Question-and-Answer Session
Operator
(Operator instructions)
Your first question is from the line of William Katz with Buckingham Research.
William Katz – Buckingham Research
Thank you and good afternoon. John, I was wondering if you could start a little bit then give a little more color about the headcount reductions, where they are and then given your view that expenses will be flat year-over-year, what kind of implicit revenue substance are you making against that?
John Calamos
Well the key to the cost reduction as you know, the revenue future is so based on what happens to the markets. So we came at it this way Bill, to say that what we wanted to do was hold the line on expenses to our total expense level and compensation for 2007. The reductions were pretty much across the board. We looked at areas and tried to cost contain with everybody taking a hit, including myself and Nick Calamos, our Chief Investment officer. So it was pretty much across the board. We wanted to continue to be in a position to grow the company, which we think we are and to put an emphasis on greater productivity with our staff.
William Katz – Buckingham Research
Okay, so as I understand, your conversation guidance is flat and not necessarily your overall expenses?
John Calamos
Really, we are not using the fourth quarter run rate. Our total expenses for 2007, we expect to be flat for 2008. So the mix may change Bill but in its entirety we are focused on keeping that 2007 expense structure pretty set back.
William Katz – Buckingham Research
Okay, that was helpful. Thank you. Next question is, just in terms of the revenue yield, I guess your one of the few companies to report so far, that has actually seen a little bit of improvement in the yield and it is a little counter intuitive. So I was wondering if you could walk through some color as to what is going on, is it just geographically driven? Is there some timing here, maybe just some add back from of the closed-end waivers, just trying to get a sense of what may have driven that sequentially.
John Calamos
Well you bring up a lot of good points and the closed-end waivers are something that will impact us later in the year. As we start to unwind a seven-basis point waiver on CHI and a three-basis point waiver on CHY. That will happen in June and July respectively, leading collectively to about $1.1 million or 1.2 million in revenue pickup. The actual realization rate is largely impacted because in a significant portion of our separately managed accounts, we bill on the beginning asset. So in a depreciating market, we actually have a little protection or installation to the fee revenue and what ends up happening, is our management fee is fixed for the quarter but your average asset is decreasing over the quarter. So that inherently about one-basis point to the fee rate. With that being said, I think the fourth quarter of 73 basis points is probably more in line with our expectations in the short term.
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