Growth in our card businesses was partially offset by  a decline in travel commissions and fees and a decrease in Travelers Cheque investment income due to continued weakness in travel activity. on dealing with our challenges and repositioning AEFA for future growth. American Express Financial Advisors (AEFA) reported net income of $632 million, up from $52 million a year ago. Total revenues rose 17 percent. However, in making year-over-year comparisons, it is important to note that AEFA’s 2001 results were depressed by a number of previously mentioned unusual items includ- ing high-yield investment losses, and AEFA’s portion of restructuring and September 11th-related charges. Continued volatility and weakness in the equity markets made 2002 a challenging year for most financial services companies, and AEFA was no exception.  Total assets owned, managed and administered were $230.6 billion, down 9 percent from 2001 due to lower equity market values and, to a lesser extent, outflows of managed assets. As a result, management and distribution fees declined 7 percent. Total cash sales  of investment products were flat with year-ago levels.  While human resources expenses at AEFA decreased slightly due to the benefits of reengineering and cost controls, other operating expenses rose 19 percent.  Despite weak earnings performance due to the external environment, AEFA made progress during the year in a number of key areas: expanding its product offerings, improving investment performance and growing the number of financial advisors. In addition, AEFA’s return on equity compared favorably to industry averages. The progress we made is encouraging after the disappointing results of 2001. We remain focused The Bank’s results signal a significant turnaround.  To put it into perspective, AEB’s pre-tax income for 2002 in a difficult economic environment was about four times higher than its results in the robust economic years of 1999 and 2000. AEB continued to make good progress in its strategic shift to consumer and private banking from commercial lending – a reorientation of the business that is now largely complete. The Personal Financial Services (PFS) and Private Banking groups together accounted for  49 percent of AEB’s 2002 net revenue, compared with 46 percent in 2001 and 37 percent in 2000. Private Banking client holdings increased 12 percent and stood at $13.9 billion at the end of the year. In keeping with the Bank’s strategy, corporate and other loans decreased from $926 million a year ago to $483 million. The Bank had strong revenue growth of 15 percent  on higher net interest income, which reflected lower funding costs, as well as higher foreign exchange and other revenue. AEB’s results also benefited from lower operating expenses due to ongoing reengineering efforts. This was partially offset by higher provisions for consumer losses in Hong Kong, where the environment was particularly difficult. American Express Bank (AEB) reported net income of $80 million, up sharply from a net loss of $13 million in 2001. Even excluding its portion of last year’s previ- ously mentioned restructuring charge, AEB’s earnings growth in 2002 was outstanding. AMERICAN EXPRESS BANK AMERICAN EXPRESS FINANCIAL ADVISORS I 9 AXP I