Key Performance Indicators

Invested assets were CHF 652 billion on 30 June 2004, down 2% from CHF 663 billion on 31 March 2004. In US dollar terms, invested assets decreased 0.1% as net new money inflows were more than offset by market movements. Compared to second quarter a year earlier, invested assets have increased 13% in US dollar terms.

The inflow of net new money was CHF 2.2 billion in second quarter 2004, lower than CHF 2.8 billion in first quarter 2004. The decline in net new money was primarily related to outflows in liquid investments. Including interest and dividends, net new money in second quarter 2004 was CHF 5.8 billion, down from CHF 6.6 billion in first quarter 2004. Muted levels of investor confidence, particularly at the start of the quarter, continued to perceptibly affect the market. Although our inflow of net new money in second quarter fell from the first, our result still compares favorably to US peers, underlining the competitive strength of our private client business.

The gross margin on invested assets was 78 basis points in second quarter 2004, 5 basis points lower than in first quarter 2004. Excluding acquisition costs (goodwill and intangible asset amortization, net goodwill funding costs and retention payments), the gross margin was 80 basis points, 6 basis points lower than in first quarter 2004. Client activity in second quarter 2004 was slower than in first quarter, with daily average trading volumes declining 10% from the particularly high first quarter levels.

The cost / income ratio before acquisition costs was 85.7% in second quarter 2004, up from the record low of 84.1% reported in first quarter 2004. The increase is primarily attributable to lower transactional revenues. The cost / income ratio before acquisition costs for first half 2004 was 2.8 percentage points lower than in the same period a year earlier, reflecting increased revenues and continued tight management of costs.

Recurring fees stood at CHF 523 million in second quarter 2004, up 1% from first quarter 2004. In US dollar terms, recurring fees again reached record levels in second quarter 2004. This reflected increased asset levels in fee-based accounts as USD 2.5 billion in net new assets flowed into managed account products.

Our financial advisors continue to be among the most productive in the industry. In second quarter 2004, productivity per advisor declined to CHF 165,000 from CHF 172,000 in first quarter 2004, as transaction volumes fell.

Financial advisor productivity has improved 14% compared to second quarter 2003. Financial advisor headcount stood at 7,360 on 30 June 2004. The decline of 91 from 7,451 on 31 March 2004 reflects turnover primarily among trainees, less experienced and lower producing financial advisors. We continue to recruit talented and highly productive financial advisors and have resumed our trainee programs. Therefore, we expect renewed growth in our advisor force in coming quarters.

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