
|
18,397
|
|
|
|
13,769
|
|
|
|
|
|
|
|
|
|
|
Partnership investments
|
|
$
|
37,549
|
|
|
$
|
28,471
|
|
|
|
|
|
|
|
|
|
|
Prior to second quarter of 2008, the Company held a partnership
investment in the Calamos Equity Opportunities Fund LP.
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 non-controlling interests
portion of $10.8 million, and are included in investment
and other income (loss) in the consolidated statements of
operations.
As of December 31, 2009 and 2008, the Company had a net
interest of $17.5 million (91.5%) and $13.4 million
(91.2%), respectively in Calamos Market Neutral Opportunities
Fund LP. The non-controlling interests owned 8.5% and 8.8%
of Calamos Market Neutral Opportunities Fund LP at
December 31, 2009 and 2008, respectively and are presented
in the consolidated statements of financial condition as
non-controlling interest in partnership investments. During
2008, the Company sold $30.0 million of its investment in
the partnership and realized a loss of $6.1 million, which
is included in investments and other income (loss) in the
consolidated statements of operations.
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, which is included in investments and other
income (loss) in the consolidated statements of operation.
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
using the equity method of accounting based on the net asset
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, 2009 and 2008, 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.
|
|
(7)
|
Fair
Value Measurements
|
The fair value of certain assets and liabilities are segregated
into 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.
For each period presented, the Company did not have any
positions in Level 3 securities.
F-18
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Investments are presented in the financial statements at fair
value in accordance with accounting principles generally
accepted in the United States of America. Investments in mutual
funds are stated at fair value based on published net asset
values of shares owned by the Company. Investments in securities
traded on a national securities exchange are stated at the last
reported sales price on the day of valuation. Other securities
traded in the
over-the-counter
market and listed securities for which no sale was reported on
that date are stated at the last quoted bid price, except for
short sales positions and call options written, for which the
last quoted asked price is used. Convertible bonds and other
securities for which quotations are not readily available are
valued at fair value as determined by the General Partner.
The following provides the hierarchy of inputs used to derive
the fair value of the Companys investment securities,
derivative assets and liabilities, and securities and
derivatives owned and securities sold but not yet purchased by
the Partnership Investments as of December 31, 2009 and
2008, respectively. Foreign currency contracts are presented on
a net basis where the right of offset exists, and no impact of
these positions exists at December 31, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
Quoted Prices
|
|
|
Significant
|
|
|
|
|
|
|
in Active
|
|
|
Other
|
|
|
|
|
|
|
Markets for
|
|
|
Observable
|
|
(in thousands)
|
|
December 31,
|
|
|
Identical Assets
|
|
|
Inputs
|
|
Description
|
|
2009
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
Investment securities (Note 4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
|
$
|
207,781
|
|
|
$
|
207,781
|
|
|
$
|
|
|
Common stocks
|
|
|
105
|
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
207,886
|
|
|
|
207,886
|
|
|
|
|
|
Derivative assets (Note 5)
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange-traded put option contracts
|
|
|
1,720
|
|
|
|
1,720
|
|
|
|
|
|
Derivative liabilities (Note 5)
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange-traded call option contracts
|
|
|
(3,450
|
)
|
|
|
(3,450
|
)
|
|
|
|
|
Securities and derivatives owned by the Partnership Investments
(Note 6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stocks
|
|
|
532
|
|
|
|
532
|
|
|
|
|
|
Convertible preferred stocks
|
|
|
1,767
|
|
|
|
660
|
|
|
|
1,107
|
|
Purchased options
|
|
|
179
|
|
|
|
179
|
|
|
|
|
|
Convertible bonds
|
|
|
18,798
|
|
|
|
|
|
|
|
18,798
|
|
Corporate bonds
|
|
|
700
|
|
|
|
|
|
|
|
700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,976
|
|
|
|
1,371
|
|
|
|
20,605
|
|
Securities sold but not yet purchased Common stocks (Note 6)
|
|
|
(10,893
|
)
|
|
|
(10,893
|
)
|
|
|
|
|
Exchange-traded call option contracts
|
|
|
(41
|
)
|
|
|
(41
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,934
|
)
|
|
|
(10,934
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
217,198
|
|
|
$
|
196,593
|
|
|
$
|
20,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-19
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
Quoted Prices
|
|
|
Significant
|
|
|
|
|
|
|
in Active
|
|
|
Other
|
|
|
|
|
|
|
Markets for
|
|
|
Observable
|
|
(in thousands)
|
|
December 31,
|
|
|
Identical Assets
|
|
|
Inputs
|
|
Description
|
|
2008
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
Investment securities (Note 4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
|
$
|
173,024
|
|
|
$
|
173,024
|
|
|
$
|
|
|
Common stocks
|
|
|
131
|
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
173,155
|
|
|
|
173,155
|
|
|
|
|
|
Derivative assets (Note 5)
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange-traded put option contracts
|
|
|
14,288
|
|
|
|
14,288
|
|
|
|
|
|
Derivative liabilities (Note 5)
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange-traded call option contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities and derivatives owned by the Partnership Investments
(Note 6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stocks
|
|
|
6,947
|
|
|
|
6,645
|
|
|
|
302
|
|
Convertible preferred stocks
|
|
|
3,052
|
|
|
|
2,306
|
|
|
|
746
|
|
Purchased options
|
|
|
327
|
|
|
|
327
|
|
|
|
|
|
Convertible bonds
|
|
|
14,268
|
|
|
|
|
|
|
|
14,268
|
|
Corporate bonds
|
|
|
2,444
|
|
|
|
|
|
|
|
2,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,038
|
|
|
|
9,278
|
|
|
|
17,760
|
|
Securities sold but not yet purchased Common stocks (Note 6)
|
|
|
(5,491
|
)
|
|
|
(5,240
|
)
|
|
|
(251
|
)
|
Exchange-traded call option contracts
|
|
|
(206
|
)
|
|
|
(206
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,697
|
)
|
|
|
(5,446
|
)
|
|
|
(251
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
208,784
|
|
|
$
|
191,275
|
|
|
$
|
17,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8)
|
Property
and Equipment
|
At December 31, 2009 and 2008, property and equipment and
related accumulated depreciation were as follows:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
Furniture, fixtures, and equipment
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
73,086
|
|
|
$
|
72,777
|
|
Accumulated depreciation
|
|
|
40,174
|
|
|
|
31,719
|
|
|
|
|
|
|
|
|
|
|
Furniture, fixtures, and equipment, net
|
|
$
|
32,912
|
|
|
$
|
41,058
|
|
|
|
|
|
|
|
|
|
|
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.
F-20
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 contain 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, 2009, the Company was in compliance with all
covenants.
The table below summarizes the outstanding debt balance at
December 31, 2009 and 2008.
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
Senior unsecured notes
|
|
|
|
|
|
|
|
|
5.24% notes due April 29, 2011
|
|
$
|
32,886
|
|
|
$
|
32,886
|
|
6.33% notes due July 15, 2014
|
|
|
46,160
|
|
|
|
46,160
|
|
6.52% notes due July 15, 2017
|
|
|
22,100
|
|
|
|
22,100
|
|
6.67% notes due July 15, 2019
|
|
|
23,854
|
|
|
|
23,854
|
|
|
|
|
|
|
|
|
|
|
Total senior unsecured notes
|
|
|
125,000
|
|
|
|
125,000
|
|
Less current portion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
125,000
|
|
|
$
|
125,000
|
|
|
|
|
|
|
|
|
|
|
The aggregate average interest rate on the notes is 6.14% over
the remaining life of the notes.
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 and include both a discretionary profit sharing
component and a matching component. For the years ended
December 31, 2009, 2008 and 2007, the Company recorded
expense for the contributions to the PSP Plan in the amounts of
$3.6 million, $3.1 million and $4.5 million,
respectively. This expense is included in employee compensation
and benefits on the consolidated statements of operations.
|
|
(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 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
also use treasury shares or issue new shares upon the exercise
of stock options and upon conversion of RSUs.
F-21
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 not to exceed six years after the grant date, and are
expensed on a straight line basis over this period. During 2009
and 2008, 705,224 and 358,722 restricted stock units with an
estimated fair value of $5.8 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, 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
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
705,224
|
|
|
|
8.21
|
|
Forfeited
|
|
|
(24,951
|
)
|
|
|
17.58
|
|
Exercised upon vesting
|
|
|
(203,693
|
)
|
|
|
19.51
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009
|
|
|
1,519,661
|
|
|
|
16.67
|
|
|
|
|
|
|
|
|
|
|
Converted during the year ended December 31:
|
|
|
|
|
|
|
|
|
2007
|
|
|
162,184
|
|
|
|
18.00
|
|
2008
|
|
|
173,605
|
|
|
|
18.00
|
|
2009
|
|
|
170,896
|
|
|
|
19.51
|
|
At December 31, 2009, the Company had 1,519,661 RSUs
outstanding with a weighted average remaining contractual life
of 3.5 years and an aggregate intrinsic value of
$17.5 million. The weighted average fair value of RSUs at
the date of grant for the years ended December 31, 2009 and
2008 was $8.21 and $19.92 per share, respectively. The aggregate
intrinsic value and the fair value of RSUs vested and exercised
during 2009 and 2008 were $1.6 million and
$5.8 million, respectively.
During 2009, 203,693 RSUs were exercised and, after
32,797 units were withheld for taxes, 170,896 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 $1.5 million. The total tax benefit realized in
connection with the exercise of the RSUs during 2009 was
$164,000, as the Company receives tax benefits equal to the fair
value of CAMs common stock on the exercise date, less the
amount attributable to the non-controlling interest. 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, into 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 of the RSUs during 2008 was
$527,000.
F-22
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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. No new awards were granted during the year ended
December 31, 2009; however, during 2008, 1,076,166 stock
options with an estimated fair value of $7.2 million were
awarded to employees of the Company in accordance with the
provisions of the plan. The weighted average fair value of
options at the date of grant for the year ended
December 31, 2008 was $6.66 per option. 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
|
|
Dividend yield
|
|
2.10%-2.27%
|
|
1.67%
|
Expected volatility
|
|
35%
|
|
35%
|
Risk-free interest rate
|
|
3.3%-4.7%
|
|
4.7%
|
Expected life
|
|
7.5 years
|
|
7.5 years
|
In May 2009, the stockholders of the Company approved an
amendment to the Corporations Incentive Compensation Plan
to allow for a stock option exchange program (the Program)
designed to provide eligible employees an opportunity to
exchange certain outstanding underwater stock options for a
lesser amount of new options to be granted for a lower exercise
price. The number of new stock options was determined using an
exchange ratio designed to result in a fair value of the new
stock options being approximately equal to the fair value of the
stock options that were surrendered for exchange. The Company
did not incur any incremental expense from the exchange program
since the fair value of the new awards did not exceed the fair
value of the awards surrendered. The Program expired on
July 23, 2009 whereby 264,547 eligible stock options were
tendered in exchange for 197,712 new options (net exchange of
66,835 options). The exercise price of the new stock options was
$17.80, which is 120% of the closing price of the Companys
Class A common stock as of the exchange date.
Summarized information on the Companys outstanding stock
options at December 31, 2009 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
|
|
|
$17.80
|
|
|
197,712
|
|
|
|
6.9 years
|
|
|
$
|
17.80
|
|
|
|
|
|
|
$
|
|
|
$18.00-$29.11
|
|
|
2,010,475
|
|
|
|
6.8 years
|
|
|
|
21.99
|
|
|
|
425,426
|
|
|
|
20.09
|
|
$35.43
|
|
|
262,094
|
|
|
|
6.1 years
|
|
|
|
35.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,470,281
|
|
|
|
6.7 years
|
|
|
|
23.08
|
|
|
|
425,426
|
|
|
$
|
20.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The outstanding options do not have an intrinsic value as the
exercise price exceeded the market value in all cases.
F-23
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, 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
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
Stock options exchanged, net
|
|
|
(66,835
|
)
|
|
|
28.60
|
|
Forfeited
|
|
|
(51,210
|
)
|
|
|
21.18
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009
|
|
|
2,470,281
|
|
|
|
23.08
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31:
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
2008
|
|
|
173,655
|
|
|
|
18.00
|
|
2009
|
|
|
425,426
|
|
|
|
20.09
|
|
During the year ended December 31, 2009, compensation
expense recorded in connection with the RSUs and stock options
was $8.6 million of which $1.9 million was credited as
additional paid-in capital. For the twelve months ended
December 31, 2008, compensation expense recorded in
connection with the RSUs and stock options was $7.1 million
of which $1.5 million was credited as additional paid-in
capital. The amount of deferred tax asset created was $686,000,
$545,000 and $608,000 during the years ended December 31,
2009, 2008 and 2007, respectively. At December 31, 2009,
approximately $21.9 million of total unrecognized
compensation expense related to unvested stock option and RSU
awards is expected to be recognized over a weighted-average
service period of 3.4 years.
F-24
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(13)
|
Non-Operating
Income (Loss), Net of Non-controlling Interest in Partnership
Investments
|
Non-operating income (loss), net of non-controlling interest in
partnership investments was comprised of the following
components for the years ended December 31, 2009, 2008 and
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Interest income
|
|
$
|
737
|
|
|
$
|
2,334
|
|
|
$
|
16,706
|
|
Interest expense
|
|
|
(7,801
|
)
|
|
|
(32,010
|
)
|
|
|
(19,555
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest expense
|
|
|
(7,064
|
)
|
|
|
(29,676
|
)
|
|
|
(2,849
|
)
|
Investment income (loss)
|
|
|
1,921
|
|
|
|
(295,793
|
)
|
|
|
33,413
|
|
Debt extinguishment costs
|
|
|
|
|
|
|
(37,498
|
)
|
|
|
|
|
Miscellaneous other income (loss)
|
|
|
233
|
|
|
|
(1,088
|
)
|
|
|
935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment and other income (loss)
|
|
|
2,154
|
|
|
|
(334,379
|
)
|
|
|
34,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (loss)
|
|
|
(4,910
|
)
|
|
|
(364,055
|
)
|
|
|
31,499
|
|
Net (income) loss attributable to non-controlling interest in
partnership investments
|
|
|
(336
|
)
|
|
|
72,156
|
|
|
|
(1,598
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (loss), net of non-controlling interest in
partnership investments
|
|
$
|
(5,246
|
)
|
|
$
|
(291,899
|
)
|
|
$
|
29,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The provision for income taxes for the years ended
December 31, 2009, 2008 and 2007 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
773
|
|
|
$
|
(1,090
|
)
|
|
$
|
8,404
|
|
State:
|
|
|
|
|
|
|
|
|
|
|
|
|
CAM portion
|
|
|
189
|
|
|
|
(355
|
)
|
|
|
2,001
|
|
Calamos Interests portion
|
|
|
331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current income taxes
|
|
|
1,293
|
|
|
|
(1,445
|
)
|
|
|
10,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
6,059
|
|
|
|
(8,444
|
)
|
|
|
6,672
|
|
State
|
|
|
527
|
|
|
|
6,102
|
|
|
|
1,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred income taxes
|
|
|
6,586
|
|
|
|
(2,342
|
)
|
|
|
8,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income provision (benefit)
|
|
$
|
7,879
|
|
|
$
|
(3,787
|
)
|
|
$
|
18,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings is subject to certain income-based state taxes;
therefore, income tax provision (benefit) reflect not only the
portion attributed to CAM stockholders but also a portion of
income tax provision (benefit) attributable to non-controlling
interests.
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.
F-25
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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, 2005 and 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
interest and penalties), approximately 23% of which will be
attributed to CAM. Holdings proposed penalties are
currently under appeal. The proposed IRS adjustments
attributable to CAM are agreed upon and have been recorded as a
current tax expense in 2009.
The following table reconciles the statutory federal income tax
rate to the effective income tax rate for the years ended
December 31, 2009, 2008 and 2007, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Statutory U.S. federal income tax rate
|
|
|
34.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Effect of higher tax rates in carryback period
|
|
|
|
|
|
|
0.6
|
%
|
|
|
|
|
State income taxes, net of federal tax benefits
|
|
|
2.0
|
%
|
|
|
2.0
|
%
|
|
|
5.0
|
%
|
Other non-deductible items
|
|
|
0.4
|
%
|
|
|
(0.3
|
)%
|
|
|
0.2
|
%
|
Holdings state income taxes
|
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
Impact on net deferred tax assets from change in statutory
income tax rate
|
|
|
0.9
|
%
|
|
|
(23.9
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
38.8
|
%
|
|
|
13.4
|
%
|
|
|
40.2
|
%
|
Calamos Interests state income taxes
|
|
|
(1.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAM effective income tax rate
|
|
|
37.8
|
%
|
|
|
13.4
|
%
|
|
|
40.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2009 and 2008 are as follows:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
$
|
74,030
|
|
|
$
|
82,006
|
|
Capital loss carryforward
|
|
|
12,202
|
|
|
|
10,850
|
|
Other
|
|
|
3,992
|
|
|
|
4,918
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
90,224
|
|
|
|
97,774
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Unrealized net holding gains on investments of
available-for-sale
securities
|
|
|
2,709
|
|
|
|
96
|
|
Deferred sales commission
|
|
|
916
|
|
|
|
1,360
|
|
Other
|
|
|
344
|
|
|
|
712
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
3,969
|
|
|
|
2,168
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
86,255
|
|
|
$
|
95,606
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets and liabilities are reflected on the
Companys consolidated statements of financial condition as
net deferred tax assets. The current and non-current portions of
the net deferred tax asset were $9.6 million and
$76.7 million, respectively, at December 31, 2009 and
$11.8 million and $83.8 million at December 31,
2008.
F-26
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 the 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 2009, CAM recorded a net deferred tax asset of
$2.1 million as a result of a net recognized capital loss
of $5.8 million. This $5.8 million capital loss
carryforward will expire in 2014 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.
In 2008, CAM recorded an estimated net deferred tax asset of
$10.8 million as a result of a net recognized capital loss
of $34.7 million. The Company filed 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.
At December 31, 2009, 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
(Loss) Per Share
|
The following table reflects the calculation of basic and
diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Earnings (loss) per share basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) available to common shareholders
|
|
|
12,424
|
|
|
$
|
(24,521
|
)
|
|
$
|
27,745
|
|
Weighted average shares outstanding
|
|
|
19,626
|
|
|
|
19,753
|
|
|
|
22,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share basic
|
|
$
|
0.63
|
|
|
$
|
(1.24
|
)
|
|
$
|
1.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
|
|
|
$
|
(204,958
|
)
|
|
$
|
204,592
|
|
Non-controlling interest in partnership investments
|
|
|
|
|
|
|
72,156
|
|
|
|
(1,598
|
)
|
Less: Impact of revaluation of net deferred tax assets
|
|
|
|
|
|
|
32,888
|
|
|
|
|
|
Less: Impact of income taxes
|
|
|
|
|
|
|
(49,535
|
)
|
|
|
81,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) available to common shareholders
|
|
$
|
12,424
|
|
|
$
|
(116,155
|
)
|
|
$
|
121,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
19,626
|
|
|
|
19,753
|
|
|
|
22,297
|
|
Exchange of Calamos Interests ownership for common stock
|
|
|
|
|
|
|
77,444
|
|
|
|
77,000
|
|
Dilutive impact of restricted stock units
|
|
|
328
|
|
|
|
252
|
|
|
|
386
|
|
Dilutive impact of stock options
|
|
|
|
|
|
|
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
19,954
|
|
|
|
97,449
|
|
|
|
99,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share diluted
|
|
$
|
0.62
|
|
|
$
|
(1.24
|
)
|
|
$
|
1.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-27
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Diluted shares outstanding for 2009, 2008 and 2007 are
calculated (a) assuming that Calamos Interests exchanged
all of their ownership interest in Holdings and their CAM
Class B common stock for shares of CAMs Class A
common stock (the Exchange) and (b) including the effect of
outstanding dilutive equity incentive compensation awards. The
number of diluted shares outstanding for 2008 presented above
reflects the economic impact that (a) and (b) would
have on the Companys 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 would have been anti-dilutive. For 2009, the impact
of the Exchange was anti-dilutive and, therefore, is excluded
from the calculation of diluted earnings (loss) per share.
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 value
approach and results in the Calamos Interests being entitled to
the same or fewer shares of Class A common stock.
The Company uses the treasury stock method to reflect the
dilutive effect of unvested RSUs and unexercised stock options
on diluted earnings per share. Under the treasury stock method,
if the average market price of common stock increases above the
options exercise price, the proceeds that would be assumed
to be realized from the exercise of the option would be used to
acquire outstanding shares of common stock. However, the awards
may be anti-dilutive even when the market price of the
underlying stock exceeds the 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 increase 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Exchange of Calamos Interests membership units in Holdings
for shares of Class A common stock on a
one-for-one
basis
|
|
|
47,923,822
|
|
|
|
77,444,069
|
|
|
|
|
|
Restricted stock units
|
|
|
897,064
|
|
|
|
755,876
|
|
|
|
|
|
Stock options
|
|
|
2,472,381
|
|
|
|
2,588,326
|
|
|
|
1,282,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
51,293,267
|
|
|
|
80,788,271
|
|
|
|
1,282,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assuming an Exchange at December 31, 2009,
47.9 million shares would be issued to the Calamos
Interests. The formula for exchanging ownership interest in
Holdings for shares of CAMs Class A common stock is
set forth in the Companys Second Amended and Restated
Certificate of Incorporation (filed as Exhibit 3(i) to the
2008 Annual Report on
Form 10-K).
For illustrative purposes the Exchange is based in part on the
NASDAQ Global Select Market closing price of CAMs
Class A common stock on December 31, 2009 and on
managements estimation of the fair market value of
CAMs net assets other than its ownership interest in
Holdings. In the event of an actual Exchange, the majority of
the Companys independent directors may determine the fair
market value of a share of CAMs Class A common stock
to be other than the closing price and will determine the fair
market value of CAMs net assets other than its ownership
in Holdings.
F-28
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(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. As of
December 31, 2009, there are no material 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, 2009, 2008 and 2007 were $4.9 million,
$4.9 million and $4.6 million respectively. At
December 31, 2009, 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:
|
|
|
|
|
2010
|
|
$
|
4,665
|
|
2011
|
|
|
4,252
|
|
2012
|
|
|
4,316
|
|
2013
|
|
|
4,409
|
|
2014
|
|
|
4,538
|
|
Thereafter
|
|
|
48,268
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
70,448
|
|
|
|
|
|
|
|
|
(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, 2009 and 2008, the net capital,
the excess of the required net capital and the net capital ratio
were as follows:
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
2009
|
|
2008
|
|
Net capital
|
|
$
|
37,926
|
|
|
$
|
26,240
|
|
Excess of required net capital
|
|
$
|
36,823
|
|
|
$
|
25,342
|
|
Net capital ratio
|
|
|
0.44 : 1.0
|
|
|
|
0.51 : 1.0
|
|
CFS is not required to compute the Reserve Requirements under
Exhibit A of
Rule 15c3-3(k)(2)(i)
or to include Information Relating to the Possession or Control
Requirements under
Rule 15c3-3,
because the Registrant operates primarily with the purpose of
distributing mutual fund shares and does not hold customer funds
or safekeep customer securities.
F-29
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the years ended December 31, 2009, 2008 and 2007, 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Calamos Growth Fund
|
|
|
34
|
%
|
|
|
40
|
%
|
|
|
43
|
%
|
Calamos Growth and Income Fund
|
|
|
15
|
%
|
|
|
16
|
%
|
|
|
17
|
%
|
|
|
(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 the
remaining 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.
These transactions are included 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
non-controlling 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 at
December 31, 2008, the membership units then owned by CAM
exceeds the shares of Class A common stock outstanding.
|
|
(20)
|
Quarterly
Financial Information (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the Quarter Ended
|
|
(In thousands, except
|
|
2008
|
|
|
2009
|
|
share data)
|
|
March 31
|
|
|
June 30
|
|
|
Sept. 30
|
|
|
Dec. 31
|
|
|
March 31
|
|
|
June 30
|
|
|
Sept. 30
|
|
|
Dec. 31
|
|
|
Assets under management (in millions)
|
|
$
|
40,906
|
|
|
$
|
41,210
|
|
|
$
|
33,329
|
|
|
$
|
24,040
|
|
|
$
|
23,469
|
|
|
$
|
27,032
|
|
|
$
|
30,543
|
|
|
$
|
32.714
|
|
Total revenue
|
|
|
110,693
|
|
|
|
112,238
|
|
|
|
101,807
|
|
|
|
66,851
|
|
|
|
59,569
|
|
|
|
67,079
|
|
|
|
73,798
|
|
|
|
81,292
|
|
Total operating expenses
|
|
|
66,264
|
|
|
|
63,127
|
|
|
|
57,696
|
|
|
|
45,405
|
|
|
|
46,379
|
|
|
|
45,695
|
|
|
|
46,424
|
|
|
|
45,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
44,429
|
|
|
|
49,111
|
|
|
|
44,111
|
|
|
|
21,446
|
|
|
|
13,190
|
|
|
|
21,384
|
|
|
|
27,374
|
|
|
|
36,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
449
|
|
|
$
|
1,896
|
|
|
$
|
(799
|
)
|
|
$
|
(26,067
|
)
|
|
$
|
3,352
|
|
|
$
|
1,787
|
|
|
$
|
2,590
|
|
|
$
|
4,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
|
|
$
|
0.02
|
|
|
$
|
0.09
|
|
|
$
|
(0.05
|
)
|
|
$
|
(1.34
|
)
|
|
$
|
0.17
|
|
|
$
|
0.09
|
|
|
$
|
0.13
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares outstanding
|
|
|
97,621,495
|
|
|
|
97,051,708
|
|
|
|
96,829,687
|
|
|
|
98,551,808
|
|
|
|
19,751,288
|
|
|
|
19,990,070
|
|
|
|
20,090,555
|
|
|
|
20,080,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In calculating the 2009 per share results for the quarters ended
March 31, 2009, June 30, 2009 and September 30,
2009, the effective tax rates applied to income before
non-controlling interest in Calamos Holdings LLC and income tax
provision (benefits) were 38.5%, 37.4% and 37.8%. In calculating
the 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 non-controlling
interest in Calamos Holdings LLC and income tax provision
(benefits) were 40.3%, 36.9% and 33.0%, respectively.
F-30
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(21)
|
Recently
Issued Accounting Pronouncements
|
Accounting
Standards Adopted During Fiscal Year 2009
In the fourth quarter, the Company adopted a new accounting
standard issued by the Financial Accounting Standards Board
(FASB) that permits, as a practical expedient, a reporting
entity to measure the fair value of an investment in certain
entities on the basis of the net asset value per share of the
investment. The Company adopted the standard, which had no
impact on the Companys consolidated financial statements.
During the fourth quarter, the Company adopted a new FASB
standard which clarifies the scope of the decrease in ownership
provision under Topic 810 and expands the disclosure
requirements about deconsolidation of a subsidiary or
derecognition of a group of assets. The Companys
consolidated financial statements reflect the required
disclosures.
In the third quarter, the Company adopted a new FASB standard
that provides clarification surrounding circumstances in which a
quoted price in an active market for an identical liability is
not available, a reporting entity is required to measure fair
value using the quoted price of the identical liability when
traded as an asset, quoted price for similar liabilities or
similar liabilities when traded as an asset, or utilize a
valuation technique. The Company adopted the standard, which had
no impact on the Companys consolidated financial
statements.
In the third quarter, the Company adopted the FASB Accounting
Standards Codification (the Codification), which is now the sole
source of authoritative U.S. GAAP and supersedes all
then-existing non-SEC accounting and reporting standards. All
other non-grandfathered non-SEC accounting literature not
included in the Codification became non-authoritative. As the
Codification does not change U.S. GAAP, the adoption of the
Codification had no impact on the Companys consolidated
financial statements.
In the second quarter, the Company adopted a new FASB standard
which requires disclosures about fair value of financial
instruments for interim reporting periods and requires entities
to disclose the methods and significant assumptions used to
estimate the fair value of financial instruments and describe
changes in methods and significant assumptions, in both interim
and annual financial statements. The Companys consolidated
financial statements reflect the required disclosures.
In the second quarter, the Company adopted a new FASB standard
which amends the guidance for determining whether an
other-than-temporary
impairment exists on debt securities. The standard had no impact
on the Companys consolidated financial statements as it is
not currently a direct holder of debt securities.
In the second quarter, the Company adopted a new FASB standard
which provides guidance for estimating the fair value of assets
and liabilities when the volume and level of trade activity for
the asset or liability have significantly decreased and
emphasizes that fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date
under current market conditions. The standard had no impact on
the Companys consolidated financial statements.
In the second quarter, the Company adopted a new FASB standard
which establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but
before financial statements are issued. The rules concerning
recognition and disclosure of subsequent events will remain
substantially unchanged from current generally accepted auditing
standards. Additionally, disclosure of the date through which an
entity has evaluated subsequent events and the basis for that
date is required. The Company adopted this standard and included
the appropriate disclosures in its consolidated financial
statements.
In the first quarter, the Company adopted a new FASB standard
which establishes requirements for how the acquirer in a
business combination recognizes, measures and discloses
identified assets and goodwill acquired, liabilities assumed,
and any non-controlling interests. The standard had no impact on
the Companys consolidated financial statements.
F-31
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In the first quarter, the Company adopted a new FASB standard
which establishes accounting and reporting requirements for
non-controlling interest, previously referred by the Company as
minority interest. The standard requires non-controlling
interest to be reported as a component of equity on the
consolidated statements of financial position and the amount of
net income attributable to non-controlling interest to be
identified on the consolidated statements of income. The Company
applied the presentation to its consolidated financial
statements for all periods presented.
In the first quarter, the Company adopted a new FASB standard
which requires additional disclosures for derivative instruments
and hedging activities. The Company included the appropriate
disclosures in its consolidated financial statements.
New
Accounting Standards Not Yet Adopted
In June 2009, the FASB issued a new statement which modifies the
analysis required to determine whether a companys variable
interest(s) give it a controlling financial interest in a
variable interest entity (VIE). This analysis identifies the
primary beneficiary of a VIE as the enterprise that has both the
power to direct the activities of a VIE and the obligation to
absorb losses or the right to receive benefits of the VIE. The
standard is effective for fiscal years beginning after
November 15, 2009. In November 2009, the FASB issued a
proposed standard update which defers the requirements of this
new standard for asset managers interests in entities that
apply the specialized accounting guidance for investment
companies or that have the attributes of investment companies.
The proposed standard update, once finalized, is expected to be
effective for fiscal years beginning after November 15,
2009. The Company is evaluating the impact that this standard
will have on its consolidated financial statements, if any.
F-32
|
|
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 McGladrey & Pullen, 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.
|
|
Item 9B.
|
Other
Information
|
None
PART III
|
|
Item 10.
|
Directors
and Executive Officers of the Registrant
|
|
|
|
|
|
Management
|
|
|
|
Directors
|
|
|
|
|
|
|
John P. Calamos, Sr.
Chairman, Chief Executive
Officer and Co-Chief
Investment Officer
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James J. Boyne
President of Distribution and
Operations, 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
President of Investments
and Co-Chief Investment Officer
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Gary J. Felsten
Senior Vice President
and Director of Human Resources
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Nick P. Calamos
President of Investments
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
and Chief Financial Officer
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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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Randall T. Zipfel
Senior Vice President
and Chief Operating Officer
Investments and IT
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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 2010
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 June 4, 2010.
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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 June 4, 2010.
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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 June 4, 2010.
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Item 14.
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Principal
Accountant 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 June 4, 2010.
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 (incorporated by reference to Exhibit 3(i) to
the Registrants Annual Report on
Form 10-K
filed with the Securities and Exchange Commission on
March 13, 2009).
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3(ii)
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Second Amended and Restated By-laws of the Registrant
(incorporated by reference to Exhibit 3(ii) to the
Registrants Annual Report on
Form 10-K
filed with the Securities and Exchange Commission on
March 13, 2009).
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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 and Exchange Commission on May 7,
2008).
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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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10.5
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Omnibus Amendment Relating to Code Section 409A
(incorporated by reference to Exhibit 10.5 to the
Registrants Annual Report on
Form 10-K
filed with the Securities and Exchange Commission on
March 13, 2009).
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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 (incorporated by reference to
Exhibit 10.7 to the Registrants Annual Report on
Form 10-K
filed with the Securities and Exchange Commission on
March 13, 2009).
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10.8
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Form of Non-Employee Equity Award Statement (incorporated by
reference to Exhibit 10.7 to the Registrants Annual
Report on
Form 10-K
filed with the Securities and Exchange Commission on
March 13, 2009).
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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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Fourth 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.
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23.1
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Consent of Independent Registered Public Accounting Firm,
McGladrey & Pullen, LLP.
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23.2
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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 5, 2010.
CALAMOS ASSET MANAGEMENT, INC.
Name: Cristina Wasiak
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|
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Title:
|
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 5, 2010
|
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|
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/s/ Cristina
Wasiak
Cristina
Wasiak
|
|
Senior Vice President, Chief Financial Officer (Principal
Financial Officer)
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March 5, 2010
|
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/s/ Nick
P. Calamos
Nick
P. Calamos
|
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President of Investments and Co-Chief Investment Officer,
Director
|
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March 5, 2010
|
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/s/ G.
Bradford Bulkley
G.
Bradford Bulkley
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Director
|
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March 5, 2010
|
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/s/ Mitchell
S. Feiger
Mitchell
S. Feiger
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Director
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March 5, 2010
|
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/s/ Richard
W. Gilbert
Richard
W. Gilbert
|
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Director
|
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March 5, 2010
|
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/s/ Arthur
L. Knight
Arthur
L. Knight
|
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Director
|
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March 5, 2010
|
II-5