CALAMOS ASSET MANAGEMENT, INC.
September 10, 2004
VIA ELECTRONIC TRANSMISSION
Mr. William Friar
Senior Financial Analyst
Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
Calamos Asset Management, Inc.
File No. 333-117847
Responses to SEC Comment Letter dated September 2, 2004
Dear Mr. Friar:
On behalf of Calamos Asset Management, Inc. (the "Company"), set
forth below are the comments of the staff of the Securities and Exchange
Commission (the "Commission") received in your letter dated September 2, 2004
relating to the Company's registration statement on Form S-1 (File No.
333-117847) filed on August 2, 2004 (the "Registration Statement"), including
the prospectus contained therein (the "Prospectus"). Each comment is followed by
the Company's response to that comment. Capitalized terms used but not defined
herein have the meanings assigned to them in the Registration Statement.
This letter should be read in conjunction with the accompanying
Amendment No. 1 to the Registration Statement ("Amendment No. 1"), which the
Company filed with the Commission on the date hereof. In this letter, all page
references set forth in the Company's responses to the staff's comments refer to
page numbers in Amendment No. 1. To assist the staff in reviewing Amendment No.
1, we are delivering, by overnight mail to Mr. Clampitt, a copy of this letter
and eight bound copies of Amendment No. 1. Four of the copies of Amendment No. 1
have been marked to show changes from the Registration Statement as originally
filed with the Commission on August 2, 2004.
By its responses herein and in Amendment No. 1, the Company believes
that it has addressed all of the comments of the staff of the Commission. The
Company is aware of its
Mr. William Friar
September 10, 2004
Page 2
obligations under the Securities Act and will request in writing an acceleration
of the effective date of the Registration Statement. At such time, the Company
will, pursuant to the staff's request, furnish a letter acknowledging the
matters specified in the bullet points included in the introductory paragraphs
of your letter dated September 2, 2004.
General
1. Please revise to delete legalese such as thereof, whereby,
therefrom, therein, therefore, whereas, etc.
The Company has revised its disclosure pursuant to the staff's
comments.
Prospectus Cover Page
2. The filing has a significant amount of non-Rule 430A information
missing. Please include the information in the next pre-effective
amendment. The staff may have significant comments upon our review
of the amendment and it may take us a significant amount of time to
review the amendment.
The Company has revised the Prospectus to include as much of the
missing non-Rule 430A information as is currently available. The
Company will revise the Prospectus further in a subsequent
pre-effective amendment to include additional non-Rule 430A
information as it becomes available.
3. The second paragraph indicates the existing holders will sell some
of their holdings in this offering. Revise to include a selling
shareholder section and include the membership units being sold, and
the proceeds to be received. Present the information with and
without the overallotment sales.
Pursuant to conversations with the staff, the Company has not
included a selling shareholder section in the Prospectus, but has
revised other sections of the Prospectus to provide additional
information regarding the membership units being sold and the
proceeds to be received by Calamos Family Partners, Inc. In
addition, the Company directs the staff to the "Principal
Stockholders" section of the Prospectus for additional information
about the beneficial ownership of the Company's common stock by the
stockholders of Calamos Family Partners, Inc. after the offering.
4. Revise the last paragraph to indicate the date the listing
application was filed.
The Company has revised the Prospectus cover page pursuant to the
staff's comments.
Mr. William Friar
September 10, 2004
Page 3
Table of Contents
5. Supplementally advise as to why the Calamos Growth and Income
Portfolio is not included in the references to "mutual funds" and
"open-end funds". We may have further comment.
The Company has excluded the Calamos Growth and Income Portfolio
from references to "mutual funds" and "open-end funds" because the
portfolio differs significantly from the other funds managed by the
Company. The Calamos Growth and Income Portfolio is a portfolio of
the Calamos Advisors Trust, a registered open-end investment
company. The portfolio's shares are offered to certain life
insurance companies for allocation to separate accounts established
for the purpose of funding variable annuity and variable life
insurance contracts. Unlike the shares of all other mutual funds
managed by the Company, the portfolio's shares are not offered
directly to the public. The Company believes that including the
Calamos Growth and Income Portfolio in references to "mutual funds"
and "open-end funds" throughout the Prospectus would render many
general discussions about mutual funds and open-end funds
inaccurate, particularly discussions about the distribution and sale
of, and fees earned on, such funds, and would be confusing to
prospective investors in the Company's Class A common stock. In
addition, at June 30, 2004, the portfolio represented only $28.2
million of the Company's $32.3 billion of assets under management.
The Company therefore submits that disclosure about the portfolio is
immaterial to prospective investors in the Company's Class A common
stock.
Summary-Overview
6. Regarding the reasons for the significant growth in funds under
management and related revenues and income and noting the
significant amount of deferred sales commissions, revise to explain
whether the arrangements to attract funds, or the compensation paid
by the Company to sales agents has changed during the periods
referenced.
Over the periods presented, the Company changed its arrangements to
attract mutual fund customers only insofar as it significantly
increased the size of its sales force and broadened its mandate to
emphasize sales of mutual funds and also entered into additional
third-party selling arrangements. The Company believes that these
measures, along with its strong investment performance, broad range
of investment strategies and diverse product offerings, resulted in
the growth in assets under management over the periods presented.
The disclosure in the "Summary - Our Company" section of the
Prospectus has been revised accordingly.
The Company distributes its mutual funds and managed accounts
through third-party selling agents. Over the periods presented, the
Company did not initiate any
Mr. William Friar
September 10, 2004
Page 4
changes to the compensation paid to these selling agents; however,
certain of the Company's third-party selling agents requested the
Company to make supplemental compensation payments, often referred
to as "revenue sharing" payments, to them.1 The Company's total
supplemental compensation payments to third-party selling agents as
a percentage of assets under management and revenues have decreased
over the periods presented and comprised 2.2% and 3.3% of the
Company's total revenues for the six months ended June 30, 2004 and
the year ended December 31, 2003, respectively. The Company does not
believe that the increase in the dollar amount of supplemental
compensation payments to certain third-party selling agents
contributed to the growth of the Company's assets under management,
but rather was necessary to maintain existing relationships. Given
that these supplemental compensation payments have been declining as
a percentage of assets under management and revenues and that the
Company does not believe that such payments were a contributing
factor to the growth of assets under management, the Company has not
included the requested disclosure.
Strategy, Investment Philosophy and Management
7. Revise to move these two sections to a place in the prospectus after
the risk factors, such as, the business section.
The Company advises the staff that the referenced sections are
summaries of disclosure that appears in the Business section of the
Prospectus. The Company has deleted the referenced sections from the
Summary section but has disclosed under "Summary - Our Company"
limited information previously included in those sections that the
Company believes is material to an investor's understanding of the
Company's business.
Reorganization
8. Revise to add information regarding both the "Real Estate
Distribution" and the "Formation Transaction" to include the pro
forma effect on assets, revenues and income. For the "Real Estate
Distribution", if the assets distributed will still be used by the
Company, disclose the anticipated dollar amount of expenses to be
incurred by the Company. For the "Formation Transaction", revise to
include a brief discussion of the S Corp termination and its effect
on 2004 earnings and cash flows, such as dividends that are expected
to be paid out of retained earnings.
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1 The Company advises the staff that it does not believe that the
characterization "revenue sharing" accurately reflects the nature of these
payments. Accordingly, the Company has deleted references to "revenue
sharing payments" throughout the Prospectus and replaced them with
"supplemental compensation payments."
Mr. William Friar
September 10, 2004
Page 5
The disclosure on page 2 of the Prospectus regarding the Real Estate
Distribution has been revised to reflect the fair value of the
assets, and the amount of mortgage debt, distributed to the
stockholders of Calamos Family Partners, Inc. The existing
headquarters of the Company, which were distributed in the Real
Estate Distribution, will continue to be occupied by the Company
until the Company's new headquarters, which are being constructed by
a company owned by stockholders of Calamos Family Partners, Inc. and
are expected to be completed in mid-2005, become available for
occupancy. The expected annualized monthly lease payments for the
Company's existing headquarters represent 1.25% of the Company's net
income for the year ended December 31, 2003. The Company therefore
believes the amount of the lease payments is immaterial, and it has
not disclosed them on page 2 of the Prospectus. The amount of the
lease payments, however, continues to be disclosed under "Certain
Relationships and Related Party Transactions - Lease of Corporate
Headquarters" in the Prospectus.
The pro forma impact of the Real Estate Distribution on the
Company's revenues for the six months ended June 30, 2004 and the
year ended December 31, 2003 was 0.1% and 0.2%, respectively, and
the pro forma impact on the Company's net income for the six months
ended June 30, 2004 and the year ended December 31, 2003 was 3.4%
and 0.1%, respectively. The Company does not believe that the pro
forma impact of the Real Estate Distribution on revenue and net
income is material and therefore has not revised the disclosure to
reflect this impact on page 2 of the Prospectus. This pro forma
impact, however, continues to be disclosed in the unaudited pro
forma financial information beginning on page 32 of the Prospectus.
The Company has added disclosure on page 3 of the Prospectus
discussing the impact on the Company of taxation as a C corporation.
9. Revise to disclose any other arrangements whereby the Calamos Family
Partners will derive revenues from the Company, such as, management
agreements, leases, etc.
The Company does not expect that Calamos Family Partners, Inc. will
derive any revenues from the Company. As discussed in response to
Comment No. 8 above and disclosed under "Certain Relationships and
Related Party Transactions - Lease of Corporate Headquarters" in the
Prospectus, the stockholders of Calamos Family Partners, Inc. will
derive revenues, indirectly through a company owned by them, from
the Company under the Company's lease for its corporate
headquarters. The Company has included additional disclosure
regarding the lease in the Prospectus.
Mr. William Friar
September 10, 2004
Page 6
The Offering
10. Revise here and the section titled "Use of Proceeds" to provide a
more detailed breakdown in the use of the proceeds, including the
amounts to be used for working capital. In this regard, disclose
what amounts will be used for expansion of the alternate investment
business and briefly explain that business. In addition, in the "Use
of Proceeds" section, revise to disclose the alternate uses
contemplated in the event that sufficient cash flow is generated by
operations.
The Company has revised its disclosure pursuant to the staff's
comments.
11. Revise the "Dividend Policy" section to indicate whether
consolidated income of the Company will be taxable to holders as
partnership interests or only taxable upon distributions and whether
or not those distributions will be treated as dividend income.
The Company has revised its disclosure pursuant to the staff's
comments.
12. Revise here and in the entire section titled "Summary" to remove the
cross-references.
The Company has revised its disclosure pursuant to the staff's
comments.
Summary Historical and Pro Forma Consolidated Financial and Other Data
13. Upon completion of the employment agreements, revise the pro forma
compensation expense if the going forward compensation is greater
than the presented compensation.
The Company will revise its disclosure upon completion of the
employment agreements.
14. Revise footnote (5) once the terms of the offering are finalized.
The Company will revise its disclosure once the terms of the
offering are finalized.
Risk Factors
15. Revise your risk factor section to take out all generic risk to all
companies in your industry or revise them to make them specific to
your company. For example the risk factor, "Future sales of our
Class A common stock in the public market could lower our stock
price, and any additional capital raised by us through the sale of
equity or convertible securities may dilute your ownership in us" is
common to any company that could sell additional securities. Another
example is your risk factor, "The requirements of being a public
company may strain our resources
Mr. William Friar
September 10, 2004
Page 7
and distract management." Make this specific why your company is
particularly more at risk than any other public company. If it is
not, delete this risk factor. Other examples is "the price of our
Class A common stock may fluctuate..." As a final example, see on
page 17, "Our failure to comply with the guidelines set by our
clients..." While superficially company specific, all it is saying
is that you, like any company, are at risk for customer
dissatisfaction if you fail to provide the service to your customers
that they pay you to provide. Please be specific as to why you would
not comply with your own guidelines or guidelines between you and
your customers.
The Company has revised the risk factor section to delete the risk
factor, "The requirements of being a public company may strain our
resources and distract management," and the risk factor, "The price
of our Class A common stock may fluctuate...." The Company has
retained the risk factor, "Future sales of our Class A common
stock...," because that risk factor explains the risk of dilution to
the holders Class A common stock if Calamos Family Partners, Inc.
converts its shares of Class B common stock into, or exchange its
membership units in Calamos Holdings LLC for, shares of the
Company's Class A common stock. The Company believes that this risk
is unique to the Company due to its dual class capital structure.
The Company has also retained the risk factor "Our failure to comply
with the guidelines set by our clients...," which is particular to
it as compared to issuers in other industries, since, as a
registered investment adviser, the Company has a fiduciary
obligation to its clients under Section 206 of the Investment
Advisers Act of 1940, as amended, and, with respect to certain
clients, under the Employee Retirement Income Security Act of 1974
(ERISA). In addition, in managing mutual fund assets, an adviser
must comply with limitations under the Investment Company Act and
the Internal Revenue Code. As a result, an investment adviser's
conduct will be measured against a higher standard of conduct than
that used for other types of commercial transactions. The Company
believes that because a registered investment adviser's fiduciary
obligations exceed the normal obligations of a company to its
customers, there is a unique risk of which prospective investors in
the Company's Class A common stock should be aware.
Related to Industry
"Our business and operations..."
16. Revise the second paragraph to disclose whether or not the Company
had any late trading or market timing activities in the funds it
manages during the periods covered by the financial statements
included in the filing. If so, please describe. If there are
policies that allow these types of activities, please also describe.
The Company advises the staff that it has not entered into any late
trading agreements or any agreements to permit short-term, frequent
trading with respect to the funds that it manages. Accordingly,
Mr. William Friar
September 10, 2004
Page 8
no disclosure has been added in response to this comment. The
Company has policies and procedures in place that are designed to
prevent and detect late trading and short-term, frequent trading
with respect to the funds that it manages.
Competition
17. Delete the risk paragraph for competition. Such disclosure can be
included in the business section.
The Company has deleted the risk factor. In addition, the Company
has supplemented its disclosure in the Business section under
"Competition" to address matters that had been addressed in the risk
factor.
12b-1 fees
18. Revise the disclosure to clarify that the 12b-1 are assessed on
holders of the mutual funds and briefly explain the reasons for the
increase, such as volume under management or increase in fee rate
charged. In addition, disclose the products which are assessed these
fees, such as, Class B and C shares of the open end funds and
disclose the increase in those products corresponding to the dates
disclosed for the fees, i.e., at 12/31/03 and at 6/30/04. If the
increase is attributable to an increase in the rate assessed, please
describe any such change.
The Company has revised its disclosure to clarify that each open-end
fund pays asset-based distribution fees to the Company and that the
amounts of such fees received by the Company have increased as its
assets under management have grown. The Company does not believe
that additional disclosure relating to the referenced products and
fees by share class is material to the risk factor discussion;
however, the Company has added the requested disclosure to the MD&A
section of the Prospectus. The Company advises the staff that the
Rule 12b-1 fee rates paid by the mutual funds that the Company
manages did not change during the periods presented.
Soft dollars
19. Revise the second paragraph to provide a further breakdown of
commissions. For example disclose the amount paid by open end funds,
closed end funds, institutional investors and managed accounts. Also
disclose whether or not the commission rates were different for each
of these types of clients. In addition, if any commissions were paid
to affiliates, disclose the amount.
In the spirit of Comment No. 15, the Company has deleted the
referenced risk factor. The Company submits that the elimination of
soft dollar payments, which totaled approximately $1.3 million in
2003, would have an immaterial impact on the Company's operating
results; therefore, a discussion thereof is not material to
prospective investors in the Company's Class A common stock.
Nevertheless, in
Mr. William Friar
September 10, 2004
Page 9
response to the staff's comment the Company supplementally advises
the staff that commission rates generally do not vary by client;
instead, commission rates are particular to a specific transaction,
which may include various types of clients as a result of aggregated
trading. During 2003, Calamos Financial Services, Inc. earned
approximately $208,000 in commissions for executing trades for the
Company's advisory clients. None of these trades resulted in soft
dollar credits.
Investment Performance
20. Revise to delete the risk paragraph or move it to elsewhere in the
prospectus after the risk factors.
The Company has deleted the risk factor. In addition, the Company
has supplemented the disclosure related to investment performance in
the Business section of the Prospectus.
Third-party distribution
21. Revise the first paragraph to explain why access is so dependent
upon 12b-1 fees.
The Company has revised its disclosure pursuant to the staff's
comments.
22. Revise the second paragraph to disclose the percentages of the large
distributors at 12/31/03. In addition, disclose the fees received
from intermediaries of managed accounts for the year ended 12/31/03
and the period ended 6/30/04.
The Company has revised its disclosure pursuant to the staff's
comments.
23. Revise the last paragraph to disclose the payments made in 2003 and
during the 6 months ended 6/30/04. In addition, if the amounts paid
are significantly greater than in previous years, briefly explain
why. Provide disclosure if more than 10% went to any intermediary.
As discussed in the Company's response to Comment No. 6, the
Company's supplemental compensation payments are made to maintain
existing relationships with third-party selling agents. Since the
Company expects to continue to make these payments, this is not a
significant risk factor and therefore the last paragraph of the
referenced risk factor has been deleted.
Mr. William Friar
September 10, 2004
Page 10
Communication, Information and Computer systems
24. Revise to move this disclosure to elsewhere in the prospectus after
the risk factors.
The Company has deleted the risk factor. In addition, the Company
has supplemented its disclosure relating to information systems in
the Business section of the Prospectus.
Dependence on Calamos Holding to distribute cash
25. Revise to clarify and explain how the taxation will occur on several
levels. First, will Calamos Holdings LLC be taxable as a corporation
and pay dividends to Calamos Asset Management or will it be a
pass-through entity and its income will be passed through to Calamos
Asset Management and Calamos Family Partners on a pro-rata basis.
Once that is explained, will Calamos Asset Management be taxed as a
corporation or will it be a pass-through entity and holders will be
taxed on their pro-rata interest or will holders only be taxed if
Asset Management pays holders a dividend from retained or current
earnings.
The Company has revised its disclosure pursuant to the staff's
comments.
Our business is dependent on third-party vendors
26. Revise to disclose the amounts paid to third-party vendors for the
year ended 12/31/04 and for the period ended 6/30/04.
The Company has revised this risk factor to clarify that it relates
to services provided by third-party vendors with respect to the
mutual funds managed by the Company. The intended focus of the risk
factor was on the dependence of those mutual funds on services
provided by third-party vendors and the potential risk associated
with poor performance or disruption of these services. While the
services provided are important to fund operations, the costs of
obtaining these services are borne by the funds to which the
services are provided and not by the Company. Accordingly, the
Company does not believe that the amount paid by mutual funds (and
not the Company) to such third-party vendors is material to
prospective investors in its Class A common stock. The Company
therefore has not disclosed these amounts in the Prospectus.
Risks related to the Offering
Investment Company
27. Briefly advise us supplementally how you intend to operate the
Company to avoid being deemed an Investment Company.
Mr. William Friar
September 10, 2004
Page 11
Following the Reorganization, the business of the Company will be to
act as the sole Manager of Calamos Holdings LLC, through which it
will engage primarily in the business of providing advisory services
through its subsidiaries. The Company will hold itself out to the
public in a consistent manner. The Company will monitor its
investments in investment securities (if any) to ensure that it does
not inadvertently fall within the definition of "investment company"
contained in Section 3(a) of Investment Company Act. For the
one-year period following the completion of the offering, the
Company may rely (to the extent necessary) on Rule 3a-2 under the
Investment Company Act with respect to the investment of proceeds
from the offering. Please see the response to comment 28 below for
an analysis of why the Company will not be an investment company.
28. Supplementally advise us as to the specific exemption from
registration under the Investment Company Act that you intend to
rely upon.
The Company will not be an investment company, as such term is
defined in the relevant provisions of Section 3(a) of the Investment
Company Act, and therefore will not be required to be registered
under such Act.
The Company was established as a holding company and the Company's
statements in the Prospectus indicate that, immediately following
the Reorganization, its only business will be to act as the sole
Manager of Calamos Holdings LLC, through which it will continue to
conduct the business now conducted by Calamos Family Partners, Inc.
Upon completion of the offering, the Company's principal asset will
be its limited liability company interest in Calamos Holdings LLC.
That interest will not constitute an investment security for
purposes of Section 3(a) of the Investment Company Act because all
returns in respect of such interest will be generated by the Company
in its capacity as the sole Manager of Calamos Holdings LLC. In this
regard, the Company's interest in Calamos Holdings LLC as sole
Manager should be viewed as equivalent to a general partnership
interest, which ordinarily is presumed not to be a security under
the federal securities laws, by virtue of the general partner
exercising management control over the partnership and having access
to information about the partnership so that its profits are not
dependent on the entrepreneurial or managerial efforts of others.1
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1 See Williamson v. Tucker, 645 F.2d 404 (5th Cir.), cert denied, 454 U.S.
897 (1981). See also Shoreline Fund L.P. and Condor Fund International,
Inc., SEC No-Action Letter (Nov. 14, 1994); Scudder, Stevens & Clarke SEC
no-Action Letter (Mar. 12, 1980); Oppenheimer Capital, L.P., SEC No-Action
Letter (July 29, 1987); Albert M. Zlotnick, SEC No-Action Letter (June 9,
1986).
Mr. William Friar
September 10, 2004
Page 12
Alternatively, the Company's interest in Calamos Holdings LLC is not
an investment security because Calamos Holdings LLC will be a
"majority-owned subsidiary" of the Company that is neither an
investment company nor a 3(c)(1) or 3(c)(7) company. Based on our
analysis of Calamos Holdings LLC's limited liability company
agreement and the rights of the respective members under that
agreement, the Company's interest in Calamos Holdings LLC will
constitute ownership of 100% of the outstanding "voting securities"
of Calamos Holdings LLC within the meaning of the Investment Company
Act. Thus, the Company is not an investment company within the
meaning of 3(a)(1)(A) or (C) of the Investment Company Act. 2
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2 In the event that upon completion of the offering, the Company invests in
investment securities in an amount that temporarily causes it to exceed
the percentage limit in Section 3(a)(1)(C), the Company intends to rely on
the exemption for "transient investment companies" set out in Rule 3a-2
under the Investment Company Act for a period of up to one year.
Mr. William Friar
September 10, 2004
Page 13
The Company further notes, in the alternative, that it is not an
investment company by virtue of Rule 3a-1 under the Investment
Company Act.
Mr. William Friar
September 10, 2004
Page 14
It is anticipated that the Company's principal asset will be, and
virtually all of the Company's net income after taxes will be
derived from, its interest in Calamos Holdings LLC, a company that
is "controlled primarily" by the Company through which the Company
engages in a business other than that of investing, reinvesting,
owning, holding or trading in securities and which is not itself an
investment company.
Reorganization and Holding Company Structure
Holding Company Structure
29. Revise to explain why profits, losses, and distributions will be
"generally" pro rata. In this regard, clarify how they may not be
made pro rata or delete the word, "generally".
The Company advises the staff that all of the referenced profits,
losses and distributions will be allocated pro rata. The Company has
therefore deleted the word "generally" from its disclosure in the
Prospectus.
Use of Proceeds
30. Revise to use tables presenting the uses with and without the
overallotment option. In this regard, present at the top of the
table the gross proceeds, then underwriter fees and commissions,
then selling shareholder proceeds, then net proceeds, then the uses
in order. If you continue to say that changes may occur in the use
of proceeds, disclose the specifics of the contingencies that may
result in a change and identify the alternative uses of proceeds.
See Instruction 7 to Rule 504 of regulation S-K.
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Mr. William Friar
September 10, 2004
Page 15
The Company has revised its disclosure pursuant to the staff's
comments.
MD&A
General
31. MD&A is intended to give the investor an opportunity to look at the
company through the eyes of management by providing both a short and
long-term analysis of the business of the company. When discussing
your results of operations and financial condition, please provide a
prospective analysis. For instance, but not limited to, discuss why
funds under management have increase and whether you anticipate a
continued increase in funds under management. Do you anticipate your
operating expenses to increase at its current rate? Does management
project an increase in its net income for the foreseeable future? If
management is unable to determine any trends in their results of
operations and financial condition, please state that, and include a
discussion of the reasons why. Discuss the material uncertainties
known to management that would cause reported financial information
not to be necessarily indicative of future operating results or of
its future financial condition. You should provide information about
the quality and potential variability of your company's financial
condition so that investors can judge the likelihood that past
performance is or is not indicative of future performance. Any
uncertainties with regards to each aspect of your results of
operations and financial condition should be discussed in turn.
Additionally, in all future annual and quarterly filings, this
information should be included. Refer to Release No. 33-8350.
The Company has revised its disclosure pursuant to the staff's
comments.
32. Revise the fourth paragraph to explain in what circumstances net
profits, net losses and distributions will not be pro rata.
The Company advises the staff that all of the referenced net
profits, net losses and distributions will be allocated pro rata.
The Company has therefore deleted the word "generally" from its
disclosure in the Prospectus.
Investment Products
Mutual Funds
Open-end Funds
33. Revise to disclose the amount outstanding at 12/31/03 for each share
class and also disclose the fees received (loads and otherwise) and
paid (commissions and otherwise) for the year ended 12/31/03 and the
period ending 6/30/04 in each share class discussion.
The Company has revised its disclosure pursuant to the staff's
comments.
Mr. William Friar
September 10, 2004
Page 16
Closed-End Funds
34. Revise to present the same disclosures as requested by the comment
above.
Unlike open-end funds, closed-end funds are not comprised of
multiple share classes. Accordingly, the Company has not disclosed
assets under management by share class. Total assets under
management for closed-end funds at June 30, 2004 and December 31,
2003 are disclosed in the table on page 40 of the Prospectus.
The Company does not receive commissions in connection with sales of
closed-end fund shares. During the six months ended June 30, 2004,
the Company did pay $6.0 million of one-time distribution and
service fees to underwriters of its closed-end fund offerings. The
closed-end fund description on page 43 of the Prospectus has been
revised to disclose this amount. No one-time distribution and
service fees were paid in 2003 or 2002.
Separate Accounts
35. Revise to present the same information requested by the comments
above.
As in the case of closed-end funds, the Company does not receive
fees (other than investment management fees) or commissions in
connection with separate accounts, and, unlike open-end funds,
separate accounts are not comprised of multiple share classes.
Accordingly, the Company has not revised the disclosure pursuant to
the staff's request.
Revenues
Fees
36. Revise to disclose the amount of accounting fees during the period
April 1, 2004 through June 30, 2004 as well as the fee rate(s) for
each product.
The Company has revised its disclosure pursuant to the staff's
comments.
Termination of EAU Plan
37. After this section is completed, revise the "Dilution" and "Use of
Proceeds" sections to disclose the additional shares ("Dilution")
and the cash payout ("Use of Proceeds").
The Company will revise the "Dilution" and "Use of Proceeds"
sections accordingly in a subsequent pre-effective amendment to the
Registration Statement.
Mr. William Friar
September 10, 2004
Page 17
Operating results
6 months ended 6/30/04
Revenues
38. Reconcile the narrative before the table on page 47 to agree with
the table for the amount, the increase and the percentage.
The Company has revised its disclosure pursuant to the staff's
comments.
Operating Expenses
39. Noting that several expenses increased at a greater rate than the
revenues, revise to add narrative to explain why the distribution
expenses increased 166% while distribution fees increased 124%. With
regard to marketing and sales promotion, add narrative to further
explain the $6.0 million as well as narrative to explain the types
of payments generally made that result in these expenses.
The Company has revised its disclosure to clarify and explain the
relevant fees and expenses referred to in Comment No. 39. The
Company has added disclosure to the discussion of marketing and
sales promotion in response to the staff's request. Further
explanation as to the types of payments that result in marketing and
sales promotion expenses are included in the discussion under "Other
Operating Expenses" on page 45 of the Prospectus.
Year ended 12/31/03
40. The explanation for the increase in net purchases discloses no
changes in the compensation (fees and commissions) paid to attract
those purchases. If true, indicate no changes in the compensation
rates occurred from the year ended 12/31/02 or otherwise disclose
any such changes.
As discussed in response to Comment No. 6 above, over the periods
covered by the MD&A, the Company did not initiate any changes to the
compensation paid to its third-party selling agents. The Company
therefore has not revised the disclosure in the Prospectus to
address this increase.
41. Revise to make similar disclosures in the "Revenue" and "Operating
Expenses" sections that follow.
Mr. William Friar
September 10, 2004
Page 18
The Company has not made the requested disclosures in the referenced
"Revenue" sections for the reasons discussed in response to Comment
No. 40 above; however, the Company has revised its disclosures in
the "Operating Expenses" section pursuant to the staff's request.
Year ended 12/31/02
42. Make disclosures in the appropriate sections consistent with
comments 35-37.
Based on clarification from the staff, the Company understands that
the intended references in this comment were to Comment Nos. 39-41.
With respect to Comment No. 39, the Company has made disclosures in
the section comparing the year ended December 31, 2002 to the prior
year that are consistent with those made in response to Comment No.
39. Because the Company did not pay any one-time distribution and
service fees to underwriters in connection with its closed-end fund
offerings in 2002, the Company has not provided disclosure to that
effect. With respect to Comment Nos. 40 and 41, the Company has not
made disclosures consistent with those comments for the reasons
discussed in response to Comment No. 40 above.
Liquidity and Capital Resources
43. Revise the second paragraph on page 56. We note the paragraph is
referring to amortization, not cash flows or the balance sheet.
Revise accordingly.
The Company advises the staff that the paragraph was intended to
refer to cash flows, and the Company has revised the financial data
in the paragraph accordingly.
44. Noting the cash used for construction payments in the third
paragraph on page 56, supplementally advise the staff of the
arrangement for the new headquarters, such as, how much is owed to
complete, when will it be complete, who will pay the remaining
costs, will the Company then lease the building and what will be the
costs to the Company. We may have further comment.
The Company supplementally advises the staff that a subsidiary of
Calamos Property Holdings LLC, which is owned by the stockholders of
Calamos Family Partners, Inc. is developing an office complex, which
will include the office building that the Company will occupy. Of
the $60 million phase one development costs, approximately $26
million remains. The Company has no financial obligation or
continuing involvement in the construction of the office complex.
The Company will execute a long-term contract to occupy the space
under an operating lease with an expected commencement date in 2005.
In addition to the estimated annual lease payments of $3,000,000,
the Company plans to incur additional cost of $30,000,000 for
furniture, equipment and leasehold improvements before occupying the
space.
Mr. William Friar
September 10, 2004
Page 19
Business
Business Strategy
45. We note the growing deferred sales commissions and the $150 million
debt used to finance these commissions. Please advise us whether or
not the company has changed its fee arrangements or its business
strategy. Without knowing your response, it would seem to us that
because of the recent significant increases, you will have to
augment or clarify the narrative to address these issues regardless
of your response.
The Company advises the staff that the proceeds of the $150 million
of notes issued by the Company in April 2004 are not generally being
applied to finance commissions payable by the Company. The Company
used a portion of the proceeds from the note offering to repay and
terminate a $30 million credit facility that had previously been
used to finance the payment of deferred sales commissions; however,
as is disclosed on page 55 of the Prospectus, the Company currently
funds the payment of deferred sales commissions from operating cash
flows and expects to continue to do so in future periods. In
addition, the Company advises the staff that it has not changed its
fee arrangements or business strategy. Deferred sales commissions
have increased as a result of increased sales of Class B and Class C
shares of the open-end funds the Company manages and the resulting
growth in the Company's assets under management. As discussed in
response to Comment No. 6 above, the Company's increase in assets
under management was attributable to a number of factors unrelated
to fee arrangements. The Company therefore does not believe that
additional disclosure with respect to deferred sales commissions is
necessary.
46. Noting the possibility of conflict between managed accounts, please
advise us supplementally and with a view towards additional
disclosures under a section titled "Potential Conflicts of
Interest", how the Company prevents such conflicts, such as, one
fund or managed account shorting the securities held by another
fund.
The Company supplementally submits that it has policies and
procedures that allow it to identify and manage the referenced
conflicts. For example, it has procedures in place to ensure that
investment opportunities and securities transactions are allocated
equitably among clients. Many other potential conflict areas, such
as investments in the securities industry, are specifically limited
by statute. The Company examines actual transactions against client
accounts to determine that these procedures are followed.
In the particular case of short selling, the Company does not permit
the short selling of a security (including through the use of
synthetic instruments) in one account that is held long in any other
account, other than for purposes of
Mr. William Friar
September 10, 2004
Page 20
legitimate portfolio hedging. Short positions are monitored to
ensure that this policy is followed.
47. Revise to disclose here or in the "Management" section how the
Calamos Family investments are monitored to avoid conflicts of
interest, such as, shorting securities that are in managed accounts.
The Company supplementally submits that the Company obtains the
brokerage account confirmations and statements for all its
employees, including the Calamos family members that are
stockholders of Calamos Family Partners, Inc. and members of their
immediate families. Positions in securities accounts are monitored
as they occur, and formal quarterly reporting and verifications are
required. Under the Code of Ethics for the Company, many types of
securities transactions must be pre-approved before they are made.
The Company further reports on a periodic basis to the Boards of
Trustees of the Calamos Mutual Funds on compliance with the Code of
Ethics.
The Code of Ethics and its policies and procedures regarding
personal trading apply to all employees of the Company, including
members of the Calamos family. The purpose of this structure is to
deter and detect conflicts of interest between the securities
trading of employees of the Company and its clients. The Code and
these policies and procedures extend to areas beyond short selling
to prohibit practices such as front-running and trading on inside
information. Employee trades are continuously monitored and reviewed
for compliance with the Code of Ethics precisely to determine if
such conflicts occur, and to deal with them quickly if and when they
arise.
Distribution, Sales and Client Services - Page 68
48. Please name any intermediary whose clients represent more than 10%
of assets under management.
The Company has revised its disclosure to indicate which
institutions act as intermediaries for more than 10% of the
Company's assets under management.
Incentive Compensation Plan
49. Revise to add a risk factor for the new compensation plans and
disclose the caps on number of shares and/or cash that may be issued
to plan participants both annually and during the lifetime of the
plans. The potential dilution to shareholders should also be
disclosed.
The Company has revised the risk factor relating to dilution of
stockholders to address the possibility of dilution upon issuance
and exercise of stock options under employee benefit plans.
Mr. William Friar
September 10, 2004
Page 21
Split-Dollar Insurance Agreements - Page 87
50. Disclose the cost to the Company of the insurance agreements.
The Company has revised its disclosure pursuant to the staff's
comments.
Certain Relationships
Tax Indemnity Agreement - Page 91
51. Please add disclosure regarding earnings (profits) up to the
effective date of the reorganization to clarify who will be entitled
to what earnings, whether any distributions will be made after
6/30/04 as in previous years, who will be responsible for any
assessed back taxes, penalties and interest after 6/30/04, and any
other material aspects of the Agreement.
The Company advises the staff that, while the question regarding who
is entitled to earnings (profits) up to the effective date of the
Reorganization is relevant to the Company's offering, this issue is
not addressed in the Tax Indemnity Agreement. The Registration
Statement previously indicated that Calamos Asset Management, Inc.
would generally be indemnified by Calamos Family Partners, Inc. for
income taxes related to the former subsidiaries of Calamos Family
Partners, Inc. incurred prior to the closing of the public offering.
This disclosure in the Prospectus has been revised to make it clear
that interest and penalties attributable to income taxes incurred in
periods prior to the closing of the public offering will also be
indemnified by Calamos Family Partners, Inc. The Company has also
added language describing other terms of the Tax Indemnity
Agreement.
Lease of Corporate Headquarters - Page 92
52. Please state, if true, that in the opinion of management, the terms
of the transaction are as fair to the company as could have been
made with unaffiliated parties.
The Company has revised its disclosure pursuant to the staff's
comments.
Description of Capital Stock
Class B shares
53. Revise to clarify whether or not any dividends or other
distributions can be made to Class B holders without being made
simultaneously and in the same amounts to Class A holders.
Dividends and other distributions cannot be made to holders of Class
B common stock unless they are simultaneously made to holders of
Class A common stock. The Company has revised its disclosure
accordingly.
Mr. William Friar
September 10, 2004
Page 22
Certain U.S. Tax Considerations for non-U.S. Holders - Page 100
54. If you retain this section, balance this section with a comparable
section, "Certain U.S. Tax Considerations for U.S. Holders" or
explain why you do not include one.
The Company submits that the requested disclosure is not necessary.
The Company submits that, based on a review of comparable
transactions, most offerings of common stock by U.S. corporations
that are registered with the Commission only disclose the tax
consequences of the offering to Non-U.S. Holders. This practice (of
disclosing only the tax consequences of stock ownership to Non-U.S.
Holders) has been followed in the registration statements for a
number of recent prominent stock offerings, such as that of Google
Inc., Assurant, Inc., Dominos Pizza, Inc. and Genworth Financial.
The Company also notes that the registration statements of stock
offerings with structures similar to that of this offering, such as
that of barnesandnoble.com Inc., follow the same practice. This
practice is likely followed because it is believed that (i) the U.S.
withholding tax and backup withholding tax regimes are not well
understood by non-U.S. Holders and (ii) these regimes may have
material consequences to non-U.S. Holders. The current practice
implicitly assumes that the disclosure of the U.S. federal income
tax consequences of an investment in the common stock of a U.S.
corporation to U.S. Holders is unnecessary because these
consequences are well known to U.S. investors.
Underwriting
55. Revise to disclose if the Company will announce, via press release
or 8-K filing, when stabilization activities have ceased. If not, so
state.
The Company does not currently intend to make an announcement in
connection with the cessation of stabilizing transactions and has
revised the Prospectus to disclose that, to the extent stabilizing
transactions are commenced, they may be discontinued at any time
without notice.
56. Revise to disclose the present intentions of those participating in
the Directed Share program as to how many shares they intend to
purchase.
The Company is not yet aware of the number of shares that
participants in the directed share program intend to purchase.
Moreover, the Company submits that disclosing the present intentions
of the participants in the directed share program is not material to
prospective investors in the Company Class A common stock and that
disclosure of such intentions could be misleading. The Company
advises the staff that, under the terms of the directed share
program, if participants do not orally confirm their purchases
within one business day after the execution of the underwriting
agreement, the shares reserved for them will be offered to the
Mr. William Friar
September 10, 2004
Page 23
general public on the same terms as the other shares offered by the
Prospectus. The Company has revised the Prospectus to disclose this
information. In light of the foregoing, the Company submits that to
the extent the present intentions of directed share program
participants are known to the Company as of the date of execution of
the underwriting agreement and are disclosed in the Registration
Statement on the date of effectiveness, such present intentions may
not accurately represent the numbers of shares actually allocated to
those participants, as such allocations could change materially on
the business day after the date of effectiveness to the extent
participants fail to confirm their purchases. The Company therefore
does not intend to make the requested disclosure.
57. With regard to the naked shorts, supplementally advise the staff as
to the authority to enter into such arrangements. We may have
further comment. In addition, supplementally advise the staff as to
why you believe short selling will offset downward price pressures.
As disclosed in the Prospectus under the caption "Underwriters" and
permitted under Regulation M, the underwriters may engage in
stabilizing transactions with respect to the common stock and may
over-allot in connection with the offering, creating a short
position in the common stock for their own account. Such
over-allotments may be in excess of the over-allotment option
granted to the underwriters, resulting in naked short positions. As
has been long-standing industry practice and as disclosed in the
Prospectus, the underwriters must close out a naked short position
by purchasing shares of common stock in the open market. All
purchasers of securities in the offering are provided with a
Prospectus that meets the requirements of the Securities Act of 1933
and over-allotments are not distinguished or separately identified
to the purchaser. We also note that in no event will more than the
number of shares that is registered pursuant to the registration
statement actually be issued by the Company pursuant to the offering
or be outstanding as a result of the offering.
Short sales by the underwriters, whether resulting in covered shorts
or naked shorts, are made for the purpose of facilitating the
orderly distribution of the common stock by creating buying power
which can be used for the purpose of supporting market price.
Part II
Indemnification
58. Revise the prospectus to include the information required by Rule
510 of regulation S-K.
The Company has revised its disclosure pursuant to the staff's
comments.
Mr. William Friar
September 10, 2004
Page 24
Accounting Comments
Reorganization - Page 3
59. We note that you interchange Calamos Family Partners, Inc. and
Calamos Holdings, Inc. when referring to your company within the
document. We also note that Calamos Holdings, Inc. will be renamed
Calamos Family Partners, Inc. upon Reorganization. Please revise to
ensure consistency in your discussions about your company in the
document.
The Company has revised the Prospectus to eliminate references to
Calamos Holdings, Inc., except in the following instances: (1) in
the definitions appearing on page (ii) of the Prospectus; (2) in the
audited financial statements included in the Prospectus; and (3) in
the summary and selected financial data sections, to the extent that
those sections refer to the audited financial statements of Calamos
Holdings, Inc. At this time, Calamos Holdings, Inc. has not changed
its name to Calamos Family Partners, Inc., and therefore the audited
financial statements and the audit report contained therein continue
to refer to the financial statements of Calamos Holdings, Inc. The
Company expects that the name change will be effectuated prior to
the consummation of the offering and that in the final Prospectus,
the audited financial statements (including the audit report
contained therein) and any references to those financial statements
in the summary and selected financial data sections will refer to
Calamos Family Partners, Inc.
Holding Company Structure - Page 5
60. Supplementally tell us and revise to disclose how you determined
that your designation as the sole Manager of Calamos Holdings, LLC
allows you to include its financial results into your consolidated
financial statements. In your response provide the specific
accounting literature you relied upon and the basis for your
conclusion. We note on page 35 that post-Reorganization, Calamos
Family Partners, Inc. is assumed to own 80% of Calamos Holdings,
LLC.
The primary accounting guidance on consolidation of partnerships is
found in AICPA Statement of Position No. 78-9, Accounting of
Investments in Real Estate Ventures (SOP 78-9), which generally has
been applied to all investments in limited partnerships, including
those that are not real estate ventures. SOP 78-9 indicates that
absent important rights in the hands of limited partners, there is a
presumption that the general partner controls the partnership and
should consolidate the partnership (refer to paragraphs .08-10).
Calamos Asset Management, Inc. is presumed to own 20% equity
interest in Calamos Holdings LLC. It will also act as sole Manager
of Calamos Holdings LLC and have control over all of its affairs.
The proposed structure does not currently allow for any removal of
Calamos Asset Management, Inc. as sole
Mr. William Friar
September 10, 2004
Page 25
Manager and does not provide other rights that may be considered
important rights under SOP 78-9. Therefore, in applying the SOP 78-9
consolidation model to the proposed structure, we have concluded
that Calamos Holdings LLC should be consolidated into Calamos Asset
Management, Inc. with Calamos Family Partners, Inc.'s interest in
Calamos Holdings LLC presented as a minority interest in the
consolidated financial statements.
We also note that if the LLC structure were evaluated as a corporate
entity, subject to the consolidation guidance under Accounting
Research Bulletin No. 51, Consolidated Financial Statements (ARB
51), and FASB Statement No. 94, Consolidation of All Majority-Owned
Subsidiaries (Statement 94) the presence of Calamos Asset
Management, Inc.'s voting control would require consolidation of
Calamos Holdings LLC by Calamos Asset Management, Inc.
61. In the last paragraph on page 5 you state that you intend to cause
Calamos Holdings LLC to distribute cash on a pro rata basis to its
members to cover their tax liabilities. Please revise the unaudited
pro forma financial information beginning on page 31 to give effect
to this planned transaction or explain why no adjustment is
required.
The Company submits that no pro forma adjustment is necessary as the
Company currently adheres to the distribution policy described. This
policy is a current practice and is reflected in the historical
financial statements. Furthermore, there would be no pro forma
income statement effect, as distributions to stockholders are not
reflected in the Company's income statement.
Summary Historical and Pro Forma Consolidated Financial and Other Data - Page 8
62. We note that the Real Estate Distribution occurred on June 30, 2004
and that your disclosure in the second paragraph that your unaudited
pro forma balance sheet as of June 30, 2004 does not give effect to
this transaction. Supplementally tell us how you determined that it
was appropriate to reflect this transaction in your unaudited pro
forma income statements, considering the guidance in Instruction 1
to Rule 11-02 of Regulation S-X.
The Company supplementally advises the staff that the Real Estate
Distribution occurred on June 30, 2004 and therefore is already
included in the Company's historical balance sheet data as of such
date. As a result, the Company's unaudited pro forma balance sheet
data as of June 30, 2004 do not give pro forma effect to such
distribution, although the historical impact of such distribution is
included in such data. The Company has clarified its disclosure
accordingly.
63. Please revise your historical financial statements to reflect the
Real Estate Distribution transaction consummated on June 30, 2004 as
a discontinued operation, or advise us. Refer to paragraphs 27 and
41-44 of SFAS 144.
Mr. William Friar
September 10, 2004
Page 26
The Company submits that no revisions are necessary to reflect the
Real Estate Distribution as discontinued operations. The Real Estate
Distribution does not constitute discontinued operations for the
Company, because these activities do not represent a separate
component of the Company's operations, as defined by FAS 144. The
Company uses a portion of the real estate described in its
operations. The expenses incurred in operating and maintaining the
building are fully integrated in the Company's operating expenses as
the primary tenant.
64. Please revise to include both historical and pro forma basic and
diluted earnings per share with weighted average shares outstanding.
The Company has revised its disclosure pursuant to the staff's
comments.
Unaudited Pro Forma Financial Information - Page 31
65. Please revise your introductory paragraphs on page 31 to clearly
identify the financial statements from where the historical
consolidated financial data has been derived and what the presented
pro forma financial information represent, as required by paragraph
11-02 of Regulation S-X. You may include a discussion similar to
that presented on page 8 to provide this disclosure.
The Company has revised its disclosure pursuant to the staff's
comments.
66. Please revise your pro forma balance sheet to include a separate
column presenting the pro forma adjustments related to the issuance
of common stock shares for this offering. Present your pro forma
balance sheet data in two stages in order to reflect your pro forma
balance sheet after the Formation transaction prior to the pro forma
adjustment related to the offering.
The Company does not believe that any changes are required in its
pro forma balance sheet presentation, as the Reorganization will not
change the totals for assets, liabilities or stockholder's equity.
Furthermore, only the consummation of the offering and the
application of the net proceeds thereof to purchase membership units
in Calamos Holdings LLC give rise to the consolidation and
subsequent creation of the minority interest. The Company expects
these events to occur simultaneously and therefore submits that they
are appropriately presented in a single column in the pro forma
balance sheet.
Pro Forma Consolidated Income Statement - Page 33
67. Please revise to disclose pro forma basic and diluted earnings per
share for each period presented. Explain in the notes how the
weighted average shares outstanding were computed.
The Company has revised its disclosure pursuant to the staff's
comments.
Mr. William Friar
September 10, 2004
Page 27
Notes to Pro Forma Consolidated Financial Information - Page 35
68. Please revise note (1) to describe how you determined the assumed
net proceeds of $45.5 million from this offering. Specify the number
of shares assumed issued and how you determined the net proceeds per
share.
To provide a more complete description of the pro forma impact of
the Reorganization in its initial filing, the Company assumed that
net proceeds of $45.5 million, irrespective of the number of shares
sold, would be used to acquire newly membership units from Calamos
Holdings LLC. The Company expects that, prior to launching the
offering and commencing the road show, the Company will file a
pre-effective amendment to the Registration Statement disclosing on
the front cover of the Prospectus a range for the initial public
offering price per share and disclosing pro forma and other data
throughout the Prospectus that is based on an assumed offering price
at the mid-point of this range.
69. Please revise note (2) to describe how you determined the amounts of
adjustments to minority interest, additional paid in capital,
retained earnings and accumulated other comprehensive income.
Explain how you determined that your current methodology of assuming
an 80% minority interest is factually supportable as required by
Rule 11-02 (b) of Regulation S-X. Consider presenting the
information in a tabular form and key in a detailed explanation to
explain how each adjustment amount was determined.
The Company has revised its disclosure pursuant to the first
sentence of Comment No. 69. With respect to the remainder of Comment
No. 69, the Company assumed a minority interest of 80% to provide a
more complete description of the pro forma impact of the
Reorganization in its initial filing. As discussed in response to
Comment No. 68 above, the Company expects to file a pre-effective
amendment to the Registration Statement disclosing on the front
cover of the Prospectus a range for the initial public offering
price per share and disclosing pro forma and other data throughout
the Prospectus that is based on an assumed offering price at the
mid-point of this range.
70. Please revise to remove note (3) and the pro forma adjustments
related to the Real Estate distribution given that the transaction
occurred on June 30, 2004, or advise us.
The Company submits that, although the Real Estate Distribution
occurred on June 30, 2004, pro forma adjustments are required as the
effect of the Real Estate Distribution is recorded in the income
statement presented.
71. Please revise note (4) to explain how the minority interest
adjustment is determined and why it is based on pre-tax income.
Mr. William Friar
September 10, 2004
Page 28
The Company has revised its disclosure pursuant to the staff's
comments.
72. Please revise note (5) to explain how you determined the amount of
income tax adjustment for each of the periods presented.
The Company has included additional disclosure to clarify the
determination of income tax.
73. Please revise to clarify in footnote (6) on page 35 what
"recharacterization of compensation in the form of equity
distributions to owners" in the amount of $1.6 million represents.
Explain how you determined this amount to be (i) directly
attributable to the transaction, (ii) expected to have a continuing
impact on your operating results, and (iii) factually supportable.
The Company has revised its disclosure pursuant to the staff's
comments.
74. Please revise other parts of the filing, including the summary
historical and pro forma consolidated financial data on pages 9 and
10, to incorporate similar changes in the notes presented.
The Company has revised its disclosure pursuant to the staff's
comments.
Selected Historical Combined Financial and Other Data - Page 36
75. Please revise to reference the footnotes on pages 37 and 38 to the
presented financial data on page 37.
The Company has revised its disclosure pursuant to the staff's
comments.
Management's Discussion and Analysis of Financial Condition and Results of
Operations Revenues - Investment Management Fees - Page 33
76. We note that you compute investment management fees received from
some of the separate accounts, for which you act as investment
adviser, in advance at the beginning of the quarterly period. Please
revise to explain how you determine the amount of revenue recognized
from these fees to the extent that actual fees are different from
those estimated at the beginning of the period.
The Company supplementally submits that it does not estimate
management fees. Management fees calculated on beginning of period
assets are the actual fees recorded as unearned income and
recognized evenly throughout the quarter.
77. Please revise your accounting policy footnote on page F-8 to provide
an enhanced disclosure about your revenue recognition of investment
management fees that you receive from mutual funds and separate
accounts.
The Company has revised its disclosure pursuant to the staff's
comments.
Mr. William Friar
September 10, 2004
Page 29
Operating Expenses - Other Operating Expenses - Page 45
78. We note that you include "revenue sharing" payments to your third
party distributors in marketing and promotion expense.
Supplementally tell us how you determined it appropriate to record
gross revenues related to such transactions with a corresponding
expense in marketing and promotion, as opposed to recording revenue
net. In your response quantify the revenue and expense amounts and
tell us what accounting literature you relied on including your
consideration of EITF 99-19.
The Company's supplemental compensation payments to third-party
selling agents are paid only to certain selling agents of the
Company's products. These payments are discretionary, as the Company
has control over whether or not it will make these payments or
otherwise deal with third-party selling agents that require such
payments as part of their compensation. The Company believes that,
in consideration of EITF 99-19, revenues derived from investment
management fees are appropriately recorded gross because (1) the
Company is the primary obligor with respect to the investment
management services provided, (2) the Company negotiates the price
for the investment management services, (3) the Company performs all
of the investment management services for the client, and (4) the
Company has the discretion to select its suppliers. As such, all
investment management fees are recorded gross without deducting any
supplemental compensation paid to certain third-party selling
agents.
Operating Results - Page 46
79. For each period presented, you have attributed changes in your
revenues primarily to changes in your assets under management.
Please revise to:
- Explain the reasons for changes in the amounts of average
assets under management in each period. For instance, explain
the underlying causes for the significant increases in net
purchases in mutual funds and separate accounts as well as
market appreciation of assets under management;
- Explain how changes in your average assets under management
impacted the amounts of reported revenues for each revenue
item in each period. Quantify the impact as appropriate;
- Describe any known trends and uncertainties that have had or
are expected to have a material impact on reported revenues.
Refer to the Item 303 (a) (3) of Regulation S-K and recently issued
Interpretive Release No. 33-8350.
Mr. William Friar
September 10, 2004
Page 30
The Company has revised its disclosure pursuant to the staff's
comments.
80. Please revise to provide an enhanced discussion of specific reasons
for material changes in each component of operating expenses for
each of the periods presented. For instance, we note on page 51 that
you attribute the increase of $14.6 million in distribution expense
from 2002 to 2003 to increased sales of funds and corresponding
growth of assets under management. In your amended filing, explain
and quantify how much sales of funds increased, explain and quantify
the corresponding growth of assets under management and explain what
the quantitative impact of each of these increases was on your
operating expenses.
The Company has revised its disclosure pursuant to the staff's
comments.
Interest Rate Risk - Page 57
81. Please revise to include market risk disclosures in accordance with
Item 305 of Regulation S-K.
The Company has revised its disclosure pursuant to the staff's
comments.
Critical Accounting Policies - Page 57
82. Please revise your disclosure of critical accounting policies to
provide both a qualitative and quantitative discussion that
describes the significant assumptions underlying your critical
accounting estimates. Discuss the judgments and uncertainties
affecting the application of your critical accounting policies and
the likelihood that materially different amounts would be reported
under different conditions or using different assumptions. For
example,
- Discuss the method and significant assumptions used to
estimate the fair value of your company for purposes of
accounting for your equity appreciation rights.
- Describe the significant assumptions used to estimate the
expected future cash flows from 12b-1 fees.
Refer to Item V of Release No. 33-8350.
The Company has revised its disclosure pursuant to the staff's
comments.
Mr. William Friar
September 10, 2004
Page 31
Recently Issued Accounting Pronouncements - Page 58
83. Please revise Note 11 to the consolidated financial statements on
page F-15 to conform to the changes below.
The Company has revised its disclosure pursuant to the staff's
comments.
84. Please revise to explain how you determined that Calamos
Multi-Strategy, L.P. met the definition of a voting interest entity
and is not within the scope of FIN 46R considering the guidance in
paragraph 4 of FIN 46R.
The Company has revised its disclosure pursuant to the staff's
comments.
85. Please note that the SEC staff speech referred to on pages 59 and
F-16 represents the author's views and is not considered a part of
U.S. GAAP. Please revise to ensure that your accounting for your
investment in Calamos Multi-Strategy, L.P. is in accordance with
U.S. GAAP.
The Company has revised its disclosure pursuant to the staff's
comments.
86. Supplementally and in the revised filing explain how you concluded
that accounting for your investment in Calamos Multi-Strategy, L.P.
using the equity method is in accordance with U.S. GAAP. Explain why
you are not required to consolidate the L.P. for the periods
presented given the fact that the current limited partnership
agreement does not provide "important rights" to limited partners to
preclude its consolidation into your financial statements,
considering the guidance provided in paragraph 9 of SOP 78-9.
In determining whether the equity method of accounting applies, the
Company first assessed whether Calamos Multi-Strategy, L.P. fit the
definition of a variable interest entity ("VIE"). In assessing if
Calamos Multi-Strategy, L.P. is a 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 the partnership is therefore not considered a VIE. The
Company has determined that Calamos Multi-Strategy, L.P., in which
Calamos Financial Services holds a general partnership interest, 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
Partner and the Limited Partners Have Certain Rights) the Company
has amended its limited partnership agreements in 2004 to
incorporate additional rights, namely an amendment to replace the
general partner by a simple majority vote of the limited partners.
These amendments will allow the Company to continue to account for
its general partnership interests in the Calamos Multi-Strategy,
L.P. on the equity method of accounting and not consolidate it into
its results.
The Company has revised its disclosure pursuant to the staff's
comments.
Employment Related Arrangements - Page 85
87. Please revise the notes to the consolidated financial statements to
disclose significant commitments under employment related
arrangements.
The Company respectfully submits that it believes that no
significant commitments exist as of the balance sheet dates
presented, and therefore no disclosure is necessary. The employment
related arrangements disclosed in the Registration Statement will
take effect upon consummation of the offering.
Consolidated Statements of Financial Condition - Page F-3
88. Please revise to include a footnote clarifying the nature of the
minority interest at December 31, 2003 and 2002, and explain what
events occurred during the six months ended June 30, 2004 that
eliminated such minority interests.
Mr. William Friar
September 10, 2004
Page 32
The Company has revised the disclosure in the footnotes accordingly.
Consolidated Statements of Income - Page F-4
89. Please revise to include Class B shares of common stock in your
earnings per share computations, or disclose why they should not be
included.
The Company has revised its disclosure pursuant to the staff's
comments.
90. Please revise to include earnings per share disclosures required by
paragraphs 40 and 41 of SFAS 128 or explain in your accounting
policy footnote why such disclosures are not required.
The Company has revised its disclosure pursuant to the staff's
comments.
91. Please revise to disclose the pertinent rights of Class B common
shareholders in the event they are significantly different from
those of Class A common shareholders.
The Company has revised its disclosure pursuant to the staff's
comments.
92. Supplementally tell us and revise to disclose how you determined
that Equity Appreciation Units should not be considered in your
computation of diluted earnings per share, considering the guidance
in paragraph 168 of SFAS 128.
The Company supplementally advises the staff that because its Equity
Appreciation Units are only payable in cash and have no conversion
feature to common stock or a common stock equivalent, EAUs are not
included in the diluted EPS calculation. As such, EAUs are not
considered dilutive as defined by paragraph 168 of SFAS 128 nor
under its interpretive literature.
Consolidated Statements of Cash Flows - Page F-6
93. We note that the amounts of cash paid for dividends does not agree
with the amounts presented in the consolidated statement of changes
in stockholders' equity for 2001 and the six months ended June 30,
2004. Please revise to correct if in error or explain the reason for
the difference.
The Company supplementally submits to the staff that the dividends
paid do not agree with the amount presented in the consolidated
stockholders' equity for 2001 due to a $859,166 dividend that was
declared in 2000, but was not paid until 2001. In addition, the
dividends paid for the six months 2004 do not agree with the amount
presented in the consolidated stockholders' equity for the first six
months of 2004 due to a $9,999,466 non-cash distribution as
presented in the "supplemental schedule of non-cash activities"
shown on the consolidated statement of cash flows.
Mr. William Friar
September 10, 2004
Page 33
Notes to Consolidated Financial Statements
General
94. Please revise to include a footnote describing the transactions that
give rise to amounts receivable from customers. State whether
securities owned by customers are held as collateral for these
receivable balances. Also, state how you evaluate these receivables
for collectibility and whether you have established an allowance for
doubtful accounts for any period presented.
The Company has revised its disclosure pursuant to the staff's
comments. The Company supplementally advises the staff that it does
not hold customers' securities as collateral.
95. Please revise to include a footnote that discloses the key
provisions of your deferred compensation plan and how the costs are
being accrued. In addition, supplementally tell us whether you have
segregated funds that are restricted as to use for the sole purpose
of making payments under this plan.
The Company has revised its disclosure pursuant to the staff's
comments. The Company supplementally advises the staff that it has
not segregated funds for the purpose of making payments under the
plan.
Note 2 - Summary of Accounting Policies
- Investment Securities - Page F-7
96. Please revise to disclose the methods and significant assumptions
used to estimate the fair value of your financial instruments,
including your not readily marketable securities. Refer to
paragraphs 10 - 15 of SFAS 107.
The Company has revised its disclosure pursuant to the staff's
comments.
97. Please supplementally tell us the amounts of your not readily
marketable securities at the end of each of the periods presented
and revise to disclose when you consider an impairment of securities
to be other than temporary.
The amount of "not readily marketable securities" as of December 31,
2002, December 31, 2003 and June 30, 2004 is $20,100. In addition,
the Company has revised its disclosure to explain when other than
temporary impairment exists.
- Equity Incentive Plan - Page-F-8
98. Please revise to actually describe the accounting method used to
account for your equity incentive plans, rather than just
referencing the relevant accounting guidance.
The Company has revised its disclosure pursuant to the staff's
comments.
Mr. William Friar
September 10, 2004
Page 34
- Revenue Recognition - Page F-8
99. Please revise your accounting policy for recognizing 12b-1
distribution fees to clarify when these are considered earned.
The Company has revised its disclosure pursuant to the staff's
comments.
100. Supplementally explain to us how you determined that the use of
settlement date rather than trade date in recognizing sales charges
does not have a material impact on your financial statements.
The Company bases its immateriality assessment on a comparison of
the amount of underwriting fees on the last three trade dates of a
quarter that settle on the first three trade dates of the following
quarter. Trades settle on a T+3 basis. As a result, trades that
occur on the last three days of each quarter settle in the first
three days of the subsequent quarter. Based on these comparisons,
the Company does not believe that there is any material impact on
its financial statements as a result of using settlement date data
instead of trade date data when recognizing underwriting fees. For
example, the underwriting fees resulting from settled trades for the
first three days of July 2004 were $83,729, representing the maximum
misstatement and deemed immaterial.
- Deferred Sales Commissions - Page F-9
101. Supplementally explain your methodology for determining the
amortization period for each of your Class B and Class C shares.
Specifically address how you determine the period over which you
receive 12b-1 fees.
The Company receives 12b-1 fees equal to 1.00% annually of Class B
share assets from each fund and retains .75% annually from Class B
shares assets for the period of eight years or until shares are
redeemed. After eight years, the Class B shares convert to Class A
shares, after which the 12b-1 fees retained by the Company cease.
The Company amortizes its deferred sales commission asset on a
straight-line basis over an eight-year period, which is equal to the
period in which it will receive 12b-1 fees, assuming the shares are
held for the entire period. In the event that the shares are
redeemed within eight years, amortization expense is accelerated to
remove the remaining deferred sales commission asset.
The Company receives 12b-1 fees equal to 1.00% annually of the
assets of each fund and retains 1.00% annually for the first year
from Class C shares. After one year, the Company remits the full one
percent 12b-1 fee to the selling broker. The Company amortizes its
deferred sales commission asset on a straight-line basis over a
one-year period, which is equal to the period in which it will
receive 12b-1 fees.
Mr. William Friar
September 10, 2004
Page 35
102. Please revise to disclose the weighted average amortization periods
assumed to determine the amortization expense for Class B and Class
C shares.
In accordance with the Company's methodology discussed in response
to Comment No. 101 above, the Company does not assume a weighted
average amortization period for purposes of computing amortization
expense. However, if the existing asset at June 30, 2004 were to be
amortized at the historical rate, including the component for
acceleration, the resulting weighted average amortization periods
for Class B and Class C shares would be 6.1 and 1.0 years,
respectively.
103. Supplementally explain your methodology for evaluating deferred
sales commissions for impairment. Identify the lowest level at which
you evaluate these assets for impairment. For example, do you
evaluate your deferred sales commissions on an individual fund
basis, by class of shares or in total?
As of June 30, 2004, the Company evaluated the recoverability of its
deferred sales commission asset on a fund-by-fund basis for each
share class. This comparison represents the lowest level of
impairment analysis.
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, or the period in which the
Company receives 12b-1 fees, 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.
104. In the event you group your deferred sales commissions for
impairment evaluation, explain how you considered the guidance in
paragraphs 10-14 of SFAS 144.
As discussed in response to Comment No. 103 above, as of June 30,
2004, the Company evaluated the recoverability of its deferred sales
commission asset on a fund-by-fund basis for each share class and
the Company does not group deferred sales commissions by share
class. In considering the guidance in paragraphs 10-14 of SFAS 144,
the Company believes that its impairment analysis is performed at
the lowest practicable level.
105. Supplementally explain your methodology for estimating the future
cash flows that you expect to be generated from deferred sales
commissions over their estimated remaining lives. Specifically
address the following in your response:
Mr. William Friar
September 10, 2004
Page 36
- To the extent that these future cash flows include asset-based
fees, explain how you estimate market values of the related
assets under management. Explain whether a
probability-weighted approach was considered and how you
considered the guidance in paragraphs 16-19 of SFAS 144 in
estimating these cash flows.
- Describe the present value technique and assumptions used to
estimate the fair value of your deferred sales commissions.
For example, explain whether you used a risk-free or
risk-adjusted rate to discount your future cash flows. Refer
to Concepts Statement 7.
The Company has built an asset projection model that estimates the
future asset for each fund within each share class. The model begins
with the prior month's ending shares for each fund and projects the
ending asset over the remaining useful life, i.e., the remaining
period over which the Company will collect a 12b-1 fee.
Significant assumptions utilized by the Company to estimate future
average assets under management include expected future market
performance and redemption rates. Market performance assumptions are
selected using a long-term view of expected average market returns
based on long-term historical returns for each asset class held
within the fund. Future redemption assumptions are determined by
using the actual redemption rates that each fund experienced over
the prior twenty-four month period. The Company has considered the
guidance in paragraphs 16-19 of SFAS 144 and has chosen not to use
the probability weighted approach because the Company believes that
the use of long-term historical returns does not materially differ
from a probability-weighted approach.
106. Please revise to disclose the amounts of impairments recorded in
each of the periods presented or confirm if there were none.
The Company has revised its disclosure pursuant to the staff's
comments.
Note 3 - Related-party Transactions - Page F-9
107. On page F-10 you disclose certain amounts earned from affiliates.
Please revise to clarify the related parties from which you have
earned these fees.
The Company has revised its disclosure pursuant to the staff's
comments.
Note 4 - Investment Securities - Page F-11
108. Please revise to provide disclosures about your available for sale
securities required by paragraph 21 of SFAS 115 and paragraph 534(e)
of SFAS 133.
Mr. William Friar
September 10, 2004
Page 37
The Company has revised its disclosure pursuant to the staff's
comments.
Note 5 - Property and Equipment - Page F-12
109. Supplementally explain to us how you accounted for the distribution
of your real estate assets to your current stockholders. Cite the
authoritative literature upon which you relied in recording this
transaction.
The Company supplementally advises the staff that the distribution
of our real estate assets was accounted for as a nonreciprocal
distribution of nonmonetary assets to owners in accordance with APB
29, Accounting for Nonmonetary Transactions. According to paragraph
18, a nonreciprocal transfer of a nonmonetary asset to a stockholder
should be recorded by the distributing entity at the fair value of
the asset transferred and a gain or loss should be recognized on the
disposition of the asset. Paragraph 23 clarifies this accounting
treatment by adding that fair value should only be used if it is
"objectively measurable and would be clearly realizable to the
distributing entity in an outright sale at or near the time of
distribution". Prior to the distribution and in order to meet the
requirements as identified by paragraph 23, the Company engaged an
independent third party appraiser to perform a valuation of the real
estate assets that resulted in the gain.
Note 10 - Regulatory and Net Capital Requirements - Page F-15
110. Please revise to disclose when your calculation of net capital
requirements was last reviewed by your regulators and disclose the
outcome of that review.
The Company advises the staff supplementally that the Company's
calculation of net capital as of June 30, 2004 was filed with the
NASD on July 26, 2004. We do not believe this information is
required to be disclosed in the financial statements.
111. Please revise to disclose the amount of funds segregated for the
exclusive benefit of customers in accordance with Rule 15c3-3. If
you have not segregated such funds, supplementally tell us under
what section of the Rule an exemption is being claimed.
The Company has revised its disclosure pursuant to the staff's
comments.
If you have any questions concerning the matter referred to in this
letter, please call the undersigned at (630) 245-7296 or counsel to the Company,
Michael Schiavone of Shearman & Sterling LLP, at (212) 848-4813.
Very truly yours,
/s/ James S. Hamman, Jr.
cc: Michael Clampitt
(Securities and Exchange Commission)
Michael Schiavone
(Shearman & Sterling LLP)