UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED:

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

CALAMOS ASSET MANAGEMENT, INC.

Delaware (State or Other Jurisdiction of Incorporation or Organization)		32-0122554 (I.R.S. Employer Identification No.)

2020 Calamos Court, Naperville, Illinois (Address of Principal Executive Offices)		60563 (Zip Code)

(630) 245-7200
(Registrant’s telephone number, including area code)

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

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 Exchange Act). o Yes þ No

At May 1, 2006, the company had 23,161,898 shares of Class A common stock and 100 shares of Class B common stock outstanding.

 

 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

		March 31,				December 31,
		2006				2005
		(unaudited)
ASSETS:
Current assets
Cash and cash equivalents		$	213,520			$	210,469
Receivables:
Affiliates and affiliated funds			26,983				24,670
Customers			11,747				9,806
Investment securities			136,875				128,265
Investment in partnerships			92,535				79,956
Prepaid expenses			2,864				2,342
Deferred tax asset, net			8,958				7,846
Other			113				195
Total current assets			493,595				463,549
Non-current assets
Deferred tax asset, net			97,008				101,280
Deferred sales commissions			60,097				58,390
Property and equipment, net of accumulated depreciation ($7,938 at 3/31/06 and $6,357 at 12/31/05)			42,580				40,547
Other non-current assets			1,771				1,711
Total non-current assets			201,456				201,928
Total assets			695,051				665,477
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities
Accounts payable:
Brokers			20,283				18,485
Affiliates and affiliated funds			97				93
Accrued compensation and benefits			7,140				19,131
Accrued expenses and other current liabilities			11,976				11,025
Total current liabilities			39,496				48,734
Long-term liabilities
Long-term debt			150,000				150,000
Other long-term liabilities			6,713				6,726
Total long-term liabilities			156,713				156,726
Total liabilities			196,209				205,460
Minority interest in investment in partnerships			50,716				44,453
Minority interest in Calamos Holdings LLC			253,400				229,430
Stockholders’ equity:
Class A Common Stock, $0.01 par value. Authorized 600,000,000 shares; issued and outstanding 23,161,898 shares at 3/31/06 and 23,000,000 shares at 12/31/05			232				230
Class B Common Stock, $0.01 par value. Authorized 1,000 shares; issued and outstanding 100 shares			0				0
Additional paid-in capital			156,807				156,274
Retained earnings			33,593				26,698
Accumulated other comprehensive income			4,094				2,932
Total stockholders’ equity			194,726				186,134
Total liabilities, minority interest and stockholders’ equity		$	695,051			$	665,477

See accompanying notes to consolidated financial statements.

		2006				2005
Revenues:
Investment management fees		$	81,479			$	65,840
Distribution and underwriting fees			38,140				30,625
Other			1,144				856
Total revenues			120,763				97,321
Expenses:
Employee compensation and benefits			19,006				14,921
Distribution and underwriting expense			24,965				17,671
Amortization of deferred sales commissions			7,740				7,876
Marketing and sales promotion			3,108				3,468
General and administrative			7,174				4,396
Total expenses			61,993				48,332
Operating income			58,770				48,989
Other income (expense):
Net interest income (expense)			362				(1,171	)
Investment and other income			11,786				(3,815	)
Minority interest in partnership investments			(6,262	)			2,150
Total other income (expense), net			5,886				(2,836	)
Income before minority interest in Calamos Holdings LLC and income taxes			64,656				46,153
Minority interest in Calamos Holdings LLC			49,623				35,535
Income before income taxes			15,033				10,618
Income taxes			6,028				4,247
Net income		$	9,005			$	6,371
Earnings per share
Basic		$	0.39			$	0.28
Diluted		$	0.38			$	0.28
Weighted average shares outstanding
Basic			23,161,998				23,000,100
Diluted			100,973,155				100,598,485

See accompanying notes to consolidated financial statements.

CALAMOS ASSET MANAGEMENT, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Three Months Ended March 31, 2006
(in thousands)
(unaudited)

														Accumulated
						Additional								Other
		Common				Paid-in				Retained				Comprehensive
		Stock				Capital				Earnings				Income				Total
Balance at December 31, 2005		$	230			$	156,274			$	26,698			$	2,932			$	186,134
Net income			—				—				9,005				—				9,005
Changes in unrealized gains on available-for-sale securities, net of minority interest and income taxes			—				—				—				1,146				1,146
Total comprehensive income																			10,151
Issuance of common stock under stock incentive plans (161,898 Class A common shares)			2				119				—				16				137
Compensation expense recognized under stock incentive plans, net of minority interest			—				414				—				—				414
Dividend equivalent accrued under stock incentive plans, net of minority interest			—				—				(25	)			—				(25	)
Dividends declared			—				—				(2,085	)			—				(2,085	)
Balance at March 31, 2006		$	232			$	156,807			$	33,593			$	4,094			$	194,726

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2006 and 2005
(in thousands)
(unaudited)

		2006				2005
Cash and cash equivalents at beginning of year		$	210,469			$	149,768
Cash flows from operating activities:
Net income			9,005				6,371
Adjustments to reconcile net income to net cash provided by operating activities:
Minority interest in partnership investments			6,262				(2,150	)
Minority interest in Calamos Holdings LLC			49,623				35,535
Amortization of deferred sales commissions			7,740				7,876
Other depreciation and amortization			1,653				962
Unrealized depreciation (appreciation) on investment securities			(234	)			3,761
Unrealized depreciation (appreciation) on partnership investments			(10,898	)			91
Management fee received in partnership units			(40	)			(40	)
Stock-based compensation			1,788				997
Deferred taxes			2,672				1,625
Increase in assets:
Accounts receivable:
Affiliates and affiliated mutual funds			(2,313	)			(1,240	)
Customers			(1,941	)			(463	)
Deferred sales commissions			(9,447	)			(10,143	)
Other assets			(3,214	)			(1,036	)
Increase (decrease) in liabilities:
Accounts payable			1,802				1,631
Accrued compensation and benefits			(11,991	)			(4,384	)
Other liabilities and accrued expenses			1,521				2,386
Net cash provided by operating activities			41,988				41,779
Cash flows used in investing activities:
Net additions to property and equipment			(3,615	)			(11,120	)
Net purchases of securities and partnership investments			(1,763	)			(25,493	)
Net cash used in investing activities			(5,378	)			(36,613	)
Cash flows used in financing activities:
Deferred tax benefit on vesting under stock incentive plans			(289	)			—
Cash distributions paid to minority shareholders			(31,185	)			(22,904	)
Cash dividends paid to common shareholders			(2,085	)			(1,610	)
Net cash used in financing activities			(33,559	)			(24,514	)
Net increase (decrease) in cash			3,051				(19,348	)
Cash and cash equivalents at end of period		$	213,520			$	130,420

See accompanying notes to consolidated financial statements.

(1) Organization and Description of Business

Calamos Asset Management, Inc. (CAM), together with its subsidiaries (the Company), primarily provides investment advisory services to individual and institutional investors as well as investment advisory services to a family of open-end and closed-end funds. CAM operates and controls all of the business and affairs of Calamos Holdings LLC (Holdings), and, as a result of this control, consolidates the financial results of Holdings with its own financial results.

(2) Basis of Presentation

The consolidated financial statements as of March 31, 2006 and for the three months ending March 31, 2006 and 2005 have not been audited by the Company’s independent registered public accounting firm. In the opinion of management, such information contains all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial condition and results of operations. The results for the interim periods ended March 31 are not necessarily indicative of the results to be obtained for a full fiscal year. Certain amounts for the prior year have been reclassified to conform to the current year’s presentation.

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from these estimates.

Calamos Family Partners, Inc.’s (CFP) and John P. Calamos, Sr.’s combined 76.9% and 77% interest in Holdings at March 31, 2006 and 2005, respectively, is represented as minority interest in the Company’s financial statements. Income before minority interest in Calamos Holdings LLC and income taxes, which was $64.7 million and $46.2 million for the three months ended March 31, 2006 and 2005, respectively, included approximately $106,700 and $4,200 of investment income earned on cash and cash equivalents held solely by CAM during the same periods. This investment income is not reduced by any minority interests; therefore, the resulting minority interest is less than 76.9% and 77% for the three months ended March 31, 2006 and 2005, respectively.

(3) Cash and Cash Equivalents

At March 31, 2006, the Company had $2.8 million in a restricted escrow account that has been designated to fund leasehold improvements for the office facility at 2020 Calamos Court in Naperville, Illinois.

(4) Earnings Per Share

The following table reflects the calculation of basic and diluted earnings per share:

		Three Months Ended
(in thousands, except per share data)		March 31,
		2006				2005
Earnings per share — basic
Earnings available to common shareholders		$	9,005			$	6,371
Weighted average shares outstanding			23,162				23,000
Earnings per share — basic		$	0.39			$	0.28

		Three Months Ended
(in thousands except per share data)		March 31,
		2006				2005
Earnings per share — diluted
Income before minority interest in Calamos Holdings LLC and income taxes		$	64,656			$	46,153
Less: Impact of income taxes			25,927				18,461
Earnings available to common shareholders		$	38,729			$	27,692
Weighted average shares outstanding			23,162				23,000
Conversion of membership units for common stock			77,000				77,000
Dilutive impact of restricted stock units			660				547
Dilutive impact of stock options			151				51
Weighted average shares and potential dilutive shares outstanding			100,973				100,598
Earnings per share — dilutive		$	0.38			$	0.28

Diluted shares outstanding for the three months ended March 31, 2006 and 2005 are calculated (a) assuming CFP and John P. Calamos, Sr. exchanged all of their membership units in Holdings for shares of the Company’s Class A common stock on a one-for-one basis and (b) including the effect of outstanding restricted stock unit and stock option awards. An effective tax rate of 40.1% and 40.0% was applied to income before minority interest in Holdings and income taxes in calculating diluted earnings available to common shareholders for the three months ended March 31, 2006 and 2005, respectively.

The Company uses the treasury stock method to reflect the dilutive effect of unvested restricted stock units (RSUs) and unexercised stock options on diluted earnings per share. Under the treasury stock method, if the average market price of common stock increases above the option’s exercise price, the proceeds that would be assumed to be realized from the exercise of the option would be assumed to be used to acquire outstanding shares of common stock. However, pursuant to the Financial Accounting Standards Board’s (FASB) Statement of Financial Accounting Standard (SFAS) No. 123(R), Share-Based Payment (SFAS 123(R)), the awards may be anti-dilutive even when the market price of the underlying stock exceeds the related exercise price. This result is possible because compensation cost attributed to future services and not yet recognized is included as a component of the assumed proceeds upon exercise. As such, the dilutive effect of such options and RSUs would result in the addition of a net number of shares to the weighted-average number of shares used in the calculation of diluted earnings per share. For the three months ended March 31, 2006, stock options for 665,362 shares were excluded from the computation of diluted earnings per share, as they were anti-dilutive. No RSUs were anti-dilutive during the three months ended March 31, 2006. For the three months ended March 31, 2005, stock options for 293,500 shares and RSUs for 97,000 shares were excluded from the computation of diluted earnings per share, as they were anti-dilutive.

(5) Incentive Compensation Plan

Certain employees of the Company participate in an incentive compensation plan, which includes stock options and restricted stock units (RSUs). The Company intends to issue new shares of CAM’s Class A common stock upon the exercise of stock options or upon conversion of RSUs. The Annual Report on Form 10-K for the year ended December 31, 2005 provides details of this plan and its provisions.

On January 1, 2006, the Company adopted SFAS 123(R), Share-Based Payment, which requires public registrants to recognize the cost of stock-based compensation in their financial statements based on the grant-date fair value of the award. The Company adopted the fair value recognition provisions of SFAS 123 effective January 1, 2004 and elected to recognize compensation expense based upon the grant-date fair value. The provisions of SFAS 123(R) are similar, but not identical, to the fair value recognition that the Company has used since the beginning of 2004. The effects of this change do not have a material impact on the Company’s financial statements.

A summary of the stock option activity for the three months ended March 31, 2006 is as follows:

						Weighted
		Number				Average
		of Shares				Exercise Price
Outstanding at beginning of period			1,009,967			$	21.35
Granted			387,780				35.43
Forfeited			(54,067	)			25.19
Exercised			—				—
Outstanding at end of period			1,343,680				25.26

At March 31, 2006, the Company had 1,343,680 stock options outstanding with a weighted average remaining contractual life of 9.2 years and an aggregate intrinsic value of $16.3 million. No stock options granted under this plan have become exercisable as of March 31, 2006.

The weighted average fair value of stock options at the date of grant for the three months ended March 31, 2006 and 2005 was $14.33 and $11.25, respectively. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

		2006				2005
Dividend yield			1.02	%			0.97	%
Expected volatility			33	%			33	%
Risk-free interest rate			4.6	%			3.9	%
Expected life		7.5 years				7.5 years

CALAMOS ASSET MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of the RSU activity for the three months ended March 31, 2006 is as follows:

						Weighted
						Average Fair
		Number				Value of RSUs
		of Shares				Granted
Outstanding at beginning of period			1,414,862			$	18.79
Granted			129,260				35.43
Forfeited			(18,790	)			24.89
Exercised			(233,599	)			18.00
Outstanding at end of period			1,291,733				20.51

At March 31, 2006, the Company had 1,291,733 RSUs outstanding with a weighted average remaining contractual life of 4.4 years and an aggregate intrinsic value of $48.3 million. The weighted average fair value of RSUs at the date of grant for the three months ended March 31, 2006 and 2005 was $35.43 and $28.76, respectively. The aggregate intrinsic value and the fair value of RSUs exercised and vested during the three months ended March 31, 2006 was $7.3 million.

In connection with the 233,599 shares exercised during the first quarter of 2006, 161,898 RSUs, net of units withheld for taxes, were converted, on a one-for-one basis, for shares of CAM’s Class A common stock. The total intrinsic value and the fair value of the converted shares was $5.1 million. This conversion changed CAM’s ownership in Holdings to 23.1%. RSUs are granted with no strike price and, therefore, the Company receives no proceeds when the RSUs are exercised. Because RSUs are typically settled with newly issued shares, there is no cash used by the Company to settle awards. The total tax benefit realized by CAM in connection with the exercise of the RSUs during the three months ended March 31, 2006 was $676,000. No RSUs were exercised and vested during the three months ended March 31, 2005.

Expense recorded in connection with the RSUs and stock options was $1.8 million during the three months ended March 31, 2006 of which $414,000, net of minority interest, was credited as additional paid-in capital. Expense recorded in connection with the RSUs and stock options was $1.0 million during the three months ended March 31, 2005 of which $229,000, net of minority interest, was credited as additional paid-in capital. The amount of deferred tax asset created was $166,000 and $92,000 during the three months ended March 31, 2006 and 2005, respectively. At March 31, 2006, approximately $23.0 million of total unrecognized compensation expense related to nonvested stock option and RSU awards is expected to be recognized over a weighted-average period of 4.7 years.

(6) New Accounting Pronouncements

In June 2005, the FASB issued SFAS 154, Accounting Changes and Error Corrections, which changes the requirements for accounting for and reporting a change in accounting principle. SFAS 154 requires companies to account for and apply voluntary changes in accounting principles retrospectively to prior periods’ financial statements, rather than recording a cumulative effect adjustment within the period of the change, unless it is impractical to determine the effects of the change on each period being presented. The provisions of SFAS 154 for accounting changes and corrections of errors made became effective for the Company beginning January 1, 2006. The implementation of this standard did not have a material effect on our financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

We provide investment advisory services to institutions and individuals, managing $47.6 billion in client assets at March 31, 2006. Our operating results fluctuate primarily due to changes in the total value and composition of our assets under management. The value and composition of our assets under management are, and will continue to be, influenced by a variety of factors including purchases and redemptions of shares of the open-end funds and other investment products that we manage, fluctuations in the financial markets around the world that result in appreciation or depreciation of assets under management and our introduction of new investment strategies and products.

The value and composition of our assets under management and our ability to continue to attract clients depends on a variety of factors including the education of our clients about our investment philosophy, the delivery of best-in-class service, the relative investment performance of our investment products as compared to competing offerings and market indices, the competitive conditions in the mutual fund, asset management and broader financial services sectors, investor sentiment and confidence, and our decision to open or close products and strategies when deemed to be in the best interests of our clients.

We market our investment strategies to our clients through a variety of products designed to suit their investment needs. We currently offer six types of mutual fund and separate account investment products. The following table details our assets under management at March 31, 2006 and 2005.

(in millions)		March 31,
		2006				2005
Mutual Funds
Open-end funds		$	28,838			$	21,482
Closed-end funds			6,176				5,884
Total mutual funds			35,014				27,366
Separate Accounts
Institutional accounts			4,647				3,347
Managed accounts			7,032				6,911
Private client accounts			808				549
Alternative investments			100				73
Total separate accounts			12,587				10,880
Total assets under management		$	47,601			$	38,246

Our revenues are substantially comprised of investment management fees earned under contracts with the mutual funds and separate accounts that we manage. Our revenues are also comprised of distribution and underwriting fees, including asset-based distributions and/or service fees received pursuant to Rule 12b-1 plans. Investment management fees and distribution and underwriting fees may fluctuate based on a number of factors, including the total value and composition of our assets under management, market appreciation or depreciation and the level of net purchases and redemptions, which represents the sum of new client investments, additional funding from existing clients, withdrawals of assets from and termination of client accounts and purchases and redemptions of mutual fund shares. The distribution of assets under management among our investment products also has an impact on our revenues, as some products carry different fees than others.

Our largest operating expenses are related to the distribution of mutual funds, including Rule 12b-1 payments, employee compensation and benefits expense, which includes salaries, incentive compensation and related benefits costs, and amortization of deferred sales commissions for open-end mutual funds. Operating expenses may fluctuate due to a number of factors, including changes in distribution expense as a result of fluctuations in mutual fund sales and market appreciation or depreciation, variations in staffing and compensation, and depreciation and amortization relating to capital expenditures incurred to maintain and enhance our administrative and operating services infrastructure.

Operating Results

Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005

Assets Under Management

Assets under management increased by $9.4 billion, or 24%, to $47.6 billion at March 31, 2006 from $38.2 billion at March 31, 2005. At March 31, 2006, our assets under management consisted of 74% mutual funds and 26% separate accounts, as compared to 72% mutual funds and 28% separate accounts at March 31, 2005.

		Three Months Ended
(in millions)		March 31,								Change
		2006				2005				Amount				Percent
Mutual Funds
Beginning assets under management		$	31,898			$	26,951			$	4,947				18	%
Net purchases			1,368				1,551				(183	)			12
Market appreciation (depreciation)			1,748				(1,136	)			2,884				254
Ending assets under management			35,014				27,366				7,648				28
Average assets under management			33,889				27,157				6,732				25
Separate Accounts
Beginning assets under management			11,907				11,024				883				8
Net purchases			72				403				(331	)			82
Market appreciation (depreciation)			608				(547	)			1,155				211
Ending assets under management			12,587				10,880				1,707				16
Average assets under management			12,377				10,891				1,486				14
Total Assets Under Management
Beginning assets under management			43,805				37,975				5,830				15
Net purchases			1,440				1,954				(514	)			26
Market appreciation (depreciation)			2,356				(1,683	)			4,039				240
Ending assets under management			47,601				38,246				9,355				24
Average assets under management		$	46,266			$	38,048			$	8,218				22	%

Mutual fund net purchases decreased by $183 million, or 12%, to $1.4 billion for the three months ended March 31, 2006 from $1.6 billion for the prior year. The decrease in mutual fund net purchases was due to higher open-end fund redemptions which have increased with the growth in assets under management. The Market Neutral Income Fund had net inflows of $179 million for the three months ended March 31, 2006 compared to net outflows of $50 million for the prior year period. For the three months ended March 31, 2006 and 2005, net inflows of the Growth Fund were $818 million and $1.4 billion, respectively, while net inflows of the Global Growth and Income Fund were $107 million and $16 million for the same periods, respectively. There were no new closed-end fund offerings during the three months ended March 31, 2006 or 2005.

Separate account net purchases decreased by $331 million to $72 million for the first quarter of 2006 from $403 million in the prior year period. Separate account outflows in our convertible strategies, which remain closed to new investors, continue to be offset by inflows in our equity strategies, primarily through our international sub-advised relationships.

Revenues

Total revenues increased by $23.4 million, or 24%, to $120.8 million for the three months ended March 31, 2006 from $97.3 million compared to the prior year. The increase was primarily due to higher investment management fees and distribution and underwriting fees.

(in thousands)		Three Months Ended March 31,								Change
		2006				2005				Amount				Percent
Investment management fees		$	81,479			$	65,840			$	15,639				24	%
Distribution and underwriting fees			38,140				30,625				7,515				25	%
Other			1,144				856				288				34	%
Total revenues		$	120,763			$	97,321			$	23,442				24	%

Investment management fees increased by $15.6 million, or 24%, to $81.5 million for the three months ended March 31, 2006 from $65.8 million for the first quarter of 2005 as a result of an $8.2 billion increase in average assets under management. The overall growth in investment management fees was due primarily to an increase in mutual fund investment management fees, which increased to $65.0 million for the three months ended March 31, 2006 from $52.1 million for the prior year period. Open-end fund investment management fees increased to $52.1 million for the quarter ended March 31, 2006 from $39.7 million for the prior year period as a result of a $6.7 billion increase in open-end fund average assets under management. Closed-end fund investment management fees increased to $12.8 million for the three months ended March 31, 2006 from $12.4 million for the prior year as a result of an increase in closed-end fund average assets under management of $0.2 billion. Investment management fees from separate accounts increased to $16.5 million for the three months ended March 31, 2006 from $13.7 million for the prior year as a result of an increase in separate accounts average assets under management of $1.5 billion. Investment management fees as a percentage of average assets under management increased to 0.71% for the three months ended March 31, 2006 from 0.69% for the prior year, representing the increase in assets in our equity strategies which generally carry higher fees.

Distribution and underwriting fees increased by $7.5 million, or 25%, to $38.1 million for the three months ended March 31, 2006 from $30.6 million for the first quarter of 2005, primarily due to a $6.7 billion increase in open-end funds average assets under management.

Operating Expenses

Operating expenses increased by $13.7 million, or 28%, to $62.0 million for the three months ended March 31, 2006 from $48.3 million for the prior year. The increase was primarily due to higher distribution and underwriting, employee compensation and benefits and general and administrative expenses.

(in thousands)		Three Months Ended March 31,								Change
		2006				2005				Amount				Percent
Employee compensation and benefits		$	19,006			$	14,921			$	4,085				27	%
Distribution and underwriting expense			24,965				17,671				7,294				41	%
Amortization of deferred sales commissions			7,740				7,876				(136	)			2	%
Marketing and sales promotion			3,108				3,468				(360	)			10	%
General and administrative			7,174				4,396				2,778				63	%
Total operating expenses		$	61,993			$	48,332			$	13,661				28	%

Employee compensation and benefits expense increased by $4.1 million for the three months ended March 31, 2006 when compared to the prior year largely due to higher salary and benefits expense as we continued to expand our staffing levels to build our institutional sales efforts, to internalize mutual fund client services and to expand our staff in order to support our public company requirements, and due to higher equity compensation expense resulting from new awards granted under our existing incentive compensation plan.

Distribution and underwriting expense increased by $7.3 million, or 41%, primarily due to an increase of $4.4 million resulting from the growth in the Class C share assets older than one year and to an increase of $2.9 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.

However, Class C share assets do generate a distribution expense in subsequent years as we pay the Rule 12b-1 fees to the selling firms. Although the Rule 12b-1 fee rates we paid to broker-dealers and other intermediaries in the three months ended March 31, 2006 did not change from the rates paid in the prior year, we expect distribution expense to increase to the extent our open-end mutual funds assets under management continue to grow.

Marketing and sales promotion expense decreased by $0.4 million primarily due to cost savings recognized through efficiencies in fulfillment and a decrease in certain estimated supplemental compensation payments. We expect these expenses will fluctuate with changes in the number of customers and with changes in mutual fund assets under management.

General and administrative expense increased by $2.8 million primarily due to a $1.2 million increase in occupancy-related costs and a $0.7 million increase in depreciation expense. The increase in occupancy costs and depreciation expense was primarily due to costs associated with occupying our new headquarters. The increase in depreciation expense was due to the depreciation of new assets placed in service in our new headquarters. We expect that our depreciation expense for the remainder of 2006 will continue to be higher than the comparable periods of 2005.

Other Income (Expense), Net

Other income (expense), net was a net income of $5.9 million for the three months ended March 31, 2006 as compared to a net expense of $2.8 million for the three months ended March 31, 2005.

(in thousands)		Three Months Ended March 31,								Change
		2006				2005				Amount				Percent
Net interest income (expense)		$	362			$	(1,171	)		$	1,533				*
Investment and other income			11,786				(3,815	)			15,601				*
Minority interest in partnership investments			(6,262	)			2,150				(8,412	)			*
Total other income (expense), net		$	5,886			$	(2,836	)		$	8,722				*

The change in net interest income (expense) of $1.5 million was primarily due to interest income on cash and cash equivalents of $2.4 million during the first quarter of 2006 compared to $0.9 million during the first quarter of 2005. Interest expense was $2.0 million during each period presented. Investment and other income, which is principally comprised of $11.6 million in unrealized appreciation primarily from our consolidated partnerships, increased by $15.6 million primarily due to market appreciation. The $8.4 million change in minority interest in partnership investments represents the corresponding minority interests portion of the market appreciation from our consolidated partnerships.

Income Taxes

Income taxes as a percentage of income before income taxes was 40.1% for the first three months of 2006 compared to 40.0% for the first three months of 2005.

Liquidity and Capital Resources

Our current financial condition is highly liquid, with the majority of our assets comprised of our corporate investment portfolio that includes cash and cash equivalents, investment securities and investments in partnerships. Investment securities are principally comprised of company-sponsored mutual funds and investments in partnerships are typically comprised of highly liquid exchange-traded securities. Our working capital requirements historically have been met through cash generated by our operations and long-term debt.

The following tables summarize key statements of financial condition data relating to our liquidity and capital resources.

(in thousands)		March 31,				December 31,
		2006				2005
Statements of financial condition data:
Cash and cash equivalents		$	213,520			$	210,469
Receivables			38,730				34,476
Investment securities			136,875				128,265
Investment in partnerships			92,535				79,956
Deferred tax asset			105,966				109,126
Deferred sales commissions			60,097				58,390
Long-term debt			150,000				150,000

Cash flows for the three months ended March 31, 2006 and 2005 are shown below:

(in thousands)		March 31,
		2006				2005
Cash flow data:
Net cash provided by operating activities		$	41,988			$	41,779
Net cash used in investing activities			(5,378	)			(36,613	)
Net cash used in financing activities			(33,559	)			(24,514	)

Net cash provided by operating activities increased by $0.2 million, to $42.0 million for the three months ended March 31, 2006 from $41.8 million for the three months ended March 31, 2005, primarily as a result of an $18.5 million increase in income before minority interest and income taxes, mostly offset by $15.0 million related to unrealized appreciation on investment securities and on investment in partnerships.

The payment of deferred sales commissions by us to financial intermediaries who sell Class B and C shares of our open-end funds is a significant use of our operating cash flows. Use of cash for deferred sales commissions decreased by $0.7 million to $9.4 million for the three months ended March 31, 2006 from $10.1 million for the three months ended March 31, 2005, representing a reduction in the proportion of Class B share sales during the same periods. We expect that the payment of deferred sales commissions will vary in proportion to future sales of Class B and C shares of open-end funds and that these commissions will continue to be funded by cash flows from operations.

Investing activities typically consist of investments in products that we sponsor and property and equipment purchases. Net cash used in investing activities was $5.4 million for the three months ended March 31, 2006 and was primarily comprised of our $3.6 million investment in property and equipment for our office facility. We anticipate increasing the future level of investments in our products as opportunities arise.

Net cash used by financing activities was $33.6 million for the three months ended March 31, 2006 and was primarily comprised of distributions to minority shareholders of $31.2 million, including distributions for their tax liabilities of $24.3 million, as well as dividends paid to common shareholders of $2.1 million.

We expect our cash and liquidity requirements will be met with the cash on hand and through cash generated by operations. We intend to satisfy our capital requirements over the next 12 months through these sources of liquidity.

Critical Accounting Policies

Our significant accounting policies are described in note 3 of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2005. A discussion of critical accounting policies is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2005. There were no significant changes in our critical accounting policies during the three months ended March 31, 2006.

Forward-Looking Information

From time to time, information or statements provided by us or on our behalf, including those within this Quarterly Report on Form 10-Q, may contain certain forward-looking statements relating to future events, future financial performance, strategies, expectations, competitive environment, and regulations. These forward-looking statements include, without limitation, statements regarding proposed new products; results of operations or liquidity; projections, predictions, expectations, estimates or forecasts as to our business, financial and operating results and future economic performance; and management’s goals and objectives and other similar expressions concerning matters that are not historical facts.

Words such as “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to: adverse changes in applicable laws or regulations; downward fee pressures and increased industry competition; risks inherent to the investment management business; the loss of revenues due to contract terminations and redemptions; our ownership structure; general declines in the prices of securities; catastrophic or unpredictable events; the loss of key executives; the unavailability of third-party retail distribution channels; increased costs of distribution; failure to recruit and retain qualified personnel; a loss of assets, and thus revenues, if our largest funds perform poorly; damage to our reputation; and our holding company structure. Further, the value and composition of our assets under management are, and will continue to be, influenced by a variety of factors including, among other things: purchases and redemptions of shares of the open-end funds and other investment products; fluctuations in the financial markets around the world that result in appreciation or depreciation of assets under management; our introduction of new investment strategies and products; our ability to educate our clients about our investment philosophy and provide them with best-in-class service; the relative investment performance of our investment products as compared to competing offerings and market indices; competitive conditions in the mutual fund, asset management and broader financial services sectors; investor sentiment and confidence; and our decision to open or close products and strategies when deemed to be in the best interests of our clients. Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2005 discusses some of these and other important factors in detail under the caption “Risk Factors.”

Forward-looking statements speak only as of the date the statements are made. Readers should not place undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

An analysis of our market risk was included in our Annual Report on Form 10-K for the year ended December 31, 2005. There were no material changes to the Company’s market risk during the three months ended March 31, 2006.

Item 4. Controls and Procedures

Our management, including our principal executive and principal financial officers, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of March 31, 2006, and has concluded that such disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

There were no changes in the company’s internal control over financial reporting that occurred during our first quarter that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 6. Exhibits

3(i)		Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 2, 2004).
3(ii)		Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 26, 2005).
4.1		Stockholders’ Agreement among John P. Calamos, Sr., Nick P. Calamos and John P. Calamos, Jr., certain trusts controlled by them, Calamos Family Partners, Inc. and the Registrant (incorporated by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 3, 2004).
4.2		Registration Rights Agreement between Calamos Family Partners, Inc., John P. Calamos, Sr. and the Registrant (incorporated by reference to Exhibit 4.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 3, 2004).
31.1		Certification pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act.
31.2		Certification pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act.
32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.