Results

We reported a very strong full-year result in 2004. Pre-tax profit was CHF 544 million, an increase of 64% from the 2003 pre-tax profit of CHF 332 million. The increase was driven by higher operating income, which rose 16% reflecting strong net new money inflows, a continuing change in asset mix towards higher-margin products, and a rise in market valuations resulting in increased asset levels and revenues. This was accompanied by continued cost reductions.

Pre-tax profit was CHF 164 million in fourth quarter 2004, up CHF 59 million from CHF 105 million in third quarter 2004. The increase was largely due to higher performance fees and lower operating expenses, which were affected by provisions relating to the restructuring of our business in the Americas in the third quarter.

Operating income

Operating income in fourth quarter 2004 was CHF 526 million, up CHF 35 million from CHF 491 million in the previous quarter. The increase was driven by improved market valuations and continued strong net new money inflows which boosted our asset-based fees as well as by higher performance fees earned in all our businesses. Institutional revenue, at CHF 287 million in fourth quarter, increased by CHF 33 million from CHF 254 million in third quarter. This was mainly a result of higher market valuations positively impacting our asset-based fees and increased performance fees in both traditional and alternative investments, partly offset by the weakening US dollar against the Swiss franc. Wholesale intermediary revenues were CHF 239 million in fourth quarter, up slightly from CHF 237 million in third quarter 2004.

Operating expenses

Operating expenses were CHF 362 million in fourth quarter 2004, down from CHF 386 million in third quarter 2004. The decrease was mainly attributable to lower personnel expenses. Personnel expenses, at CHF 204 million in fourth quarter 2004, were down from CHF 229 million a quarter earlier, due to the final fixing of incentive compensation. General and administrative expenses, at CHF 91 million in fourth quarter 2004, were broadly in line with the previous quarter. Provisions made for restructuring our Americas business and damage from Hurricane Ivan in the Cayman Islands influenced the third quarter result. This quarter we saw higher provisions and litigation costs as well as an increase in professional fees and travel and entertainment costs.

Headcount

Headcount was 2,665 on 31 December 2004, an increase of 26 or 1% from 2,639 on 30 September 2004, largely driven by the need for additional resources in our growing alternative and quantitative investments and fund services businesses, as well as our expansion of the European real estate business.