Invested assets were CHF 626 billion on 30 September 2003, up 1% from CHF 622 billion on 30 June 2003. In US dollar terms, invested assets have increased 3% in the quarter, reflecting positive inflows of net new money and the effects of market appreciation on invested assets. Compared to the third quarter a year earlier, invested assets have increased 5%. In US dollar terms, invested assets were 18% higher on 30 September 2003 when compared to a year earlier.
The inflow of net new money was a very strong CHF 5.7 billion in third quarter 2003, significantly higher than CHF 3.9 billion in second quarter 2003 and CHF 3.4 billion reported for the third quarter a year earlier. Including interest and dividends, net new money in third quarter 2003 was CHF 9.7 billion, up from CHF 7.7 billion in second quarter 2003 and comparing very favorably to the net new money performance reported by competitors.
Gross margin on invested assets was 82 basis points in third quarter 2003, compared to 98 basis points in second quarter. Before acquisition costs (goodwill and intangible asset amortization, net goodwill funding and retention payments) and excluding the gain from the sale of Correspondent Services Corporation (CSC) in second quarter, gross margin on invested assets decreased 5 basis points to 86 basis points. This reflects the decline in municipal securities revenues and the absence of CSC revenues, although their impact was somewhat offset by higher recurring fees.
The cost / income ratio before acquisition costs was 87% in third quarter 2003, compared to 86% in second quarter 2003. The slight change is a result of a seasonal slowdown in client activity that impacted the level of nonrecurring fees and the industry-wide decline in municipal securities activity. Compared to third quarter last year, the cost / income ratio improved by one percentage point, reflecting recovering revenues and the benefits of cost management initiatives.
Recurring fees were CHF 512 million in third quarter 2003, 13% higher than CHF 455 million in second quarter 2003. Excluding the effects of currency fluctuations, recurring fees were up 11% on managed account fee gains resulting from increased asset levels, with clients investing more than USD 2.6 billion into them. Recurring fees also benefited from the higher level of fees for mutual fund products. In USD terms, third quarter recurring fees were at their highest level since PaineWebber became part of UBS.
The number of financial advisors was 8,001 on 30 September 2003, down 283 from 8,284 on 30 June 2003. We have been restricting the number of new trainees in our financial advisor training program and turnover rates have remained high for less productive advisors. We continue to invest in and recruit highly productive and experienced financial advisors. Additionally, given the improved market conditions, we have now resumed hiring new trainees.
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