Key Performance Indicators

The pre-goodwill cost / income ratio was 67.1% in second quarter 2004, up from 65.1% in first quarter 2004. Revenues declined slightly while IT expenses rose.

Institutional

Institutional invested assets, at their highest level since 2000, were CHF 338 billion on 30 June 2004. The effect of the strong inflows of net new money from existing as well as new clients combined with our positive investment performance were partially offset by the appreciation of the Swiss franc against major currencies.

Net new money inflows in second quarter 2004 were CHF 7.6 billion. This was the second best quarterly result since 2000 and CHF 2.5 billion below the excellent first quarter level of CHF 10.1 billion. The alternative and quantitative investments business, with CHF 5.4 billion, continued to attract the largest inflows. This was followed by significant net new money inflows in equity and fixed income mandates in the core investment management business, mainly in the UK and Asia Pacific. These inflows were partially offset by money market outflows of CHF 1.3 billion.

The gross margin in second quarter was 31 basis points, a decrease of 4 basis points from 35 basis points in first quarter, mainly a result of the high performance fee levels in first quarter 2004.

Wholesale Intermediary

Invested assets were CHF 257 billion on 30 June 2004, down CHF 10 billion from the CHF 267 billion reported on 31 March 2004. Continued inflows into core asset classes were more than offset by outflows from money market funds – to a large extent related to UBS Bank USA – as well as negative market performance and the strengthening of the Swiss franc against most major currencies.

The outflow of net new money was CHF 4.6 billion in second quarter 2004 including a further CHF 8.3 billion drain from money market funds. Excluding money market funds, there was an inflow of net new money of CHF 3.7 billion in second quarter 2004, reflecting new fixed income mandates and the launch of new absolute return funds that attracted more than CHF 1 billion in subscriptions in their initial two months.

The gross margin was 36 basis points in second quarter 2004, an increase of 2 basis points over 34 basis points reported in first quarter. This improvement is mainly due to the ongoing shift into higher-margin asset classes.

Money market sweep accounts

The majority of money market fund assets managed by our US wholesale intermediary business represent the cash portion of private client accounts. Money market outflows from these accounts into UBS Bank USA were approximately CHF 4 billion in second quarter 2004. Before the bank’s launch, cash balances of private clients in the US were swept into our money market funds. Now, those cash proceeds are redirected automatically into FDIC-insured deposit accounts at UBS Bank USA. Although there was no one-time bulk transfer of client money market assets to the bank, the funds invested in our sweep accounts are being used to complete client transactions and will therefore gradually deplete over time. Such funds are a low-fee component of Global Asset Management’s invested assets.