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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF
1934 For the quarterly period ended September 30, 2004 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the transition period from ________________ to ____________________ Commission File Number: 000-51003 CALAMOS ASSET MANAGEMENT, INC. (Exact Name of Registrant as Specified in its Charter) Delaware
    
    32-0122554(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)1111 E. Warrenville Road, Naperville, Illinois
    
    60563(Address of Principal Executive Offices)
    
    (Zip Code)
 (630) 245-7200
(Registrants telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days. o Yes x No Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). o Yes x No Indicate the number of shares outstanding of each of the issuers classes of
common stock ($.01 par value), as of the latest practicable date. 23,000,000
shares of Class A common stock and 100 shares of Class B common stock at
December 2, 2004.




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TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONItem 1. Financial Statements.Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.Item 3. Quantitative and Qualitative Disclosures About Market Risk.Item 4. Controls and Procedures.PART II  OTHER INFORMATIONItem 1. Legal Proceedings.Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.Item 3. Defaults Upon Senior Securities.Item 4. Submission of Matters to a Vote of Security Holders.Item 5. Other InformationItem 6. Exhibits.SIGNATURESStockholders' AgreementRegistration Rights AgreementEmployment Agreement with John P. Calamos, Sr.Employment Agreement with Nick P. CalamosEmployment Agreement with James S. Hamman, Jr.Employment Agreement with Patrick H. DudasikIncentive Compensation PlanForm of EAU-Based RSU Award StatementForm of IPO Equity Award StatementForm of Services-Based RSU Award StatementContribution AgreementTax Indemnity AgreementSecond Amended and Restated Limited Liability AgmtManagement Services Agreement302 Certification of Principal Executive Officer302 Certification of Principal Financial OfficerSection 906 Certifications    Table of Contents  
 PART I  FINANCIAL INFORMATION 
 Item 1. Financial Statements. CALAMOS ASSET MANAGEMENT, INC.(successor to Calamos Holdings, Inc.) CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION September 30,
    
    December 31,2004
    
    2003(unaudited)Assets:Current assetsCash and cash equivalents
    
    $
    117,023,370
    
    
    $
    5,073,249Receivables:Affiliates and affiliated funds
    
    
    24,440,727
    
    
    
    19,150,245Customers
    
    
    5,183,388
    
    
    
    3,942,188Investment securities, trading and available for sale
    
    
    58,670,036
    
    
    
    10,389,428Prepaid expenses
    
    
    1,076,529
    
    
    
    977,735Other
    
    
    4,188,381
    
    
    
    2,186,993Total current assets
    
    
    210,582,431
    
    
    
    41,719,838Noncurrent assetsDeferred sales commissions
    
    
    59,365,398
    
    
    
    49,235,519Property and equipment, net
    
    
    4,099,709
    
    
    
    12,260,416Other noncurrent assets
    
    
    2,966,094
    
    
    
    1,314,994Total noncurrent assets
    
    
    66,431,201
    
    
    
    62,810,929Total assets
    
    
    277,013,632
    
    
    
    104,530,767Liabilities:Current liabilitiesAccounts payable:Brokers
    
    
    10,077,630
    
    
    
    6,094,162Affiliates
    
    
    86,839
    
    
    
    19,800Accrued compensation and benefits
    
    
    6,797,851
    
    
    
    3,755,572Current portion of debt
    
    
    
    
    
    
    15,676,461Accrued expenses and other current liabilities
    
    
    16,676,565
    
    
    
    5,342,538Total current liabilities
    
    
    33,638,885
    
    
    
    30,888,533Long-term liabilitiesLong-term debt
    
    
    150,000,000
    
    
    
    23,008,047Deferred compensation
    
    
    9,092,755
    
    
    
    4,210,309Total long-term liabilities
    
    
    159,092,755
    
    
    
    27,218,356Total liabilities
    
    
    192,731,640
    
    
    
    58,106,889Minority interest
    
    
    
    
    
    
    10,890Stockholder equity:Class A Voting Common Stock, no par value. Authorized 5,000 shares;
issued and outstanding 3,953 shares
    
    
    
    
    
    
    Class B Non-Voting Common Stock, no par value. Authorized 20,000
shares; issued and outstanding 16,047 shares
    
    
    
    
    
    
    Additional paid-in capital
    
    
    2,274,291
    
    
    
    2,274,291Retained earnings
    
    
    79,005,521
    
    
    
    42,093,471Accumulated other comprehensive income
    
    
    3,002,180
    
    
    
    2,045,226Total stockholder equity
    
    
    84,281,992
    
    
    
    46,412,988Total liabilities, minority interest and stockholder equity
    
    $
    277,013,632
    
    
    $
    104,530,767
 See accompanying notes to financial statements. -2-




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CALAMOS ASSET MANAGEMENT, INC.
(successor to Calamos Holdings, Inc.) UNAUDITED CONSOLIDATED STATEMENTS OF INCOME For the three months ending
    
    For the nine months endingSeptember 30, 2004
    
    September 30, 2003
    
    September 30, 2004
    
    September 30, 2003Revenues:Investment management fees
    
    $
    55,837,107
    
    
    $
    30,002,324
    
    
    $
    148,539,953
    
    
    $
    73,660,533Distribution and underwriting fees
    
    
    24,769,274
    
    
    
    14,584,991
    
    
    
    70,571,210
    
    
    
    35,022,077Other
    
    
    624,676
    
    
    
    59,433
    
    
    
    1,634,720
    
    
    
    217,349Total revenues
    
    
    81,231,057
    
    
    
    44,646,748
    
    
    
    220,745,883
    
    
    
    108,899,959Expenses:Employee compensation and benefits
    
    
    17,102,479
    
    
    
    8,551,954
    
    
    
    45,247,677
    
    
    
    23,823,483Distribution expense
    
    
    12,967,130
    
    
    
    6,247,971
    
    
    
    34,669,977
    
    
    
    14,408,507Amortization of deferred sales commissions
    
    
    7,597,824
    
    
    
    5,186,687
    
    
    
    21,676,956
    
    
    
    13,691,347Marketing and sales promotion
    
    
    3,732,190
    
    
    
    2,322,423
    
    
    
    15,729,526
    
    
    
    6,182,443General and administrative
    
    
    4,376,585
    
    
    
    1,937,908
    
    
    
    10,563,102
    
    
    
    6,186,402Total expenses
    
    
    45,776,208
    
    
    
    24,246,943
    
    
    
    127,887,238
    
    
    
    64,292,182Operating income
    
    
    35,454,849
    
    
    
    20,399,805
    
    
    
    92,858,645
    
    
    
    44,607,777Other income (expense):Interest expense
    
    
    (2,052,523
    )
    
    
    (260,472
    )
    
    
    (3,945,558
    )
    
    
    (735,267
    )Investment and other income
    
    
    392,462
    
    
    
    254,793
    
    
    
    2,908,345
    
    
    
    693,785Total other income (expense), net
    
    
    (1,660,061
    )
    
    
    (5,679
    )
    
    
    (1,037,213
    )
    
    
    (41,482
    )Income before minority interest and
income taxes
    
    
    33,794,788
    
    
    
    20,394,126
    
    
    
    91,821,432
    
    
    
    44,566,295Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income before income taxes
    
    
    33,794,788
    
    
    
    20,394,126
    
    
    
    91,821,432
    
    
    
    44,566,295Income taxes
    
    
    687,834
    
    
    
    419,941
    
    
    
    1,565,094
    
    
    
    735,072Net income
    
    $
    33,106,954
    
    
    $
    19,974,185
    
    
    $
    90,256,338
    
    
    $
    43,831,223Earnings per share, basic, based on 20,000
Class A and Class B weighted average
shares outstanding
    
    $
    1,655.35
    
    
    $
    998.71
    
    
    $
    4,512.82
    
    
    $
    2,191.56Earnings per share, basic and diluted,
based on 96,800,100 weighted average units
outstanding after giving effect to the
Reorganization
    
    $
    0.34
    
    
    
    
    
    
    $
    0.93
    
    
    
    
 See accompanying notes to financial statements. -3-




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CALAMOS ASSET MANAGEMENT, INC.
(successor to Calamos Holdings, Inc.) UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER EQUITY Additional
    
    
    
    
    
    AccumulatedPaid-in
    
    Retained
    
    ComprehensiveCommon Stock
    
    Capital
    
    Earnings
    
    Income
    
    TotalBalance at December 31, 2003
    
    
    
    
    
    $
    2,274,291
    
    
    $
    42,093,471
    
    
    $
    2,045,226
    
    
    $
    46,412,988Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    90,256,338
    
    
    
    Changes in unrealized gains
on available-for-sale
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    956,954Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91,213,292Dividends paid
    
    
    
    
    
    
    
    
    
    
    (53,344,288
    )
    
    
    
    
    
    
    (53,344,288
    )Balance at September 30, 2004
    
    
    
    
    
    $
    2,274,291
    
    
    $
    79,005,521
    
    
    $
    3,002,180
    
    
    $
    84,281,992
 See accompanying notes to financial statements. -4-




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CALAMOS ASSET MANAGEMENT, INC.
(successor to Calamos Holdings, Inc.) UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months endingSeptember 30, 2004
    
    September 30, 2003Cash and cash equivalents at beginning of year
    
    $
    5,073,249
    
    
    $
    2,648,286Cash flows from operating activities:Net income
    
    
    90,256,338
    
    
    
    43,831,223Adjustments to reconcile income to net cash provided by
operating activities:Amortization of deferred sales commissions
    
    
    21,676,956
    
    
    
    13,691,347Other depreciation and amortization
    
    
    936,767
    
    
    
    690,859Unrealized appreciation on trading securities
    
    
    (79,005
    )
    
    
    (566,082
    )Unrealized appreciation on investment in partnership
    
    
    (59,002
    )
    
    
    (68,733
    )Management fee received in partnership units
    
    
    (120,628
    )
    
    
    (118,902
    )Gain on disposal of property
    
    
    (1,989,061
    )
    
    
    Increase in assetsAccounts receivable:Customers
    
    
    (1,241,200
    )
    
    
    (1,000,758
    )Affiliates and affiliated mutual funds
    
    
    (5,290,482
    )
    
    
    (8,680,060
    )Deferred sales commissions
    
    
    (31,806,835
    )
    
    
    (29,414,170
    )Other assets
    
    
    (2,026,665
    )
    
    
    (260,913
    )Increase in liabilitiesAccounts payables
    
    
    4,050,507
    
    
    
    801,907Accrued compensation and benefits and deferred compensation
    
    
    7,924,725
    
    
    
    262,800Other liabilities and accrued expenses
    
    
    11,345,501
    
    
    
    1,021,174Net cash provided by operating activities
    
    
    93,577,916
    
    
    
    20,189,692Cash flows used in investing activities:Net additions to property and equipment
    
    
    (8,831,139
    )
    
    
    (5,558,442
    )Net purchases of securities and partnership investments
    
    
    (47,244,649
    )
    
    
    (309,566
    )Net cash used in investing activities
    
    
    (56,075,788
    )
    
    
    (5,868,008
    )Cash flows provided by (used in) financing activities:Net borrowings (payments) on bank debt
    
    
    (30,199,508
    )
    
    
    5,368,263Net borrowings (payments) on mortgage payable
    
    
    (152,000
    )
    
    
    4,153,000Net borrowings of debt offering
    
    
    148,144,323
    
    
    
    Cash dividends paid
    
    
    (43,344,822
    )
    
    
    (22,590,485
    )Net cash provided by (used in) financing
activities
    
    
    74,447,993
    
    
    
    (13,069,222
    )Net increase in cash
    
    
    111,950,121
    
    
    
    1,252,462Cash and cash equivalents at end of year
    
    $
    117,023,370
    
    
    $
    3,900,748Supplemental disclosure of cash flow information:Cash paid during the year for income taxes
    
    $
    1,165,655
    
    
    $
    390,000Interest paid
    
    
    539,408
    
    
    
    558,238Supplemental schedule of noncash activities:Fair value of fixed assets and other assets distributed to owners
    
    
    (18,354,830
    )
    
    
    Fair value of mortgage payable and other liabilities assumed by
owners
    
    
    8,355,364
    
    
    
    Fair value of distribution to owners
    
    $
    (9,999,466
    )
    
    
    
 See accompanying notes to financial statements. -5-




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CALAMOS ASSET MANAGEMENT, INC.
(successor to Calamos Holdings, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three and Nine Months ended September 30, 2004 and 2003
(unaudited) (1) Organization and Description of Business Calamos Asset Management, Inc., together with its subsidiaries (CAM),
completed an initial public offering of its Class A common stock on November 2,
2004. On October 15, 2004, Calamos Family Partners, Inc. (formerly known as
Calamos Holdings Inc.), (CFP) contributed all of its assets and liabilities,
including all equity interests in its wholly-owned subsidiaries, to Calamos
Holdings LLC (Holdings) in exchange for 96,800,000 of the membership units of
Holdings. On November 2, 2004, CAM applied the net proceeds of its initial
public offering to acquire membership units in Holdings and became the sole
manager of Holdings. As the sole manager of Holdings, CAM is conducting the
business previously conducted by CFP. For more information regarding the
initial public offering and the reorganization undertaken in connection
therewith (the Reorganization), see CAMs Registration Statement on Form S-1
(File No. 333-117847) (the Registration Statement) filed with the Securities
and Exchange Commission (SEC). In these notes to the consolidated financial statements, unless the
context otherwise requires, references to the Company refer to (1) CFP, its
consolidated subsidiaries and their predecessor companies before consummation
of the Reorganization, and (2) CAM and its consolidated subsidiaries, including
Holdings and the subsidiaries of Holdings, after consummation of the
Reorganization. Unless the context otherwise requires:  
    
    CAL refers to (1) Calamos Asset Management, Inc., an Illinois
corporation and wholly-owned subsidiary of Calamos Holdings, Inc.,
before consummation of the Reorganization, and (2) Calamos Advisors LLC,
a Delaware limited liability company and wholly-owned subsidiary of
Calamos Holdings LLC, after consummation of the reorganization;
    
    CFS refers to (1) Calamos Financial Services, Inc., an Illinois
corporation and wholly-owned subsidiary of Calamos Holdings, Inc.,
before consummation of the Reorganization, and (2) Calamos Financial
Services LLC, a Delaware limited liability company and wholly-owned
subsidiary of Calamos Holdings LLC, after consummation of the
Reorganization;
    
    CPM refers to (1) Calamos Property Management, Inc., an Illinois
corporation and wholly-owned subsidiary of Calamos Holdings, Inc.,
before consummation of the Reorganization and (2) Calamos Property
Management LLC, a Delaware limited liability company and wholly-owned
subsidiary of Calamos Holdings LLC, after consummation of the
Reorganization; and
    
    CPL refers to (1) Calamos Partners, Inc., an Illinois corporation
and wholly-owned subsidiary of Calamos Holdings, Inc., before
consummation of the Reorganization and (2) Calamos Partners LLC, a
Delaware limited liability company and wholly-owned subsidiary of
Calamos Holdings LLC, after consummation of the Reorganization. The consolidated financial statements included in this report reflect the
operations of CFP and its wholly-owned subsidiaries: CAL, CFS, CPM and CPL,
prior to the consummation of the Reorganization. CAL, an investment adviser registered with the SEC under the Investment
Advisers Act of 1940, serves as an investment adviser to individual and
institutional investors. CAL also provides investment management services to
the Calamos Family of Funds (the Funds) and to Calamos Convertible
Opportunities and Income Fund, Calamos Convertible and High Income Fund and the
Calamos Strategic Total Return Fund (the Closed-end Funds), closed-end funds
listed on the New York Stock Exchange. CPL is an investment adviser that provides investment management services
primarily to alternative investment products. -6-




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CFS, a broker-dealer registered with the SEC under the Securities Exchange
Act of 1934, is (1) the sole distributor of the Funds, (2) an introducing
broker-dealer in the purchase and sale of securities and security options, and
(3) an introducing broker-dealer in the purchase and sale of securities and
security options for the Funds. CPM provides real estate investment services. Before consummation of the
Reorganization, CPM provided property management services primarily for
properties owned by CFP. (2) Summary of Accounting Policies Unaudited Interim Financial Statements The interim financial statements as of September 30, 2004 and for the
three and nine months ending September 30, 2003 and September 30, 2004 are
unaudited. In the opinion of management, such information contains all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the financial condition and results of operations. The results

for the interim periods ended September 30 are not necessarily indicative of
the results to be obtained for a full fiscal year. As a C corporation, CAM
will be subject to taxes that apply to C corporations that are not reflected
in these financial statements. In addition, CAMs employee compensation and
benefit expense as well as certain other operating expenses will differ from
CFPs historical expenses as a result of CAMs public company status. These
financial statements should be read in conjunction with the consolidated
financial statements included in the Registration Statement. Principles of Consolidation The consolidated financial statements included in this report present the
financial statements of CFP and its four wholly-owned subsidiaries prior to the
Reorganization, and its majority interest in Calamos Hedge Fund, L.P. for the
Statement of Financial Condition dated December 31, 2003. All significant
intercompany balances and transactions have been eliminated in consolidation. Cash and Cash Equivalents 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 classified as cash
equivalents in the Companys financial statements. 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 insignificant. Investment Securities The Company carries its investments at fair value for both trading
securities and available-for-sale securities. For a substantial majority of the
Companys investments, fair values are determined based upon market prices. If
quoted market prices are not available, the Company uses matrix, model or other
similar pricing methods to determine fair value. For the periods presented,
non-readily marketable securities represent less than one percent of all
investment securities. The Company records investment securities on a trade
date basis. Because CFS is a registered broker-dealer, the Company is required to
classify securities owned by CFS as trading securities. The Company also
classifies securities held by Calamos Hedge Fund, L.P. as trading securities.
Unrealized gains and losses on trading securities and on partnership units are
included in net investment gain (loss) in the statement of income for all
periods presented. The Company records all securities owned by CAL and CPM as
available-for-sale under SFAS No. 115, Accounting for Certain Investments in
Debt and Equity Securities, as the company does not 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 as a separate -7-




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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. On a quarterly basis, the Company conducts regular reviews to assess
whether other-than-temporary impairment exists. Changing economic conditions,
global changes, regional changes, or changes related to specific issuers or
industries, could adversely affect these values. 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 3 years to 39 years. Leasehold improvements
are amortized over the shorter of their estimated useful lives or the remaining
term of the lease. Debt Issue Costs Deferred debt issuance costs are included in other assets in accordance
with APB 21, Interest on Receivables and Payablesand amortized on a
straight-line basis over the related term of the debt.In accordance with EITF
95-13, Classification of Debt Issue Costs in the Statement of Cash Flows, the
deferred costs are classified as a financing activity in the statement of cash
flows. Equity Incentive Plan The Company established a long-term equity appreciation unit plan (EAU
Plan) for select individuals of the Company. The Company accounted for the EAU
Plan using the accounting methods prescribed by Financial Accounting Standards
Board Financial Interpretation No. 28, Accounting for Stock Appreciation Rights
and Other Variable Stock Option or Award Plans, an interpretation of APB
Opinions No. 15 and 25(FIN 28), and its related interpretations. In accordance
with FIN 28, compensation expense was accrued over the periods in which
employees perform services. As such, changes in the aggregate unit value,
multiplied by the ratio of actual to total number of service periods in the
vesting period were recorded as an increase or decrease to expense in the
current period. Revenue Recognition The Company earns revenue by providing investment management services to
open-end and closed-end mutual funds and to separate accounts. This revenue is
earned pursuant to the terms of the underlying advisory contract and is based
on a contractual investment advisory fee applied to the assets in each
portfolio. Any fees collected in advance are deferred and recognized over the
period earned. Performance-based advisory fees earned from certain separate
accounts are recognized annually upon completion of the contract year and based
upon either (1) the positive difference between the investment returns on a
clients portfolio compared to a benchmark index or (2) the absolute percentage
of gain in the clients account. Distribution and underwriting fees consist primarily of Rule 12b-1
distribution and/or service fees from the Funds, contingent deferred sales
charges (CDSC) on the redemption of fund shares and sales charges that are
primarily earned on the distribution of mutual fund shares. 12b-1 fees are
accrued monthly as services are performed and are based on the average daily
assets of the funds. CDSC fees are recorded on a trade date basis when earned,
and sales charges are recorded on the settlement date. The use of settlement
date rather than trade date does not have a material effect on the Companys
financial statements. Investment and other income includes investment gains (losses), interest
and dividend income, and gain on sale of real estate. Dividend and interest
income are recognized when earned. Deferred Sales Commissions Deferred sales commissions are commissions advanced by the Company on the
sale of Class B and Class C shares of the Funds. Deferred 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 acquisition cost asset. These redemptions result in an
amortization period not to exceed 12 months for Class C shares and 96 months (8
years) for Class B shares. -8-




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The Company evaluates the carrying value of its deferred sales commissions
on a quarterly basis. In its impairment analysis, the Company compares the
carrying value of the deferred sales commission asset to the undiscounted cash
flow expected to be generated by the asset over its remaining useful life to
determine whether impairment has occurred. If the carrying value of the asset
exceeds the undiscounted cash flow, the asset is written down to fair value
based on discounted cash flows. Impairment adjustments are recognized in the
statement of income as a component of amortization of deferred sales
commissions. As of each reporting period presented, the Company determined that
no impairment of the deferred commission asset existed. Income Taxes During the periods presented, the Company had elected to be taxed as an
S corporation under the Internal Revenue Code. Therefore, the income and
expenses of the Company were included in the income tax returns of the
Companys stockholders. The Company was subject to Illinois replacement tax and
other state income taxes. Replacement taxes are recorded as income taxes in the
consolidated statement of income. Investments in Partnerships The Company has an interest in Calamos Multi-Strategy, L.P.
(Multi-Strategy) which is accounted for using the equity method and is carried
at the net asset value of the partnership units held by the Company. Earnings per Share Basic earnings per share is computed by dividing net income available to
common stockholders by the weighted average number of shares of common stock
outstanding during each year. Shares issued during the year are weighted for
the portion of the year that they were outstanding. Diluted earnings per share
is equivalent to basic earnings per share because there are no common stock
equivalents outstanding during any period presented. Use of Estimates in the Preparation of Financial Statements Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets, liabilities, revenues and expenses and the
disclosure of contingent assets and liabilities to prepare these consolidated
financial statements in conformity with accounting principles generally
accepted in the United States of America. Actual results could differ from
those estimates. (3) Earnings Per Share Earnings per share is presented on the Companys historical basis of 3,953
Class A Voting Common Stock shares and 16,047 Class B Non-voting Common Stock
shares. In addition, we have provided earnings per share for the
periods ending September 30, 2004, based upon 96,800,000
outstanding membership units of Holdings after giving effect to the
Reorganization. (4) Recently Issued Accounting Pronouncements In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation (FIN) No. 46, Consolidation of Variable Interest Entities(FIN
46), which establishes guidance for consolidation of variable interest entities
that function to support the activities of the primary beneficiary. FIN 46
requires a variable interest entity to be consolidated by a company if that
company is subject to a majority of the risk of loss from the variable interest
entitys activities or is entitled to receive a majority of the entitys
residual returns. In general, a variable interest entity is a corporation,
partnership, trust or any other legal structure used for business purposes that
either (a) does not have equity investors with voting rights, or (b) has equity
investors that do not provide sufficient financial resources for the entity to
support its activities. FIN 46 also requires various disclosures about variable
interest entities that a company is not required to consolidate but in which it
has a significant variable interest. In December 2003, the FASB further revised FIN 46 through FIN No. 46R,
Consolidation of Variable Interest Entities(FIN 46R). FIN 46R changes the
effective date of FIN 46 for certain entities and makes other significant
changes to FIN 46 based on implementation issues that arose during 2003.
Application of FIN 46R is required for period ending after December 15, 2003
for all interests in special purpose entities and for period ending after March
15, 2004, for interest in other entities. -9-




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##### Table of Contents



In assessing if Multi-Strategy is a variable interest entity (VIE), the
criteria in paragraph 5 of FIN 46R must be evaluated. In general terms, FIN 46R
indicates: if a) the total equity investment at risk is not sufficient for an
entity to finance it activities, b) if the group of equity investors of an
entity lacks certain characteristics of a controlling financial interest, or c)
the voting rights of the equity investors are not proportionate to their
returns and substantially all of the entitys activities either involve or are
conducted on behalf of one investor, that entity is considered a VIE, and is
subject to consolidation according to the provisions of FIN 46R. The Company
determined that such criteria in paragraph 5 of FIN 46R have not been met and
Multi-Strategy is therefore not considered a VIE. Accordingly, the Company has
determined that Multi-Strategy is a voting interest entity. The Company
accounts for its investment in Calamos Multi-Strategy L.P. in accordance with
SOP 78-9. Consistent with others in the industry, the Company has historically
relied primarily on redemption rights of the limited partners to meet the
important rights requirement of SOP 78-9. In light of current accounting
developments regarding what constitutes important rights (including open EITF
Issue 04-5  Investors Accounting for an Investment in a Limited Partnership
When the Investor is the Sole General Partner and the Limited Partners Have
Certain Rights), the Company amended its limited partnership agreements in 2004
to incorporate additional rights, namely to replace the general partner by a
simple majority vote of the limited partners. These amendments allow the
Company to continue to account for its general partnership interests in the
Multi-Strategy on the equity method of accounting and not consolidate it into
its results. (5) Subsequent Events As of September 30, 2004, the Companys business was conducted by CFP,
which is wholly-owned by members of the Calamos family and Calamos family
trusts. On October 15, 2004, CFP contributed all of its assets and liabilities,
including all of the equity interests in its wholly-owned subsidiaries, to
Holdings in exchange for 100% of the membership units in Holdings. This
transaction established Holdings as the owner and operator of the business
conducted by CFP and its subsidiaries. On November 2, 2004, CAM closed its initial public offering of 20.0
million shares of common stock at $18 per share and received proceeds, net of
the underwriting discount, of $335.7 million. On November 8, 2004, CAM sold an
additional 3.0 million shares of common stock pursuant to the exercise of the
underwriters over-allotment option and received proceeds, net of the
underwriting discount, of $50.4 million. CAM used $50.0 million of the
proceeds to purchase 3.0 million newly issued membership units directly from
Holdings and $332.6 to purchase 20.0 million membership units ($3.0 million of
which were purchased in connection with the over-allotment option) in Holdings
from CFP. In connection with its initial acquisition of membership units, CAM
became the sole manager of Holdings and is conducting the business previously
conducted by CFP and its subsidiaries. As sole manager of Holdings, CAM operates and controls all of the business
and affairs of Holdings and consolidates the financial results of Holdings. In
light of Calamos Family Partners, Inc.s and John P. Calamos, Sr.s 77.0%
ownership interest in Holdings (the Calamos Family Interests), the Company will
reflect such ownership interest as a minority interest in its statement of
financial condition and statement of income. Net profits or losses and
distributions of Holdings are allocated and made to its members pro rata in
accordance with the percentages of their respective equity interests.
Accordingly, net profits or losses of Holdings are currently allocated, and
distributions of Holdings are made, 23.0% to CAM and 77.0% to the Calamos
Family Interests. The Companys historical results will be those of CFP, as
its predecessor company. As a result, the Companys net income, after excluding
the Calamos Family Interests, will represent 23.0% of Holdings net income, and
similarly, outstanding shares of CAMs Class A common stock will represent
23.0% of the outstanding membership units of Holdings. After the pricing of the initial public offering, the Company granted
awards of 1,356,137 restricted stock units (RSUs) with an aggregate value of
$24.4 million and 727,728 options with an aggregate exercise price of $13.1
million to certain employees pursuant to the Calamos Asset Management, Inc.
Incentive Compensation Plan. Certain of these awards replaced all outstanding
Equity Appreciation Unit (EAU) awards previously made under the Calamos Family
Partners Equity Appreciation Units Plan, which was subsequently terminated.
The Company will record compensation expense of $3.7 million during the fourth
quarter relating to the change in value of the EAUs. The RSUs and
option awards are subject to various vesting schedules and will fully vested
within six years of the grant date. In October 2004, the Company entered into a lease with 2020 Calamos Court
LLC, an entity wholly-owned by the shareholders of CFP, with respect to the new
corporate headquarters being constructed for its occupancy. The lease was
assigned by CFP to Holdings as part of the Reorganization. The term of the
lease, and rent under the lease, will commence on the first day of the first month after which Holdings receives possession
of the leased premises, which is expected to be in mid-2005, and ends on May
31, 2025. Monthly base rent initially will be $237,183 through May 1, 2006 and
will increase by 3% annually, beginning June 1, 2006, for the remaining term of
the lease. Minimum base rent payments over the life of the lease will be
$76,478,460. In general, Holdings may not terminate the lease unless a
casualty, condemnation or material temporary taking affects all or a
substantial portion of the leased premises. -10-




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations. In the following sections of this report, unless the context otherwise
requires, references to we, us, our and our company refer to (1)
Calamos Family Partners, Inc. (formerly known as Calamos Holdings, Inc.), a
Delaware corporation, its subsidiaries and their predecessor companies before
consummation of the reorganization undertaken in connection with our initial
public offering, which we refer to as the Reorganization, and (2) Calamos
Asset Management, Inc., a Delaware corporation, and its consolidated
subsidiaries, including Calamos Holdings LLC and the subsidiaries of Calamos
Holdings LLC, after consummation of the Reorganization. Unless the context
otherwise requires:  
    
    Calamos Advisors refers to (1) Calamos Asset Management, Inc., an
Illinois corporation, registered investment adviser and wholly-owned
subsidiary of Calamos Holdings, Inc., before consummation of the
Reorganization, and (2) Calamos Advisors LLC, a Delaware limited
liability company and wholly-owned subsidiary of Calamos Holdings LLC,
after consummation of the reorganization; and
    
    Calamos Financial Services refers to (1) Calamos Financial
Services, Inc., an Illinois corporation, registered broker-dealer and
wholly-owned subsidiary of Calamos Holdings, Inc., before consummation
of the Reorganization, and (2) Calamos Financial Services LLC, a
Delaware limited liability company and wholly-owned subsidiary of
Calamos Holdings LLC, after consummation of the Reorganization. General We provide investment advisory services through our subsidiaries to
institutions and individuals, managing $33.2 billion in client assets at
September 30, 2004. Our operating results fluctuate primarily due to changes
in the total value and composition of our assets under management which are,
and will continue to be, significantly influenced by purchases and redemptions
of shares of open-end funds and other investment products as well as
fluctuations in financial markets around the world that result in appreciation
or depreciation of assets under management. The value and composition of our
assets under management and our ability to continue to attract clients also
depends on a variety of factors including the education of our clients about
our investment philosophy, the delivery of best-in-class service, the relative
investment performance of our investment products as compared to competing
offerings, the competitive conditions in the mutual fund, asset management and
broader financial services sectors, investor sentiment and confidence, and our
decision to close strategies when deemed in the best interests of our clients. We market our investment strategies to our clients through a variety of
products designed to suit their individual investment needs. We currently offer
the following six types of mutual fund and separate account investment
products:  
    
    Open-end funds are continually offered and are not listed on an
exchange. Open-end funds issue new shares for purchase and redeem
shares from those shareholders who sell. The share price for
purchases and redemptions of open-end funds is determined by each
funds 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.
    
    Closed-end funds typically sell a finite number of shares to
investors through underwritten public offerings, unlike open-end
funds, which continually offer new shares to investors. After the
public offerings, investors buy closed-end fund shares from, and sell
those shares to, other investors through an exchange or broker-dealer
market. 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.
Because closed-end funds do not continually offer new shares to
investors, increases in net purchases of closed-end funds are
entirely dependent on our ability to consummate closed-end fund
offerings. Market demand for closed-end fund offerings is difficult
to predict. We intend to monitor the market and pursue opportunities
as they present themselves and when doing so would be consistent with
our business strategy.
    
    Institutional accounts are separately managed accounts for
institutional investors such as public and private pension funds,

public funds and endowment funds. -11-




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
    
    Managed accounts are separately managed accounts for individual
and institutional investors offered primarily through national and
regional broker-dealers. Managed accounts may be structured as
investment management agreements between us and the investor directly
or us and the broker dealer.
    
    Private client accounts are separately managed accounts for
individual investors offered directly by us.
    
    Alternative investments include non-registered investment
vehicles, primarily hedge funds, offered directly by us to qualified
individual and institutional investors. The following table details our assets under management at September 30,
2003 and 2004. At Sept. 30, 2003
    
    At Sept. 30, 2004(in millions)Mutual FundsOpen-end funds
    
    $
    9,554
    
    
    $
    17,307Closed-end funds
    
    
    2,270
    
    
    
    5,798Total mutual funds
    
    
    11,824
    
    
    
    23,105Separate AccountsInstitutional accounts
    
    
    2,403
    
    
    
    3,108Managed accounts
    
    
    5,749
    
    
    
    6,576Private client accounts
    
    
    201
    
    
    
    443Alternative investments
    
    
    15
    
    
    
    17Total separate accounts
    
    
    8,368
    
    
    
    10,144Total assets under management
    
    $
    20,192
    
    
    $
    33,249
 Our revenues are substantially comprised of investment management fees
earned under contracts with the mutual funds and separate accounts managed by
our subsidiaries. Our revenues are also comprised of distribution and
underwriting fees, including asset based distribution and/or service fees
received pursuant to Rule 12b-1 plans. Investment management fees and
distribution and underwriting fees may fluctuate based on a number of factors,
including the total value of our assets under management, market appreciation
or depreciation, and the 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. The mix of assets under
management among our investment products also has an impact on our revenues, as
some products carry different fees than others. Our largest operating expense is employee compensation and benefits
expense, which includes salaries, incentive compensation and related benefits
costs. Expenses related to the distribution of mutual funds, including rule
12b-1 payments and amortization of deferred sales commissions for open-end
mutual funds, are also significant. Operating expenses may fluctuate due to a
number of factors, including variations in staffing and compensation, changes
in distribution expense as a result of fluctuations in mutual fund sales and
market appreciation or depreciation, and depreciation and amortization relating
to capital expenditures incurred to maintain and enhance our administrative and
operating services infrastructure. Reorganization and Holding Company Structure As of September 30, 2004, our business was conducted by Calamos Family
Partners, Inc. (formerly known as Calamos Holdings, Inc.), which is
wholly-owned by members of the Calamos family and Calamos family trusts. On
October 15, 2004, Calamos Family Partners, Inc. contributed all of its assets
and liabilities, including all of the equity interests in its wholly-owned
subsidiaries, to Calamos Holdings LLC in exchange for 100% of the membership
units in Calamos Holdings LLC. This transaction established Calamos Holdings
LLC as the owner and operator of the business conducted by Calamos Family
Partners, Inc. and its subsidiaries. On November 2, 2004, we closed our initial public offering of 20.0 million
shares of Class A common stock and received proceeds, net of the underwriting
discount, of $335.7 million. On November 8, 2004, we sold an additional 3.0
million shares of common stock pursuant to the exercise of the underwriters
over-allotment option and received proceeds, net of the underwriting discount,
of $50.4 million. We used $50 million of the proceeds to purchase 3.0 million
newly issued membership units directly from Calamos Holdings LLC and $332.6 to
purchase 20.0 million membership units ($3.0 million of -12-




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##### Table of Contents



which were purchased in connection with the over-allotment option) in
Calamos Holdings LLC from Calamos Family Partners, Inc. In connection with our
initial acquisition of membership units, we became the sole manager of Calamos
Holdings LLC and are conducting the business previously conducted by Calamos
Family Partners, Inc. and its subsidiaries. As sole manager of Holdings, we operate and control all of the business
and affairs of Calamos Holdings LLC and consolidate the financial results of
Calamos Holdings LLC. In light of Calamos Family Partners, Inc.s and John P.
Calamos, Sr.s 77.0% ownership interest in Calamos Holdings LLC, we will
reflect such ownership interest as a minority interest in our statement of
financial condition and statement of income. Net profits or losses and
distributions of Calamos Holdings LLC are allocated and made to its members pro
rata in accordance with the percentages of their respective equity interests.
Accordingly, net profits or losses of Calamos Holdings LLC are currently
allocated, and distributions of Calamos Holdings LLC are made, 23.0% to us and
77.0% to Calamos Family Partners, Inc. and John P. Calamos, Sr. in the
aggregate. Our historical results will be those of Calamos Family Partners,
Inc., as our predecessor company. As a result, our net income, after excluding
the minority interest of Calamos Family Partners, Inc. and John P. Calamos,
Sr., will represent 23.0% of Calamos Holdings LLCs net income, and similarly,
outstanding shares of our Class A common stock will represent 23.0% of the
outstanding membership units of Calamos Holdings LLC. Operating Results Three Months Ended September 30, 2004 Compared to Three Months Ended
September 30, 2003 Assets Under Management Assets under management were $33.2 billion at September 30, 2004, an
increase of $13.0 billion, or 65%, from $20.2 billion at September 30, 2003. At
September 30, 2004, our assets under management consisted of 69% mutual funds
and 31% separate accounts, as compared to 59% mutual funds and 41% separate
accounts at September 30, 2003. Three Months EndedSeptember 30,
    
    Period-to-Period2003
    
    2004
    
    $ Change
    
    % Change(In millions)Mutual FundsBeginning assets under management
    
    $
    9,616
    
    
    $
    22,290
    
    
    $
    12,674
    
    
    
    132
    %Net purchases
    
    
    1,708
    
    
    
    1,264
    
    
    
    (444
    )
    
    
    26
    %Market appreciation (depreciation)
    
    
    500
    
    
    
    (449
    )
    
    
    (949
    )
    
    
    190
    %Ending assets under management
    
    
    11,824
    
    
    
    23,105
    
    
    
    11,281
    
    
    
    95
    %Average assets under management
    
    
    10,882
    
    
    
    22,230
    
    
    
    11,348
    
    
    
    104
    %Separate AccountsBeginning assets under management
    
    
    8,140
    
    
    
    9,972
    
    
    
    1,832
    
    
    
    23
    %Net purchases
    
    
    145
    
    
    
    317
    
    
    
    172
    
    
    
    119
    %Market appreciation (depreciation)
    
    
    83
    
    
    
    (145
    )
    
    
    (228
    )
    
    
    275
    %Ending assets under management
    
    
    8,368
    
    
    
    10,144
    
    
    
    1,776
    
    
    
    21
    %Average assets under management
    
    
    8,271
    
    
    
    9,868
    
    
    
    1,597
    
    
    
    19
    %Total Assets Under ManagementBeginning assets under management
    
    
    17,756
    
    
    
    32,262
    
    
    
    14,506
    
    
    
    85
    %Net purchases
    
    
    1,853
    
    
    
    1,581
    
    
    
    (272
    )
    
    
    15
    %Market appreciation (depreciation)
    
    
    583
    
    
    
    (594
    )
    
    
    (1,177
    )
    
    
    202
    %Ending assets under management
    
    
    20,192
    
    
    
    33,249
    
    
    
    13,057
    
    
    
    65
    %Average assets under management
    
    $
    19,153
    
    
    $
    32,098
    
    
    $
    12,945
    
    
    
    68
    %
 Mutual fund net purchases were $1.3 billion for the three months ended
September 30, 2004, a decrease of $0.4 billion, or 26%, from $1.7 billion for
the prior year period. Open-end mutual fund purchases were $1.2 billion for
the three months ended September 30, 2004, unchanged from the prior year
period. The period over period decrease was mainly attributable to $0.5
billion of closed-end fund assets added in July 2003 which did not occur in the
three months ended September 30, 2004. Our ability to consummate closed-end
fund offerings is dependent on market demand causing our net purchases of
closed-end funds to vary period to period. We intend to monitor the market and,
consistent with our business strategy, pursue opportunities as they present
themselves. Separate account net purchases were $317.3 million for the three
months ended September 30, 2004, -13-




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an increase of $172.4 million, from $144.9 million for the prior year
period. Although our convertible strategy was closed to new accounts in
mid-2003, sales of equity separate accounts resulted in the overall increase in
net purchases. Revenues Total revenues were $81.2 million for the three months ended September 30,
2004, an increase of $36.6 million, or 82%, from $44.6 million for the three
months ended September 30, 2003. The increase was due to increases in both
investment management fees and distribution and underwriting fees. Three Months EndedSeptember 30,
    
    Period-to-Period2003
    
    2004
    
    $ Change
    
    % Change(In thousands)Investment management fees
    
    $
    30,002
    
    
    $
    55,837
    
    
    $
    25,835
    
    
    
    86
    %Distribution and underwriting fees
    
    
    14,585
    
    
    
    24,769
    
    
    
    10,184
    
    
    
    70
    %Other
    
    
    59
    
    
    
    625
    
    
    
    566
    
    
    
    951
    %Total revenues
    
    $
    44,646
    
    
    $
    81,231
    
    
    $
    36,585
    
    
    
    82
    %
 Investment management fees were $55.8 million for the three months ended
September 30, 2004, an increase of $25.8 million, or 86%, from $30.0 million
for the prior year period as a result of a $12.9 billion increase in average
assets under management. The overall growth in investment management fees was
due primarily to an increase in mutual fund investment management fees, which
increased to $43.4 million for the three months ended September 30, 2004 from
$20.3 million for the prior year period. Open-end fund investment management
fees increased to $31.3 million for the three months ended September 30, 2004
from $17.0 million for the prior year period as a result of an increase in
open-end fund average assets under management of $7.7 billion. Closed-end fund
investment management fees increased to $12.1 million for the three months
ended September 30, 2004 from $3.3 million for the prior year period as a
result of an increase in closed-end fund average assets under management of
$3.6 billion. Investment management fees as a percentage of average assets
under management increased to an annualized rate of 0.70% for the three months
ending September 30, 2004 from an annualized rate of 0.63% for the prior year
period as mutual fund assets under management, which generally carry higher
investment management fees than separate accounts, increased as a percentage of
total assets under management. Distribution and underwriting fees were $24.8 million for the three months
ended September 30, 2004, an increase of $10.2 million, or 70%, from $14.6
million for the prior year period primarily due to an increase in sales of
open-end funds and an $11.3 billion increase in average open-end mutual fund
assets under management. Other revenues were $0.6 million for the three months ended September 30,
2004 comprised primarily of $0.6 million of portfolio accounting fees earned
from mutual funds based on an agreement beginning April 1, 2004. Operating Expenses Operating expenses were $45.8 million for the three months ended
September 30, 2004, an increase of $21.5 million, or 89%, from $24.3 million for the three
months ended September 30, 2003. The increase was mainly due to increases in
employee compensation and benefits and distribution expenses. Three Months EndedSeptember 30,
    
    Period-to-Period2003
    
    2004
    
    $ Change
    
    % Change(In thousands)Employee compensation and benefits
    
    $
    8,551
    
    
    $
    17,102
    
    
    $
    8,551
    
    
    
    100
    %Distribution expense
    
    
    6,248
    
    
    
    12,967
    
    
    
    6,719
    
    
    
    108
    %Amortization of deferred sales commissions
    
    
    5,187
    
    
    
    7,598
    
    
    
    2,411
    
    
    
    46
    %Marketing and sales promotion
    
    
    2,322
    
    
    
    3,732
    
    
    
    1,410
    
    
    
    61
    %General and administrative
    
    
    1,938
    
    
    
    4,377
    
    
    
    2,439
    
    
    
    126
    %Total operating expenses
    
    $
    24,246
    
    
    $
    45,776
    
    
    $
    21,530
    
    
    
    89
    %
 Employee compensation and benefits increased by $8.6 million primarily due
to increased salary and benefits expense of $2.5 million and incentive
compensation expense of $4.5 million. We expect our employee compensation and
benefits -14-




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expenses to increase as we expand our alternative investment business.
Distribution expense increased by $6.7 million, or 108%, primarily due to
growth of average open-end fund assets under management, as well as the aging
of Class C shares of our open-end funds. Class C share assets do not generate
distribution expense in the first year following their sale because we retain
the Rule 12b-1 fees during that first year to offset the upfront commissions
that we pay. However, Class C share assets do generate a distribution expense
in subsequent years as we pay the Rule 12b-1 fees to the selling firms. We
expect distribution expense to increase to the extent mutual funds sales and
assets under management continue to grow. Amortization of deferred sales
commissions increased by $2.4 million, or 46%, primarily due to the $15.7
million, or 36%, increase in the deferred commission asset resulting from the
additional commissions advanced on purchases of Class B and C shares of the
open-end funds. Marketing and sales promotion expenses increased by $1.4
million primarily due to an increase of $1.0 million in supplemental
compensation payments to third-party selling agents, which we expect to
increase to the extent our funds gain assets and further recognition. General
and administrative expenses increased by $2.4 million, or 126%, principally due
to increased occupancy, travel and recruiting costs of $ 1.6 million as a
result our increased staffing levels. As a public company, we expect to incur
increased general and administrative expenses such as professional fees,
directors and officers insurance and public company compliance costs. Other Income (Expense), Net Other income (expense), net was a net expense of $1.6 million for the
three months ended September 30, 2004 compared to a net expense of $5,000 for
the three months ended September 30, 2003. This increase in expense was
attributable to an increase in interest expense resulting from our issuance in
April 2004 of $150.0 million aggregate principal amount of Senior Unsecured
Notes due 2011 with a fixed rate of 5.24%. Three Months EndedSeptember 30,
    
    Period-to-Period2003
    
    2004
    
    $ Change
    
    % Change(In thousands)Investment and other income
    
    $
    255
    
    
    $
    392
    
    
    $
    137
    
    
    
    54
    %Interest expense
    
    
    (260
    )
    
    
    (2,052
    )
    
    
    (1,792
    )
    
    
    688
    %Total other income (expense), net
    
    $
    (5
    )
    
    $
    (1,660
    )
    
    $
    (1,655
    )
    
    
    *
   Net Income Net income totaled $33.1 million for the three months ended September 30,
2004 as compared to $20.0 million for the three months ended September 30,
2003, an increase of 66%. Three Months EndedSeptember 30,
    
    Period-to-Period2003
    
    2004
    
    $ Change
    
    % Change(In thousands)Total revenues
    
    $
    44,647
    
    
    $
    81,231
    
    
    $
    36,584
    
    
    
    82
    %Total operating expenses
    
    
    24,247
    
    
    
    45,776
    
    
    
    21529
    
    
    
    89
    %Operating income
    
    
    20,400
    
    
    
    35,455
    
    
    
    15,055
    
    
    
    74
    %Other income (expense)
    
    
    (5
    )
    
    
    (1,660
    )
    
    
    (1,655
    )
    
    
    *Income taxes
    
    
    420
    
    
    
    688
    
    
    
    268
    
    
    
    64
    %Net income
    
    $
    19,975
    
    
    $
    33,107
    
    
    $
    13,132
    
    
    
    66
    %
   Income Taxes -15-




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During both three-month periods our business was operated as an S
corporation. As a result, income taxes during these periods are not indicative
of our expected future income taxes. We currently operate as a C corporation
and as such will be subject to taxes applicable to C corporations in the
future. Nine Months Ended September 30, 2004 Compared to Nine Months Ended
September 30, 2003 Assets Under Management Assets under management were $33.2 billion at September 30, 2004, an
increase of $13.0 billion, or 65%, from $20.2 billion at September 30, 2003. Nine Months EndedSeptember 30,
    
    Period-to-Period2003
    
    2004
    
    $ Change
    % Change(In millions)Mutual FundsBeginning assets under management
    
    $
    5,712
    
    
    $
    14,651
    
    
    $
    8,939
    
    
    
    156
    %Net purchases
    
    
    4,691
    
    
    
    8,070
    
    
    
    3,379
    
    
    
    74
    %Market appreciation
    
    
    1,421
    
    
    
    384
    
    
    
    (1,037
    )
    
    
    79
    %Ending assets under management
    
    
    11,824
    
    
    
    23,105
    
    
    
    11,281
    
    
    
    95
    %Average assets under management
    
    
    8,478
    
    
    
    19,592
    
    
    
    11,114
    
    
    
    131
    %Separate AccountsBeginning assets under management
    
    
    7,180
    
    
    
    9,189
    
    
    
    2,009
    
    
    
    28
    %Net purchases
    
    
    456
    
    
    
    627
    
    
    
    171
    
    
    
    38
    %Market appreciation
    
    
    732
    
    
    
    328
    
    
    
    (404
    )
    
    
    55
    %Ending assets under management
    
    
    8,368
    
    
    
    10,144
    
    
    
    1,776
    
    
    
    21
    %Average assets under management
    
    
    7,816
    
    
    
    9,627
    
    
    
    1,811
    
    
    
    23
    %Total Assets Under ManagementBeginning assets under management
    
    
    12,892
    
    
    
    23,840
    
    
    
    10,948
    
    
    
    85
    %Net purchases
    
    
    5,147
    
    
    
    8,785
    
    
    
    3,638
    
    
    
    71
    %Market appreciation
    
    
    2,153
    
    
    
    624
    
    
    
    (1,529
    )
    
    
    71
    %Ending assets under management
    
    
    20,192
    
    
    
    33,249
    
    
    
    13,057
    
    
    
    65
    %Average assets under management
    
    $
    16,294
    
    
    $
    29,219
    
    
    $
    12,925
    
    
    
    79
    %
 Mutual fund net purchases were $8.1 billion for the nine months ended
September 30, 2004, an increase of $3.4 billion, or 74%, from $4.7 billion for
the prior year period. The increase in mutual fund net purchases was
principally attributable to a closed-end fund offering during the nine months
ended September 30, 2004, with $3.3 billion in closed-end fund assets under
management added during that period as compared to $1.3 billion added for the
nine months ended September 30, 2003. Our ability to consummate closed-end fund
offerings is dependent on market demand causing our net purchases of closed-end
funds to vary period to period. We intend to monitor the market and, consistent
with our business strategy, pursue opportunities as they present themselves. In
addition, open-end fund net purchases increased to $4.8 billion for the nine
months ended September 30, 2004 from $3.4 billion for the prior year period
mainly due to sales of the Calamos Growth Fund and Calamos Growth and Income
Fund. Separate account net purchases were $627 million for the nine months
ended September 30, 2004, an increase of $171.6 million, from $455.8 million
for the prior year period primarily due to purchases of our equity strategies. Revenues Total revenues were $220.7 million, for the nine months ended September
30, 2004, an increase of $111.8 million, or 103%, from $108.9 million for the
nine months ended September 30, 2003. The increase was due to increases in both
investment management fees and distribution and underwriting fees. We expect
revenues to increase through 2005 as we earn investment management fees on the
significant amount of assets under management added over the twelve months
ended September 30, 2004. -16-




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Nine Months EndedSeptember 30,
    
    Period-to-Period2003
    
    2004
    
    $ Change
    
    % Change(In thousands)Investment management fees
    
    $
    73,661
    
    
    $
    148,540
    
    
    $
    74,879
    
    
    
    102
    %Distribution and underwriting fees
    
    
    35,022
    
    
    
    70,571
    
    
    
    35,549
    
    
    
    102
    %Other
    
    
    217
    
    
    
    1,635
    
    
    
    1,418
    
    
    
    652
    %Total revenues
    
    $
    108,900
    
    
    $
    220,746
    
    
    $
    111,846
    
    
    
    103
    %
 Investment management fees were $148.5 million for the nine months ended
September 30, 2004, an increase of $74.9 million, or 102%, from $73.7 million
for the prior year period as a result of a $12.9 billion increase in average
assets under management. The overall growth in investment management fees was
due primarily to an increase in mutual fund investment management fees, which
increased to $113.6 million for the nine months ended September 30, 2004 from
$46.9 million for the prior year period. Open-end fund investment management
fees increased to $86.7 million for the nine months ended September 30, 2004
from $40.6 million for the prior year period as a result of an increase in
open-end fund average assets under management of $7.7 billion. Closed-end fund
investment management fees increased to $26.9 million for the nine months ended
September 30, 2004 from $6.3 million for the prior year period as a result of
an increase in closed-end fund average assets under management of $3.0 billion.
Separate account investment management fees increased by $8.2 million to $34.9
million on an increase in average assets under management of $1.8 billion to
$9.6 billion. Investment management fees as a percentage of average assets
under management increased to an annualized rate of 0.68% for the nine months
ended September 30, 2004 from an annualized rate of 0.60% for the prior year
period as mutual fund assets under management, which generally carry higher
investment management fees than separate accounts, increased as a percentage of
total assets under management. Distribution and underwriting fees were $70.6 million for the nine months
ended September 30, 2004, an increase of $35.5 million, or 102%, from $35.0
million for the prior year period primarily due to an increase in sales of the
open-end funds and a $7.7 billion increase in average open-end fund assets
under management. Other revenues were $1.6 million for the nine months ended September 30,
2004 including $1.2 million of portfolio accounting fees earned from our mutual
funds. Operating Expenses Operating expenses were $127.9 million for the nine months ended September
30, 2004, an increase of $63.6 million, or 99%, from $64.3 million for the nine
months ended September 30, 2003. The increase was primarily due to increases in
employee compensation and benefits expense, distribution expense and a one-time
marketing and sales promotion expenses. Nine Months EndedSeptember 30,
    
    Period-to-Period2003
    
    2004
    
    $ Change
    
    % Change(In thousands)Employee compensation and benefits
    
    $
    23,823
    
    
    $
    45,248
    
    
    $
    21,425
    
    
    
    90
    %Distribution expense
    
    
    14,409
    
    
    
    34,670
    
    
    
    20,261
    
    
    
    141
    %Amortization of deferred sales commissions
    
    
    13,691
    
    
    
    21,677
    
    
    
    7,986
    
    
    
    58
    %Marketing and sales promotion
    
    
    6,182
    
    
    
    15,730
    
    
    
    9,548
    
    
    
    154
    %General and administrative
    
    
    6,186
    
    
    
    10,563
    
    
    
    4,377
    
    
    
    71
    %Total operating expenses
    
    $
    64,291
    
    
    $
    127,888
    
    
    $
    63,597
    
    
    
    99
    %
 Employee compensation and benefits, increased by 90% to $45.2 million
primarily due to increased staffing levels, increased compensation rates,
including accrued annual bonuses, and increased costs associated with our
equity appreciation unit plan. Distribution expense increased by $20.2 million,
or 141%, primarily due to growth of average open-end fund assets under
management, as well as the aging of Class C shares of our open-end funds. Class
C share assets do not generate distribution expense in the first year following
their sale because we retain the Rule 12b-1 fees during that first year to
offset the upfront commissions that we pay. However, Class C share assets do
generate a distribution expense in subsequent years as we pay the Rule 12b-1
fees to the selling firms. We expect distribution expense to increase to the
extent mutual fund sales and assets under management continue to grow.
Amortization of deferred sales commissions increased by $8.0 million, or 58%,
primarily due to the $15.7 million, or 36%, increase in the deferred commission
asset resulting from the additional commissions advanced on purchases of Class
B and C shares of the open-end funds. Marketing and sales promotion expenses
increased by $9.5 million primarily due to an increase of $9.1 million in
supplemental compensation payments to third-party selling agents. This
increase is largely attributable to a $6.0 million one-time fee to underwriters
in connection with a closed-end fund offering during the period. General and
administrative expenses increased by $4.4 million, or 71%, predominantly as a
result of increased occupancy, travel, professional and business services of
$3.2 million as a result of our increased staffing levels. -17-




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Other Income (Expense), Net Other income (expense), net was a net expense of $1.0 million for the nine
months ended September 30, 2004 as compared to a net expense of $41,000 for the
nine months ended September 30, 2003. Investment and other income for the nine
months endings September 30, 2004 included a gain of approximately $2 million
related to the distribution of all of our real estate assets consisting of our
existing and future corporate headquarters and related property and equipment.
The gain was offset by an increase in interest expense attributable to our
issuance in April 2004 of $150.0 million aggregate principal amount of Senior
Unsecured Notes due 2011 with a fixed rate of 5.24%. Nine Months EndedSeptember 30,
    
    Period-to-Period2003
    
    2004
    
    $ Change
    
    % Change(In thousands)Investment and other income
    
    $
    694
    
    
    $
    2,908
    
    
    $
    2,214
    
    
    
    319
    %Interest expense
    
    
    (735
    )
    
    
    (3,946
    )
    
    
    (3,211
    )
    
    
    437
    %Total other income (expense), net
    
    $
    (41
    )
    
    $
    (1,038
    )
    
    $
    (997
    )
    
    
    *
   Net Income Net income totaled $90.3 million for the nine months ended September 30,
2004 as compared to $43.8 million for the nine months ended September 30, 2003,
an increase of 106%. Nine Months EndedSeptember 30,
    
    Period-to-Period2003
    
    2004
    
    $ Change
    
    % Change(In thousands)Total revenues
    
    $
    108,900
    
    
    $
    220,746
    
    
    $
    111,846
    
    
    
    103
    %Total operating expenses
    
    
    64,292
    
    
    
    127,887
    
    
    
    63,595
    
    
    
    99
    %Operating income
    
    
    44,608
    
    
    
    92,859
    
    
    
    48,251
    
    
    
    108
    %Other income/(expense)
    
    
    (41
    )
    
    
    (1,037
    )
    
    
    (996
    )
    
    
    *Income taxes
    
    
    735
    
    
    
    1,565
    
    
    
    830
    
    
    
    113
    %Net income
    
    $
    43,832
    
    
    $
    90,257
    
    
    $
    46,425
    
    
    
    106
    %
   Income Taxes During both nine month-periods our business was operated as an S
corporation. As a result, income taxes during these periods are not indicative
of our expected future income taxes. We currently operate as a C corporation
and as such will be subject to taxes applicable to C corporations in the
future. Liquidity and Capital Resources Our working capital requirements historically have been met through cash
generated by our operations and bank borrowings, as well as our issuance during
2004 of $150.0 million aggregate principal amount of Senior Unsecured Notes due
2011. The following tables summarize key statement of financial condition data
relating to our liquidity and capital resources. -18-




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At December 31, 2003
    
    As Sept. 30, 2004(in thousands)Statement of financial condition data:Cash and cash equivalents
    
    $
    5,073
    
    
    $
    117,023Receivables
    
    
    23,092
    
    
    
    29,624Investments
    
    
    10,389
    
    
    
    58,670Deferred sales commissions
    
    
    49,236
    
    
    
    59,365Current portion of bank debt
    
    
    15,676
    
    
    
    Long-term debt
    
    
    23,008
    
    
    
    150,000
 Nine Months EndedSeptember 30,2003
    
    2004(in thousands)Cash flow data:Net cash provided by operating activities
    
    $
    20,190
    
    
    $
    93,578Net cash used in investing activities
    
    
    (5,868
    )
    
    
    (56,076
    )Net cash provided by (used in) financing activities
    
    
    (13,069
    )
    
    
    74,448
 Net cash provided by operating activities was $93.6 million for the nine
months ended September 30, 2004, an increase of $73.4 million from $20.2
million for the nine months ended September 30, 2003 with an increase in net
income of $46.4 million being the largest contributor to this increase. We
expect that operating cash flows will serve as our primary source of working
capital for the near future. The payment of deferred sales commissions by us to financial
intermediaries who sell Class B and C shares of the open-end funds we manage is
a significant use of our operating cash flows. Use of cash for deferred sales
commissions increased by $2.5 million to $31.9 million for the nine months
ended September 30, 2004 from $29.4 million for the nine months ended September
30, 2003. We expect that the payment of deferred sales commissions will
continue to increase in the future to the extent sales of Class B and C shares
of open-end funds continue to increase. The amortization of deferred sales
commissions will similarly be affected. Investing activities consist primarily of investments in products that we
sponsor and of the purchase of furniture, fixtures and equipment. Net cash used
in investing activities increased to $56.7 million for the nine months ended
September 30, 2004 from $5.9 million for the nine months ended September 30,
2003 as a result of investment in products managed by us of $47.2 million and
increases in furniture, fixtures and equipment to support our increasing
staffing levels. We anticipate increasing the future level of investments in
products managed by us and expect to use a portion of our net proceeds from our
initial public offering to seed new products, including open-end funds and
alternative investments. Net cash provided by financing activities was $74.5 million for the nine
months ended September 30, 2004 as compared to net cash used in financing
activities of $13.1 million for the nine months ended September 30, 2003. The
change resulted from the issuance of $150.0 million aggregate principal amount
of Senior Unsecured Notes, offset by the repayment of $30.4 million of bank and
mortgage debt and a $20.8 million increase in distributions to owners,
including distributions for their S corporation tax liabilities. On April 29, 2004, we issued $150.0 million aggregate principal amount of
5.24% Senior Unsecured Notes due April 29, 2011. We used a portion of those net
proceeds to repay and terminate a credit facility of approximately $30.0
million, which we entered into during 2002, primarily to finance our payment of
deferred sales commissions with respect to open-end funds. We currently fund
the payment of deferred sales commissions from operating cash flows and expect
to continue to do so in future periods. Our total capital at September 30, 2004 was $234.3 million and was
comprised of $84.3 million of stockholder equity and $150.0 million of debt
under our Senior Unsecured Notes. We expect that in the future, our cash and
liquidity requirements will be met primarily through cash generated by
operations. -19-




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Critical Accounting Policies and Estimates The preparation of our consolidated financial statements in accordance
with accounting principles generally accepted in the United States of America
requires management to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable
under current circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not
readily available from other sources. We evaluate our estimates on an ongoing
basis. Actual results may differ from these estimates under different
assumptions or conditions. Accounting policies are an integral part of our consolidated financial
statements. A thorough understanding of these accounting policies is essential
when reviewing our reported results of operations and our financial position.
Management believes that the critical accounting policies and estimates
discussed below involve additional management judgment due to the sensitivity
of the methods and assumptions used. Deferred Sales Commissions Deferred sales commissions are commissions advanced by us on the sale of
Class B and Class C shares of the open-end funds. Deferred sales commissions
are amortized on a straight-line basis over the period in which 12b-1 fees are
received. Because 12b-1 fees cease upon redemption of shares, amortization
expense is accelerated when shares are redeemed, resulting in the reduction of
the deferred sales commission asset. These redemptions result in an
amortization period not to exceed 12 months for Class C shares and 96 months (8
years) for Class B shares. We evaluate the carrying value of our deferred sales commissions for
impairment purposes on a quarterly basis. Significant assumptions utilized by
us to estimate future average assets under management include expected future
market performance and redemption rates. Market performance assumptions are
selected using expected average market returns based on long-term historical
returns for each asset class held within the fund. Future redemption
assumptions were determined by using the actual redemption rates that each fund
experienced over the prior twenty-four month period. These assumptions are
reviewed and updated quarterly, or monthly when events or changes in
circumstances occur that could significantly increase the risk of impairment of
the asset. Estimates of undiscounted future cash flows and the remaining life
of the deferred sales commission asset are made from these assumptions. If we determine that the deferred sales commission asset is not
recoverable, an impairment condition would exist and a loss would be measured
as the amount by which the recorded amount of the asset exceeds its estimated
fair value. If the carrying value of the deferred sales commission asset
exceeds the undiscounted cash flow, the asset is written down to fair value
based on discounted cash flows. Impairment adjustments are recognized in the
statement of income as a component of amortization of deferred sales
commissions. As of each reporting period presented, we determined that no
impairment of the deferred commission asset existed, but due to the volatility
of the capital markets and the changes in redemption rates, we are unable to
predict whether or when future impairment of the deferred sales commission
asset might occur. Equity Incentive Plan We established a long-term equity appreciation unit plan (EAU Plan) for
select individuals employed by us. We accounted for the EAU Plan using the
accounting methods prescribed by Financial Accounting Standards Board Financial
Interpretation No. 28, Accounting for Stock Appreciation Rights and Other
Variable Stock Option or Award Plans, an interpretation of APB Opinions No. 15
and 25(FIN 28), and its related interpretations. In accordance with FIN 28,
compensation expense was accrued over the periods in which employees perform
services. As such, changes in the aggregate unit value, multiplied by the ratio
of actual to total number of service periods in the vesting period were
recorded as an increase or decrease to expense in the current period. The value of the EAU at the valuation date was derived from an equally
weighted calculation based on multiples of assets under management, revenue and
EBITDA, defined as net income plus interest expense, income taxes and fixed
asset depreciation, excluding amortization of deferred sales commissions. We
use industry multiples provided by independent third party sources in computing
the values. -20-




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Recently Issued Accounting Pronouncements In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation (FIN) No. 46, Consolidation of Variable Interest Entities(FIN
46), which establishes guidance for consolidation of variable interest entities
that function to support the activities of the primary beneficiary. FIN 46
requires a variable interest entity to be consolidated by a company if that
company is subject to a majority of the risk of loss from the variable interest
entitys activities or is entitled to receive a majority of the entitys
residual returns. An entity that consolidates a variable interest entity is
called the primary beneficiary of that entity. In general, a variable interest
entity is a corporation, partnership, trust or any other legal structure used
for business purposes that either (a) does not have equity investors with
voting rights, or (b) has equity investors that do not provide sufficient
financial resources for the entity to support its activities. FIN 46 also
requires various disclosures about variable interest entities that a company is
not required to consolidate but in which it has a significant variable
interest. In December 2003, the FASB further revised FIN 46 through FIN No. 46R,
Consolidation of Variable Interest Entities(FIN 46R). FIN 46R changes the
effective date of FIN 46 for certain entities and makes other significant
changes to FIN 46 based on implementation issues that arose during 2003.
Application of FIN 46R is required for periods ending after December 15, 2003
for all interests in special purpose entities and for periods ending after
March 15, 2004 for interest in other entities. We have an investment in Calamos Multi-Strategy, L.P., a private
investment partnership managed by one of our subsidiaries. In assessing if
Calamos Multi-Strategy, L.P. is a variable interest entity (VIE), the criteria
in paragraph 5 of FIN 46R must be evaluated. In general terms, FIN 46R
indicates: if (a) the total equity investment at risk is not sufficient for an
entity to finance it activities, (b) if the group of equity investors of an
entity lacks certain characteristics of a controlling financial interest, or
(c) the voting rights of the equity investors are not proportionate to their
returns and substantially all of the entitys activities either involve or are
conducted on behalf of one investor, that entity is considered a VIE and is
subject to consolidation according to the provisions of FIN 46R. Accordingly,
we determined that such criteria in paragraph 5 of FIN 46R have not been met
and the partnership is therefore not considered a VIE. We have determined that Calamos Multi-Strategy, L.P., in which Calamos
Financial Services holds a general partnership interest, is a voting interest
entity. We account for our investment in Calamos Multi-Strategy, L.P. in
accordance with AICPA Statement of Position No. 78-9. Consistent with others in
the industry, we have historically relied primarily on redemption rights of the
limited partners to meet the important rights requirement of SOP 78-9. In
light of current accounting developments regarding what constitutes important
rights (including open EITF Issue 04-5  Investors Accounting for an
Investment in a Limited Partnership When the Investor is the Sole General
Partner and the Limited Partners Have Certain Rights), we amended our limited
partnership agreements in 2004 to incorporate additional rights, namely to
replace the general partner by a simple majority vote of the limited partners
excluding related parties. These amendments will allow us to continue to
account for our general partnership interests in the Calamos Multi-Strategy,
L.P. on the equity method of accounting and not consolidate it into our
results. Forward-Looking Information From time to time, information or statements provided by us or on our behalf,
including those within this Quarterly Report, may contain certain
forward-looking statements relating to future events, future financial
performance, strategies, expectations and competitive environment, and
regulations. These forward-looking statements include, without limitation,
statements regarding proposed new products; results of operations or liquidity;
projections, predictions, expectations, estimates or forecasts as to our
business, financial and operating results and future economic performance; and
managements goals and objectives and other similar expressions concerning
matters that are not historical facts. Words such as may, will, should, could, would, predicts,
potential, continue, expects, anticipates, future, intends,
plans, believes, estimates, and similar expressions, as well as
statements in future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future
performance or results, and will not necessarily be accurate indications of the
times at, or by, which such performance or results will be achieved.
Forward-looking statements are based on information available at the time those
statements are made and/or managements 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 -21-




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differences include, but are not limited to: adverse changes in applicable laws
or regulations; downward fee pressures and increased industry competition;
risks inherent to the investment management business; the loss of revenues due
to contract terminations and redemptions; conflicts of interest due to our
ownership structure; general declines in the prices of securities; the loss of
key executives; the unavailability of third-party retail distribution channels;
failure to recruit and retain qualified personnel; a loss of revenues if our
largest funds perform poorly; failure to comply with client and mutual fund
board guidelines; non-performance of third-party vendors and our holding
company structure. Further, the value and composition of our assets under
management are, and will continue to be, influenced by a variety of factors
including, among other things: purchases and redemptions of shares of the
open-end funds and other investment products; fluctuations in the financial
markets around the world that result in appreciation or depreciation of assets
under management; our introduction of new investment strategies and products;
our ability to educate our clients about our investment philosophy and provide
them with best-in-class service; the relative investment performance of our
investment products as compared to competing offerings and market indices;
competitive conditions in the mutual fund, asset management and broader
financial services sectors; investor sentiment and confidence; and our decision
to close strategies when deemed in the best interests of our clients. Forward-looking statements speak only as of the date the statements are made.
Readers should not place undue reliance on any forward-looking statements. We
assume no obligation to update forward-looking statements to reflect actual
results, changes in assumptions or changes in other factors affecting
forward-looking information, except to the extent required by applicable
securities laws. 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk. Our exposure to market risk is directly related to the role of our
subsidiaries as investment advisers for the mutual funds and separate accounts
they manage. A significant majority of our revenue, approximately 95% for the
nine months ended September 30, 2004, is derived from investment advisory,
distribution and portfolio accounting agreements with the mutual funds and
separate accounts. Under these agreements, the fees we receive are typically
based on the market value of the assets under management. Accordingly, a
decline in the prices of securities generally may cause our revenue and income
to decline by causing the value of the assets we manage to decrease or by
causing our clients to withdraw funds in favor of investments that they
perceive as offering greater opportunity or lower risk. In addition, a decline in the prices of securities may present market
conditions that could preclude us from increasing assets under management and
prevent us from realizing higher fee revenue associated with such growth. We are also subject to market risk due to a decline in the prices of
investment securities. We own investment securities primarily comprised of
mutual funds managed by Calamos Advisors. At September 30, 2004, the fair value
of these investment securities was $58.7 million. Assuming a 10% increase or
decrease in the value of these investments, the fair value would increase or
decrease by $5.9 million at September 30, 2004. On April 29, 2004, we issued
$150 million of Senior Unsecured Notes due April 29, 2011 to various note
purchasers in a private placement. These notes have a fixed interest rate of
5.24%, and consequently, we do not believe that these notes have any interest
rate risk. Due to the nature of our business, we believe that we do not face
any material credit risk, inflation, interest rate or foreign currency rate
risk. 
 Item 4. Controls and Procedures. Our management, including our principal executive and principal financial
officers, has evaluated the effectiveness of our disclosure controls and
procedures as of September 30, 2004, and has concluded that such disclosure
controls and procedures are effective to ensure that information required to be
disclosed by us in the reports that we file or submit under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported, within
the time periods specified in the SECs rules and forms. Our management, including our principal executive and principal financial
officers, has evaluated any changes in our internal control over financial
reporting that occurred during the quarterly period ended September 30, 2004,
and has concluded that there was no change during the quarterly period ended
September 30, 2004 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting. -22-




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##### Table of Contents



PART II  OTHER INFORMATION 
 Item 1. Legal Proceedings. In the normal course of business, we may be subject to various legal
proceedings from time to time. Currently, there are no legal proceedings
pending against us or any of our subsidiaries. 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. (a) In July 2004, upon our incorporation, we issued 100 shares of common
stock to Calamos Holdings, Inc. in exchange for $1.00. In connection with our
initial public offering, in October 2004 each of those shares of common stock
was changed into and reclassified as a share of our Class B common stock. Each
share of our Class B common stock is convertible at the option of the holder
into one share of our Class A common stock. Any shares of Class B common stock
transferred to a person other than a member of the Calamos family or any entity
controlled by one or more members of the Calamos family shall automatically
convert to shares of our Class A common stock upon such disposition. If the
number of outstanding shares of our Class B common stock plus the number of
membership units in Calamos Holdings LLC and shares of Class A common stock
owned by the holders of the Class B common stock falls below 15% of the total
number of outstanding membership units in Calamos Holdings LLC, then all
outstanding shares of our Class B common stock shall automatically convert into
our Class A common stock. (b) The effective date of our registration statement filed on Form S-1
under the Securities Act of 1933 (File No. 333-117847) relating to our initial
public offering of shares of Class A common stock was October 27, 2004. A total
of 23,000,000 shares of the our Class A common stock were registered, and all
shares were sold. The joint bookrunning managers for the offering were
Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated. The offering commenced on October 27, 2004 and has been completed. The
offering price per share was $18.00 resulting in gross offering proceeds to us
of $414,000,000. The underwriting discount was $27,945,000, none of which was
paid to our affiliates. We incurred approximately $3.2 million of other
expenses in connection with the offering. The net proceeds to us totaled
approximately $383.3 million. 
 Item 3. Defaults Upon Senior Securities. Not Applicable. 
 Item 4. Submission of Matters to a Vote of Security Holders. Not Applicable. 
 Item 5. Other Information UNAUDITED PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma condensed consolidated financial
statements have been derived by applying pro forma adjustments to our
historical consolidated financial statements included in this report. The adjustments necessary to fairly present the unaudited pro forma
condensed consolidated financial statements are based on available information
and assumptions that we believe are reasonable. The unaudited pro forma
condensed consolidated statements of income and financial condition are
presented for illustrative purposes only and do not purport to represent our
consolidated results of operations or financial position that would actually
have occurred had the transactions referred to below been consummated on
January 1, 2004 for the consolidated statement of income and on September 30,
2004 for the consolidated statement of financial condition, or to project our
consolidated results of operations or financial position for any future date or
period. -23-




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##### Table of Contents



The unaudited pro forma condensed consolidated income statement for the
nine months ended September 30, 2004 give pro forma effect to the
Reorganization, including (1) the Real Estate Distribution, by which Calamos
Family Partners, Inc. distributed its interest in all of its owned real estate
assets to its stockholders, who contributed those assets to a new limited
liability company, Calamos Property Holdings LLC, (2) the Formation
Transaction, by which Calamos Family Partners, Inc. established Calamos
Holdings LLC as a Delaware limited liability company and contributed all of its
assets and liabilities, including all equity interests in its wholly-owned
subsidiaries, to Calamos Holdings LLC in exchange for all of the membership
units of Calamos Holdings LLC and (3) the consummation of our initial public
offering and our application of a portion of the net proceeds from the offering
to purchase newly issued membership units in Calamos Holdings LLC and the
remaining net proceeds to purchase membership units in Calamos Holdings LLC
from Calamos Family Partners, Inc., in each case as though such transactions
had occurred at the beginning of such periods. The unaudited pro forma
consolidated statement of financial condition as of September 30, 2004 gives
pro forma effect to the transactions described above as if they had occurred on
September 30, 2004, except that it does not give pro forma effect to the Real
Estate Distribution, as such distribution occurred on June 30, 2004 and is
already reflected in our historical results as of September 30, 2004. As a result of the Reorganization, we became the sole manager of Calamos
Holdings LLC, and, together with its direct and indirect subsidiaries, are
conducting the business formerly conducted by the subsidiaries of Calamos
Family Partners, Inc. As sole manager of Calamos Holdings LLC, we operate and
control all of the business and affairs of Calamos Holdings LLC and consolidate
the financial results of Calamos Holdings LLC with ours. In light of Calamos
Family Partners, Inc.s and John P. Calamos, Sr.s 77.0% aggregate ownership
interest in Calamos Holdings LLC, we reflect such ownership interest as a
minority interest in our statement of financial condition and statement of
income. Our historical results are those of Calamos Family Partners, Inc., as
our predecessor company. As a result, our net income, after excluding Calamos
Family Partners, Inc.s and John P. Calamos, Sr.s minority interest,
represents 23.0% of Calamos Holdings LLCs net income, and similarly,
outstanding shares of our Class A common stock represent 23.0% of the
outstanding membership units of Calamos Holdings LLC. Read this unaudited pro forma condensed consolidated financial information
together with the other information contained in this report, including
Managements Discussion and Analysis of Financial Condition and Results of
Operations, and our unaudited interim consolidated financial statements and
the notes thereto. -24-




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##### Table of Contents



PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
As of September 30, 2004
(In thousands)
(Unaudited) Pro FormaHistorical
    
    Adjustments
    
    As AdjustedAssets:Current assetsCash and cash equivalents
    
    $
    117,023
    
    
    $
    53,172
    (1)
    
    $
    170,195Receivables:Affiliates and affiliated funds
    
    
    24,441
    
    
    
    
    
    
    
    24,441Customers
    
    
    5,183
    
    
    
    
    
    
    
    5,183Investment securities, trading and available for sale
    
    
    58,670
    
    
    
    
    
    
    
    58,670Other current assets
    
    
    5,265
    
    
    
    
    
    
    
    5,265Total current assets
    
    
    210,582
    
    
    
    53,172
    
    
    
    263,754Non-current assetsDeferred sales commissions
    
    
    59,366
    
    
    
    
    
    
    
    59,366Property and equipment, net
    
    
    4,100
    
    
    
    
    
    
    
    4,100Other non-current assets
    
    
    2,966
    
    
    
    
    
    
    
    2,966Total non-current assets
    
    
    66,432
    
    
    
    
    
    
    
    66,432Total assets
    
    $
    277,014
    
    
    $
    53,172
    
    
    $
    330,186Liabilities:Current liabilitiesAccounts payable:Brokers
    
    $
    10,077
    
    
    $
    
    
    
    $
    10,077Affiliates
    
    
    87
    
    
    
    
    
    
    
    87Accrued compensation and benefits
    
    
    6,798
    
    
    
    
    
    
    
    6,798Current portion of bank debt
    
    
    
    
    
    
    
    
    
    
    Accrued expenses and other current liabilities
    
    
    16,677
    
    
    
    
    
    
    
    16,677Total current liabilities
    
    
    33,639
    
    
    
    
    
    
    
    33,639Long-term liabilitiesLong-term debt
    
    
    150,000
    
    
    
    
    
    
    
    150,000Deferred compensation
    
    
    9,093
    
    
    
    
    
    
    
    9,093Total long-term liabilities
    
    
    159,093
    
    
    
    
    
    
    
    159,093Total liabilities
    
    
    192,732
    
    
    
    
    
    
    
    192,732Minority interest
    
    
    
    
    
    
    105,840
    
    
    
    105,840
    (2)Stockholder equity:Common Stock  Class A, no par value, 5,000 shares
authorized, 3,953 shares issued and outstanding on an
actual basis; none issued and outstanding on a pro forma
basis
    
    
    
    
    
    
    
    
    
    
    Common Stock  Class A, $.01 par value, none issued and
outstanding on an actual basis; 100,000,000 authorized,
23,000,000 issued and authorized on a pro forma basis
    
    
    
    
    
    
    230
    
    
    
    230
    (2)Common Stock  Class B, no par value, 20,000 shares
authorized, 16,047 shares issued and authorized on an
actual basis; none issued and outstanding on a pro forma
basis
    
    
    
    
    
    
    
    
    
    
    Common Stock  Class B, no par value, none issued and
authorized on an actual basis; 100 share authorized,
issued and outstanding on a pro forma basis
    
    
    
    
    
    
    
    
    
    
    Additional paid in capital
    
    
    2,274
    
    
    
    28,420
    
    
    
    30,694
    (2)Retained earnings
    
    
    79,066
    
    
    
    (79,066
    )
    
    
    
    (2)Accumulated other comprehensive income
    
    
    3,002
    
    
    
    (2,312
    )
    
    
    690
    (2)Total stockholder equity
    
    
    84,282
    
    
    
    (2,668
    )
    
    
    31,614
    (2)Total liabilities, minority interest and stockholder equity
    
    $
    277,014
    
    
    $
    53,172
    
    
    $
    330,186
 -25-




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##### Table of Contents



PRO FORMA CONSOLIDATED INCOME STATEMENT
For the Nine Months Ended September 30, 2004
(In thousands, except per share data)
(Unaudited) Pro FormaHistorical
    
    Adjustments
    
    As AdjustedRevenues:Investment management fees
    
    $
    148,540
    
    
    $
    
    
    
    $
    148,540Distribution and underwriting fees
    
    
    70,571
    
    
    
    
    
    
    
    70,571Other
    
    
    1,635
    
    
    
    (157
    )(3)
    
    
    1,478Total revenues
    
    
    220,746
    
    
    
    (157
    )
    
    
    220,589Operating Expenses:Employee compensation and benefits
    
    
    45,248
    
    
    
    (123
    )(3)
    
    
    45,125Distribution expense
    
    
    34,670
    
    
    
    
    
    
    
    34,670Amortization of deferred sales commissions
    
    
    21,677
    
    
    
    
    
    
    
    21,677Marketing and sales promotion
    
    
    15,730
    
    
    
    
    
    
    
    15,730General and administrative
    
    
    10,563
    
    
    
    115
    (3)
    
    
    10,678Total operating expenses
    
    
    127,888
    
    
    
    (8
    )
    
    
    127,880Operating income
    
    
    92,858
    
    
    
    (149
    )
    
    
    92,709Other income (expense), net:Investment and other income
    
    
    2,908
    
    
    
    (1,989
    )(3)
    
    
    919Interest expense
    
    
    (3,946
    )
    
    
    181
    (3)
    
    
    (3,765
    )Total other income (expense), net
    
    
    (1,038
    )
    
    
    (1,808
    )
    
    
    (2,846
    )Income before minority interest and income taxes
    
    
    91,821
    
    
    
    (1,957
    )
    
    
    89,864Minority interest
    
    
    
    
    
    
    69,196
    (4)
    
    
    69,196Income before income taxes
    
    
    91,821
    
    
    
    (71,153
    )
    
    
    20,668Income taxes
    
    
    1,565
    
    
    
    6,702
    (5)
    
    
    8,267Net income
    
    $
    90,256
    
    
    $
    (77,855
    )
    
    $
    12,401Pro forma basic earnings per share based on 23,000,100 average
shares outstanding(6)
    
    
    
    
    
    
    
    
    
    $
    0.54Pro forma diluted earnings per share based on 100,000,100 average
shares outstanding(7)
    
    
    
    
    
    
    
    
    
    $
    0.54
 -26-




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NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)  (1)
    
    Reflects application of $49,872 of net proceeds from our initial public
offering to purchase newly issued membership units in Calamos Holdings LLC
as well as a $3,300 contribution by John P. Calamos, Sr. in exchange for
200,000 newly issued membership units in Calamos Holdings LLC.(2)
    
    The pro forma balance sheet amounts of minority interest and stockholder
equity at September 30, 2004 were determined by multiplying the respective
aggregate post-Reorganization ownership percentage of Calamos Family
Partners, Inc. and John P. Calamos, Sr. (77.0% minority interest) and
Calamos Asset Management, Inc. (23.0%) by the historical stockholder
equity ($84,282) plus the net proceeds ($49,872) plus the contribution by
John P. Calamos, Sr. ($3,300). The sum of historical stockholder equity,
net proceeds of our initial public offering, and the contribution by John
P. Calamos, Sr. multiplied by the minority interest percentage of 77.0%,
or $105,840, represents the pro forma minority interest at September 30,
2004. The sum of historical stockholder equity, net proceeds of our
initial public offering, and the contribution by John P. Calamos, Sr.
multiplied by 23%, or $31,614, represents the pro forma stockholder equity
of Calamos Asset Management, Inc. at September 30, 2004. The pro forma
adjustments to stockholder equity were determined as follows: (a) common
stock was created by multiplying the Class A common shares of 23,000,000
by $0.01 per share par value ($230); (b) accumulated other comprehensive
income (AOCI) was created by multiplying historical AOCI by the 77.0%
minority interest; (c) retained earnings were eliminated entirely; and (d)
additional paid in capital was derived as the difference between $31,614
the AOCI balance as adjusted of $690.(3)
    
    On June 30, 2004, land, building, property and equipment with a fair
value of $18,355 and mortgage debt of $8,485 were distributed by Calamos
Family Partners, Inc. to its stockholders who contributed them to a new
limited liability company. In addition, the expense of operating and
maintaining the building, including certain employee compensation expense,
was transferred from Calamos Family Partners, Inc. to the new limited
liability company. An adjustment has been made to investment and other
income for the nine months ended September 30, 2004 to exclude the
realized gain of $1,989 recognized on the disposition. For the nine months
ended September 30, 2004, adjustments were made to reflect Calamos Family
Partners, Inc. as if it did not own the real estate. These adjustments
were to decrease sub-lease rental income in other revenue by $157, to
decrease employee compensation and benefits by $123, to decrease interest
expense by $182, to decrease depreciation expense and other professional
expenses by $232, which offset the increase within rent expense of $347 in
general and administrative expenses.(4)
    
    Represents a minority interest allocation equal to 77.0% of the income of
Calamos Holdings LLC to Calamos Family Partners, Inc. and John P. Calamos,
Sr. Minority interest was determined by multiplying the pro forma income
before minority interest and taxes by Calamos Family Partners, Inc.s and
John P. Calamos, Sr.s 77.0% aggregate ownership. The minority interest
adjustment is presented based on the income of Calamos Holdings LLC.(5)
    
    Reflects the impact of federal and state income taxes on the income
allocated from Calamos Holdings LLC to Calamos Asset Management, Inc.
Historically, Calamos Family Partners, Inc. operated as an S corporation
and was not subject to U.S. federal and certain state income taxes, but
was subject to Illinois replacement taxes. The amount of pro forma
adjustment was determined by eliminating the Illinois Replacement tax and
combining the projected federal corporate income tax rate with the
applicable state tax rates, rounded to the nearest full percent and
applying to income before taxes.(6)
    
    Represents 23,000,000 shares of Class A common stock, which represents
23.0% of the outstanding shares after the offering. In addition to shares
of Class A common stock, there are 100 shares of Class B common stock
outstanding.(7)
    
    Our diluted shares outstanding at September 30, 2004 represent, after
giving effect to our initial public offering, 100,000,100 shares of our Class A
common stock, assuming Calamos Family Partners, Inc. and John P. Calamos,
Sr. exchanged all of their membership units in Calamos Holdings LLC for,
and converted all outstanding shares of our Class B common stock
into, shares of our Class A common stock, in each case on a one-for-one basis,
as of the date of our initial public offering. In calculating diluted
earnings per share net income was increased by $41,517, resulting from the
elimination of the $69,196 minority interest, net of $27,678 in income
taxes. -27-




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##### Table of Contents



Item 6. Exhibits. The following exhibits required by Item 601 of Regulation S-K are furnished
herewith.  3.1
    
    Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference
to Exhibit 3.1 to the Registrants Current Report on Form 8-K filed with the Securities and
Exchange Commission on November 2, 2004).3.2
    
    Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 to the
Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on
November 2, 2004).4.1
    
    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.4.2
    
    Registration Rights Agreement between Calamos Family Partners, Inc., John P. Calamos, Sr. and
the Registrant.10.1
    
    Employment Agreement between the Registrant and John P. Calamos, Sr.10.2
    
    Employment Agreement between the Registrant and Nick P. Calamos.10.3
    
    Employment Agreement between the Registrant and James S. Hamman, Jr.10.4
    
    Employment Agreement between the Registrant and Patrick H. Dudasik.10.5
    
    Calamos Asset Management, Inc. Incentive Compensation Plan.10.6
    
    Form of EAU-Based RSU Award Statement10.7
    
    Form of IPO Equity Award Statement10.8
    
    Form of Services-Based RSU Award Statement10.9
    
    Contribution Agreement between the Registrant and Calamos Holdings, LLC10.10
    
    Tax Indemnity Agreement among the Registrant, Calamos Family Partners, Inc. and Calamos Family
Holdings LLC10.11
    
    Second Amended and Restated Limited Liability Company Agreement of Calamos Holdings LLC
effective as of November 2, 2004, by and among Calamos Family Partners, Inc., John P. Calamos,
Sr. and the Registrant.10.12
    
    Management Services Agreement between the Registrant and Calamos Family Partners, Inc.31.1
    
    Certification of Principal Executive Officer required under Section 302.31.2
    
    Certification of Principal Financial Officer required under Section 302.32.1
    
    Certifications required under Section 906. -28-




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SIGNATURES Pursuant to the requirements 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. CALAMOS ASSET
MANAGEMENT, INC.
        
         (Registrant)Date: December 3, 2004
    
    By:
    
    /s/  Patrick H. DudasikPatrick H. DudasikExecutive Vice President and Chief
        
Financial Officer and Treasurer
 -29-