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.

In 2006, operating income was a record CHF 3,220 million, up 29% from a year earlier. Institutional revenues were up 36%, and wholesale intermediary revenues rose 22%, both benefiting from higher management fees in most investment areas, inflows of net new money, and higher markets.

In 2006, operating expenses increased by 28% from 2005. Personnel expenses were 52% above 2005 and general and administrative expenses increased by 31%, mainly due to investments in strategic initiatives. Other business units were charged CHF 105 million compared with the net charges from other business units of CHF 116 million a year earlier, mainly reflecting higher net charge-outs to the Investment Bank for investment management services provided by ­Dillon Read Capital Management (see facts and figures on Global Asset Management below).

Institutional invested assets were CHF 519 billion on 31 December 2006, up 18% from a year earlier, reflecting positive market performance (mainly in equities), strong net new money inflows and the inclusion of Pactual. In 2006, net new money inflows were CHF 29.8 billion, up significantly from the CHF 21.3 billion recorded in 2005. Strong inflows were reported in most asset classes, partly offset by outflows from equity mandates.

Invested assets for wholesale intermediaries were CHF 347 billion on 31 December 2006, up 7% from a year earlier, ­reflecting positive market performance, net new money inflows and the inclusion of Pactual. In 2006, net new money was CHF 7.4 billion, down from CHF 28.2 billion a year earlier. In 2005, net new money ­inflows resulted from the large number of product launches across all major asset classes. In 2006 we experienced outflows in fixed income and equities while continuing to experience inflows into multi-asset funds.