CREDIT SUISSE GROUP

Paradeplatz 8 P.O. Box 1 8070 Zurich Switzerland

Telephone + 41 1 212 16 16 Fax + 41 1 333 25 87 Internet www.credit-suisse.com

ANNUAL REPORT 1996/1997

CREDIT SUISSE GROUP

Paradeplatz 8

P.O. Box 1

8070 Zurich

Switzerland

Telephone + 41 1 212 16 16

Fax + 41 1 333 25 87

Internet www.credit-suisse.com

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CSGB_E_UG_Aussen_def 24.4.1997 15:09 Uhr Seite 1

CONTENTS

1 Corporate and Financial Highlights 1996

2 To our Shareholders

4 The Structure of Credit Suisse Group

5 The Four Business Units of Credit Suisse Group

6 Credit Suisse Group Consolidated Results

8 Credit Suisse

10 Credit Suisse Private Banking

12 Credit Suisse First Boston

14 Credit Suisse Asset Management

16 Credit Suisse Group Risk Management

18 Credit Suisse Group and the Community

20 The Role of the Swiss Financial Centre

in the Second World War

23 Financial Report

66 Seven-year Summary of Selected Financial Data

68 Information for Investors

70 Board of Directors and

Executive Board of Credit Suisse Group

72 Boards of Directors of Credit Suisse

and Credit Suisse First Boston;

Executive Boards of the Business Units

74 Locations on World Map

76 Locations and Addresses

PERFORMANCE OF CREDIT SUISSE GROUP SHARES

50

100

1993 1994 1995 1996

Swiss Market IndexSwiss Performance Index - BanksCSG

150

1997

Financial Calendar

Annual General Meeting 1997 Friday, 30 May 1997

Financial statements for 1st half 1997 Wednesday, 27 August 1997

Press Conference on the Annual Results 1997 Thursday, 5 March 1998

Annual General Meeting 1998 Friday, 29 May 1998

MARKET CAPITALISATION as at 31 December

CHF bn

0

5

10

15

20

25

90 91 92 93 94 95 96

CONTENTS FINANCIAL REPORT

24 Introductory comments

26 Consolidated income statement

27 Consolidated statement of source

and application of funds

28 Consolidated balance sheet

30 Consolidated off-balance-sheet business

32 Notes to the consolidated financial statements

57 Report of the Group’s auditors

58 Income statement (Parent Company)

59 Balance sheet before allocation of

retained earnings (Parent Company)

60 Notes to the financial statements (Parent Company)

64 Proposed allocation of retained earnings

65 Report of the statutory auditors to the Annual

General Meeting of Credit Suisse Group, Zurich

CSGB_E_UG_Innen_def 2.5.1997 13:57 Uhr Seite 1

1

CORPORATE AND FINANCIAL HIGHLIGHTS 1996

1996 1995 ChangeGroup income statement and balance sheet in CHF m in CHF m +/- %

Net operating income 12,890 11,002 17

Group operating profit after tax 1,795 1,806 –1

Group loss/profit –2,432 1,541 –

of which minority interests 157 140 12

Cash flow 3,719 3,492 7

Total assets 524,154 412,490 27

Total shareholders’ equity 16,426 17,362 –5

of which minority interests 581 878 –34

Market capitalisation 26,701 22,279 20

Per share (par value CHF 20) CHF CHF +/- %

Group operating profit after tax 8.62 9.02 –4

Net loss/profit (average) –13.63 7.59 –

Net profit (fully diluted) – 7.47 –

Dividend 4 4 0

Book value 81.60 87.5 –7

Year-end closing price 137.5 118.25 16

Ratios % % +/- %

ROE (operating profit after tax) 10.1 10.9 17

after minority interests 9.6 10.3 3

ROE (net loss/profit) –13.7 9.0 –258

after minority interests –15.2 8.7 3

BIS core capital ratio (tier 1) 8.0 8.6 12

BIS capital ratio 11.9 12.7 12

Resources (at year-end) No. No. +/- %

Total staff 34,821 34,310 1

of which in Switzerland 23,553 24,330 –2

Total offices 470 500 –6

of which in Switzerland 369 402 –8

1996 – AN EXTRAORDINARY YEAR

Strategic repositioning. By focusing on the activities of its four business units, Credit Suisse, Credit Suisse Private Banking,

Credit Suisse First Boston and Credit Suisse Asset Management, Credit Suisse Group laid the foundation for future growth and for a

considerable expansion in profitability.

Concentrating on core business. Credit Suisse Group intends to divest its non-core activities. At the end of 1996, the Group took

the first steps towards selling its most important non-core interest, Electrowatt Ltd.

Good operating results. Last year’s good operating results demonstrated the strong earnings power of Credit Suisse Group.

Net operating income increased by 17% to CHF 12.89 bn, and gross operating profit improved 12% to CHF 4.55 bn.

Extraordinary measures – investment in the future. A number of forward-looking measures, such as the introduction of a new

methodology for credit risk management and the provisions made for restructuring costs, led to a technical loss.

GEOGRAPHICAL COMPOSITION OF NET OPERATING INCOME

SwitzerlandInternational

52%

48%

STRUCTURE OF NET OPERATING INCOME

Net interest incomeNet commission and service fee incomeNet trading incomeOther ordinary income

30% 27%

38%

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CSGB_E_2_3_Statement 2.5.1997 17:03 Uhr Seite 2

RAINER E. GUT, CHAIRMAN OF THE BOARDOF DIRECTORS, AND LUKAS MÜHLEMANN, CHIEF EXECUTIVEOFFICER

TO OUR SHAREHOLDERS

2

Dear shareholder

For our company, 1996 was a year marked by good operational performance, but also by

far-reaching strategic reorientation. Over the last ten years we have expanded to become a

major, globally active financial group through a number of acquisitions within Switzerland

and abroad but also through our own internally generated expansion. With consolidated net

operating income of almost CHF 13 bn and total assets of over CHF 500 bn we are now

one of the largest financial services companies in the world.

Our new Group structure will ensure that we are able to focus our services even more

effectively on the needs of our customers and on the markets in which we operate.

Responsibility for each of our financial services activities is clearly allocated to one of the

four new business units. This will help us to improve competitiveness, further expand our

market position, significantly increase our earning power and profitability and lay the

foundations for future growth.

Although only a few months have passed since the introduction of the new structure,

the benefits are already apparent. The new Credit Suisse Group has gained in dynamism,

efficiency and transparency. Each of the four business units has clear objectives in terms of

market positioning, allocation of resources and results.

A fundamental component of our strategic reorientation is concentration on our core

business. As a result, we are divesting ourselves of operations which lie outside the financial

services sector. Accordingly, at the end of 1996 we agreed the sale of our stake in

Electrowatt. We secured advantageous arrangements for both the industry and the energy

sections which provide maximum benefit for all concerned and help to safeguard jobs within

the Electrowatt Group.

CSGB_E_2_3_Statement 2.5.1997 17:03 Uhr Seite 3

In addition to the organisational restructuring, a further important feature of the 1996 finan-

cial year was the need to take a number of extraordinary financial measures. We have made

provision for the costs of the restructuring. In addition, we introduced a completely new

credit risk management system and formed the provisions and reserves necessary to under-

pin it. In future, expected risk costs will be determined statistically and charged to the

income statement. The new system will help ensure that pricing is more closely attuned to

the corresponding risk. It will also enhance the transparency of our credit portfolio. The

annual charges for provisions and losses will be stabilised through the use of a fluctuation

reserve.

These and other extraordinary measures, which we view as an investment in the future

prosperity of our company, inevitably made an impact on our annual accounts, mainly in the

form of extraordinary income and expenses. Thus, despite our healthy operating result we

ended the year with a technical loss.

The reorientation of our Group represents a huge challenge for all our staff whatever

their level or location. We would like to thank them for the superb job they are doing.

We are certain that the decisions and measures taken last year have laid very solid

foundations for the future success of Credit Suisse Group. Our task over the next few years

is to ensure that our new structure lives up to its promises – for the benefit of our

customers, our staff, and our shareholders. We would like to express our gratitude for the

trust placed in us.

Rainer E. Gut Lukas Mühlemann

Chairman of the Board of Directors Chief Executive Officer

3

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THE STRUCTURE OF CREDIT SUISSE GROUP

One of the world’s leading financial services groups, Credit Suisse Group

is active on every continent and in all the world’s major financial centres.

The Group comprises four business units, Credit Suisse, Credit Suisse

Private Banking, Credit Suisse First Boston and Credit Suisse Asset

Management, each geared to the requirements of specific customer

groups and markets.

240 locations in Switzerland 50 locations in Switzerland40 locations internationally

Subsidiaries Subsidiaries

*Direct holdings of Credit Suisse Group

CREDIT SUISSE

2 locations in Switzerland 7 locations in Switzerland50 locations internationally 10 locations internationally

Subsidiaries Subsidiaries

CREDIT SUISSE FIRST BOSTON

Neue Aargauer Bank*(98.6%)CS Leasing LtdCS Car Leasing LtdCS Real Estate Leasing Ltd

Bank Leu*Affida Bank*Bank Heusser*Credit Suisse Fides*Clariden Bank*Bank Hofmann*Bank für Handel & EffektenCS Life*Credit Suisse Trust*

Credit Suisse Financial Products(80%)Credit Suisse First BostonPrivate Equity*Credit Suisse Group Services*

BEA AssociatesCredis International FundHolding Ltd.

4

CSGB_E_4_5_Chart 2.5.1997 17:04 Uhr Seite 5

THE FOUR BUSINESS UNITS OF CREDIT SUISSE GROUP

CREDIT SUISSE

CREDIT SUISSE PRIVATE BANKING

Credit Suisse is among the market leadersin its area of business, thanks to its highlevel of innovation in the design ofproducts and services, particularly in thearea of direct banking, and to itscollaborative arrangement with Winterthur,Switzerland’s largest insurer.

Credit Suisse serves corporate and individual clients in Switzerland through an efficient branch network covering allmajor locations and a multichannelstrategy.

Credit Suisse Private Banking providescomprehensive services in the areas ofportfolio management and financial advicefor private clients worldwide.

Credit Suisse Private Banking is one ofthe largest private banking operations inthe world with a strong market presencein Switzerland and internationally.

CREDIT SUISSE ASSET MANAGEMENT

CREDIT SUISSE FIRST BOSTON

As an advisor, partner and capital-raiserfor its clients, Credit Suisse First Bostonfocuses on long-term businessrelationships, offering integrated servicesin corporate and investment banking. Ithas a presence in all the world’s principalfinancial centres.

Credit Suisse First Boston is one of asmall number of global providers of financial services to major companies.

Credit Suisse Asset Managementcomprises the internationally orientedasset management and advisory businessof Credit Suisse Group and Credis, the investment fund company servingSwitzerland and Europe.

The worldwide activities of Credit SuisseAsset Management are focused on therequirements of institutional investors.

5

CSGB_E_6_7_GroupResults 2.5.1997 17:05 Uhr Seite 6

CREDIT SUISSE GROUP CONSOLIDATED RESULTS

In 1996 Credit Suisse Group succeeded in improving its consolidated net

operating income by 17% to CHF 12.9 bn. All major sources of income

contributed to this healthy growth. Group operating profit after tax stood

at CHF 1.8 bn. This result contrasts with a technical loss of CHF 2.4 bn

posted by the Group because of the restructuring operations and the

introduction of a new credit risk management framework.

6

Good operating result. Of the consolidated net operating income of CHF 12.9 bn, trading

income advanced most strongly, posting an increase of 33% to CHF 3.9 bn. Earnings from

commission and service fee activities climbed by 18% to CHF 4.9 bn, while net interest

income rose by 6% to CHF 3.5 bn. At 38% of operating income, commission and service

fee revenue remains the most important source of earnings.

Operating expenses rose by 20% to CHF 8.3 bn, partly owing to currency movements

but also as a result of higher staff expenses and of restructuring costs incurred in the

second half of 1996. Staff numbers at end-1996 totalled 34,821. In Switzerland there was

a net reduction of 440 jobs, a figure which takes into account the permanent employment

of more than 500 former apprentices, trainees and graduate trainees and the hiring of a

further 300 new apprentices. This compares with an increase in staff abroad of 950.

The growth in staff numbers abroad can be attributed to the healthy business performance

of CS First Boston Inc. and of Credit Suisse Financial Products as well as to the strategic

expansion of the international operations of the former Credit Suisse.

In 1996 Credit Suisse Group posted a gross operating profit of CHF 4.6 bn,

an increase of 12%.

Because of the continued difficult economic environment in Switzerland and the

persistently adverse conditions on the Swiss property market, depreciation, write-downs,

provisions and losses in the operational income statement climbed by 26% to CHF 2.1 bn.

Pre-tax operating profit amounted to CHF 2.5 bn, up 3% on the previous year.

Return on equity in respect of the Group operating profit after tax was at 10.1%,

and, after accounting for minority interests, 9.6%.

The balance sheet total of Credit Suisse Group stood at CHF 524 bn at year-end.

The BIS core capital ratio (tier 1) for Credit Suisse Group was 8%, while the BIS capital ratio

was 11.9%. Shareholders’ equity fell to CHF 16.4 bn, including minority interests, due to

the technical loss.

CSGB_E_6_7_GroupResults 2.5.1997 17:05 Uhr Seite 7

A technical loss as a result of extraordinary measures. Extraordinary income amounted

to CHF 1.3 bn. This is attributable primarily to the book profit from the planned sale of

Electrowatt Ltd.

Extraordinary expenditure stood at CHF 5.4 bn, comprising CHF 1 bn in restructuring

costs for the refocusing of the Group initiated in July 1996 and CHF 97 m in other

expenses in connection with previous restructuring projects; CHF 1.6 bn for extraordinary

provisions in respect of Swiss lending and the introduction of the new credit risk

management system; CHF 459 m for extraordinary depreciation; CHF 1.6 bn incremental

credit reserve which, together with a further CHF 195 m, was assigned to the reserves

for general banking risks; CHF 216 m for the formation of a provision for the integration of

the emerging market trading activities of CS First Boston Inc. into the new Credit Suisse

First Boston; other extraordinary expenses of CHF 242 m.

As a result of the extraordinary structural and strategic measures which have been

taken, the Group recorded a technical loss at year-end of CHF 2.4 bn before minority

interests, CHF 2.6 bn after minority interests.

Given the sound operating results for 1996 and the pleasing start to the current

year, an unchanged dividend of CHF 4 per share will be proposed at the annual meeting

on 30 May.

Pro forma accounts for the business units. Indicative pro forma accounts have been

drawn up for 1996 for the four new business units of Credit Suisse Group, which have been

in operation since 1 January 1997. These accounts are based on the operating result for

1996.

Credit Suisse, which serves Swiss corporate and individual customers, posted

operating income of CHF 2.7 bn. High provisions and a cost structure which continues to

be unsatisfactory resulted in Credit Suisse recording a pre-tax operating loss of CHF 950 m.

Credit Suisse Private Banking, which offers private banking services worldwide,

recorded operating income of CHF 3.0 bn and annual pre-tax operating profit of

CHF 1.4 bn.

Credit Suisse First Boston, the globally active provider of corporate and investment

banking services, achieved operating income of CHF 6.5 bn, with annual pre-tax operating

profit of CHF 1.9 bn.

Credit Suisse Asset Management, which provides asset management services to

institutional investors, recorded operating income of CHF 660 m and posted annual pre-tax

operating profit of CHF 195 m.

7

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CORPORATE AND INDIVIDUAL CUSTOMERS IN SWITZERLAND

Credit Suisse, the business unit which specialises in serving Swiss

corporate and individual customers, recorded net operating income in

1996 of CHF 2.7 bn. Even in a difficult economic environment, Credit

Suisse was able to maintain its good position in the market and, indeed,

extend its position in individual areas such as retirement savings. The

pre-tax loss of CHF 950 m posted by the business unit was attributable

largely to the high level of provisions and a cost structure which

remains unsatisfactory. Over the next few years Credit Suisse aims to

improve its results sufficiently so as to ensure a satisfactory return on

the capital deployed.

8

Structure. The Credit Suisse business unit comprises the Swiss corporate and individual

customer business of the former Credit Suisse and of Swiss Volksbank, together with Neue

Aargauer Bank. Boasting around 2.5 million customers and a market share of some 20%,

Credit Suisse is among Switzerland’s leading banks. Its target branch network will cover

around 240 locations, backed up by 555 CASH SERVICE ATMs. Credit Suisse is working

systematically to extend its strong position in telephone banking and telebanking; it already

has around 150,000 customers in this area.

In an essentially recessionary economic environment the volume of business, both on

the lendings and the deposits side, remained constant in 1996.

Individual customer business. Individual customer business performed well and produced

a clearly positive result. The merger of the Credit Suisse and Swiss Volksbank personal

pension foundations has created one of the largest Pillar 3 foundations on the Swiss

market, with pension assets of around CHF 2.8 bn. Both the number of members and the

volume of funds experienced another significant expansion in 1996. Thanks to the

collaborative arrangement with the Winterthur Group, the range of products and services

was expanded to include integrated risk cover, making it even more attractive.

In contrast to the growth in savings deposits, there was another sharp drop in

medium-term notes business as a result of low interest rates and the attraction of other

investment options in the funds area. Assets invested by individual customers in Credis

funds accounted for over 40% of the total amount in safekeeping at the end of 1996. Sales

of CS Life products continued to perform well: around 40% of CS Life’s premium income –

which in 1996 amounted to CHF 924 m – was generated through Credit Suisse.

Self-service facilities are becoming increasingly popular. Over 70% of all cash

withdrawals are now made at cash dispensers.

In the second half of last year, the foundations were laid for the harmonisation and

standardisation of the product range in 1997. Further steps were also taken towards

streamlining the branch network. Credit Suisse has a set of three private accounts designed

to meet the varying requirements of individual customers. In addition, the bank offers an

CSGB_E_8_9_Business 2.5.1997 17:05 Uhr Seite 9

attractive range of savings products, including an Interest Growth Savings Account which

rewards long-term saving with an interest bonus.

Corporate clients. Corporate client business recorded a positive performance, but is still

not yielding sufficient returns to cover risks. A high level of provisions led to a negative

result.

Corporate clients, in particular small and medium-sized businesses (SMBs), form the

backbone of the Swiss economy. For Credit Suisse, SMBs are a core customer group,

accounting for 100,000 banking relationships. Over 45% of lendings are made to such

companies and more than 75% of Credit Suisse corporate client officers service SMBs.

Credit Suisse wants to help existing and new corporate clients ensure their future

success. A number of measures have already been taken:

In mid-1996 a central unit was set up to deal with the broad-ranging requirements of

SMBs. An automatic telephone service has been established – DIRECT LINE BUSINESS –

giving corporate clients access to their accounts 24 hours a day. Further products designed

to meet the needs of corporate clients will follow. The focus will be on providing services

which allow companies to carry out financial transactions round the clock and cost-

effectively on an electronic basis.

The collaborative arrangement with the Winterthur Group is of great importance for

corporate client business. From the second half of 1997 all corporate clients will be able to

benefit from comprehensive and integrated bancassurance solutions from a single source.

1996 results. The figures posted by Credit Suisse in 1996, with a pre-tax operating loss of

CHF 950 m, were unsatisfactory. However, through the restructuring Credit Suisse will have

a firm basis for attaining an appropriate level of profitability. The emphasis is now on the

implementation of its cost reduction measures, the systematic use of alternative channels of

distribution, increased marketing efforts for customer retention and, finally, margins in

lending business which are more closely tailored to risk.

1996Pro forma figures (indicative) in CHF m

Net operating income 2,700Personnel expenses 1,720Valuation adjustments, provisions and losses 990Pre-tax operating loss –950Equity 3,950Staff 15,800

9

CSGB_E_10_11_PrivatBanking 2.5.1997 17:06 Uhr Seite 10

SERVICES FOR PRIVATE INVESTORS IN SWITZERLAND AND INTERNATIONALLY

In the 1996 financial year Credit Suisse Private Banking recorded

substantial growth. It received an additional boost from low interest

rates worldwide and lively capital markets.

10

Structure. The new Credit Suisse Private Banking comprises three areas: Credit Suisse

Private Banking in the narrow sense, covering the national and international private banking

business of the former Credit Suisse and Swiss Volksbank; the independent private banks,

i.e. the Bank Leu Group (Bank Leu, Affida Bank, Bank Heusser, Credit Suisse Fides),

Clariden Bank, Bank Hofmann and Bank für Handel & Effekten; and the CS Life and

Credit Suisse Trust Switzerland/Guernsey product and service centres, Credit Suisse

Securities London, Swiss American Securities Inc., New York, and Credit Suisse Deposit

Centre Guernsey.

Within the framework of Credit Suisse Private Banking Switzerland/international,

six “market groups” provide a service which is in close touch with and directly focused on

the requirements of their customers and markets. The Investment Office and Finance &

Treasury divisions, Services and the Corporate Centre ensure the necessary basis for this

and provide support for front-office activities.

In Switzerland, Credit Suisse Private Banking is present in 40 locations. Outside

Switzerland it has some 50 offices in the key private banking markets on every continent.

Consolidation and strategic expansion. In 1996 the emphasis in Swiss onshore business

was on consolidation and extending the scope of financial advisory services to meet client

requirements. The financial advice which Credit Suisse Private Banking provides is geared to

the different stages of the client’s life and encompasses services in the areas of investment,

portfolio management, financing, tax, inheritance, pension provision and real estate. The

new fee and pricing system introduced in investment and portfolio management business in

Switzerland makes for a clearer overview of costs.

In offshore business Credit Suisse Private Banking has expanded its range of trust

services, which now extends from standardised, cost-effective products to comprehensive,

tailor-made solutions.

Milestones reached. Since the refocusing of the Group was announced on 2 July 1996,

considerable energy has been devoted to setting up the new Credit Suisse Private Banking

business unit. This has involved such major tasks as defining and implementing the new

organisational structure, appointing staff, allocating clients within the new structure and

providing clients with the necessary information. In addition, the set-up of the Swiss/

international sales network was finalised, the Management Information System defined and

a qualitative and quantitative business plan drawn up for 1997.

CSGB_E_10_11_PrivatBanking 2.5.1997 17:06 Uhr Seite 11

Focus on the front office. Credit Suisse Private Banking employs around 6,150 staff,

most of whom work in front-office related functions in one of the six market groups. Around

2,800 are employed in Switzerland and around 900 outside Switzerland. The independent

private banks have a staff of 1,880 and 520 work in the product and service centres.

At the beginning of 1997 there was a client base of approximately 270,000,

two-thirds of whom were from outside Switzerland. 50,000 are served by the independent

private banks and 18,000 by the Credit Suisse Private Banking international section.

Around half have assets invested of less than CHF 500,000. 74% of funds under manage-

ment are with Credit Suisse Private Banking in Switzerland, 10% are accounted for by the

international section and 16% by the independent private banks.

1996 results. In 1996 investment and portfolio management business was conducted in an

environment of low interest rates across the world and lively activity on the capital markets.

Against this backdrop commission income improved, particularly in the first half of the year.

Overall, this area of business posted better results than in the previous year.

Of total net operating income of CHF 3.0 bn, CHF 810 m was used to cover staff

expenses. After other expenditure and ordinary provisions of CHF 60 m, pre-tax profit stood

at just under CHF 1.4 bn.

1996Pro forma figures (indicative) in CHF m

Net operating income 3,040Personnel expenses 810Valuation adjustments, provisions and losses 60Pre-tax operating profit 1,360Equity 1,950Staff 6,150

11

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WORLDWIDE CORPORATE AND INVESTMENT BANKING

Financial performance for 1996 included record levels of revenues and

strong levels of net operating income. Among its many major transactions

the former CS First Boston was advisor to Boeing in its USD 14.6 bn

purchase of McDonnell Douglas and underwriter of The Walt Disney

Company’s issue of USD 2.6 bn in senior notes. The old Credit Suisse

was arranger of a USD 3 bn revolving credit facility for J.C. Penney’s

acquisition of the Eckerd Corporation. In the Swiss franc capital

markets Credit Suisse was the number one lead-manager for the sixth

consecutive year.

12

Structure. On 1 January 1997 CS First Boston was brought together with the international

wholesale business and the trading activities of the old Credit Suisse to form the new

Credit Suisse First Boston (CSFB).

Corporate and investment banking. Even before the creation of the new Credit Suisse

First Boston business unit, the former Credit Suisse (corporate banking) and CS First

Boston (investment banking) had been working together for some time. Last year, in close

conjunction with one another and making good use of each other’s network of relation-

ships, they lead or co-managed more transactions than in any prior year. The bouyant global

environment for mergers and acquisitions continued through 1996. Credit Suisse and

CS First Boston executed close to 40 transactions in excess of USD 1 bn and advised on a

total of 250 deals with a total volume of over USD 200 bn. CS First Boston maintained

leadership in the field of privatisation. It advised the Victorian Government of Australia on its

entire programme of restructuring and privatising the state-owned electricity industry, with a

total value realised thus far of AUD 13.6 bn. The project financing for the Kern River

Funding Corporation attracted significant attention for its creative use of capital markets in

preference to bank financing. In addition, the Credit Suisse project finance team in Hong

Kong arranged one of the largest infrastructure project financings in Asia, USD 1.4 bn for

the PT Jawa Power project in Indonesia.

Equity trading and sales. In 1996, the Firm arranged the secondary offering for ENI,

the recently privatised Italian oil company; at USD 5.9 bn, it was the largest secondary

equity offering on record. CSFB was responsible for one of the largest corporate secondary

offerings ever accomplished in Europe, the German SGL Carbon. Last year CSFB acted as

co-lead manager for the common stock offering of the Commonwealth Bank of Australia;

at USD 3.3 bn it was the largest-ever bank equity offering. CSFB also completed the

largest equity financing for an Indian industrial company in recent years when it acted as

bookrunner for Tata Engineering and Locomotive Company’s USD 200 m issue.

CSGB_E_12_13_First_Boston 2.5.1997 17:06 Uhr Seite 13

Any equity business is to a substantial degree dependent upon the quality of its research.

At CSFB equity research has become virtually synonymous with Economic Value Added

(EVA™). This analysis of Economic Value Added has helped solidify relationships with

issuers of securities.

Fixed income trading and sales. In 1996 Credit Suisse and CS First Boston were among

the key global market players in virtually all of the fixed income markets they are active in.

On the basis of 1996 performance, International Financing Review named Credit Suisse

“Swiss Franc Bond House of the Year” and named CS First Boston “Eurobond House of

the Year”.

The consolidation of Credit Suisse and CS First Boston has created a broadly

diversified fixed income department with three major groups: government securities and

proprietary trading worldwide; emerging markets and foreign exchange; and capital markets.

The unification that created Credit Suisse First Boston will promote rapid expansion in

the new growth markets with use of the existing banking and broker licences worldwide.

Continuous expansion of trading in growth markets is one of CSFB’s most important

strategic initiatives.

Private Equity. The Firm’s direct investment arm, Private Equity, chooses its investment

opportunities in areas such as recapitalisations, management buyouts and growth

financings. Private Equity has committed and invested capital of approximately USD 1.4 bn,

including its own funds and those under management directly.

Credit Suisse Financial Products. In 1996, Credit Suisse Financial Products produced

record results benefiting from favourable conditions in the major world markets. There were

strong results in equity derivatives, credit derivatives and emerging market products and

European fixed income products. For the second year running there was a general downturn

in client interest in structured fixed income products in developed markets. This was more

than offset however by higher turnover and trading profits in less complex products.

1996Pro forma figures (indicative) in CHF m

Net operating income 6,475Personnel expenses 3,265Valuation adjustments, provisions and losses 170Pre-tax operating profit 1,875Equity 9,600Staff 11,000

13

CSGB_E_14_15_Asset_Man 2.5.1997 17:07 Uhr Seite 14

SERVICES FOR INSTITUTIONAL INVESTORS WORLDWIDE

During 1996, preparations were made to combine the institutional asset

management business and mutual fund business of Credit Suisse and

Swiss Volksbank and create the Credit Suisse Asset Management

business unit. The business currently amounts to over USD 160 bn in

discretionary and advisory assets under management. Credit Suisse

Asset Management is a major global participant in institutional and

mutual fund asset management. Overall, 1996 was a good year.

14

Structure. The different entities in the institutional and mutual fund business have been

brought together within Credit Suisse Asset Management. From these enterprises, a new

and focused global asset management product and distribution organisation has been

created. Credit Suisse Asset Management aims to extend its position as one of the most

successful global providers of services for institutional and mutual fund investment

customers.

The product mix. Credit Suisse Asset Management’s clients are world wide, with large

concentrations in Switzerland (32%), in Europe (25%) and in the US (28%). While strong

in all areas, the management of fixed income assets is the largest business, representing

52% of assets under management, with equity (17%) and balanced portfolios (18%) also

accounting for a substantial share of assets under management. Key market segments are

the management of mutual funds which represents 38% of assets under management,

followed by pension funds (28%).

Domestic products. Credit Suisse Asset Management’s largest business is managing

domestic assets for locally domiciled clients. The biggest market is Switzerland where

discretionary assets under management represent USD 36 bn and advisory assets,

USD 44 bn. The Swiss institutional asset management business enjoyed significant growth

in 1996 and continued to produce good investment results. The Swiss team continued to

focus on Swiss fixed income and equity but also expanded balanced funds and an array of

indexed products. ANSKA, the pooled pension fund vehicle for Swiss corporate pension

funds, experienced substantial growth and good investment performance. A number of the

mutual funds managed by Credit Suisse Asset Management Switzerland won performance

awards from Micropal, Lipper and BOPP for 1996.

Other markets where Credit Suisse Asset Management offers domestic products are

the US, Japan, Australia and Eastern Europe. In the US, through the wholly owned

subsidiary BEA, 1996 was another year of growth and very good performance in fixed

income funds, high-yield commodities and derivatives. BEA has also become a participant in

a pooled mutual fund product for a major US brokerage firm and has introduced mutual

funds in several mutual fund supermarkets.

CSGB_E_14_15_Asset_Man 2.5.1997 17:07 Uhr Seite 15

1996 was also a successful year in Japan, with growth and above-average investment

results. With USD 7.1 bn at year-end, up 42% in 1996, Credit Suisse Asset Management

Japan is among the largest foreign asset managers, with an excellent product line. The core

strengths lie in balanced account management designed for corporate and government

entities.

Australia represents the smallest but fastest growing market. 1996 ended with assets

under management of USD 2.4 bn and good performance numbers in equity, fixed income,

and balanced accounts.

Global products. The global products managed in London and New York enjoyed a 22%

surge in assets under management and a 28% increase in the number of client relationships

during 1996. The global fixed income flagship product managed in London ended the year

with USD 14.2 bn under management and produced a fifth straight year of first quartile

performance and won several awards. Other key products are UK equities, European

equities and Eastern European emerging markets, all of which had first quartile performance

in 1996.

Mutual funds. A key to the distribution strategy is the mutual fund organisation. Aided by

strong markets and superior investment performance, assets under management grew

21% to end the year at USD 45 bn. The exceptional investment performance resulted in

the Micropal award, “Best Management Group 1996” (in the category “very large

organisations”), and, in addition, over 70 other awards for individual mutual funds. In 1996

Credit Suisse Asset Management successfully opened distribution channels in the UK and

Japan. Efforts are currently underway to develop and extend distribution channels in

Germany, Italy and France. Mutual funds were launched in Russia late in the year and

the operations in the Czech Republic further developed.

1996Pro forma figures (indicative) in CHF m

Net operating income 660Personnel expenses 220Valuation adjustments, provisions and losses 30Pre-tax operating profit 195Equity 400Staff 1,254

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CSGB_E_16_17_Group_Risk 2.5.1997 17:08 Uhr Seite 16

CREDIT SUISSE GROUP RISK MANAGEMENT

Today effective risk management is a crucial component of banking

business. It is an ongoing task for providers of financial services to see

that risks are quantified and minimised. Credit Suisse Group places a

very high priority on the careful management of risk. The aim is to

ensure, in rapidly changing markets, that the relationship between risk

and return is optimised across the Group.

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Risk management at Credit Suisse Group is carried out at various levels:

– Within each business unit all relevant risks are determined and controlled, using

standardised procedures. In this way returns – after risk-related costs – can be more

closely predicted and capital usage optimised.

– The overall monitoring and the management of risk takes place at Group level, in close

co-operation with the business units. This also creates the conditions for an optimal

allocation of business capital.

At all levels the development and application of state-of-the-art technology is an essential

prerequisite.

Market risks. Through the effective management of market risk a steady flow of returns

can be obtained in line with the relevant risks. Of crucial importance in the monitoring of

market risk are:

– the precision of the market risk measurement models used; Credit Suisse Group uses

value-at-risk methods and scenario analysis tools among others

– the quality and consistency of the data used

– continuous, up-to-date reporting

Credit risks. In 1996 Credit Suisse Group designed a new, forward-looking framework for

the management and pricing of credit risk. It has five essential components:

– a credit limit system for individual counterparties

– country and sector concentration limits

– a forward-looking credit risk provisioning methodology

– consistent methods for valuing the credit portfolio, allowing, for example, a unified

categorisation according to risk class

– the securitisation of credit risk

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An essential element of the new provisioning system is the Annual Credit Provision (ACP),

representing the future expected annual credit loss on the performing part of the credit

portfolio. The second element, the Incremental Credit Reserve (ICR), is designed to absorb

the fluctuations around the ACP from year to year.

The new provisioning methodology also supports risk-adjusted pricing and the

optimisation of the credit portfolio through targeted diversification.

Settlement risks. In order to minimise settlement risk – e.g. in funds transfer or currency

transactions – the settlement amounts of as many counterparties as possible are netted

against each other. The objective is to reduce the total transfer sums through netting.

Credit Suisse First Boston is in the process of installing netting systems at its major trading

centres worldwide.

Operational risks. Operational risks – i.e. risks incurred through internal processes – are

reduced through comprehensive regulation of procedures by means of internal directives,

and through the systematic use of internal controls. In addition, effective EDP contingency

plans minimise the risk of system crashes and security breakdowns.

Legal risks. Legal risks are contained principally through the use of appropriate business

documents, such as standard master agreements and individual trade confirmations, and

through ongoing consultation with internal and external legal experts.

Asset and liability management and liquidity management. Balance sheet interest rate

risk is monitored and managed by the individual business units and by special centres of

competence. Responsibility lies with the respective Asset and Liability Management

Committees. Swaps, forward rate agreements, options and other instruments are used to

manage such risks.

Applying the various risk management procedures outlined will allow the Group to make

optimal use of its capital. In this way risk management also helps enhance shareholder

value.

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CSGB_E_18_19_CreditSuisse 2.5.1997 17:08 Uhr Seite 18

CREDIT SUISSE GROUP AND THE COMMUNITY

Companies are measured not merely in terms of their financial perfor-

mance but also in terms of their role in society as a whole. Credit Suisse

Group is well aware that in addition to its core economic responsibilities

it also has responsibilities on the wider social level. In Switzerland,

in particular, Credit Suisse Group wants to participate in shaping the

social and economic environment in which it operates to the good of the

community.

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Credit Suisse Group as employer. On 2 July 1996 it was announced that CS Holding

would be reshaped to form Credit Suisse Group. The increase in productivity linked to the

new structure involves job reductions in various areas of the Group. Credit Suisse Group

was concerned to give its staff a clear picture at the earliest possible juncture of exactly how

the job reductions were to be achieved. In collaboration with the employer and employee

associations, a workable strategy was developed for the reductions for Switzerland. In fact,

as early as July of last year Credit Suisse Group was able to reassure its staff that the

downsizing would be achieved largely through attrition (fluctuation and retirement), in

tandem with such measures as transfers within the Group, early retirement provisions,

retraining and flexible working arrangements. Within the international organisation, where the

job reductions cannot be achieved solely through these measures, solutions will be sought

which are appropriate to local practices and legal provisions. Credit Suisse Group is

committed to further developing the skills and market competitiveness of its staff and

therefore to supporting them with ongoing training. The objective here is also to maintain

and enhance the Group’s competitiveness. Only in this way can new, attractive jobs be

created. The success of this is demonstrated by the rapid expansion of operations in

a number of areas.

Commitment to the environment. Over the last 20 years or so Credit Suisse has pursued

an active policy of environmental protection. Since 1989 a special environmental unit set

up under the aegis of the Executive Board has played an important part in helping the bank

pursue a highly effective environmental policy. One of the most notable aspects of the

bank’s commitment to environmental protection is that it has also generated value for

customers and shareholders. By integrating ecological considerations into its operations,

cost savings have been made and environmental risks reduced.

In 1996 Credit Suisse published its first environmental report. Aimed at staff,

customers and shareholders, as well as at interested members of the public, this report sets

out the basis of the company’s environmental strategy and details the concrete measures

which have been taken.

In 1996 Credit Suisse also introduced an environmental audit with the aim of

measuring its success in achieving its objectives in this area. One of the company’s aims is

to achieve a further substantial reduction in its energy consumption.

CSGB_E_18_19_CreditSuisse 2.5.1997 17:08 Uhr Seite 19

Since 1992 Credit Suisse has systematically examined credit applications for environmental

risk, thus enabling companies to identify such risks at an early stage. Where there is a

potential risk, the bank is ideally placed to offer the customer advice and to provide contact

with specialists and the relevant official bodies.

Charitable contributions. In 1996 the companies within Credit Suisse Group provided

support to a number of different organisations and institutions with social, charitable,

humanitarian and cultural objectives. More than a thousand beneficiaries shared a total of

around CHF 13 m. The Anniversary Foundations helped finance a large number of

undertakings benefiting the community, such as “Les Schtroumpfs” (Geneva), the Swiss

Cerebral Palsy Association (Zurich area group), the Fontana Passugg Co-operative (Chur)

and the Centre Européen de la Culture (Geneva).

Credit Suisse Group as sponsor. In today’s environment many charitable and community

organisations can rely on support from companies. There are very many cultural, sporting

and social organisations which would be forced to scale down their activities were it not for

the support of the private sector.

The high points of the 1996 sponsorship year at Credit Suisse included the

International Festival of Music in Lucerne, Euro ’96 (football) in England, the “White Turf”

event (horse racing on snow) in St Moritz, the European Masters (golf) in Crans-Montana

and the World Road Cycling Championships in Lugano.

“Corporate philanthropy” is an integral part of Credit Suisse Group’s business activities

in the USA. There, too, events and organisations are selected with the utmost care to

maximise both the benefit to Credit Suisse Group and the benefit to the community. In 1996

the two largest sponsorship programmes in the USA involved the Carnegie Hall and the

Museum of Modern Art (MOMA), both world-class institutions. Credit Suisse Group was the

main sponsor of the special series of films for children, “Matinees at MOMA”.

The Credit Suisse Foundation Trust is the philanthropic arm of Credit Suisse First

Boston and provided grants to more than 100 organisations focusing on inner city youth and

education in 1996. In addition to that financial support, more than 500 Credit Suisse First

Boston employees volunteered their time and efforts in connection with a variety of youth

and education related organisations. Finally, the core business units of Credit Suisse First

Boston provided assistance to more than 300 charitable organisations in support of their

clients and the regions in which those clients are located.

Credit Suisse First Boston also played a leading fund-raising role for the Ronald

McDonald House of New York City, Junior Achievement, Polytechnic University and

The Appeal of Conscience Foundation.

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CSGB_E_20_21_Finanzplatz 2.5.1997 17:09 Uhr Seite 20

THE ROLE OF THE SWISS FINANCIAL CENTRE IN THE SECOND WORLD WAR

Credit Suisse Group is applying itself very seriously to the debate

about the role the Swiss banks played during the Second World War.

Switzerland’s public authorities and the industrial and financial

community are aware of the scope and significance of this discussion

and are working at all levels towards finding constructive solutions.

The big three banks have made an important contribution to this with

their initiative to create a humanitarian fund to which they have

contributed CHF 100 m.

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Dormant assets. The commemoration of the end of the Second World War two years ago

brought the fate of the victims and survivors of the War and the Holocaust back to the

centre of public attention. In the context of the search for assets belonging to the descen-

dants of Holocaust victims, in the summer of 1995 the Swiss Bankers Association asked its

members to carry out a further survey of all assets which had been deposited with them

before 8 May 1945 where the customer had not been in contact for at least ten years.

The survey revealed a total of 40 m Swiss francs in dormant accounts. Since the

beginning of 1996 the search for assets at Swiss banks on behalf of the heirs has been

co-ordinated by the Swiss Banking Ombudsman’s Central Contact Office.

On 2 May 1996 the Swiss banks and Jewish organisations decided to establish

a joint commission to examine the surveys instigated by the Swiss Bankers Association.

Credit Suisse Group will ensure that the audit companies commissioned with this task enjoy

optimal conditions in which to carry out their work at Credit Suisse Group companies.

Under current banking legislation Swiss banks are obliged to continue to manage

dormant assets for an unlimited period. Credit Suisse Group supports the political drive for

legislation for assets which have been dormant over a long period of time to be assigned

to an external, independent body.

Historical investigations. Swiss banks enjoy the trust of a broad international public and

are aware of their obligations in this matter. Credit Suisse Group is therefore committed to

supporting in whatever way possible the Volcker Commission and the government’s

Committee of Experts, who are charged with investigating the history of Switzerland’s

financial centre during the Second World War. It is also carrying out an objective examination

of its own company history for the period in question.

CSGB_E_20_21_Finanzplatz 2.5.1997 17:09 Uhr Seite 21

A humanitarian gesture. Credit Suisse Group and the other big Swiss banks have laid the

foundations for a humanitarian fund for the victims of the Holocaust. The contribution of a

total of CHF 100 m, deposited in an account held under the trusteeship of the Swiss

National Bank, has encouraged other parties to contribute. The Federal Council has now

created a Special Fund and, in close consultation with Jewish organisations, has determined

its purpose and how it is to be managed. The fund is not directly linked to the dormant

accounts: all rights to dormant assets on the part of the legal beneficiaries will be

maintained in full.

The idea behind the establishment of the fund goes beyond the questions about

Switzerland’s role during the Second World War. It represents a gesture of gratitude for the

fact that Switzerland was spared the ravages of the war and was able to draw maximum

benefit from post-war economic developments. The fund should thus be seen as a signal

of recognition of the immeasurable suffering of those concerned.

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