UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

Commission File Number: 000-51003

Calamos Asset Management, Inc.

(Exact name of Registrant as specified in its charter)

Registrant’s telephone number, including area code:

630-245-7200

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes o         No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes o         No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes þ         No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    [       ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer     o                   Accelerated filer     þ                   Non-accelerated filer     o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes o         No þ

The aggregate market value of common stock held by non-affiliates (assuming that all directors and executive officers are affiliates) on June 30, 2005, the last business day of the registrant’s most recently completed second fiscal quarter, was $626.5 million.

At March 1, 2006, there were 23,161,898 shares of Class A common stock and 100 shares of Class B common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Part III — Portions of the definitive proxy statement for our Annual Meeting of Shareholders on June 1, 2006, as specifically described herein.

PART I

      In this report, unless the context otherwise requires, references to “we,” “us,” “our” and “our company” refer to Calamos Asset Management, Inc., a Delaware corporation, and its consolidated subsidiaries, including Calamos Holdings LLC and the operating company subsidiaries of Calamos Holdings LLC. Calamos Asset Management, Inc. was incorporated on July 23, 2004, in preparation for our company’s initial public offering later that year.

      Unless the context otherwise requires:

      “Calamos Advisors” refers to Calamos Advisors LLC, a Delaware limited liability company, registered investment advisor and wholly owned subsidiary of Calamos Holdings LLC. Calamos Advisors acts as an investment advisor in managing our open-end and closed-end mutual funds; and

      “Calamos Financial Services” refers to Calamos Financial Services LLC, a Delaware limited liability company, registered broker-dealer and wholly owned subsidiary of Calamos Holdings LLC. Calamos Financial Services acts as the sole distributor of our family of open-end mutual funds.

      The other operating company subsidiaries of Calamos Holdings LLC are Calamos Property Management LLC, a provider of real estate investment services; and Calamos Partners LLC and Calamos Capital LLC, investment advisors that provide investment management services primarily related to alternative investment products.

      The assets under management and other financial data presented in this report with respect to the mutual funds we manage include the Calamos Growth and Income Portfolio, which is a portfolio of the Calamos Advisors Trust, a registered open-end investment company. However, references to the terms “mutual funds” and “open-end funds” in this report do not otherwise include this portfolio.

Overview

      We provide investment advisory services to institutions and individuals, managing $43.8 billion in client assets at December 31, 2005. For nearly 30 years, we have been steadfast in our focus on providing our clients with superior risk-adjusted returns, which we define as investment returns that are superior to performance benchmarks, with an equal or lower level of assumed risk. We have consistently applied an investment philosophy and proprietary process centered on risk management across an expanding range of investment strategies, including equity, balanced high yield, convertible, and alternative assets, while analyzing global markets. We believe this disciplined adherence to our investment philosophy and process has enabled us to deliver superior risk-adjusted returns. At December 31, 2005, 95% of the $25.6 billion of open-end fund assets managed by us, with an overall Morningstar rating, were rated by Morningstar as “four stars” or “five stars.” These ratings are based on past performance, which may not be predictive of future results. For additional information about Morningstar ratings, see “Mutual Fund Ratings and Rankings.”

      Our target clients are institutions and individuals with long-term investment horizons. We make our range of investment strategies available to these clients, directly and through intermediaries, by offering an array of investment products designed to suit their individual investment needs, such as open-end funds, closed-end funds and separate accounts, including alternative investments. We plan to introduce new investment strategies that provide the opportunity for attractive risk-adjusted returns for our clients.

      We believe our investment performance, broad range of investment strategies, diverse product offerings and an expanded sales effort have allowed us to consistently grow our assets under management and revenues and position us for continued organic growth. Our assets under management have increased from $9.3 billion at December 31, 2001 to $43.8 billion at December 31, 2005.

      On October 28, 2004, the Class A common stock of Calamos Asset Management, Inc. began trading on the Nasdaq National Market under the symbol CLMS. We paid our first quarterly dividend of 7 cents per share in February 2005 and increased our quarterly dividend 29% to 9 cents per share in February 2006. We

have added new board members to ensure that we have a majority of independent directors on our board, who are members of our audit, compensation, and nominating and governance committees. We expect to recruit additional outside expertise to our board over time.

Business Strategy

      Our business strategy is to continue to diversify the assets we manage by investment product and type of client. Investment products have been created organically within what we believe to be a strong core competency in investment research and portfolio management. We apply a team approach to investment research and portfolio management, which continues to provide significant leverage of investment talent. Our franchise is built upon a consistent investment philosophy and process that has produced strong risk-adjusted investment performance and driven significant organic growth in assets under management. In managing historical growth and in planning for future growth, we have been, and will continue to be, guided by the following:

      A key guiding principle is to have the client’s best interests in mind and to work hard to outperform client expectations in performance and service. We strongly believe that the success of our company is a byproduct of our success in helping clients achieve their investment objectives.

      We have a long-term record of achieving high, risk-adjusted returns on the mutual funds and separate accounts that we manage. As of December 31, 2005, Lipper ranked our Growth Fund as the #1 multi-cap growth fund for 10 years, our Market Neutral Fund as the #1 flexible income fund for 10 years, and our Convertible Fund as the #3 convertible fund for 10 years. For additional information about Lipper rankings, see “Mutual Fund Ratings and Rankings.” Our key strategy is to maintain our investment performance by consistently applying our investment philosophy and process while actively managing each of our strategies to maintain a stable balance of risk and reward over the full course of a market cycle. We are equally mindful of protecting our clients during changing market conditions and accordingly have closed, and expect to continue to close, products to new investments during periods when we do not believe satisfactory risk-adjusted returns can be achieved on additional new investments.

      Our investment strategies are focused on seeking to generate superior risk-adjusted returns over the long term. We seek to attract and retain long-term clients. In order to attract these clients, we focus on educating investors about our investment philosophy and process. We believe that excellent client service is critical to attracting, developing and maintaining long-term client relationships. To ensure top-notch service, we brought our mutual fund client services team in-house in 2005 rather than relying on our transfer agent to provide this important function. Our client services representatives handle calls to our toll-free number and support our sales force via outbound calls to enhance awareness of our strategies. As another measure of the value we place on excellent client service, our operations departments received “ISO 9001:2000” certification from the International Organization of Standardization (ISO). We believe that our firm is one of the first investment advisors to implement this standard within an investment operations group. We intend to pursue ISO certification for additional departments within the firm, as it provides a rigorous framework for documenting and continually improving our business practices.

      Since the introduction of our first convertible strategy in 1977, we have expanded product offerings globally among equity, balanced, high yield, convertible, and alternative asset strategies. Each expansion has been based on our core competency in investment research. We have developed proprietary research capabilities, including an expertise in valuing companies, taking into consideration their total capital structure.

In 1990 we introduced our first equity strategy and in 1999 we began offering a high yield strategy, both of which make use of the analytics and modeling originally designed to assess the hybrid nature of convertible securities. In 2003, we expanded our equity strategies by creating a strategy to focus solely on the large cap sector of the market. In 2004, we introduced a more flexible total return strategy, providing investors access to our equity, convertible and high yield expertise in one vehicle. Also in 2004, we introduced an equity-oriented alternative investment product and expanded the investment strategies employed by an existing convertible arbitrage alternative investment product. In 2005, we launched an open-end fund and a closed-end fund that place greater emphasis on investments outside the United States. Looking ahead, we expect to focus on building our alternative investment products, which may include a mezzanine fund and/or a private equity fund. In late 2004 and 2005, Calamos Holdings LLC invested $50 million in new products and set aside another $30 million for new product initiatives. During the same period, Calamos Family Partners, Inc. invested $104 million in our products, with another $30 million earmarked for our products. We will continue to selectively expand our investment strategies where we believe the application of our core competencies and our investment philosophy and process can produce attractive risk-adjusted returns. We believe that by doing so, we can enhance our long-term ability to increase our assets under management and revenues.

      We strive to expand our presence in distribution channels that best deliver our strategies to long-term investors, in order to grow our client base, assets under management and revenues. For example, our first institutional account mandate was initiated in 1981 for a pension fund account that remains a client today. In the late 1980s, we became one of the first participants in the broker-sponsored managed account business, and in 2002, we launched the first of our four closed-end funds. In 2005, we reorganized our sales force in order to place additional emphasis on institutional investors, including private pension funds, public funds, endowment funds, banks and insurance companies. We have continued to expand our distribution among family offices, private foundations and high net worth investors, as well as among 401 (k) platforms, broker consultants, broker-dealers, financial planners and other channels for mutual funds and managed account products. We see continued opportunities to expand and diversify our distribution relationships and client base. Specifically, we believe we can continue to grow organically by focusing on institutional client growth, increasing the number of intermediaries that distribute Calamos products, and increasing the average number of Calamos funds recommended by broker-dealers and financial advisors. In addition, we have expanded our distribution outside the United States through alternative investments and other managed account relationships, as well as our first fund distribution arrangement outside the United States: a co-branding and investment management agreement signed in 2005 with a leading Swiss bank, Union Bancaire Privée (UBP). This agreement enables us to increase our brand recognition in Europe while benefiting from UBP’s established sales force. We also see a significant opportunity to expand our alternative investment offerings by creating partnerships and other vehicles. In addition, to manage our growth, we have recruited senior-level managers with extensive industry experience to run our day-to-day operations so that our investment professionals can focus on investment performance.

      We believe that brand awareness can accelerate our organic asset growth and help expand our client base. Over the years, we have been recognized for producing top-tier investment performance across a range of investment strategies. For example, Forbes named the Growth Fund number one in its annual mutual fund survey, published September 19, 2005. This was the third consecutive year in which we received this recognition. In the Investors’ Guide 2006 issue of Fortune, December 12, 2005, the Growth Fund was named one of seven “star funds.” The company itself was profiled in a variety of articles during 2005, including Pensions & Investments and BusinessWeek. Furthermore, our chief investment officers John P. Calamos, Sr. and Nick P. Calamos have written books on investments in convertible securities and are recognized experts on investing. During 2005, they discussed their investment insights in Barron’s, BusinessWeek and the New York Times, as well as on CNBC and Bloomberg TV. We believe that as a public company, we have been able to further strengthen the Calamos brand, awareness of our investment philosophy and the positive recognition we enjoy.

Investment Philosophy, Management and Process

      We believe that a successful investment philosophy must be consistent and long-term oriented. Our investment philosophy is based on our strong views about the longer-term trends and economic conditions that impact financial markets. We assume there will always be unforeseen events that will continually test the conventional wisdom. We believe we can achieve favorable investment results based on our experience in many market environments, continued study of economics and financial markets, and application of a sound investment process that can cope with volatility and risky markets. Because of this investment philosophy, our investment process is focused on risk management. The creation of wealth for our clients over the long term is not solely about producing returns, but about managing risk, which we define as the potential for loss and the variability of returns.

      We seek to provide our clients with superior risk-adjusted returns over the long term. While seeking to achieve strong returns, we are focused, first and foremost, on managing risk. We offer a variety of investment strategies that represent distinct balances, or profiles, of risk and reward. We believe that diversification is critical to managing risk and moderating the impact of volatile markets. Our objective is to maintain the consistency of each strategy’s risk and reward profile, whether managing a conservative or an aggressive strategy.

      We construct portfolios by applying various proprietary investment tools and techniques. We analyze and select individual securities in the context of our perspective on macroeconomic themes in the U.S. and the world. To maintain diversified portfolios for our clients, we assess the impact a security will have on the portfolio’s asset class allocation (where applicable) as well as its industry and sector weightings. Our investment philosophy embraces the extensive use of quantitative tools, overlaid with internal qualitative research and analysis.

      We view our quantitative approach as a competitive advantage and have a history of committing resources to build, maintain and enhance our analytical abilities. In addition to our sizable allocation of staff and resources to technology, a separate research development team is dedicated solely to investment team needs and projects, reporting directly to our chief investment officers. Our preference to build software reflects our desire to control underlying assumptions and to allow for the customization of our investment process. We have consistently sought technological advantages to improve the investment process, and continue to devote significant resources in this area.

      Our investment management team is led by John P. Calamos, Sr. and Nick P. Calamos, our chief investment officers. As the originators of our investment philosophy, they developed a team approach to implementing that philosophy through our investment process. This team approach allows for valuable contributions from numerous analysts within our company and creates a synergy of expertise that can be applied across many different investment strategies. We also believe that pooling the expertise of our analysts provides for more consistent investment performance over the long term and enables our company to manage asset growth without significantly adding personnel.

      Members of our investment team participate in a career track system that helps institutionalize our investment process by immersing many analysts and other team members in our system from early in their careers. Additionally, key members of the investment team participate in our incentive compensation plan. Through this plan, investment team members will be able to share in the overall success of our company. As of year-end 2005, our investment management team included 68 members focused on portfolio management and research, trading, portfolio administration and development of analytical models. In 2006, we intend to hire several additional investment professionals to accommodate asset growth and facilitate building an alternative investment strategy, which we expect will be run by a separate investment team following our investment process under the leadership of our chief investment officers.

      We believe that the financial markets operate in a manner that precludes using a single method of analysis and that market fluctuations call for a more flexible approach. Our long-term investment strategy is based on an investment process that uses a variety of sophisticated quantitative models. Our approach also incorporates academic theory and real-world experience to determine a company’s economic enterprise value. Using this process, our investment management team is able to value all securities within a corporate capital structure. This process is employed in each of our investment strategies.

      The key steps in our investment process are:

Investment Strategies

      The following table describes our investment strategies within the equity, balanced, high yield, convertible and alternative asset classes. At December 31, 2005, we and Calamos Family Partners, Inc. have a total of $286 million invested in our firm’s investment strategies.

Investment Products

      We market our investment strategies to our clients through a variety of products designed to suit their individual investment needs. We currently offer six types of investment products that fall into the categories of mutual funds and separate accounts.

      Mutual funds include registered open-end funds and registered closed-end funds and totaled $31.9 billion at December 31, 2005.

      At December 31, 2005, we had $26.0 billion of assets under management in open-end funds, representing approximately 59% of our total assets under management. Open-end funds are continually offered and are not listed on an exchange. Open-end funds issue new shares for purchase, unless they are closed to new investors, and redeem shares from those shareholders who sell. The share price for purchases and redemptions of open-end funds is determined by each fund’s net asset value, which is calculated at the end of each business day.

      We introduced our first open-end fund, the Convertible Fund, in 1985. We have since expanded our open-end fund products and services to invest in securities world-wide and to include equity, balanced, high yield, convertible and alternative strategies that we believe offer attractive risk-adjusted return potential when managed in a manner that is consistent with our core investment philosophy and process. The strategic focus of our sales and marketing effort has been on increasing access to our products, including open-end funds, offered by each financial intermediary. We currently act as the investment advisor to nine open-end funds offered to customers primarily through financial intermediaries. Additionally, we have proactively responded to changing market conditions by repositioning certain existing open-end funds. Since 2003, the Convertible Fund and the Market Neutral Income Fund were closed because we did not believe the market for convertible securities provided satisfactory risk-adjusted returns for additional investments in these funds. As of December 30, 2005, we renamed our Market Neutral Fund the Calamos Market Neutral Income Fund and broadened its mandate to include a covered call strategy. Calamos Market Neutral Income Fund reopened to new investments on January 3, 2006. We expect to continue to seek opportunities to expand and develop the investment strategies offered in our open-end fund products as market conditions change.

      Calamos Advisors manages the strategies of each of the open-end funds with the goal of achieving higher returns with less risk than that of the broad market. To do so, our investment team focuses on maintaining each strategy’s distinct balance between risk and return throughout the full course of the market cycle. The

following table provides the assets under management, risk, overall Morningstar ratings and Lipper rankings for each open-end fund managed as of December 31, 2005.

      At December 31, 2005, we had $5.9 billion of assets under management in closed-end funds, representing approximately 14% of our total assets under management. Closed-end funds typically sell a finite number of shares to investors through underwritten public offerings, unlike open-end funds, which continually offer new shares to investors. After the public offerings, investors buy closed-end fund shares from, and sell those shares to, other investors through an exchange or broker-dealer market.

      We introduced our first closed-end fund, the Convertible Opportunities and Income Fund (NYSE: CHI), in 2002. With this fund, we were among the first managers to combine different asset classes in a single closed-end offering, seeking to enhance returns and limit risk. We have since expanded our closed-end fund products and currently act as the investment advisor to four closed-end funds, each of which trades on the New York Stock Exchange.

      Since 2002, we have sought to capitalize on the success, as measured by risk-adjusted returns and share price performance, achieved by our first closed-end fund, Convertible Opportunities and Income Fund. In 2003, we introduced the Convertible and High Income Fund (NYSE: CHY), which combines our convertible and high yield strategies. In 2004, we introduced the Strategic Total Return Fund (NYSE: CSQ), which seeks total return through a combination of our equity, convertible and high yield strategies. In 2005, we launched the Global Total Return Fund (NYSE: CGO), which seeks total return through a globally diversified portfolio of equity, convertible and high yield strategies. Under favorable market conditions, we expect to continue to seek opportunities to introduce our investment strategies through new closed-end funds that we believe will offer attractive risk-adjusted return potential.

      Each of the closed-end funds employs leverage in its capital structure through the issuance of preferred shares to increase its total assets. The dividends paid to preferred shareholders are based on short-term interest rates, while the proceeds from the issuance of preferred shares are invested by the funds in longer-term taxable

securities. In this manner, we seek to generate additional dividend potential for the common shareholders based on historical differences between short-term and long-term taxable interest rates.

      Separate accounts include institutional accounts, managed accounts, private client accounts and alternative investments and totaled $11.9 billion at December 31, 2005.

      At December 31, 2005, we had $4.2 billion of assets under management in institutional accounts, representing approximately 9% of our total assets under management. Institutional accounts are separately managed accounts for institutional investors, such as private pension funds, public funds and endowment funds, and are offered directly by us and through institutional consultants.

      Our first institutional account mandate was initiated in 1981 for a pension fund account that remains a client today. Since initially offering convertible investment strategies to institutions, we have broadened our mandates to include a variety of investment strategies in other asset classes, such as equity and high yield. Currently our convertible strategies remain closed to new accounts. We act as investment advisor to approximately 120 institutional accounts.

      We focus on growing our institutional business through equity and high yield mandates, managed under both domestic and global objectives. Our target mandates allow for sufficient investment flexibility by which to achieve the objectives of our clients under changing market conditions. We expect to continue to dedicate personnel to support these efforts, in both a sales and service function.

      At December 31, 2005, we had $6.9 billion of assets under management in managed accounts, representing approximately 16% of our total assets under management. 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.

      We first introduced a managed account through a broker-dealer sponsored platform in 1989. Since initially offering convertible investment strategies to our managed account customers, we have broadened our mandates to include balanced, equity and high yield investment strategies. Currently our convertible strategies remain closed to new accounts. We act as investment advisor to more than 24,000 managed accounts, including approximately 71 institutional managed accounts held through 21 broker-sponsored managed account programs. We focus on selectively growing our managed account business through expanded participation in broker-sponsored managed account programs. For programs in which we have a relationship directly with the investor, we target mandates that allow for greater investment flexibility under changing market conditions. We expect to continue to devote personnel resources to support our relationships with broker-dealers, in both a sales and client service function.

      At December 31, 2005, we had $748 million of assets under management in private client accounts, representing approximately 2% of our total assets under management. Private client accounts are separately managed accounts offered directly by us and primarily include high net worth individuals, family offices and private foundations, among others.

      The origins of our private client business date back to 1977. Under this business, we provide customized asset allocation advice to our clients, under the guidance of our investment management team. We currently act as investment advisor to more than 900 private client accounts. For our private client accounts, we offer a Managed Mutual Fund Program, providing customized portfolios drawn from our mutual fund family, as well

as separately managed accounts. Our private client account group will continue to develop the Managed Mutual Fund Program and will increasingly emphasize our alternative investment products.

      At December 31, 2005, we had $91 million of assets under management in alternative investment products, representing less than 1% of our total assets under management. Alternative investment products include non-registered investment vehicles, primarily hedge funds, offered directly by us to qualified individual and institutional investors.

      Building upon our expertise in risk management, we introduced our first alternative investment product, a multi-strategy hedge fund (originally a convertible arbitrage fund), in 1988. Continued development of alternative products is a key strategic priority for us. We believe that the combination of our investment team approach and analytical resources give us the ability to further excel in this arena, particularly in specialized and underserved market segments. We expect to introduce multiple new alternative products in the form of private investment pools, under a variety of strategies that are consistent with our core investment philosophy and process.

Mutual Fund Ratings and Rankings

      This report includes references to ratings and rankings by Morningstar, Inc. and Lipper Analytical Services, Inc., which were derived from information published by them. Overall Morningstar ratings of mutual funds reflect historical risk-adjusted performance as of a particular date and are subject to change every month. Overall Morningstar ratings of mutual funds are calculated from a fund’s three-, five- and 10-year average annual returns, as available, in excess of 90-day T-bill returns with appropriate fee adjustments and a risk factor that reflects fund performance below 90-day T-bill returns. The top 10% of the funds in an investment category receive five stars, the next 22.5% receive four stars, the next 35% receive three stars, the next 22.5% receive two stars and the last 10% receive one star. Each share class of a fund is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.

      Lipper rankings of funds are based on net total return performance with dividends reinvested and do not take into account or reflect sales charges; if the rankings did reflect sales charges, the results might be less favorable. Each fund is ranked within a universe of funds similar in investment objective as determined by Lipper.

      All overall Morningstar ratings and Lipper rankings of the open-end funds managed by Calamos Advisors cited in this report are for Class A shares of those funds. The other classes of shares of those funds may have different performance characteristics.

      The ratings and rankings included in this report are subject to change without notice and are based on past performance, which may not be predictive of future results.

Technology and Intellectual Property

      Our investment approach demands specific requirements for all aspects of the investment process, including risk management, security analysis and trade processing. Our use of in-house and third-party technology and software — in particular, our proprietary Calamos Corporate System, or CCS — is a result of this view, enabling customization of systems across our company. Extending beyond the proprietary software used by our investment team, all of our internal systems are geared to the underlying assumptions that guide the investment process, allowing for a more seamless integration of security analysis, trade processing, accounting and the portfolio administration of nearly 25,000 separate accounts.

      We developed CCS internally and it forms the basis of our risk management/metric system. It is highly integrated into our system for communicating with our clients and suppliers and for automating trade settlements and daily reconciliations. In mid-2005, we relocated our company from two locations to a new headquarters in Naperville, Illinois. Our infrastructure investment included a world-class data center to

support our trading floor, investment analysis and other business-critical functions. The new technology is designed to accommodate growth in the number and complexity of applications.

      Trademarks, service marks and brand-name recognition are important to our business. We have rights to the trade and service marks under which our products are offered in connection with financial analysis and consultation, financial portfolio management and financial investment. We have registered certain service marks in the United States, France, Ireland and Switzerland and will continue to do so as new trademarks and service marks are developed or acquired. We have taken, and will continue to take, action to protect our interest in these service marks.

Distribution, Sales and Client Service

      We distribute our products to both individuals and institutions, primarily through financial intermediaries. Our sales professionals are located across the United States. They act in a consultative role by conducting investment seminars and training sessions, as well as providing prospectuses and other literature to deepen investors’ knowledge and understanding of our investment strategies and proprietary investment process. Our in-house sales representatives support the outside sales force by making outbound calls to enhance awareness of our strategies. We have brought our mutual fund client services group in-house to enhance the communication that takes place with our investors seeking additional information. In 2005, we restructured our sales force in order to place greater emphasis on institutional investors, including private pension funds, public funds, endowment funds, banks and insurance companies. We have continued to expand our distribution among family offices, private foundations and high net worth investors, as well as among 401(k) platforms, broker consultants, broker-dealers, financial planners and other channels for mutual funds and managed account products. Specifically, we believe we can continue to grow organically by focusing on institutional client growth, increasing the number of intermediaries that distribute Calamos products, and increasing the average number of Calamos funds recommended by broker-dealers and financial advisors. We also see distribution opportunities outside the United States, which may include expanding our investment management and co-branding agreement with UBP, a Swiss bank that offers its UBAM sub-advised portfolios to individual and institutional investors via an extensive network of relationships with financial advisors and brokers, primarily in Europe, or signing an agreement with additional new partners in Europe or Asia.

      Our sales efforts are supported by our investor marketing and communications group, which creates information regarding our products and strategies tailored to specific investor segments, as well as print and online materials to educate investors about our market insights, portfolio positioning, investment philosophy, and commitment to risk management and superior long-term performance. For example, we publish a quarterly analysis of market developments, performance trends and expectations, both in print and on our website. Our chief investment officers also answer investor questions during a quarterly conference call with financial advisors.

      We organize our sales and client services into three primary segments based on whether we are serving financial intermediaries, institutions or private clients.

      We have developed an extensive network of third-party financial intermediaries that includes broker-dealers, financial consultants and independent financial advisors. In 2005, we continued to expand our distribution outside the United States via a co-branding and investment management agreement with UBP. This agreement has enabled us to increase our brand recognition in Europe while benefiting from UBP’s established sales force. The UBAM-Calamos US Equity Growth Fund grew to more than $350 million at year-end 2005 from approximately $12 million when we were appointed the fund’s submanager in April 2005.

      Our products are structured to meet the needs of financial intermediaries and their clients, and we opportunistically seek to introduce new products that best deliver our investment strategies to investors through these distribution channels. We offer the Calamos open-end funds, closed-end funds and managed accounts to investors through financial intermediaries in our network.

      Client accounts held at our top five financial intermediaries represented approximately 44% of our assets under management as of December 31, 2005.

      Our institutional account products are distributed to institutions directly by us and through financial intermediaries, including institutional consultants that are dedicated to advising the institutional investor community. We have offered institutional account products directly to public and private pension funds, public funds and endowment funds since 1981. Initially, most of our institutional clients invested in convertibles. However, we closed our convertible strategies to new accounts in 2003 in order to preserve performance for existing clients. Since then, we have focused on educating institutional prospects about our performance record in equity, fixed income and alternative investment strategies. In pursuing this, we continue to educate our institutional clients on the advantages that we can offer through more flexible mandates.

      In 2005, we restructured and expanded our institutional marketing efforts in order to more effectively identify potential new investors, educate current institutional clients about the breadth of our investment strategies, respond to requests for investment management proposals, provide ongoing client service to existing institutional accounts and develop relationships with institutional consultants. Partly as a result of our increased emphasis on institutional outreach, we achieved a 25% net increase in institutional assets under management during 2005. Our institutional marketing, sales and client service efforts are supported by members of our investment management team.

      To assist our private clients in creating and preserving wealth, we offer them a full array of Calamos mutual funds, separate accounts and alternative investment products. Our individualized services include managed portfolios of mutual funds and separate accounts in both taxable and tax-deferred accounts; development and execution of multi-generational investment policies, asset management and income distribution plans; managed retirement, profit-sharing and deferred compensation plans for entrepreneurs; asset allocation and investment management for foundations and endowments; and the integration of alternative investments into a comprehensive financial plan.

      We believe our culture of excellence, our focus on attracting and retaining long-term investors and our high level of client service differentiates our distribution, sales and client service.

Competition

      We compete in all aspects of our business with a large number of investment management firms, commercial banks, broker-dealers, and insurance companies. In order to effectively compete with these organizations, we compete principally on the basis of: investment performance; quality of client service; brand recognition and business reputation; continuity of client relationships and assets under management; continuity of our selling arrangement with financial intermediaries; the range of products offered; the level of fees and commissions charged for services; the level of expenses paid to financial intermediaries for administration and distribution; and financial strength.

      The following factors, among others, serve to increase our competitive risks: the financial strength and more comprehensive line of products and services provided by our competitors; the consolidation within the investment management industry is serving to increase the size and strength of certain competitors; the relatively few barriers to entry may increase the number of competitors; and the recruiting of our investment professionals and other employees from us.

      These and other factors could reduce our earnings and revenues and materially adversely affect our business.

Regulatory Environment

      Virtually all aspects of our businesses are subject to extensive regulation in the United States at both the federal and state level, as well as by self-regulatory organizations. These laws and regulations are primarily intended to protect investment advisory clients and shareholders of registered investment companies. Under these laws and regulations, agencies that regulate investment advisors, such as Calamos Advisors, have broad administrative powers, including the power to limit, restrict or prohibit an investment advisor from carrying on its business in the event that it fails to comply with such laws and regulations. Possible sanctions that may be imposed include the suspension of individual employees, limitations on engaging in certain lines of business for specified periods of time, revocation of investment advisor and other registrations, censures and fines.

      Calamos Advisors is registered as an investment advisor with the SEC. As a registered advisor, it is subject to the requirements of the Investment Advisers Act, and the SEC’s regulations thereunder, as well as to examination by the SEC’s staff. The Investment Advisers Act imposes substantive regulation on virtually all aspects of Calamos Advisors’ advisory business and its relationship with its clients. Applicable requirements relate to, among other things, fiduciary duties to clients, engaging in transactions with clients, maintaining an effective compliance program, performance fees, solicitation arrangements, conflicts of interest, advertising, and recordkeeping, reporting and disclosure requirements. The mutual funds Calamos Advisors manages are registered with the SEC under the Investment Company Act. The Investment Company Act imposes additional obligations, including detailed operational requirements for both the funds and their advisor. Moreover, an investment advisor’s contract with a registered fund may be terminated by the fund on not more than 60 days’ notice, and is subject to annual renewal by the fund’s board after an initial two-year term. As discussed below, both the Investment Advisers Act and the Investment Company Act regulate the “assignment” of advisory contracts by the advisor. The SEC is authorized to institute proceedings and impose sanctions for violations of the Investment Advisers Act and the Investment Company Act, ranging from fines and censures to termination of an investment advisor’s registration. The failure of Calamos Advisors or the registered funds advised by Calamos Advisors to comply with the requirements of the SEC could have a material adverse effect on us.

      In response to recent scandals in the financial services industry regarding late trading, market timing and selective disclosure of portfolio information, various legislative and regulatory proposals are pending in or before, or have been adopted by, the U.S. Congress and the various regulatory agencies that supervise our operations, including the SEC. Additionally, the SEC, the National Association of Securities Dealers, Inc., or NASD, and other regulators, as well as Congress, are investigating certain practices within our industry.

      Bills regarding the mutual fund industry have been proposed in the U.S. Senate, one of which is the Mutual Fund Reform Act of 2004, or the Mutual Fund Reform Act. If enacted, the Mutual Fund Reform Act

would, among other things, eliminate asset-based distribution fees or Rule 12b-1 fees with respect to open-end funds. The Mutual Fund Reform Act also would prohibit revenue sharing, which allows a mutual fund company to pay for “shelf space” at brokerage firms or other intermediaries selling mutual funds shares, as well as “soft dollar” arrangements. If these reforms are adopted, it may become more expensive for fund sponsors to distribute and manage funds, since fund assets will not be available to defray certain costs.

      The Sarbanes-Oxley Act of 2002 and rules promulgated by the SEC have significantly changed the corporate governance requirements applicable to mutual funds. For example, the SEC has approved a new regulation that generally requires at least three-quarters of a registered fund’s board of directors to be independent, i.e., persons that are not interested persons of the investment company or its investment advisor. The regulation also requires that the chairman of the fund’s board be independent. The independent directors must also hold quarterly meetings without fund executives present.

      These regulatory and legislative initiatives, to the extent implemented, could have a substantial impact on the regulation and operation of mutual funds, investment advisors and broker-dealers and could adversely affect our manner of operation and profitability.

      In its capacity as a broker-dealer, Calamos Financial Services is subject to regulations that cover all aspects of its business, including sales practices, use and safekeeping of a client’s funds and securities, the capital structure of securities firms, recordkeeping and the conduct of directors, officers and employees. Violation of applicable regulations can result in the revocation of broker-dealer licenses, the imposition of censure or fines and the suspension or expulsion of a firm, its officers or employers. Calamos Financial Services also is required to maintain certain minimum net capital and cash reserves for the benefit of its customers.

      Under the rules and regulations of the SEC promulgated pursuant to the federal securities laws, Calamos Advisors and Calamos Financial Services are subject to periodic examination by the SEC. Calamos Financial Services also is subject to periodic examination by the NASD.

      Calamos Advisors is subject to the Employee Retirement Income Security Act of 1974, as amended, or ERISA, and to regulations promulgated thereunder, insofar as it is a “fiduciary” under ERISA with respect to benefit plan clients. ERISA and applicable provisions of the Internal Revenue Code of 1986, as amended, impose certain duties on persons who are fiduciaries under ERISA, prohibit certain transactions involving ERISA plan clients and provide monetary penalties for violations of these prohibitions. Our failure to comply with these requirements could have a material adverse effect on our business.

Employees

      At December 31, 2005, we had 331 full-time employees.

SEC Filings

      Through our Internet website, we make available our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. To retrieve any of this information, visit the Investor Relations section of our website at www.calamos.com.

Item 1A.     Risk Factors

Business Risks

      We caution the reader that the following business risks and those risks described elsewhere in this report and in our other Securities and Exchange Commission, or SEC, filings, could cause our actual results to differ materially from expectations stated in our forward-looking statements.

Risks Related to Our Industry

      Our business is subject to extensive regulation in the United States, primarily at the federal level, including regulation by the SEC under the Investment Company Act of 1940, as amended, and the Investment Advisers Act of 1940, as amended, by the Department of Labor under the Employee Retirement Income Security Act of 1974, as amended, or ERISA, as well as regulation by the National Association of Securities Dealers, Inc., or NASD, and state regulators. The mutual funds managed by Calamos Advisors are registered with the SEC as investment companies under the Investment Company Act. The Investment Advisers Act imposes numerous obligations on investment advisors, including record-keeping, advertising and operating requirements, disclosure obligations and prohibitions on fraudulent activities. The Investment Company Act imposes similar obligations, as well as additional detailed operational requirements, on registered investment companies and investment advisors. Our failure to comply with applicable laws or regulations could result in fines, censure, suspensions of personnel or other sanctions, including revocation of our registration as an investment advisor or broker-dealer. Industry regulations are designed to protect our clients and investors in our funds and other third parties who deal with us and to ensure the integrity of the financial markets. They are not designed to protect our stockholders. Changes in laws or regulations or in governmental policies could limit the sources and amounts of our revenues, increase our costs of doing business, decrease our profitability and materially and adversely affect our business.

      In response to scandals in the financial services industry regarding late trading, market timing and selective disclosure of portfolio information, various legislative and regulatory proposals are pending in or before, or have been adopted by, the U.S. Congress, the legislatures in states in which we conduct operations and the various regulatory agencies that supervise our operations, including the SEC. These proposals, to the extent enacted or adopted, could have a substantial impact on the regulation and operation of registered funds, investment advisors and broker-dealers and could adversely affect our assets under management, revenues and net income. Additionally, the SEC, the NASD and other regulators, as well as Congress, are investigating certain practices within our industry. These investigations could lead to further legislative and regulatory proposals that, if enacted or adopted, could adversely affect our business.

      The investment management business is highly competitive and has relatively low barriers to entry. To the extent we are forced to compete on the basis of price, we may not be able to maintain our current fee structure. Although our investment management fees vary from product to product, historically we have competed primarily on the performance of our products and not on the level of our investment management fees relative to those of our competitors. In recent years, however, there has been a trend toward lower fees in the investment management industry. In order to maintain our fee structure in a competitive environment, we must be able to continue to provide clients with investment returns and service that make investors willing to pay our fees. In addition, the board of directors of each mutual fund managed by Calamos Advisors must make certain findings as to the reasonableness of its fees. We cannot be assured that we will succeed in providing investment returns and service that will allow us to maintain our current fee structure. Fee reductions on existing or future new business could have an adverse effect on our profit margins and results of operations.

      We derive a substantial portion of our revenues from investment management agreements with mutual funds that, as required by law, are generally terminable by the funds’ board of directors or a vote of the majority of the funds’ outstanding voting securities on not more than 60 days’ written notice. After an initial term, each fund’s investment management agreement must be approved and renewed annually by the

independent members of such fund’s board of directors and, in certain cases, by its stockholders, as required by law. These investment management agreements may be terminated for any number of reasons, including investment performance, advisory fee rates and financial market performance, or may not be renewed. If any of these agreements are terminated, we may not be able to replace these agreements on favorable terms. The decrease in revenues that could result from any such termination could have a material adverse effect on our business.

      Open-end fund investors may redeem their investments in those funds at any time without prior notice. Investors may reduce the aggregate amount of assets under management for any number of reasons, including investment performance, changes in prevailing interest rates and financial market performance. In a declining stock market, the pace of mutual fund redemptions could accelerate. Poor performance relative to other asset management firms tends to result in decreased purchases of mutual fund shares and increased redemptions of mutual fund shares. The redemption of investments in mutual funds managed by Calamos Advisors would adversely affect our revenues, which are substantially dependent upon the assets under management in our funds. If redemptions of investments in mutual funds caused our revenues to decline, it could have a material adverse effect on our earnings.

      The SEC has adopted a rule that requires registration of many hedge fund managers. Registration under the rule requires hedge fund managers to adopt certain compliance controls in order to ensure compliance with applicable securities laws and permits increased oversight of hedge fund managers by the SEC. Any regulations applicable to hedge funds that may be adopted pursuant to this rule could have a substantial impact on our operations and may adversely affect our hedge fund business and decrease our future income.

      Substantially all of our revenues are determined by the amount of our assets under management. Under our investment advisory contracts with our clients, the investment management fee we receive is typically based on the market value of assets under management. In addition, we receive asset-based distribution and/or service fees with respect to the open-end funds managed by Calamos Advisors over time pursuant to distribution plans adopted under provisions of Rule 12b-1 under the Investment Company Act. Rule 12b-1 fees typically are based on the market value of assets under management and represented approximately 28% of our revenues for the year ended December 31, 2005 and 27% of our revenues for the years ended December 31, 2004 and 2003. Accordingly, a decline in the prices of securities generally may cause our revenues and net income to decline by either causing the value of our assets under management to decrease, which would result in lower investment advisory and Rule 12b-1 fees, or causing our clients to withdraw funds in favor of investments they perceive to offer greater opportunity or lower risk, which would also result in lower fees. The securities markets are highly volatile, and securities prices may increase or decrease for many reasons, including economic and political events and acts of terrorism beyond our control. If a decline in securities prices caused our revenues to decline, it could have a material adverse effect on our earnings.

      A terrorist attack, war, power failure, cyber-attack, natural disaster or other catastrophic or unpredictable event could adversely affect our future revenues, expenses and earnings by: interrupting our normal business operations; sustaining employee casualties, including loss of our key executives; requiring substantial expenditures and expenses to repair, replace and restore normal business operations; and reducing investor confidence.

      We have a disaster recovery plan to address catastrophic and unpredictable events but we cannot be assured that this plan will be sufficient in responding or ameliorating the effects of all disaster scenarios. If our employees or vendors we rely upon for support in a catastrophic event are unable to respond adequately or in a timely manner, we may lose clients resulting in a decrease in assets under management with a material adverse effect on revenues and net income.

Risks Related to Our Business

      As of December 31, 2005, Calamos Family Partners, Inc. and John P. Calamos owned 77% of the membership units in Calamos Holdings LLC and all of our Class B common stock, representing more than 97% of the combined voting power of all classes of our voting stock. Pursuant to the terms of our amended and restated certificate of incorporation, Calamos Family Partners, Inc. retains a majority of the combined voting power of our common stock until the number of outstanding shares of our Class B common stock, plus the number of membership units in Calamos Holdings LLC and shares of our Class A common stock held by holders of our Class B common stock, falls below 15% of the total number of outstanding membership units in Calamos Holdings LLC, at which time all outstanding shares of our Class B common stock automatically will convert into shares of our Class A common stock. Accordingly, as long as Calamos Family Partners, Inc. maintains the requisite ownership interests in our Class B common stock and our Class A common stock and in membership units of Calamos Holdings LLC, Calamos family members and their trusts, through their beneficial ownership of Calamos Family Partners, Inc., will continue to have the ability to elect all of the members of our board of directors and thereby control our management and affairs, including determinations with respect to acquisitions, dispositions, borrowings, issuances of common stock or other securities, and the declaration and payment of dividends on our common stock. In addition, they will continue to be able to determine the outcome of all matters requiring stockholder approval and will continue to be able to cause or prevent a change of control of our company or a change in the composition of our board of directors and could preclude any unsolicited acquisition of our company. The concentration of ownership could deprive our Class A stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately negatively affect the market price of our Class A common stock. As a result of the control exercised by Calamos Family Partners, Inc., none of our agreements with them and other companies controlled by them are deemed to be negotiated on “arm’s length” terms. However, any such agreements since our Initial Public Offering have been approved in accordance with the Conflict of Interests Policy contained in our Amended and Restated Certificate of Incorporation.

      We are dependent on the efforts of John P. Calamos, Sr., our Chairman, Chief Executive Officer and Co-Chief Investment Officer, and Nick P. Calamos, our Senior Executive Vice President and Co-Chief Investment Officer, and other key executives. These executives have been responsible for determining the strategic direction of our business, are integral to our brand and the positive business reputation we enjoy and, having overseen the management of all of our investment portfolios and the research teams responsible for each of our portfolio strategies, have been responsible for the historically strong investment performance that allows us to compete successfully. Although we have employment agreements with John P. Calamos, Sr. and Nick P. Calamos, we cannot assure you that they will continue to act in their positions with us. If we lose the services of any of these key executives, it would have a material adverse effect on our business. We do not maintain any “key person” insurance with respect to any of our personnel.

      The potential investor base for mutual funds and separate accounts is limited, and our ability to distribute mutual funds and access clients for separate accounts is highly dependent on access to the retail distribution systems and client bases of national and regional securities firms, banks, insurance companies, defined

contribution plan administrators and other intermediaries, which generally offer competing internally and externally managed investment products. For open-end funds, such intermediaries are paid for their services to fund shareholders, in part, through Rule 12b-1 fees and/or upfront commission payments by us, for which we receive Rule 12b-1 payments in the future. Those future payments allow us to pay or help us recover payments to selling firms. Access to such distribution systems and client bases is substantially dependent upon our ability to charge Rule 12b-1 fees to our funds. To the extent that recent regulatory initiatives prohibit or limit the imposition of Rule 12b-1 or similar fees, our access to these distribution systems and client bases may be foreclosed in the future. To a lesser extent, our institutional separate account business depends on referrals from financial planners and other professional advisors, as well as from our existing clients. We cannot assure you that these channels and client bases will continue to be accessible to us. The inability to have such access could have a material adverse effect on our earnings.

      While we continue to diversify and add new distribution channels for mutual funds and managed accounts, a significant portion of the growth in our assets under management in recent years has been accessed through intermediaries. As of December 31, 2005, substantially all of our assets under management were attributable to accounts that we accessed through third-party intermediaries. These intermediaries generally may terminate their relationships with us on short notice. Loss of any of the distribution channels afforded by these intermediaries, and the inability to access clients through new distribution channels, could decrease our assets under management and adversely affect our results of operations and growth. In addition, in the case of managed accounts offered through intermediaries to their customers, such intermediaries may reduce the fees that they remit to us as part of the arrangements they have with us. For the year ended December 31, 2005, 2004 and 2003, the fees we received from managed accounts through intermediaries were $30.5 million, $28.5 million and $24.1 million, respectively. A substantial reduction in fees received from third-party intermediaries could have a material adverse affect on our business.

      Our investment management business depends on the expertise of our personnel and their ability to work together as an effective team. Our future success depends to a substantial degree on our ability to attract and retain qualified personnel. In particular, we anticipate that it will be necessary for us to add investment professionals as we further diversify our investment products and strategies. Competition for employees with the necessary qualifications is intense and we may not be successful in our efforts to recruit and retain the required personnel.

      We cannot guarantee that our compensation methods will allow us to recruit and retain the required personnel we need. In particular, the use of equity compensation may be ineffective if the market price of our Class A common stock declines. The inability to recruit and retain qualified personnel could affect our ability to provide an acceptable level of service to our clients and funds and our ability to attract new clients and investors in our funds, each of which could have a material adverse effect on our business.

      As of December 31, 2005, 41% of our assets under management were concentrated in the Calamos Growth Fund, and 43% of our investment management fees were attributable to that fund. As a result, our operating results are particularly exposed to the performance of that fund and our ability to minimize redemptions from and maintain assets under management in that fund. If investors in the Growth Fund decided to withdraw their investments for any reason, including poor investment performance or market conditions under which this investment strategy is out of favor, our revenues from that fund would decline and it could have a material adverse effect on our earnings. Similarly, if our investment management agreement with the Growth Fund were terminated for any reason, the decrease in revenues that would result from any such termination would materially impact our earnings. We cannot assure you that investors will continue to maintain their investments in, and that we will be able to maintain our investment management agreement with, our Growth Fund. We also may close funds and investment strategies to new investors, which could

inhibit our growth and could lead to redemptions by existing investors, and could thereby cause a decrease in our revenues.

      We are a holding company, and our membership units in Calamos Holdings LLC are our primary asset. We have no significant independent means of generating revenues. Calamos Holdings LLC is treated as a partnership for U.S. federal income tax purposes and, as such, is not itself subject to U.S. federal income tax. Instead, its taxable income is allocated on a pro rata basis to Calamos Asset Management, Inc., Calamos Family Partners, Inc. and John P. Calamos, Sr. Accordingly, we incur income taxes on our proportionate share of any net taxable income of Calamos Holdings LLC, and also incur expenses related to our operations. We caused and in the future intend to cause Calamos Holdings LLC to distribute cash to its members to the extent necessary to cover their tax liabilities, if any. To the extent we need funds to pay such taxes, or for any other purpose, and Calamos Holdings LLC is unable to provide such funds, it could have a material adverse effect on our business, financial condition or results of operations.

      To date, we have paid five quarterly cash dividends and intend to continue to pay dividends on a quarterly basis. Our board of directors may, in its discretion, decrease the level of dividends or discontinue the payment of dividends entirely. In addition, as a holding company, we are dependent upon the ability of Calamos Holdings LLC to generate earnings and cash flows and distribute them to us so that we may pay our obligations and expenses and pay dividends to our stockholders. We caused and expect to cause Calamos Holdings LLC to make distributions to its members, including us. However, the ability of Calamos Holdings LLC to make such distributions is subject to its operating results, cash requirements and financial condition, the applicable laws of the State of Delaware (which may limit the amount of funds available for distribution to its members), its compliance with covenants and financial ratios related to existing or future indebtedness, including its existing Senior Unsecured Notes, and its other agreements with third parties. If, as a consequence of these various limitations and restrictions, we are unable to generate sufficient distributions from our business, we may not be able to make or may have to reduce or eliminate the payment of dividends on our shares.

      Under the Investment Company Act, an investment management agreement with a fund must provide for its automatic termination in the event of its assignment. The fund’s board and shareholders must vote to continue the agreement following its assignment, the cost of which ordinarily would be borne by us.

      Under the Investment Advisers Act, a client’s investment management agreement may not be “assigned” by the investment advisor without the client’s consent. An investment management agreement is considered under both acts to be assigned to another party when a controlling block of the advisor’s securities is transferred. In our case, an assignment of our investment management agreements may occur if, among other things, we sell or issue a certain number of additional common shares in the future. We cannot be certain that our clients will consent to assignments of our investment management agreements or approve new agreements with us if a change of control occurs. Under the Investment Company Act, if a fund’s investment advisor engages in a transaction that results in the assignment of its investment management agreement with the fund, the advisor may not impose an “unfair burden” on that fund as a result of the transaction for a two-year period after the transaction is completed. The term “unfair burden” has been interpreted to include certain increases

in investment advisory fees. This restriction may discourage potential purchasers from acquiring a controlling interest in our company.

      We depend upon in-house technology and software across the Company. If we fail to improve, protect or enforce our intellectual property rights or if our Calamos Corporate System software or our software systems do not function properly, we could suffer business disruptions, financial losses, liability to clients and damage to our reputation or be subject to regulatory intervention.

      Through excellent client service, outstanding risk-adjusted investment performance, comprehensive product offerings, superior distribution and a strong brand image, we have developed our reputation. The Calamos name and brand are valuable assets and any damage to either could hamper our ability to attract and retain clients and employees, thereby having a material adverse effect on our revenues and net income. Risks to our reputation may include regulatory inquires and unsubstantiated accusations and managing such matters may be expensive, time consuming and difficult.

Risks Related to the Company

      Shares of our Class A common stock and Class B common stock entitle the respective holders to identical rights, except that each share of our Class A common stock entitles its holder to one vote on all matters to be voted on by stockholders generally while each share of Class B common stock entitles its holder to a greater number of votes. The difference in voting rights could adversely affect the value of our Class A common stock to the extent that investors view, or any potential future purchaser of our company views, the superior voting rights of the Class B common stock to have value.

      We may sell additional shares of Class A common stock in subsequent public offerings. We also may issue additional shares of Class A common stock or convertible debt securities. As of December 31, 2005, we had 23,000,000 outstanding shares of Class A common stock.

      In addition, members of the Calamos family and trusts for their benefit own, individually and/or through their combined ownership of Calamos Family Partners, Inc., 77,000,000 membership units in Calamos Holdings LLC. Our amended and restated certificate of incorporation provides for the exchange of membership units in Calamos Holdings LLC (other than those held by us) for shares of our Class A common stock. Subject to certain selling restrictions, Calamos family members and their trusts could from time to time and for any reason exchange their membership units in Calamos Holdings LLC for shares of our Class A common stock and sell any or all of those shares.

      Calamos Family Partners, Inc. and John P. Calamos, Sr. are parties to a registration rights agreement with us. Under that agreement, Calamos Family Partners, Inc. and John P. Calamos, Sr. have the right to require us to effect the registration of shares of our Class A common stock that Calamos Family Partners, Inc. or John P. Calamos, Sr. could acquire upon conversion of their Class B common shares or exchange of their membership units in Calamos Holdings LLC.

      We cannot predict the size of future issuances of our Class A common stock or the effect, if any, that future issuances and sales of shares of our Class A common stock, including by Calamos family members and their trusts, may have on the market price of our Class A common stock. Sales or distributions of substantial amounts of our Class A common stock (including shares issued in connection with an acquisition), or the perception that such sales could occur, may cause the market price of our Class A common stock to decline.

      Members of the Calamos family and trusts for their benefit beneficially own all outstanding shares of our Class B common stock. As a result, Calamos family members are able to exercise control over all matters requiring the approval of our stockholders and would be able to prevent a change in control of our company. In addition, provisions in our amended and restated certificate of incorporation and bylaws may make it more difficult and expensive for a third party to acquire control of us even if a change of control would be beneficial to the interests of our stockholders. For example, our amended and restated certificate of incorporation authorizes the issuance of preferred stock that could be issued by our board of directors to thwart a takeover attempt. The market price of our Class A common stock could be adversely affected to the extent that the Calamos family’s control over us, as well as provisions of our amended and restated certificate of incorporation and bylaws, discourage potential takeover attempts that our stockholders may favor.

      Calamos Holdings LLC made an election under section 754 of the Internal Revenue Code of 1986, as amended (a “section 754 election”). As a result of the section 754 election, Calamos Holdings LLC increased the company’s proportionate share of the tax basis of the assets of Calamos Holdings LLC to reflect the purchase price paid by the company for its interest in Calamos Holdings LLC. For federal income tax purposes, Calamos Holdings LLC is treated as a partnership and, based upon a third party valuation, its primary intangible assets include investment management contracts and distribution agreements. Based on an opinion of counsel, these types of customer-based intangibles should be amortizable intangibles for federal income tax purposes. Therefore, Calamos Holdings LLC allocated increased tax amortization deductions to the company, which reduced the company’s share of taxable income. However, if the Internal Revenue Service were to disallow all or any portion of the tax amortization deductions allocated to the company, based on the valuation or allocation or purchase price related to the section 754 election, this action could have a material adverse effect on our business.

Item 1B.     Unresolved Staff Comments

      The company did not receive written comments from the Commission staff during 2005.

      Our principal executive offices are located at 2020 Calamos Court, Naperville, Illinois 60563, where we occupy approximately 149,000 square feet of space under lease agreements with subsidiaries of Calamos Property Holdings LLC, which is owned by the stockholders of Calamos Family Partners, Inc. We have approximately 15,000 square feet of additional office space at a different location in Naperville, Illinois under a separate lease agreement with a subsidiary of Calamos Property Holdings LLC.

      In the normal course of business, we may be subject to various legal proceedings from time to time. Currently, there are no material legal proceedings pending against us.

      No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the year ended December 31, 2005.

PART II

      Our Class A common stock ($0.01 par value) has traded on the Nasdaq National Market under the symbol “CLMS” since our initial public offering on October 28, 2004. Before October 28, 2004, there was no public market for our Class A common stock. There is no public market for our Class B common stock ($0.01 par value).

      The high and low trade price information for Class A common stock and dividends per share for each class of common stock were:

      On February 21, 2006, there were approximately 59 holders of record of our outstanding Class A common stock and one holder of record of our outstanding Class B common stock. With respect to our Class A common stock, these shares are primarily held in “street name” through brokers.

      Calamos Asset Management, Inc. expects to declare and pay quarterly cash dividends during 2006.

Equity Compensation Plan Information

      We have not repurchased any shares of our common stock since becoming a public company in October 2004.

      The following tables set forth our selected historical consolidated financial and other data, as well as financial and other data for our predecessor, Calamos Family Partners, Inc. as of the dates and for the periods indicated. The selected historical consolidated income statement data for the period January 1, 2004 to November 1, 2004 and for each of the years in the three-year period ended December 31, 2003 and the selected historical consolidated balance sheet data as of December 31, 2003, 2002 and 2001 have been derived from the audited consolidated financial statements of Calamos Family Partners, Inc. (formerly known as Calamos Holdings, Inc.).

      For all periods presented through November 1, 2004, Calamos Family Partners, Inc. operated as an S corporation and was not subject to U.S. federal and certain state income taxes. Beginning November 2, 2004, we have been subject to U.S. federal and certain state and local income taxes applicable to C corporations.

      You should read the following selected historical consolidated financial and other data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the historical consolidated financial statements and related notes, all included elsewhere in this Annual Report on Form 10-K.

      We provide investment advisory services to institutions and individuals, managing $43.8 billion in client assets at December 31, 2005. We offer our clients a variety of investment products designed to suit their individual investment needs.

Assets Under Management

      Our operating results fluctuate primarily due to changes in the total value and composition of our assets under management. The following table details our assets under management, based on the six types of

investment products we offer in the mutual fund and separate account categories, at December 31, 2005, 2004 and 2003.

      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:

      In order to increase our assets under management and expand our business, we must develop and market investment products that suit the individual investment needs of our target clients — investors seeking superior risk-adjusted returns over the long term. The value and composition of our assets under management and our ability to continue to attract clients will depend on a variety of factors, including, among other things:

Investment Products

      Mutual funds include registered open-end funds and registered closed-end funds.

      Open-End Funds. Open-end funds are continually offered and are not listed on an exchange. Open-end funds issue new shares for purchase and redeem shares from those shareholders who sell. The share price for purchases and redemptions of open-end funds is determined by each 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. Investment management fees are our principal source of revenue from open-end mutual funds and are derived from assets under management.

      We offer several share classes in each open-end fund to provide investors with alternatives to pay for commissions, distribution and service fees.

      Closed-End Funds. 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. All four of the closed-end funds that we manage currently use leverage by issuing preferred securities to increase their total assets. Assets under management in closed-end funds vary due to the amount of assets raised in underwritten public offerings, the amount of leverage utilized and market appreciation or depreciation. Our revenues from closed-end funds are derived from investment management fees on the assets that we manage. In addition, in a typical underwritten public offering, investors are charged a 4.5% commission by the selling firms. We do not receive or pay commissions in connection with sales of closed-end fund shares, although we may pay asset based distribution and service fees, as well as, one-time distribution and service fees to underwriters for underwriting public offerings of closed-end funds.

      Separate accounts include institutional accounts, managed accounts, private client accounts and alternative investments. Fund flows into and out of such accounts, which we refer to as purchases and redemptions, affect our level of assets under management. Assets under management from these accounts also vary as a result of market appreciation and depreciation. Our revenues from separate accounts are derived from investment management fees that we charge, including in some cases performance fees. Provided below is a brief differentiation of these accounts:

Revenues

      Our revenues are substantially comprised of investment management fees earned under contracts with the mutual funds and separate accounts managed by us. The distribution of assets under management among our investment products also will have an impact on our investment management fees, as some products carry different fees than others. Investment management fees may fluctuate based on a number of factors, including the following:

      Our revenues also are comprised of distribution and underwriting fees. Asset-based distribution and/or service fees received pursuant to Rule 12b-1 plans, discussed below, are a significant component of distribution and underwriting fees. Distribution and underwriting fees may fluctuate based on a number of factors, including the following:

      Investment management fees that we receive from mutual funds for which we act as investment advisor are computed monthly on an average daily net asset basis. Investment management fees that we earn on separate accounts for which we act as investment advisor are computed quarterly, either in advance or in arrears, based on the assets under management balance at the beginning or end of the quarterly period. We recognize the revenues derived from these fees over the period during which we render their investment advisory services. Investment management fees that are calculated on assets at the beginning of the quarter are the actual fees billed to clients and are recorded as unearned income and recognized evenly throughout the quarter.

      We may earn performance fees in addition to investment management fees. A performance fee structure would include both an asset-based fee and a fee based upon the performance of the portfolio. Historically, performance fees have not been a material source of revenues for us. However, in the future, as we offer products that have performance-based fees, including alternative products, we expect performance fees to become a more significant source of revenues.

      Distribution and underwriting fees include (1) asset-based distribution and/or service fees received pursuant to Rule 12b-1 plans, (2) front-end sales charges and (3) contingent deferred sales charges.

      Rule 12b-1 distribution and/or service fees are asset-based fees that open-end funds pay us over time pursuant to distribution plans adopted under provisions of Rule 12b-1 under the Investment Company Act. These fees are typically calculated as a percentage of average daily net assets under management in specific share classes of the open-end funds. These fees fluctuate with both the level of average daily net assets under management and the relative mix of assets among share classes. Rule 12b-1 fees are generally offset by distribution and service expenses paid during the period, as well as the amortization of deferred sales commissions that were previously paid by us to third parties.

      We earn front-end sales charges on the sale of Class A shares of open-end funds, which provide for a sales charge at the time of investment. We retain a portion of the applicable sales charge and, if Calamos Financial Services acts as the broker-dealer for the account, we would retain the entire sales charge. Sales charges are waived on sales to shareholders or intermediaries that exceed specified minimum dollar amounts and other specified conditions. Sales charges fluctuate with both the level of Class A share sales and the mix of Class A shares offered with and without a sales charge.

      Contingent deferred sales charges are earned on redemptions of Class B shares within six years of purchase and on redemptions of Class C shares within one year of purchase. Contingent deferred sales charges fluctuate primarily based on the length of the investment in Class B and Class C shares. Waivers of contingent deferred sales charges apply under certain circumstances.

      Since April 1, 2004, other revenues have consisted, and in future periods are expected to consist, primarily of portfolio accounting fees, which are contractual payments calculated as a percentage of combined assets of the mutual funds for financial accounting services, such as expense accrual and tax calculations. For the year ended December 31, 2005, we received $3.3 million in portfolio accounting fees. The fees were calculated using the average daily assets of the open-end and closed-end.

Operating Expenses

      Our operating expenses, which consist of employee compensation and benefits, distribution expenses, amortization of deferred sales commissions, marketing and sales promotion expenses and general and administrative expenses, may fluctuate due to a number of factors, including the following:

      Our largest operating expense is employee compensation and benefits expense, which includes salaries, deferred and incentive compensation and related benefits costs. Employee compensation and benefits are benchmarked against industry compensation standards. In order to attract and retain qualified personnel, we must maintain competitive employee compensation and benefits. We expect to experience a general rise in employee compensation and benefits expenses over time.

      We use a fair value method in recording compensation expense for restricted stock units and stock options granted under our incentive stock plans. Under the fair value method, compensation expense is measured at the grant date based on the estimated fair value of the award and is recognized as an expense over the vesting period. Fair value is determined on the date granted using the Black-Scholes option pricing model for the stock options and is determined by the market value of the underlying stock for restricted stock units.

      Distribution expense includes payments we make to broker-dealers and other intermediaries for selling, underwriting, servicing and administering mutual funds. This expense is influenced by new mutual funds sales, levels of redemptions and market appreciation or depreciation of assets under management in these products. With respect to open-end funds, this expense is comprised of Rule 12b-1 distribution and/or service fee payments to the selling firms.

      As discussed above, we pay commissions to selling firms upon the sale of Class B and C shares of open-end funds. As we pay these commissions, we create a deferred sales commission asset on our balance sheet. We amortize this asset over the period in which we receive related asset-based distribution and/or service fees pursuant to Rule 12b-1 plans. Amortization expenses generally offset the Rule 12b-1 fees we receive from the funds’ shareholders over this same period. In addition, because Rule 12b-1 fees cease upon the redemption of open-end fund shares, amortization expenses are accelerated when shares are redeemed, resulting in the reduction of the deferred sales commission asset. For more information on our financing of the sales of Class B and Class C shares in the open-end funds, see “— Liquidity and Capital Resources.”

      Other operating expenses include marketing and sales promotion expenses and general and administrative expenses. Marketing and sales promotion expenses generally vary based on the type and level of marketing, educational, sales or other programs in operation and include closed-end fund marketing costs and ongoing and one-time payments to broker-dealers. In addition, as open-end mutual funds that we manage have grown in size and recognition, we have become subject to supplemental compensation payments to third-party selling agents, which are a component of marketing and sales promotion expense. We expect supplemental compensation payments to continue to increase to the extent our funds gain assets and further recognition. In connection with closed-end funds, we make fee payments to certain underwriters for distribution, consulting and/or support services rendered during or after the offering period of each closed-end fund. These fees are based on contractual agreements with various underwriting firms and are either paid over time based on the average daily net assets of such funds or are paid at the close of the offering period based on the amount of assets raised during the offering. General and administrative expenses primarily include occupancy-related costs and professional and business services and generally increase and decrease in relative proportion to the number of employees retained by us and the overall size and scale of our business operations.

Impact of Distribution Activities on Operating Margin

      In order to gather assets under management, we engage in distribution and underwriting activities, principally with respect to our family of open-end mutual funds. Generally accepted accounting principles require that we present distribution fees earned by us as revenues and distribution fees paid to selling brokers and the amortization of deferred sales commissions as expenses in the statement of income. However, when analyzing our business, we net the result of these distribution activities as they are typically a result of a single open-end mutual fund share purchase. Hence, the result of presenting this information in accordance with generally accepted accounting principles is a reduction to our overall operating margin, as the margin on distribution activities is generally lower than the margins on the remainder of our business. The following table summarizes the net distribution fee margin for the year ended December 31, 2005:

Other Income (Expense), Net

      Other income (expense), net represents net investment gains or losses from a portion of our investment portfolio and from the limited partnerships that we consolidate, net of minority interest in those partnerships, as well as dividends and net interest income or expense. Historically, other income (expense), net has not been a material portion of our pre-tax earnings. However, as we continue to invest a significant portion of our operating cash inflow into income generating securities, we expect that the impact of other income (expense), net will continue to be more significant in future periods. For more information on our liquidity and capital resources, see “— Liquidity and Capital Resources.”

Minority Interest

      As sole manager of Calamos Holdings LLC, we consolidate the financial results of Calamos Holdings LLC with ours. In light of Calamos Family Partners, Inc.’s and John P. Calamos, Sr.’s 77% aggregate ownership interest in Calamos Holdings LLC as of December 31, 2005 and 2004, we reflect their ownership as a minority interest in our consolidated statements of financial condition and consolidated statements of income. Our historical results are those of Calamos Family Partners, Inc., as our predecessor company. As a result, our income before income taxes, after excluding Calamos Family Partners, Inc.’s and John P. Calamos, Sr.’s minority interest, represent approximately 23% of Calamos Holdings LLC’s net income, and similarly, outstanding shares of our Class A common stock represent 23% of the outstanding membership units of Calamos Holdings LLC. Beginning in 2005, income before minority interest in Calamos Holdings LLC and income taxes includes investment income earned on cash and cash equivalents held solely by Calamos Asset Management, Inc. (CAM) during the same period. This investment income is not reduced by any minority interest; therefore, the resulting minority interest is less than 77% for the year ended December 31, 2005. We expect that as we continue to generate and invest cash held solely by CAM, the minority interest will continue to decline as a percentage of income before minority interest in Calamos Holdings LLC and income taxes.

      Calamos Partners LLC is the general partner of Calamos Equity Opportunities Fund LP, an unregistered investment partnership, and at December 31, 2005, we and our affiliates had 41.9% and 52.2% interests in this partnership, respectively (94.1% combined). As of December 31, 2004, we and our affiliates had 45.5% and 54.5% interests in this partnership, respectively (100.0% combined). During 2005 and 2004, we consolidated the financial results of this partnership. The combined interests of the investments in the partnership not owned by us are presented as minority interest in partnership investments in our financial statements. We consolidate the financial results of this partnership into our results. As partnerships are created to launch new products, we as well as our affiliates may invest in these entities, and these partnerships may be required to be consolidated into our results as well.

Income Taxes

      Prior to our initial public offering, Calamos Family Partners, Inc. elected to be taxed as an S corporation under the Internal Revenue Code; therefore, the income and expenses of Calamos Family Partners, Inc. were included in the income tax returns of its stockholders. Calamos Family Partners, Inc. was subject only to Illinois replacement tax and other state taxes, resulting in an effective tax rate of 1.5%. Beginning November 2, 2004, we have been subject to income taxes applicable to C corporations. We have determined our effective tax rate to be 40.2% for the year ended December 31, 2005 and 39.9% for the period November 2, 2004 through December 31, 2004.

Dilutive Effect of Issuance of New Shares of Class A Common Stock

      When we issue new shares of Class A common stock, including upon the exercise or conversion of options or restricted stock units granted pursuant to our incentive compensation plan, our existing Class A common stockholders will experience dilution with regard to their indirect ownership interest in the equity of Calamos Holdings LLC.

      In accordance with our amended and restated certificate of incorporation and the amended and restated limited liability company agreement pursuant to which Calamos Holdings LLC is governed, the net cash proceeds received by us from any future issuance of shares of Class A common stock, including upon the exercise or conversion of options or restricted stock units granted under our incentive compensation plan, will be concurrently transferred to Calamos Holdings LLC in exchange for newly issued membership units equal in number to such number of shares of Class A common stock issued by us. The number of outstanding membership units owned by us will, therefore, equal the number of outstanding shares of our Class A common stock at all times. As a result, the amount of dilution that existing Class A common stockholders will experience with regard to their equity interest in Calamos Holdings LLC resulting from the issuance of additional shares of our Class A common stock will not be adversely affected by our holding company structure.

Recent Developments in the Regulation of the Mutual Fund Industry

      There have been significant developments in the regulation of the mutual fund industry in response to improprieties that have recently been discovered in the industry. We are uncertain as to the implementation of new rules and requirements and the impact these rules and requirements may have on our business and expenses. For additional information about the regulations applicable to our business, see “Regulatory Environment.”

Operating Results

      Prior to our initial public offering of Class A common stock, our business was conducted by Calamos Family Partners, Inc., wholly owned by members of the Calamos family and Calamos family trusts. In October 2004, Calamos Family Partners, Inc. established Calamos Holdings LLC to be the direct owner and operator of its business. On November 2, 2004, we closed our initial public offering of Class A common stock and used some of the proceeds to acquire membership units in Calamos Holdings LLC. In connection with our initial acquisition of membership units, we became the sole manager of Calamos Holdings LLC and began conducting the business previously conducted by Calamos Family Partners, Inc.

      Accordingly, the results for the periods from January 1, 2004 through November 1, 2004 presented below reflect the operations for Calamos Family Partners, Inc. and its subsidiaries (Predecessor). Results for the periods from November 2, 2004 through December 31, 2005 reflect the results of operations for Calamos Asset Management, Inc. We believe that the pro forma combined results for the twelve months ending

December 31, 2004 provide a more meaningful basis for period-to-period comparisons of our results. Therefore, we have combined the periods in the table below:

      Assets under management increased by $5.8 billion, or 15%, to $43.8 billion at December 31, 2005 from $38.0 billion at December 31, 2004. At December 31, 2005, our assets under management consisted of 73%

mutual funds and 27% separate accounts, as compared to 71% mutual funds and 29% separate accounts at December 31, 2004.

      Mutual fund net purchases were $3.4 billion in 2005 compared to $9.8 billion in the prior year. The decrease in mutual fund net purchases was primarily attributable to a $3.3 billion closed-end fund offering during 2004 that did not recur and to a $1.9 billion increase in redemptions, which have increased with the growth in assets under management. Because closed-end funds do not continually offer new shares to investors, 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. For example, we launched the Calamos Global Total Return Fund in the fourth quarter of 2005 and raised approximately $115 million in assets under management. Separate accounts net purchases decreased to $230 million in 2005 from $804 million in 2004, largely driven by managed account outflows in our convertible strategies, which remain closed to new investors.

      Total revenues increased by $105.4 million, or 34%, to $417.6 for the year ended December 31, 2005 from $312.1 million for the prior year. The increase was primarily due to higher investment management fees and distribution and underwriting fees.

      Compared to the prior year, investment management fees increased 35% in 2005 primarily due to a $9.3 billion increase in average assets under management. The overall growth in investment management fees was due primarily to an increase in fees from mutual funds, which increased to $224.4 million in 2005 from $162.7 million in the prior year. Open-end fund investment management fees increased to $174.4 million for the year ended December 31, 2005 from $123.3 million for the prior year, primarily due to increases in open-end fund average assets under management of $6.8 billion for 2005 compared to the prior year. Closed-end fund investment management fees increased to $50.0 million for the year ended December 31, 2005 from $39.4 million in the prior year as a result of increases in closed-end fund average assets under management of $1.1 billion in 2005 when compared to the prior year. Investment management fees from our separately managed accounts increased to $60.6 million from $48.0 million, driven by the shift to equity strategies within these accounts and by the increase in average assets under management. Investment management fees as a percentage of assets under management were 0.71% and 0.69% for the years ended December 31, 2005 and 2004, respectively, representing the continued shift of assets from our convertible strategies to our equity strategies, which generally carry higher fees.

      Distribution and underwriting fees increased to $129.3 million for the year ended December 31, 2005 from $98.9 million in the prior year, primarily due to increases in open-end fund average assets under management of $6.8 billion for 2005 compared to the prior year.

      Operating expenses increased to $211.5 million for the year ended December 31, 2005 from $178.7 million for the prior year. This increase was mostly due to higher distribution expenses.

      Employee compensation and benefits expense decreased by $4.7 million for the year ended December 31, 2005 when compared to the prior year, largely resulting from the decrease of $5.7 million in expense attributable to our equity compensation. The decrease in equity compensation expense was primarily driven by the conversion of liability-based compensation programs that fluctuated with the enterprise value to our equity-based programs that are accounted for using the fair value provisions that are fixed at the date of grant. This decrease was partially offset by an increase in incentive-based compensation as a result of our

performance. We do not anticipate large fluctuations in our equity compensation expense in the future, except as it relates to new award issuances; however, we expect the level of overall employee compensation and benefits expense will increase in future periods due to changes in staffing levels to support the growth and expansion of our business. Current compensation expense levels are also expected to increase due to merit increases for our existing staff but may vary due to compensation based on our performance.

      Distribution expense increased by $28.9 million to $79.4 million for 2005 when compared to the prior year, primarily due to an increase of $16.4 million resulting from the growth in the Class C share assets older than one year and due to an increase of $12.9 million resulting from the growth of average open-end fund assets under management. Class C share assets do not generate distribution expense in the first year following their sale because we retain the Rule 12b-1 fees during that first year to offset the upfront commissions that we pay, but they do generate a distribution expense in subsequent years as we pay the Rule 12b-1 fees to the selling firms. Although the Rule 12b-1 fee rates that we paid to broker-dealers and other intermediaries in 2005 did not change from the rates paid in the prior year, we expect distribution expense to increase to the extent our open-end mutual fund assets under management continue to grow.

      Marketing and sales promotion expense decreased to $14.3 million for the year ended December 31, 2005 from $18.9 million in the prior year, primarily due to a $6.0 million one-time fee paid to underwriters of a closed-end fund offering that we incurred during 2004, partially offset by increases in supplemental compensation payments to third party selling agents. As open-end mutual funds that we manage have grown in size and recognition, we have become subject to supplemental compensation payments to third-party selling agents. We expect supplemental compensation payments to continue to increase to the extent our funds gain assets and further recognition.

      General and administrative expense increased by $11.2 million for the year ended December 31, 2005 from $14.1 million in the prior year. We began making lease payments on our new headquarters in April 2005 in addition to making lease payments and other occupancy-related payments on our two other office facilities, which increased occupancy costs by $3.6 million for the year ended December 31, 2005. Maintaining two headquarters for the second and third quarters resulted in duplicative rent and non-recurring expenses of approximately $1.7 million. Additionally, for the year ended December 31, 2005, professional services expense increased $3.1 million and depreciation expense increased $3.2 million, respectively. The increases in professional services expense were primarily due to incremental costs incurred as a public company, including Sarbanes-Oxley compliance costs and higher fees related to legal and compliance, audit services and tax preparation. The increases in depreciation expense were primarily due to the depreciation of new leasehold improvements in connection with the move to our new headquarters, while $0.4 million of the increase in depreciation expense for 2005 was due to the shortening of depreciable lives of leasehold improvements in our previous headquarters caused by the move into our new headquarters. Because our move occurred in the last half of the year, we expect that our depreciation expense in the future will increase to reflect the full-year benefit provided by our new improvements.

      During the period from January 1, 2004 to November 1, 2004, our business was operated as an S corporation under the Internal Revenue Code. As a result, our effective tax rate for this period was 1.5%, while our effective tax rate for the period from November 2, 2004 to December 31, 2004 and for the year ended December 31, 2005 was 39.9% and 40.2%, respectively.

      Other income (expense), net was a net income of $5.8 million for the year ended December 31, 2005 as compared to a net expense of approximately $471,000 for the prior year.

      The $2.2 million increase in interest expense for the year ended December 31, 2005 compared to the prior year was primarily due to a full 12 months of interest expense on the $150.0 million aggregate principal Senior Unsecured Notes, which were issued in April 2004. Investment and other income increased by $12.2 million primarily due to $7.7 million market appreciation and $4.6 million of interest and dividend income. The increase in minority interest in investment in partnerships corresponds with the increase in market appreciation of the consolidated investment in partnerships.

      We believe that the pro forma results provide a more meaningful basis for period-to-period comparisons of our results for the year ended December 31, 2005 and 2004. The pro forma results for the year ended

December 31, 2004 below give effect to the Real Estate Distribution, the Formation Transaction and the consummation of our initial public offering, as described in the Notes to Pro Forma Adjustments.