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PRESS RELEASE: GAM Holding AG reports underlying net profit of CHF 100.4 million for the first half of 2011

GAM Holding AG /
GAM Holding AG reports underlying net profit of CHF 100.4 million for the first
half of 2011
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The issuer is solely responsible for the content of this announcement. 

Zurich, 23 August 2011 

  * Assets under management of CHF 113.5 billion, down 4% from year-end 2010 due
    to strengthening of Swiss franc reporting currency.
  * Net new money inflows of CHF 0.6 billion, with positive contributions from
    both GAM and Swiss & Global Asset Management.
  * Underlying net profit of CHF 100.4 million[1], down 6% year-on-year but up
    5% from second half of 2010, reflecting attractive margins and effective
    cost control. EPS at CHF 0.54, unchanged from the first half of 2010.
  * Non-cash charge of CHF 92.2 million from reduction in carrying value of 28%
    stake in Artio Global Investors Inc., excluded from underlying net profit.
  * Balance sheet remains strong and highly liquid with tangible equity of CHF
    0.8 billion, cash of CHF 0.6 billion and practically no debt.
  * Cautious outlook given continued strength of the Swiss franc and turbulent
    investment environment. 

Assets under management for the Group were CHF 113.5 billion[2] as at 30 June
2011, a fall of CHF 4.3 billion or 4% from year-end 2010. This decrease was
fully attributable to the appreciation of the Group's Swiss franc reporting
currency against the currencies in which the majority of its asset base is
denominated - the US dollar, the euro and, to a lesser extent, the British
pound. In total, the effect from foreign exchange movements reduced the Group's
asset base by CHF 4.9 billion. 

At CHF 0.6 billion(2), net new money inflows for the first six months of 2011
were lower than the significant inflows recorded last year (CHF 5.6 billion in
the first half of 2010, CHF 2.4 billion in the second half). Turbulent market
conditions and widespread macroeconomic and geopolitical concerns unsurprisingly
led to extreme caution among investors, markedly reducing their activity levels. 

Chairman and CEO Johannes A. de Gier commented: "Inevitably, a resumption of net
new money inflows more in line with our mid-term targets will be dependent on a
return to normalised levels of investor engagement and activity. While we don't
anticipate such a turn-around in the short term, our operating businesses are
well-prepared to take advantage of it when it comes, thanks to the
diversification of their product ranges. We also expect their ongoing expansion
in key markets to unlock further growth potential once conditions improve." 

"The fact that our asset and revenue base is reported in the Swiss franc, which
has continued to strengthen considerably against the US dollar and the euro
since the beginning of July, creates a significant hurdle for the growth of our
bottom-line profit despite the positive development of our underlying
businesses." 

Net new money - GAM 

GAM's net new money inflows for the first six months of 2011 totalled CHF 0.4
billion, compared to CHF 3.7 billion in the first half of 2010 and CHF 2.2
billion in the second half. 

The ongoing shift in private client preferences away from traditional multi-
strategy offshore funds of hedge funds and the related attrition from GAM's
managed portfolios were counteracted by net inflows from a wide range of other
distribution channels. In particular, they included successful mandate wins with
institutions worldwide across a number of equity products, fixed income and
multi-manager strategies, highlighting GAM's successful efforts to reduce its
dependence on its historic private banking partners. 

While the volume of inflows was generally muted compared to 2010, GAM's UCITS
III range remained a key contributor to net new money, as private investors
continued to show a preference for single-manager and tax-efficient onshore
products. Net inflows into equity funds were driven by select demand for
products that have strong long-term track records such as GAM's Asian and US
equity strategies, and for thematic funds that convincingly address investors'
current priorities. Inflows into GAM's global rates strategies, its absolute
return fixed income range and emerging market strategies (including the funds
GAM advises for Swiss & Global Asset Management) were robust, but did not reach
the strong levels of 2010. 

GAM's assets under management as at 30 June 2011 were CHF 50.7 billion, down 5%
from CHF 53.6 billion at year-end 2010, reduced by a substantial negative impact
from foreign exchange movements of CHF 3.7 billion. 

Net new money - Swiss & Global Asset Management 

Net new money inflows at Swiss & Global Asset Management for the first six
months of 2011 were CHF 1.3 billion, compared to CHF 7.4 billion in the first
half of 2010 and CHF 2.3 billion in the second half of 2010. 

The range of Julius Baer fixed income funds experienced moderate inflows. Net
new money inflows into the products advised by GAM were resilient, although not
as high as in the first half of 2010. In addition, certain bond funds managed
in-house by Swiss & Global Asset Management saw encouraging demand on the back
of strong investment performance. The physical precious metal range continued to
grow with solid net inflows particularly in the silver and platinum funds. In
equities, higher inflows into funds focused on topical themes (energy
transition, luxury) and specialty mandates (growth, absolute return) were offset
by redemptions from regional products and from the Northern Africa fund
following the temporary closure of the Egyptian stock exchange. 

The institutional business recorded slight outflows, mainly from the closure of
smaller, less profitable mandates. The contribution to growth from private label
funds was solid, but smaller than in 2010. 

At Swiss & Global Asset Management, assets under management as at 30 June 2011
were CHF 79.6 billion, CHF 0.8 billion or 1% lower than at year-end 2010,
reflecting a significant negative currency impact of CHF 2.2 billion. 

H1 2011 Group results 

Adjusted for certain non-cash items[3], underlying net profit for the first half
of 2011 fell 6% year-on-year to CHF 100.4 million. Reported on the same basis,
earnings per share were CHF 0.54, unchanged from the previous year, and return
on tangible equity rose to 24.4%, supported by the Group's active approach to
managing its capital base. 

The Group's operating income totalled CHF 324.9 million for the first half of
2011, down 12% year-on-year, reflecting the strengthening of the Swiss franc
against the US dollar and the euro - the currencies in which both operating
businesses generate the majority of their revenues. 

Net fee and commission income was only marginally down (-1%) given the average
asset base was practically unchanged from the first half of 2010. 

Performance fees, mainly reported by GAM, were CHF 15.6 million, significantly
lower than the CHF 57.7 million recorded in the first six months of 2010 when
the fixed income range saw outstanding growth combined with strong investment
performance. This fall in performance fees led to a decrease in the Group's
annualised gross margin from 62.4 basis points in the first six months of 2010
to 55.2 basis points. Excluding performance fees, the gross margin remained
unchanged from the first half of 2010. 

The income from the retained 28% stake in Artio Global Investors Inc., held as a
financial investment and reported as income from investment in associates,
decreased by 24% to CHF 12.4 million. This income is derived from publicly
available financial information and was particularly affected by the weakening
of the US dollar against the Swiss franc. 

Other operating income - which includes foreign exchange gains from hedging
activities undertaken with respect to the Group's currency exposure - rose by
CHF 5.4 million year-on-year to reach CHF 13.1 million. 

Operating expenses fell to CHF 200.2 million, a 14% reduction from the first
half of 2010. The decline in most cost categories was driven by cost discipline,
aided by foreign exchange movements that reduced expenses incurred in currencies
other than the Swiss franc, in particular the British pound. 

Personnel expenses saw a 15% reduction, reflecting a fall in contractual-based
compensation to investment professionals on the back of lower performance fees
and a reduced accounting impact from the options awarded to all Group employees
under the 2009 long-term incentive plan. 

General expenses declined by 12%, driven by effective cost discipline and the
one-off release of CHF 4 million in provisions. In the second half of the year,
costs are expected to increase modestly following the relocation of Swiss &
Global Asset Management to its new headquarters. 

The Group's cost/income ratio for the first half of 2011 was 61.6%, down from
63.1% a year ago, reflecting cost control as well as the impact from non-
recurring factors such as the release of provisions and gains on currency hedges
for the current fiscal year. Absent a weakening of the Swiss franc, the
cost/income ratio is expected to increase in future periods. 

Group balance sheet 

The Group's balance sheet remained strong, with total assets as at 30 June 2011
of CHF 2,575.8 million. The cash position was substantial at CHF 644.3 million,
despite a dividend payment of CHF 94.1 million for 2010 and the buy-back of own
shares both for the purposes of hedging the Group's economic exposure to the
options granted under the 2009 long-term incentive plan and for cancellation as
part of its buy-back programme. 

The carrying value of the stake in Artio Global Investors Inc., reported as
investment in associates, was reduced to CHF 194.3 million as at 30 June 2011,
based on the outcome of an impairment test performed according to IFRS. The
related non-cash charge of CHF 92.2 million is reflected in the Group's
consolidated income statement for the first half of 2011, but excluded from

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