Annual Review 2006

Annual Review

2006 Report

Financial Businesses & Industrial Holdings

Global Wealth Management & Business Banking

In 2006, pre-tax profit, at a record CHF 5,203 million, was up 25% compared with 2005. This increase reflects higher asset-based fees, benefiting from a buoyant market and net new money inflows, as well as rising interest income, a reflection of higher volumes in our Lombard lending business. At the same time, operating expenses, up 15% in 2006 from 2005, also rose as our business expanded. Expenses for services from other business units were up from last year, mainly due to higher information technology charges. Personnel expenses rose 22% mainly due to the hiring of an additional 2,009 employees.

Global Asset Management

We had a very strong full-year result in 2006. Pre-tax profit in 2006 was CHF 1,392 million, up from CHF 1,057 million a year earlier. Compared with 2005, the increase reflects higher management fees in all businesses and alternative and quantitative investments' performance fees. The result was partly offset by higher operating expenses, reflecting increased staffing, performance-related compensation and investments in strategic initiatives and IT projects. For 2006, the cost / income ratio was 56.8%, a decrease of 0.7 percentage points from 2005.

Investment Bank

This was our most profitable year ever. Pre-tax profit in 2006 was CHF 5,943 million, up 15% from 2005. Total operating income in 2006 was CHF 21,787 million, up 25% from CHF 17,484 million a year earlier.

Industrial Holdings

Our private equity investments were moved to our Industrial Holdings segment in first quarter 2005, matching our strategy of de-emphasizing and reducing exposure to this asset class while capitalizing on orderly exit opportunities as they arise.

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