Interest income climbed to CHF 243.0 million (+10.0 %), while fee and commission income fell by 15.3 percent to CHF 268.2 million. Operating expenses expanded to CHF 313.6 million (+15.1 %). The crisis on the financial markets led to a lower Group result in comparison with the previous year of CHF 150.6 million (–38.1 %). The decline is attributable in particular to value adjustments on our own securities portfolio (minus CHF 97.2 million). Net profit attributable to the shareholders of LLB AG amounted to CHF 144.7 million or CHF 5.08 per LLB share.

Falling stock markets and currency fluctuations had an impact on client assets under management. At CHF 46.1 billion, these were 23.1 percent under the previous year. Net new money outflow amounted to CHF 0.6 billion.

Good operative results in all segments

In the Domestic Clients segment we registered higher mortgage lending volumes and a continual influx of new money (CHF 177 million). Client assets were down by 15.5 percent to CHF 13.8 billion. At CHF 59.6 million, the segment result before tax was below the previous year's value by 25.4 percent. We were able to further strengthen our position in our home markets of Liechtenstein and Switzerland. The new Bank Linth branch in Meilen, which opened in November 2008, enables us to intensify our private banking activities in the attractive Lake Zurich economic region.

In cooperation with Swiss Re, we set up Elips Life AG during the year under report. It focuses on providing insurance cover for the risks of death and invalidity. From January 2009, we are taking over the business management of the ALVOSO pension fund. In addition, by establishing the «Financial Planning and Retirement Provisioning» business division, we are expanding our market position as the specialist for professional pension planning.

The business result of our International Clients segment was influenced by the financial crisis and the German tax affair. Nevertheless, we were able to report a small net new money inflow of CHF 85 million. Performance-related factors caused a decline of 23.5 percent in client assets to CHF 10.3 billion. The segment result before tax stood at CHF 54.5 million (previous year: CHF 75.4 million). In spite of the challenging market environment, we made available resources for future business growth. In Zurich, Liechtensteinische Landesbank (Switzerland) Ltd. moved into a new office complex on the Stampfenbachstrasse, which offers sufficient space reserves for further growth. After Abu Dhabi, we now have a second representative office in the Middle East in Dubai since November 2008.

Our Institutional Clients segment posted a fall of 27.2 percent in client assets to CHF 22.0 billion. The net new money outflow of CHF 834 million was attributable to the loss of assets of a large institutional client as well as outflows of custodian bank assets and from own-managed funds. The segment result before tax amounted to CHF 125.0 million. Following the strong growth of recent years, the focus during the report period was on optimising efficiency. We reviewed various business processes and developed our «LLB Fund Cockpit», a workflow-driven database for private labelling. As a one-stop boutique, we offer our clients in this business area a central point of contact and service.

New banking software for the LLB Group

We have set our course for the future by taking the decision to introduce the «Avaloq» banking software package. This new overall banking application will be implemented throughout the LLB Group from 2011. «Avaloq» is not just an IT project, it will also enable us to exploit existing synergy potentials in the entire corporate Group. Consequently, during the implementation of the software, we shall also review our operative processes and amalgamate central services at the Group level into individual competence centres.

Intensified risk management

The international banking crisis and the accompanying turbulence on the stock markets have precipitated deep cuts in the finance industry and the real economy. In view of these business conditions, we have intensified our risk monitoring and – where necessary – implemented measures to limit risk levels. In line with our conservative and prudent risk policy, we neither granted subprime mortgages in the USA nor invested in US mortgage-backed instruments. As precautionary measures, in interbank business we have increased liquidity levels and tightened limits to reduce possible cluster risks. We were also willing to accept the decreases in revenues this caused.

The LLB Group is in a strong position as regards financing and liquidity. We have a very solid equity capital base and our tier 1 ratio stands at 13.5 percent. This means we are not only well above legal requirements but also hold one of the top positions in international comparison. Thanks to the nature of our balance sheet structure, we are not dependent on the capital market; we obtain our financing from client funds.

New organisational structure

With effect from 1 January 2009, our Group Executive Board, which at the same time forms the Board of Management of our parent bank, has been expanded and reorganised. Four new areas of responsibility have been created, namely, Domestic and Institutional Markets, International Market, Corporate Service Center and Group Executive Management CEO. We are pleased that with Roland Matt and Dr. Kurt Mäder we can welcome two senior executives from inside our company to the Executive Board. Roland Matt will be responsible for the Domestic and Institutional Markets, and Dr. Kurt Mäder for the Corporate Service Center. Elfried Hasler takes over the International Market Business Area. Dr. Josef Fehr continues as Chairman of the Executive Board. Due to the age limit of 57 for senior executives, Norman Oehri will step down from the Group Executive Board. However, the bank can continue to benefit from his great experience and expertise. From 1 January, 2009, Norman Oehri becomes head of the new Special Clients Unit.

Changes in the Board of Directors

At the General Meeting on 8 May 2009, Dr. Michael Ritter, lic. oec. Helmuth Elkuch and Peter Harald Frommelt will step down from the Board of Directors after seven and eight years respectively. They were responsible for setting the new strategic course of the LLB Group at the beginning of this millennium. We would like to thank them for their valuable services through some difficult times, as well as for the constructive and successful cooperation for the benefit of the LLB Group.

Dividend

The Board of Directors is convinced that the LLB Group can further improve its operative performance. Moreover, it believes that the Group's financial result will again stabilise in future. Accordingly, it will propose an unchanged dividend to the previous year of CHF 3.40 per LLB share to the General Meeting. Relative to the year-end closing price, the dividend yield therefore amounts to 6.7 percent.

Outlook

It is precisely in business conditions such as those prevailing at present that our three-pillar strategy proves its validity. We shall consistently pursue this strategy in expanding and further strengthening our business activities by consolidating our position in our home market Liechtenstein, intensifying our business in Switzerland and developing new markets. These remain our objectives in 2009. Therefore, we plan to open a bank in Vienna during the second half of 2009. In the long term, we are confident about the growth prospects for our Group, and we shall therefore stick to our medium-term goals of achieving a net new money inflow of at least 3 percent per year and a return on equity of over 15 percent. Our tier 1 ratio must be maintained at 12 percent, and our cost / income ratio must continue to be one of the best in international comparison.

A note of thanks

Dr. Josef Fehr Chairman of the Board of Management

Dr. Hans-Werner Gassner Chairman of the Board of Directors