As furnished to the Securities and Exchange Commission on October 11, 2002
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 6-K
Report of Foreign Private Issuer
Dated October 11, 2002
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
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Credit Suisse Group
Paradeplatz 8, P.O. Box 1, CH 8070 Zurich, Switzerland
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F
Form 20-F /X/ Form 40-F / /
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934
Yes / / No /X/
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): N/A
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TABLE OF CONTENTS
Page
----
Forward-Looking Statements.................................. 1
Introduction................................................ 3
Operating and Financial Review and Prospects................ 4
Market Risk................................................. 37
Overview of Changes to Segments as a Result of
Realignment............................................... 38
Notes to the Interim Financial Statements (unaudited)....... 48
Supplemental Information Required by Industry Guide 3....... 85
Index to Consolidated Financial Statements for the
Years Ended December 31, 2001, 2000 and 1999*............. F-1
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* The audited consolidated financial statements beginning at page F-1 of this
Form 6-K are included to provide a segment footnote (note 4) reflecting the
realignment of our business effective January 1, 2002. No other changes have
been made to the audited consolidated financial statements filed as part of
our annual report on Form 20-F for the year ended December 31, 2001.
i
FORWARD-LOOKING STATEMENTS
This Form 6-K contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934. You should not place undue reliance on these
statements. In addition, in the future we, and others on our behalf, may make
statements that constitute forward-looking statements. Such forward-looking
statements may include, without limitation, statements relating to the
following:
- our plans, objectives or goals;
- our future economic performance or prospects;
- the potential effect on our future performance of certain contingencies; and
- assumptions underlying any such statements.
Words such as "believes," "anticipates," "expects," "intends" and "plans" and
similar expressions are intended to identify forward-looking statements but are
not the exclusive means of identifying such statements. We do not intend to
update these forward-looking statements except as may be required by applicable
securities laws.
By their very nature, forward-looking statements involve inherent risks and
uncertainties, both general and specific, and risks exist that predictions,
forecasts, projections and other outcomes described or implied in
forward-looking statements will not be achieved. We caution you that a number of
important factors could cause results to differ materially from the plans,
objectives, expectations, estimates and intentions expressed in such
forward-looking statements. These factors include:
- market and interest rate fluctuations;
- the strength of the global economy in general and the strength of the
economies of the countries in which we conduct our operations in particular;
- the ability of counterparties to meet their obligations to us;
- the effects of, and changes in, fiscal, monetary, trade and tax policies, and
currency fluctuations;
- political and social developments, including war, civil unrest or terrorist
activity;
- the possibility of foreign exchange controls, expropriation, nationalization
or confiscation of assets in countries in which we conduct our operations;
- the ability to maintain sufficient liquidity and access capital markets;
- operational factors such as systems failure, human error, or the failure
properly to implement procedures;
- actions taken by regulators with respect to our business and practices in one
or more of the countries in which we conduct our operations;
- the effects of changes in laws, regulations or accounting policies or
practices;
- competition in geographic and business areas in which we conduct our
operations;
- the ability to retain and recruit qualified personnel;
- the ability to maintain our reputation and promote our brands;
1
- the ability to increase market share and control expenses;
- technological changes;
- the timely development and acceptance of our new products and services and the
perceived overall value of these products and services by users;
- acquisitions, including the ability to integrate successfully acquired
businesses; and
- our success at managing the risks involved in the foregoing.
We caution you that the foregoing list of important factors is not exclusive;
when evaluating forward-looking statements, you should carefully consider the
foregoing factors and other uncertainties and events, as well as the information
set forth in our annual report on Form 20-F for the year ended December 31, 2001
filed with the SEC on May 15, 2002.
2
INTRODUCTION
This report on Form 6-K includes:
- a discussion of our financial results for the six months ended June 30, 2002
compared to the six months ended June 30, 2001;
- an overview of the changes to our segment information for each of the years in
the three-year period ended December 31, 2001 following the realignment of our
business units effective January 1, 2002, which changed the composition of our
reportable segments. We refer to the realignment elsewhere in this Form 6-K as
the "realignment";
- a reconciliation of our financial results for the six months ended June 30,
2002 and 2001 to US generally accepted accounting principles and other
additional notes to our interim financial statements; and
- our audited consolidated financial statements as of and for each of the years
in the three-year period ended December 31, 2001, including a segment footnote
reflecting the realignment, together with a report thereon of our independent
auditors, KPMG Klynveld Peat Marwick Goerdeler SA.
This disclosure supplements the disclosure in, and should be read with, our
Quarterly Reports for the first and second quarters of 2002, furnished to the
SEC on Form 6-K on May 15, 2002 and August 14, 2002, respectively. The audited
consolidated financial statements beginning on page F-1 of this Form 6-K are
included to provide a segment footnote (note 4) reflecting the realignment of
our business effective January 1, 2002. No other changes have been made to the
audited consolidated financial statements filed as part of our annual report on
Form 20-F for the year ended December 31, 2001.
3
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Overview
We are a global financial services company engaging in private banking, retail
and corporate banking, insurance, investment banking and asset management. We
conduct our activities through two business units, Credit Suisse Financial
Services, or CSFS, and Credit Suisse First Boston, or CSFB.
CSFS includes four segments:
- Private Banking;
- Corporate & Retail Banking;
- Life & Pensions; and
- Insurance.
CSFB includes two segments:
- Investment Banking, which is operated through two principal divisions:
- the Securities division, consisting of Equity and Fixed Income; and
- the Investment Banking division; and
- CSFB Financial Services.
For the purposes of this discussion, unless the context otherwise requires, the
terms "we," "us," "our" and the "Group" mean Credit Suisse Group and its
consolidated subsidiaries.
Factors affecting results of operations
Our results of operations are affected, to a greater or lesser degree, by a
variety of factors, including general economic and market conditions, exchange
rate fluctuations, competition within the financial services industry, and
government policy, legislation and regulation. In addition, acquisitions,
dispositions and changes in the structure of our business have affected our
results from year to year. For a discussion of additional factors affecting our
results of operations, please refer to "Item 3 -- Key Information -- Risk
factors" in our annual report on Form 20-F for the year ended December 31, 2001
filed with the SEC on May 15, 2002.
4
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Credit Suisse Group
In the first half of 2002, our operating income was CHF 15,977 million and net
loss was CHF 211 million. We measure our business at the consolidated group
level on the basis of net new asset growth and operating return on equity
excluding amortization of acquired intangible assets and goodwill. At June 30,
2002, assets under management totaled CHF 1,293.2 billion, and for the half-year
then ended net new asset growth was 1.2%. Operating return on equity was 2.2% in
the first six months of 2002. Our results of operations reflect the results of
our segments and certain corporate expenses and consolidation adjustments
recorded at the Corporate Center.
The following table sets forth our condensed consolidated income statement for
the six months ended June 30, 2002 and 2001: 1)
6 months 6 months
in CHF m 2002 2001
------------------------------------------------------------------------------------
Net interest income 4,029 3,151
Net commission and service fee income 8,732 9,741
Net trading income 2,105 6,105
Net income from the insurance business 2) 1,449 3,419
Other ordinary income/(expenses), net (338) (143)
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Operating income 15,977 22,273
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Personnel expenses 9,653 11,989
Other operating expenses 3,413 4,168
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Operating expenses 13,066 16,157
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Gross operating profit 2,911 6,116
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Depreciation of non-current assets 3) 947 985
Amortization of acquired intangible assets 366 393
Amortization of goodwill 393 356
Valuation adjustments, provisions and losses from the
banking business 1,033 650
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Depreciation, valuation adjustments and losses 2,739 2,384
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Profit before extraordinary items, taxes and minority
interests 172 3,732
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Extraordinary income/(expenses), net 105 22
Taxes (504) (907)
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Net (loss)/profit before minority interests (227) 2,847
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Minority interests 16 (131)
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Net (loss)/profit (211) 2,716
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Reconciliation to net operating profit
Amortization of acquired intangible assets 366 393
Amortization of goodwill 4) 373 356
Tax impact (127) (128)
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Net operating profit 401 3,337
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Other data
Operating return on equity 5) 2.2% 16.0%
Net new asset growth 1.2% 3.0%
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1) Certain reclassifications have been made to conform to the current
presentation.
5
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
2) For the purpose of the consolidated financial statements, operating income
for the insurance business is defined as net premiums earned, less claims
incurred and change in technical provisions and expenses for processing
claims, less commissions, plus net investment income from insurance
business.
3) Includes amortization of Present Value of Future Profits, or PVFP, from the
insurance businesses.
4) Excluding a CHF 20 million write-off relating to a participation.
5) Excluding amortization of acquired intangible assets and goodwill.
Six months ended June 30, 2002 compared to six months ended June 30, 2001
Operating income decreased CHF 6,296 million, or 28.3%, in the first half of
2002 compared to the first six months of 2001. This decrease was primarily due
to a decrease of CHF 4,000 million, or 65.5%, in net trading income in the first
half of 2002 primarily within CSFB due to weak market conditions. CSFB's
operating income decreased CHF 3,525 million, or 24.1%, in the first half of
2002 compared to the first six months of 2001 as a result of significantly lower
operating income from the Investment Banking segment's Equity and Fixed Income
businesses, reflecting the depressed markets and low new issue activity. The
decline in operating income includes a CHF 1,970 million, or 57.6%, decrease in
income from the insurance business, which was primarily attributable to a
significant decrease in investment income from the insurance businesses as a
result of continuing financial market weakness, which affected both investment
income and dividends to policyholders. The decline in investment income from the
insurance business of CHF 3,897 million includes realization of losses on
securities sold as well as the recognition of realized losses from other than
temporary impairments in our insurance businesses' investment portfolio.
Compared with the first six months of 2001, net interest income increased
CHF 878 million, or 27.9%, and net commission and service fee income decreased
CHF 1,009 million, or 10.4%. This reflects the shift in Fixed Income business
from commission- to interest-based activity within the Investment Banking
segment during the first half of 2002 due to a relatively stable interest rate
environment. Other ordinary income/(expenses), net decreased CHF 195 million, or
136.4%, to an expense of CHF 338 million in the first half of 2002, mainly due
to unrealized losses on financial investments held at the Corporate Center.
Operating expenses decreased CHF 3,091 million, or 19.1%, in the first half of
2002 compared to the first six months of 2001 mainly reflecting CSFB's cost
reduction initiatives, which reduced CSFB's operating expenses by CHF 2,769
million, or 24.4%. Personnel expenses decreased CHF 2,336 million, or 19.5%,
primarily as a result of a reduction in incentive compensation and headcount
reductions at CSFB. Amortization of retention payments was CHF 359 million in
the first half of 2002 compared to CHF 403 million in the first six months of
2001. Other operating expenses decreased CHF 755 million, or 18.1%, in the first
half 2002 primarily as a result of declines in variable expenses.
Amortization of acquired intangible assets decreased CHF 27 million primarily as
a result of divestitures at CSFB. Amortization of goodwill increased CHF 37
million in the first half of 2002 primarily due to acquisitions at CSFB and a
CHF 20 million write-off of a participation.
Valuation adjustments, provisions and losses from the banking business increased
CHF 383 million, or 58.9%, in the first half of 2002 compared to the first half
of 2001, primarily as a result of higher corporate credit provisions at CSFB due
to a deterioration in credit market conditions and provisioning for CSFB's
discontinued real estate held for sale.
Extraordinary income/(expenses), net increased CHF 83 million to CHF 105 million
for the first six months of 2002 compared to the first six months of 2001. This
increase resulted primarily from the divestiture of our insurance branch in
France and a realized gain from the sale of a participation.
6
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The effective tax rate increased from 24.2% for the six month period ended
June 30, 2001 to 181.9% for the six months ended June 30, 2002. The main reasons
were the higher net operating losses for which no deferred tax assets could be
recognized and impairments on investments that are not tax deductible in certain
countries.
A key driver of our revenue is net new asset growth, which is a key performance
indicator, or KPI, for measuring the progress of our asset gathering strategy.
The following tables provide details of assets under management at June 30, 2002
and December 31, 2001 and for the six months ended June 30, 2002 and 2001: 1)
in CHF bn 30.06.02 31.12.01
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Advisory 638.6 723.5
Discretionary 654.6 707.1
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Total assets under management 1,293.2 1,430.6
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6 months 6 months
2002 2001
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Net new assets 17.7 41.8
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1) Certain reclassifications have been made to conform to the current
presentation.
Assets under management decreased CHF 137.4 billion, or 9.6%, as of June 30,
2002 compared to December 31, 2001. This includes CHF 17.7 billion in net new
assets offset by CHF 36.9 billion of outflows related to divestitures and a
decrease of CHF 118.2 billion primarily due to the substantial deterioration of
the equity markets worldwide.
7
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following table sets forth the results by segment of Credit Suisse Group for
the six months ended June 30, 2002 and 2001: 1)
6 months 6 months
in CHF m 2002 2001
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Operating income
Private Banking 3,544 3,828
Corporate & Retail Banking 1,245 1,247
Life & Pensions 2) 608 1,416
Insurance 2) 627 1,811
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Credit Suisse Financial Services 6,024 8,302
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Investment Banking 9,317 12,521
CSFB Financial Services 1,786 2,107
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Credit Suisse First Boston 11,103 14,628
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Acquisition interest (325) (476)
Corporate Center 3) (825) (181)
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Credit Suisse Group 15,977 22,273
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Net operating profit/(loss) before minority interests 4)
Private Banking 1,120 1,221
Corporate & Retail Banking 215 181
Life & Pensions 2) (412) 434
Insurance 2) (637) 405
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Credit Suisse Financial Services 286 2,241
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Investment Banking 844 1,643
CSFB Financial Services 231 194
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Credit Suisse First Boston 1,075 1,837
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Net profit/(loss)
Credit Suisse Financial Services 295 2,112
Credit Suisse First Boston 69 669
Corporate Center 3) (575) (65)
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Credit Suisse Group (211) 2,716
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1) Certain reclassifications have been made to conform to the current
presentation.
2) For the purpose of the consolidated financial statements, operating income
for the insurance business is defined as net premiums earned, less claims
incurred and change in technical provisions and expenses for processing
claims, less commissions, plus net investment income from insurance
business.
3) Including consolidation adjustments.
4) Represents net profit/(loss) excluding acquisition-related costs and
minority interests which are reported at the business unit level only. For
reconciliation of net operating profit to net profit please refer to the
business unit discussions below.
8
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Credit Suisse Financial Services
CSFS's income statement is presented on an "operating basis," which differs from
our consolidated income statement presentation by excluding acquisition-related
costs of amortization of acquired intangible assets and goodwill from
depreciation, valuation adjustments and losses. This item is reported separately
in the income statement. A separate table presenting line items on a basis
consistent with our consolidated income statement and after giving effect to
amortization of acquired intangible assets and goodwill is also set forth below.
Although we also present CSFS's income statement on this basis, we discuss its
results on an operating basis. Management uses the operating basis to assess the
financial results and key performance indicators of CSFS.
The following table sets forth the results of CSFS on an operating basis for the
six months ended June 30, 2002 and 2001: 1)
6 months 6 months
in CHF m 2002 2001
---------------------------------------------------------------------------------
Operating income 6,024 8,302
---------------------------------------------------------------------------------
Personnel expenses 2,917 2,923
Other operating expenses 1,723 1,801
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Operating expenses 4,640 4,724
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Gross operating profit 1,384 3,578
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Depreciation of non-current assets 336 241
Amortization of present value of future profits (PVFP) 86 86
Valuation adjustments, provisions and losses from the
banking business 194 251
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Net operating profit before extraordinary items and taxes 768 3,000
---------------------------------------------------------------------------------
Extraordinary income/(expenses), net 18 11
Taxes 3) (500) (770)
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Net operating profit before minority interests 286 2,241
Amortization of acquired intangible assets and goodwill (75) (42)
Tax impact 1 1
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Net profit before minority interests 212 2,200
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Minority interests 83 (88)
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Net profit 295 2,112
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Reconciliation to net operating profit
Amortization of acquired intangible assets and goodwill 4) 55 42
Tax impact (1) (1)
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Net operating profit 349 2,153
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Other data
Growth in net operating profit (83.8%) (7.8%)
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1) Certain reclassifications have been made to conform to the current
presentation. The operating basis income statement differs from the
presentation of the Group's consolidated results in excluding
acquisition-related costs of amortization of acquired intangible assets and
goodwill from depreciation, valuation adjustments and losses.
Acquisition-related costs are reported separately in the income statement.
9
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
2) For the purpose of the consolidated financial statements, operating income
for the insurance business is defined as net premiums earned, less claims
incurred and change in technical provisions and expenses for processing
claims, less commissions, plus net investment income from insurance
business.
3) Excluding tax impact on amortization of acquired intangible assets and
goodwill.
4) Excluding a CHF 20 million write-off relating to a participation.
The following table sets forth the results of CSFS for the six months ended
June 30, 2002 and 2001, and the percentage change from period to period,
including the effects of amortization of acquired intangible assets and
goodwill. For a reconciliation of the results on an operating basis to the basis
consistent with our reported results please refer to note 1 "Segment reporting
by operating segments" in the notes to the interim financial statements: 1)
6 months 6 months
in CHF m 2002 2001 Change
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Operating income 6,024 8,302 (27.4%)
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Personnel expenses 2,917 2,923 (0.2%)
Other operating expenses 1,723 1,801 (4.3%)
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Operating expenses 4,640 4,724 (1.8%)
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Gross operating profit 1,384 3,578 (61.3%)
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Depreciation of non-current assets 2) 422 327 29.1%
Amortization of acquired intangible assets and goodwill 75 42 78.6%
Valuation adjustments, provisions and losses 194 251 (22.7%)
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Profit before extraordinary items and taxes 693 2,958 (76.6%)
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Extraordinary income/(expenses), net 18 11 63.6%
Taxes (499) (769) (35.1%)
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Net profit before minority interests 212 2,200 (90.4%)
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Minority interests 83 (88) --
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Net profit 295 2,112 (86.0%)
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1) Certain reclassifications have been made to conform to the current
presentation.
2) Including amortization of PVFP from the insurance businesses.
Six months ended June 30, 2002 compared to six months ended June 30, 2001
CSFS measures performance based on growth in net operating profit. Net operating
profit excludes amortization of acquired intangible assets and goodwill. In the
first six months of 2002, net operating profit declined 83.8% compared to the
first six months of 2001.
In the first six months of 2002, operating income decreased CHF 2,278 million,
or 27.4%, compared to the first six months of 2001. This was primarily due to
the significantly reduced investment income in our insurance segments as a
result of continuing financial market weakness. Specifically, our insurance
businesses recognized losses on the sale of securities and impairments on
investments. This had a negative impact of approximately CHF 2.6 billion on
operating income. Primarily in the Private Banking segment, yields on loans to
customers decreased faster than interest rates on customer savings and
investment deposits, which resulted in lower net interest income. In addition, a
reduced asset base as a consequence of adverse market conditions resulted in
lower net commission and service fee income.
10
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Operating expenses decreased CHF 84 million, or 1.8%, in the first six months of
2002. While personnel expenses remained stable, other operating expenses
decreased CHF 78 million, or 4.3%, mainly due to efforts to achieve a stable or
reduced cost base.
Depreciation of non-current assets increased CHF 95 million, or 39.4%, in the
first six months of 2002 compared with the same period in 2001. This was
primarily related to a partial write-off of the operational assets of "Europe
Life", an e-distribution platform of Life & Pensions. In addition, increased
capital expenditure in 2001 related to business expansion (principally the
European Financial Services Initiative, or EFSI) led to increased assets and
therefore higher depreciation in 2002.
Amortization of acquired intangible assets and goodwill increased CHF
33 million, or 78.6%, in the first six months of 2002. This was primarily due to
a CHF 20 million write-off on a participation.
Valuation adjustments, provisions and losses decreased CHF 57 million, or 22.7%,
in the first six months of 2002. This decline was principally the result of
lower credit risk and reduced losses from operations and litigation.
Extraordinary income/(expenses), net increased CHF 7 million, or 63.6%, in the
first six months of 2002. This was primarily related to extraordinary income
from the Private Banking segment as described under "-- Private Banking" below.
Private Banking
The Private Banking segment of CSFS provides personal investment counseling and
professional asset management services for an affluent and high-net-worth
clientele and has offices in Switzerland and numerous international markets.
Operating income of the Private Banking segment consists primarily of
transaction-based and asset-based fee income from assets under management.
11
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following table sets forth the results of the Private Banking segment for
the six months ended June 30, 2002 and 2001: 1)
6 months 6 months
in CHF m 2002 2001
---------------------------------------------------------------------------------
Net interest income 877 1,018
Net commission and service fee income 2,329 2,384
Net trading income 305 348
Other ordinary income 33 78
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Operating income 3,544 3,828
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Personnel expenses 1,252 1,278
Other operating expenses 731 756
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Operating expenses 1,983 2,034
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Gross operating profit 1,561 1,794
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Depreciation of non-current assets 109 68
Valuation adjustments, provisions and losses 2) 43 102
---------------------------------------------------------------------------------
Net operating profit before extraordinary items and taxes 1,409 1,624
---------------------------------------------------------------------------------
Extraordinary income/(expenses), net 19 2
Taxes (308) (405)
---------------------------------------------------------------------------------
Net operating profit before minority interests 1,120 1,221
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Other data
Increased/(decreased) credit-related valuation adjustments
2) (10) (9)
Growth in net new assets 2.7% 4.1%
Net operating profit before minority interests on average
assets under management 41.1bp 44.4bp
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1) Certain reclassifications have been made to conform to the current
presentation. The presentation of segment results differs from the
presentation of the Group's consolidated results in excluding
acquisition-related costs of amortization of acquired intangible assets and
goodwill from depreciation, valuation adjustments and losses.
Acquisition-related costs and minority interests are reported separately at
the business unit level only.
2) Increased/(decreased) valuation adjustments taken at the Group level
resulting from the difference between the statistical and actual credit
provisions.
12
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Six months ended June 30, 2002 compared to six months ended June 30, 2001
Private Banking reported a net operating profit before minority interests of CHF
1,120 million in the six months ended June 30, 2002 compared to CHF
1,221 million in the six months ended June 30, 2001. Private Banking measures
performance based on growth in net new assets and net operating profit before
minority interests on average assets under management. In the first half of
2002, net new asset growth decreased from 4.1% to 2.7% and net operating profit
before minority interests on average assets under management decreased 3.3 basis
points to 41.1 basis points.
The following table illustrates the operating income by geographic location,
separately branded companies in Switzerland and product centers for the periods
presented. This distribution does not necessarily reflect the location of the
customer.
6 months 6 months
in CHF m 2002 2001
---------------------------------------------------------------------------------
Switzerland 2,241 2,460
International 650 599
Private Banking subsidiaries 1) 497 577
Product centers 156 192
---------------------------------------------------------------------------------
Operating income 3,544 3,828
---------------------------------------------------------------------------------
1) The Private Banking subsidiaries principally include Bank Leu, Clariden
Bank, Bank Hofmann and BGP Banca di Gestione Patrimoniale.
Operating income decreased CHF 284 million, or 7.4%, in the first six months of
2002. Of the total operating income of CHF 3,544 million in the six months ended
June 30, 2002, 67% was asset-based, 21% was transaction-based and the remaining
12% was from other income components including lending, trading and income from
asset and liability management. Transaction-based fees decreased
CHF 149 million primarily due to a decline in the brokerage and fund
distribution businesses. This decline was partially offset by an increase in new
issue distribution of alternative investment products. Asset-based income
decreased CHF 50 million, due to a decrease in net interest income of
CHF 141 million, or 13.9%, in the first six months of 2002. The decrease in net
interest income was primarily a result of rates on loans to customers decreasing
faster than interest rates on customer savings and investment deposits. The
decrease in net interest income was partially offset by an increase in
commission income on assets, primarily as a result of an increase in the volume
of assets under management for alternative investment products.
Operating expenses decreased CHF 51 million, or 2.5%, in the first six months of
2002. Increased salaries and social benefits, caused by higher headcount numbers
related to the expansion of European Financial Services Initiative, or EFSI,
were partially offset by lower bonus accruals.
Depreciation of non-current assets increased CHF 41 million, or 60.3%,
principally as a result of increased capital expenditure in 2001 related to
business expansion (principally EFSI), which led to increased assets and
therefore higher depreciation in 2002.
Valuation adjustments, provisions and losses decreased CHF 59 million in the
first six months of 2002. This decline was principally the result of lower
credit risk and reduced losses from operations and litigation.
13
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Extraordinary income/(expenses), net increased CHF 17 million in the first six
months of 2002. This increase was primarily related to a realized gain on the
sale of a participation of CHF 29 million partially offset by restructuring
costs of CHF 13 million.
A key factor influencing Private Banking's results is the amount of assets under
management. The following tables provide details of assets under management at
June 30, 2002 and December 31, 2001 and for the six months ended June 30, 2002
and 2001: 1)
in CHF bn 30.06.02 31.12.01
---------------------------------------------------------------------------------
Advisory 388.6 415.3
Discretionary 128.7 131.5
---------------------------------------------------------------------------------
Assets under management 517.3 546.8
---------------------------------------------------------------------------------
6 months 6 months
2002 2001
---------------------------------------------------------------------------------
Net new assets (in CHF bn) 14.8 22.0
Growth in net new assets 2.7% 4.1%
Market movement and structural effects (8.1%) 1.6%
Acquisitions/(Divestitures) -- 0.7%
Growth in assets under management (5.4%) 6.4%
---------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation.
Assets under management decreased CHF 29.5 billion, or 5.4%, as of June 30, 2002
compared to December 31, 2001. Net new assets of CHF 14.8 billion in the first
six months of 2002 were more than offset by a decline in market values of
CHF 44.3 billion. At June 30, 2002, equities were 19.5% of total assets under
management, debt securities were 25.5%, the shares in investment funds were
31.9% and the remaining 23.1% was invested in money market products and other
investments. Other investments include alternative investments, which increased
in the first six months of 2002 as clients invested approximately
CHF 8.4 billion in this product category.
14
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Corporate & Retail Banking
The Corporate & Retail Banking segment of CSFS includes our operations for
retail banking and corporate clients in Switzerland.
The following table sets forth the results of the Corporate & Retail Banking
segment for the six months ended June 30, 2002 and 2001: 1)
6 months 6 months
in CHF m 2002 2001
---------------------------------------------------------------------------------
Net interest income 831 833
Net commission and service fee income 250 262
Net trading income 127 131
Other ordinary income 37 21
---------------------------------------------------------------------------------
Operating income 1,245 1,247
---------------------------------------------------------------------------------
Personnel expenses 468 508
Other operating expenses 307 338
---------------------------------------------------------------------------------
Operating expenses 775 846
---------------------------------------------------------------------------------
Gross operating profit 470 401
---------------------------------------------------------------------------------
Depreciation of non-current assets 37 24
Valuation adjustments, provisions and losses 2) 151 149
---------------------------------------------------------------------------------
Net operating profit before extraordinary items and taxes 282 228
---------------------------------------------------------------------------------
Extraordinary income/(expenses), net (1) 9
Taxes (66) (56)
---------------------------------------------------------------------------------
Net operating profit before minority interests 215 181
---------------------------------------------------------------------------------
Other data
Increased/(decreased) credit-related valuation
adjustments 2) 14 5
Return on average allocated capital (operating) 3) 10.9% 9.3%
---------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation. The presentation of segment results differs from the
presentation of the Group's consolidated results by excluding
acquisition-related costs of amortization of acquired intangible assets and
goodwill from depreciation, valuation adjustments and losses.
Acquisition-related costs and minority interests are reported separately at
the business unit level only.
2) Increased/(decreased) valuation adjustments taken at the Group level
resulting from the difference between the statistical and actual credit
provisions.
3) Excluding amortization of acquired intangible assets and goodwill.
Six months ended June 30, 2002 compared to six months ended June 30, 2001
Corporate & Retail Banking reported a net operating profit before minority
interests of CHF 215 million in the six months ended June 30, 2002 compared to
CHF 181 million in the six months ended June 30, 2001. The increase of 18.8% was
mainly the result of reduced operating expenses. Corporate & Retail Banking
measures performance based on operating return on average allocated capital. In
the first six months of 2002 operating return on average allocated capital was
10.9% compared to 9.3% in the first six months of 2001.
15
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following table outlines the distribution of operating income by customer
segment for Corporate & Retail Banking for the six months ended June 30, 2002
and 2001:
6 months 6 months
in CHF m 2002 2001
---------------------------------------------------------------------------------
Retail clients 411 390
Corporate clients 825 845
Other client business 1) 9 12
---------------------------------------------------------------------------------
Operating income 1,245 1,247
---------------------------------------------------------------------------------
1) Income from transactions with non-account holders.
Total operating income was flat at CHF 1,245 million compared to the first six
months of 2001. The decrease in operating income in the corporate client segment
was mainly due to lower interest margins.
Operating expenses decreased CHF 71 million, or 8.4%, in the first six months of
2002. Personnel expenses decreased CHF 40 million or 7.9% primarily due to lower
bonus accruals and efficiency improvements. Other operating expenses decreased
CHF 31 million, or 9.2%, primarily as a result of cost reduction initiatives.
Depreciation of non-current assets increased CHF 13 million, or 54.2%, in the
first six months of 2002, reflecting the higher investment level especially in
information technology in 2001.
The following tables provide details of assets under management at June 30, 2002
and December 31, 2001 and for the six months ended June 30, 2002 and 2001: 1)
in CHF bn 30.06.02 31.12.01
---------------------------------------------------------------------------------
Advisory 51.3 54.2
Discretionary 1.6 1.7
---------------------------------------------------------------------------------
Assets under management 52.9 55.9
---------------------------------------------------------------------------------
6 months 6 months
2002 2001
---------------------------------------------------------------------------------
Net new assets (in CHF bn) (1.1) (0.7)
Growth in net new assets (2.0%) (1.3%)
Market movement and structural effects (3.4%) (5.0%)
Growth in assets under management (5.4%) (6.3%)
---------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation.
Assets under management decreased 5.4% to CHF 52.9 billion as of June 30, 2002
compared to December 31, 2001. Net asset outflow was CHF 1.1 billion primarily
due to maturing time deposits of large corporate customers. Market performance
was negatively affected by the decline in the equity markets worldwide. Assets
under management held in retail client accounts fell CHF 0.8 billion, or 2.8%,
to CHF 26.8 billion. Of total assets under management, 50.7% was for retail
clients and 49.3% was for corporate clients.
16
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following tables provide details of the loan portfolio at June 30, 2002 and
December 31, 2001 and for the six months ended June 30, 2002 and 2001:
in CHF m 30.06.02 31.12.01
---------------------------------------------------------------------------------
Due from customers 28,635 28,889
Mortgages 35,316 34,279
---------------------------------------------------------------------------------
Total loans 63,951 63,168
---------------------------------------------------------------------------------
6 months 6 months
2002 2001
---------------------------------------------------------------------------------
Mortgage growth 3.0% (0.1%)
Total loan growth 1) 1.2% 2.8%
---------------------------------------------------------------------------------
1) Including loan valuation allowances.
Total loans increased CHF 783 million, or 1.2%, as a result of a CHF 1.0 billion
increase in mortgages, partially offset by a decrease of CHF 254 million in
other loans due from customers.
Life & Pensions
Life & Pensions is our provider of life and pension solutions for private and
corporate clients worldwide. Reflecting its growth strategy, Life & Pensions has
benefited from several acquisitions in recent years. In April 2000, Life &
Pensions entered the Japanese market by acquiring Nicos Life, renamed Credit
Suisse Life Insurance Co. Ltd., offering asset accumulation products to private
clients. In July 2000, Life & Pensions acquired Colonial, a closed block of
business in the United Kingdom. In January 2001, Life & Pensions acquired
Vojensky Otevreny Penzijni Fond, or VOPF, for a total purchase price of CHF
125 million.
At the end of 2001, Life & Pensions sold its French branch and its Austrian
subsidiaries. In the first half of 2002, Life & Pensions signed an agreement to
acquire Premier Life's life insurance business in Luxembourg and the portfolio
of Premier's business in Bermuda subject to regulatory approval. The acquisition
represents a further step in the implementation of its strategy to expand its
position in select markets where earnings and growth potential are believed to
be high.
17
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Swiss group pension plans that are part of the "second pillar" of the Swiss
retirement savings program are subject to a minimum return set by the Swiss
federal law on occupational benefit plans (second pillar). This rate currently
is 4%. The portion of Life & Pensions' business subject to this rate represents
23.5% of the technical reserves. In the current investment environment,
characterized by enduring low interest rates and weak equity markets, the 4%
return represents a constraint on the profitability of this line of business.
The Swiss Government is currently discussing a reduction of the minimum return
from 4% to 3.5%; however, the outcome of this discussion is uncertain.
The following table sets forth the results of the Life & Pensions segment for
the six months ended June 30, 2002 and 2001: 1)
6 months 6 months
in CHF m 2002 2001
---------------------------------------------------------------------------------
Gross premiums written 10,258 9,376
Reinsurance ceded (197) (58)
---------------------------------------------------------------------------------
Net premiums written 10,061 9,318
---------------------------------------------------------------------------------
Change in provision for unearned premiums (41) (11)
---------------------------------------------------------------------------------
Net premiums earned 10,020 9,307
---------------------------------------------------------------------------------
Death and other benefits incurred (6,647) (6,373)
Change in provision for future policyholder benefits
(technical) (4,360) (3,747)
Change in provision for future policyholder benefits
(separate account) 2) 546 448
Dividends to policyholders incurred 813 (631)
Operating expenses, net (including commissions paid) (919) (953)
Investment income general account 796 3,160
Investment income separate account (546) (448)
Other income/(expenses) (including foreign exchange impact) (6) (200)
---------------------------------------------------------------------------------
Net operating (loss)/profit before taxes and minority
interests (303) 563
---------------------------------------------------------------------------------
Taxes (109) (129)
---------------------------------------------------------------------------------
Net operating (loss)/profit before minority interests (412) 434
---------------------------------------------------------------------------------
Other data
Growth in gross premiums written 9.4% 9.5%
---------------------------------------------------------------------------------
1) The presentation of segment results differs from the presentation of the
Group's consolidated results as it reflects the way the insurance business
is managed, which is in line with peers in the insurance industry.
Amortization of goodwill is excluded from net operating expenses.
Acquisition-related costs and minority interests are reported at the
business unit level only.
2) This represents the market impact for separate account (or unit-linked)
business, where the investment risk is borne by the policyholder.
18
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Six months ended June 30, 2002 compared to six months ended June 30, 2001
Net premiums earned increased CHF 713 million, or 7.7%, in the first half of
2002. Net operating profit before minority interests decreased CHF 846 million
to a net operating loss before minority interests of CHF 412 million. This was
primarily due to the significant reduction in investment income. Despite the
current unfavorable economic environment, Life & Pensions experienced gross
premium growth of 9.4% benefiting from acquisitions as well as organic growth.
The following table shows a breakdown of direct gross premiums written by
Life & Pension's market units for the six months ended June 30, 2002 and 2001:
6 months 6 months
in CHF m 2002 2001
---------------------------------------------------------------------------------
Switzerland 5,515 5,154
Germany 1,368 1,321
United Kingdom 1,049 908
Rest of Europe and Asia 2,184 2,002
---------------------------------------------------------------------------------
Direct gross premiums written 10,116 9,385
---------------------------------------------------------------------------------
Assumed business 142 (9)
---------------------------------------------------------------------------------
Gross premiums written 10,258 9,376
---------------------------------------------------------------------------------
Direct gross premiums written increased CHF 731 million, or 7.8%, in the first
half of 2002. Excluding the effect of acquisitions and divestitures, direct
gross premiums written increased CHF 918 million, or 10.0%, primarily due to
growth in Italy of CHF 434 million driven by a tax amnesty, and in Switzerland
of CHF 322 million, resulting from a strong position in the local market
compared to our main competitors. The sale of the French branch and the Austrian
subsidiaries led to a reduction in premium volume of CHF 202 million, which was
partially offset by premiums of CHF 15 million from the newly formed company in
Liechtenstein.
In Switzerland, premium growth was CHF 361 million, or 7.0%, in the first half
of 2002. Of this amount, CHF 322 million was due to growth in individual
traditional single premium business. Premiums from separate account business
decreased CHF 85 million primarily as a result of the decline in the worldwide
capital markets, while group traditional business grew CHF 146 million, or 3.4%,
resulting from new business. In Germany, premium growth of CHF 47 million, or
3.6%, in the first half of 2002 was primarily due to an increase in premiums
from separate account business. In the United Kingdom, premium growth was CHF
141 million, or 15.5%, in the first half of 2002 primarily due to strong growth
of single premium products. This growth was primarily attributable to increased
distribution, various marketing campaigns, an improved selling environment for
group personal pensions due to the launch of stakeholder pensions (a low cost
pension developed by the Government with special requirements) and the shift
from defined benefit to defined contribution plans. Within the Rest of Europe
and Asia, premium growth was CHF 182 million, or 9.1%, in the first half of
2002. Excluding the impact of the sale of the French branch and the Austrian
subsidiaries and premiums of CHF 15 million from the newly formed company in
Liechtenstein, premium growth was CHF 369 million, or 20.5%. In Italy, premium
growth was CHF 434 million in the first half of 2002 mainly driven by an
increase in individual traditional single premium business as a result of the
tax amnesty that ended on May 15, 2002. In Iberia, premiums decreased by CHF
277 million, or 51.3% primarily due to a one-off high volume contract in the
first half of 2001 as well as strong competitive market conditions. In the other
countries reported under Rest of
19
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Europe and Asia, premium growth of CHF 212 million was primarily due to the
introduction of new products and an increase in traditional business as
policyholders moved away from separate account business.
Death and other benefits incurred increased CHF 274 million, or 4.3%, in the
first half of 2002. Excluding the impact of the sale of the French branch and
the Austrian subsidiaries, death and other benefits increased CHF 439 million,
or 7.1%. In Switzerland, an increase of CHF 259 million, or 6.7%, was mainly due
to higher maturities in individual traditional business. In the United Kingdom,
an increase of CHF 115 million, or 13.1%, was due to a prior year reinsurance
adjustment of CHF 319 million partially offset by a decrease of approximately
CHF 205 million due to a high level of Colonial staff pensions scheme surrenders
occurring in 2001. In Rest of Europe and Asia, death and other benefits incurred
increased CHF 78 million, or 11.6%, primarily due to premium growth.
Change in provision for future policyholder benefits (technical) increased CHF
613 million, or 16.4%, in the first half of 2002. Excluding the impact of the
sale of the French branch and the Austrian subsidiaries, the change in provision
for future policyholder benefits increased CHF 663 million, or 17.8%. In
Switzerland, an increase of CHF 478 million resulted primarily from an increase
in premiums written. In Germany, an increase of CHF 149 million was mainly due
to the increase in new business single premiums and an increase in the reserve
for terminal bonus. A decrease in the United Kingdom of CHF 149 million resulted
from a one time reinsurance adjustment which contributed CHF 761 million in part
offset by an increase of CHF 612 million primarily due to premium growth. In
Rest of Europe and Asia, the increase of CHF 185 million was primarily due to
premium growth.
Dividends to policyholders incurred decreased CHF 1,444 million in the first
half of 2002. Excluding the impact of the sale of the French branch and the
Austrian subsidiaries, dividends to policyholders incurred decreased CHF
1,415 million. The dividends paid to policyholders remained stable compared with
the first six months of 2001; however, the provision for future dividends
decreased in countries with legal or contractual obligations for which the
allocation to provision for future dividends is directly linked to the
underlying investment result. The primary impact was in Germany with a decrease
of CHF 1,099 million, of which CHF 959 million was due to the release of the
deferred bonus reserve in response to the decrease in investment income.
Compared to the first half year 2001, the dividends paid decreased 4.8% because
of the change in the participation rate for the year 2002 that was declared at
the end of 2001. Dividends to policyholders incurred decreased CHF 273 million
in Switzerland due to bonus rate reductions in all business lines.
Operating expenses, net, including commissions paid, decreased CHF 34 million,
or 3.6%, in the first half of 2002. Excluding the impact of the sale of the
French branch and the Austrian subsidiaries, operating expenses, net decreased
by CHF 2 million. This was reflected in the expense ratio, which improved from
10.2% in the first half of 2001 to 9.2% in the first half of 2002 as a result of
cost reduction initiatives.
Investment income general account decreased CHF 2,364 million, or 74.8%, in the
first half of 2002. Excluding the impact of the sale of the French branch and
the Austrian subsidiaries, investment income general account decreased CHF
2,259 million, or 73.9%. As a result of the significant decline in the worldwide
equity markets, Life & Pensions recognized CHF 1,406 million of other than
temporary impairments on the investment portfolio. Of the impairment amount
recognized in the first six months of 2002, approximately 53% was in
Switzerland, 28% was in the United Kingdom and 7% was in Germany.
20
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The remaining decrease of CHF 853 million was due to losses recorded from equity
securities sold during the year in an effort to minimize exposure to further
declines in the equity markets and lower dividends received on equity
securities.
Other income and expenses decreased CHF 194 million to an expense of CHF
6 million in the first half of 2002. Of this amount, approximately CHF
74 million resulted from a realized gain from the sale of the French branch. The
final gain will be determined in the third quarter of 2002 when the net asset
value of the business sold at the closing date has been confirmed by both
parties. In addition, losses on foreign exchange were significantly lower in the
first six months of 2002.
Insurance
Insurance is our provider of non-life insurance solutions for private and small
corporate clients worldwide. In recent years, Insurance has made a number of
acquisitions. In 2001, the most significant was the acquisition of the non-life
insurance operations of Commercial General Union plc, or CGU, in Belgium, for a
total purchase price of EUR 117 million (CHF 178 million). In addition,
Insurance entered into a strategic alliance with AMP/Pearl and Prudential plc to
underwrite and administer their branded general insurance products in the United
Kingdom.
Effective June 30, 2001, the Group sold Winterthur International, or WI, to XL
Capital Ltd. WI conducts mainly large account commercial property and casualty
business. The all-cash transaction was valued at approximately USD 405 million
(CHF 678 million). In December 2001, Insurance sold its subsidiaries in Austria
and Hong Kong and its French branch.
21
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following table sets forth the results of the Insurance segment for the six
months ended June 30, 2002 and 2001: 1)
6 months 6 months
in CHF m 2002 2001
---------------------------------------------------------------------------------
Gross premiums written 10,790 11,113
Reinsurance ceded (619) (1,046)
---------------------------------------------------------------------------------
Net premiums written 10,171 10,067
---------------------------------------------------------------------------------
Change in provision for unearned premiums and in provision
for future policy benefits (health) (2,437) (2,563)
---------------------------------------------------------------------------------
Net premiums earned 7,734 7,504
---------------------------------------------------------------------------------
Claims and annuities incurred, net (5,795) (5,855)
Dividends to policyholders incurred, net 50 (183)
Operating expenses, net (including commissions paid) (2,234) (2,221)
---------------------------------------------------------------------------------
Underwriting result, net (245) (755)
---------------------------------------------------------------------------------
Net investment income (179) 1,354
Other income/(expense) (including foreign exchange impact) (196) (14)
---------------------------------------------------------------------------------
Net operating (loss)/profit before taxes and minority
interests (620) 585
---------------------------------------------------------------------------------
Taxes (17) (180)
---------------------------------------------------------------------------------
Net operating (loss)/profit before minority interests (637) 405
---------------------------------------------------------------------------------
Other data
Combined ratio (excluding dividends to policyholders) 103.8% 107.6%
---------------------------------------------------------------------------------
1) The presentation of segment results differs from the presentation of the
Group's consolidated results as it reflects the way the insurance business
is managed, which is in line with peers in the insurance industry.
Amortization of goodwill is excluded from net operating expenses.
Acquisition-related costs and minority interests are reported at the
business unit level only.
Six months ended June 30, 2002 compared to six months ended June 30, 2001
Net premiums earned increased CHF 230 million, or 3.1%, in the first half of
2002 compared to the first half of 2001. The net underwriting result improved by
CHF 510 million, or 67.5%, in the first half of 2002, reflecting a reduction in
dividends to policyholders as a direct result of the realization of losses as
well as continuing improvements in claims reduction. Net operating profit before
minority interests decreased by CHF 1,042 million in the first half of 2002
compared to the first half of 2001 primarily as a result of other than temporary
impairments on investments and lower realized gains resulting from the decline
of equity markets.
Insurance measures performance based on the combined ratio. This ratio is
intended to enable Insurance to measure the net underwriting result by comparing
the claims and operating expenses incurred with the insurance premiums earned.
At June 30, 2002, the combined ratio was 103.8%, an improvement of
3.8 percentage points compared to the ratio for the six months ended June 30,
2001, benefiting from an improved claims ratio and the implementation of cost
saving initiatives in 2001.
22
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following table shows a breakdown of direct gross premiums written by
Insurance's market units for the six months ended June 30, 2002 and 2001:
6 months 6 months
in CHF m 2002 2001
---------------------------------------------------------------------------------
Switzerland 2,577 2,607
Germany 1,490 1,616
Italy 894 903
Iberia (Spain and Portugal) 810 731
United Kingdom 2,637 1,760
Belgium 506 342
North America 1,804 1,944
Other 146 799
---------------------------------------------------------------------------------
Direct gross premiums written 10,864 10,702
---------------------------------------------------------------------------------
Reinsurance assumed (74) 411
---------------------------------------------------------------------------------
Gross premiums written 10,790 11,113
---------------------------------------------------------------------------------
Direct gross premiums written increased CHF 162 million, or 1.5%, in the first
half of 2002. Excluding the effect of acquisitions and divestitures, direct
gross premiums written increased CHF 865 million, or 9.3%, as a result of rate
increases, new products and a focus on more profitable regions. The sale of WI
and the combined sales of the Austrian and Hong Kong subsidiaries and the French
branch at the end of 2001 led to reductions in premium volume of CHF 1,073
million and CHF 312 million respectively. These reductions were in part offset
by increases in premiums of CHF 503 million from the strategic alliances with
Prudential plc and AMP/Pearl in the United Kingdom and CHF 179 million from the
acquisition of CGU in Belgium.
In Switzerland, excluding the impact of premiums related to the sale of WI,
premiums increased CHF 118 million, or 4.8% in the first half of 2002, resulting
from higher tariffs in motor and new product initiatives. In Germany, excluding
the impact of WI, premium growth was CHF 36 million, or 2.5%, in the first half
of 2002. This increase was primarily driven by the motor business, which had a
growth rate of 10.3%, 5.3 percentage points of which resulted from tariff
increases. In Iberia, excluding the impact of WI, premium growth was CHF
95 million, or 13.3%, mainly driven by tariff increases. In the United Kingdom,
excluding the impact of WI and premium contribution in the first half of 2002 of
CHF 503 million resulting from the strategic alliance with Prudential plc and
AMP/Pearl, Insurance recorded premium growth of CHF 485 million, or 29.4%. This
was primarily due to organic growth in both motor insurance due to the strong
Churchill brand and commercial lines. In Belgium, excluding the impact of WI and
premium contribution of CHF 179 million in the first half of 2002 related to the
acquisition of CGU, premium growth was CHF 2 million, or 0.6%. In North America,
excluding the impact of premiums of CHF 309 million related to the sale of WI,
premiums increased CHF 169 million, or 10.3%, in the first half of 2002. The
majority of this growth was due to rate increases, partly offset by a decline in
the number of policies in force. This decrease in the number of policies was
largely due to more stringent underwriting management to address profitability.
In Other, excluding the impact of premiums of CHF 287 million related to the
sale of WI and CHF 312 million related to the sale of the subsidiaries in
Austria and Hong Kong and the French branch, premiums decreased CHF 54 million,
or 27.0%, in the first half of 2002. This was primarily due to a decrease in
premiums written in Asia and Eastern Europe as a result of difficult market
conditions in the first half of 2002.
23
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Reinsurance assumed decreased CHF 485 million in the first half of 2002
primarily due to the sale of WI. Assumed business was primarily in the United
Kingdom and Switzerland.
Claims and annuities incurred, net decreased CHF 60 million, or 1.0%, in the
first six months of 2002. Excluding the impact of claims associated with WI in
the first half of 2001, claims and annuities incurred, net decreased CHF
368 million, or 6.8%. This decrease was largely due to improved claims
management, with the largest decrease in the claims ratio occurring in North
America and Spain. The improvement in claims management in Switzerland was
offset by large losses relating to hail storms in the second quarter of 2002,
while the German business saw an increase in the claims ratio due to negative
developments in the health business and a deterioration in the non-motor lines
resulting from storms in January and February 2002. In the United Kingdom,
strong performance in motor business was offset by claims due to adverse weather
conditions at the beginning of 2002, while in Belgium, claims increased
reflecting several large fire claims at the beginning of 2002. The general
decrease in claims led to an overall improvement in the claims ratio from 78.0%
in the first half of 2001 to 74.9% in the first half of 2002.
Dividends to policyholders incurred, net decreased CHF 233 million in the first
half of 2002. In Germany, dividends to policyholders was an expense of CHF
125 million in the first half of 2001 compared to income of CHF 102 million in
the first half of 2002. CHF 104 million of the change was related to the health
business. The decrease was mainly due to the decline in the worldwide capital
markets, which resulted in the realization of losses on investments through
either sale or other than temporary impairment. These losses directly affected
the amount of dividends payable to policyholders and led to a reversal of the
reserve for future policyholder dividends.
Operating expenses, net, including commissions paid, increased CHF 13 million,
or 0.6%, in the first half of 2002. Increased acquisition expenses from premium
growth were offset to a large extent by reductions due to cost saving
initiatives. This resulted in an improvement in the expense ratio from 29.6% in
the first half of 2001 to 28.9% in the first half of 2002.
Net investment income decreased CHF 1,533 million to a negative CHF 179 million
in the first half of 2002. The result reflected the recognition in 2002 of
losses for other than temporary impairments of CHF 393 million. Of the
impairment amount recognized in 2002, approximately 27% was in Switzerland, 17%
was in North America, 15% was in the United Kingdom and 15% was in Belgium. In
addition, in 2002, Insurance sold a significant portfolio of equity securities
in an effort to minimize exposure to further declines in the equity markets,
which resulted in realization of net losses of CHF 379 million.
Other income/(expenses), net decreased CHF 182 million in the first half of
2002. In the first half of 2001, other income included the realized gain of CHF
35 million on the sale of WI. In 2002, other income/(expense) included CHF
29 million expenses for restructuring costs and the write-off of a
participation, both associated with the Bermuda operations and CHF 25 million
restructuring costs primarily in Italy and Spain. The sale of the French branch
resulted in a net loss of CHF 11 million in the first six months of 2002.
Investments for Insurance Business
Investment portfolios are managed within a defined process and set of guidelines
to meet diversification, credit quality, yield and liquidity requirements of
policy liabilities. Investments include debt instruments,
24
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
such as government bonds, loans and mortgage loans, real estate and equities and
alternative assets. The weighting of asset classes within the investment
portfolios is determined by Investment Committee meetings, which are held
periodically. For additional information on investment strategy, please refer to
"Item 4 -- Asset liability management for Life & Pensions and Insurance," and
"Item 11 -- Quantitative and qualitative disclosures about market risk" in our
annual report on Form 20-F for the year ended December 31, 2001, filed with the
SEC on May 15, 2002.
Net investment income from insurance business, excluding income from separate
accounts, decreased CHF 3,897 million in the first half of 2002. Of this amount,
CHF 1,799 million was due to the recognition of impairments on investment
securities for other than temporary declines in the market value below cost as a
result of the general decline in the worldwide equity markets, CHF
1,774 million was due to the recognition of net losses from the sales of equity
securities in an effort to minimize the exposure to further declines in the
equity markets and CHF 361 million was due to a decline in current investment
income. Loss from separate account business was CHF 546 million for the six
months ended June 30, 2002. This was primarily due to a significant portion of
the separate account business being invested in the equity markets, which were
negatively impacted during the first half of 2002.
The following table illustrates the net investment income by investment type and
investment return for the six months ended June 30, 2002 and 2001:
6 months 6 months
in CHF m 2002 2001
---------------------------------------------------------------------------------
Investment income 2,671 3,032
Realized gains and losses (1,840) 1,733
Depreciation on real estate (76) (71)
Investment expenses (138) (180)
---------------------------------------------------------------------------------
Net investment income, excluding separate account business 617 4,514
---------------------------------------------------------------------------------
Separate account income 1) (546) (448)
---------------------------------------------------------------------------------
Net investment income 71 4,066
---------------------------------------------------------------------------------
Net investment income/(loss) by segment:
Insurance (179) 1,354
Life & Pensions 250 2,712
---------------------------------------------------------------------------------
Net investment income 71 4,066
---------------------------------------------------------------------------------
Return on invested assets (excluding separate accounts): 2)
Current income 4.3% 4.6%
Other than current income/(expenses), net (3.3%) 2.2%
Total 3) 1.0% 6.8%
---------------------------------------------------------------------------------
1) Includes investment income/(loss) and realized gains and losses on separate
account business.
2) Prior-period ratios have been recalculated to conform with the current
year. Other interest bearing assets not previously included in the
investment category, such as policy loans, are now included in calculating
the investment return.
3) Total investment return includes depreciation on real estate and investment
expenses as well as investment income and realized gains and losses.
25
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following table shows a breakdown of the Insurance and Life & Pensions
investment portfolio at: 1)
in CHF bn 30.06.02 31.12.01
---------------------------------------------------------------------------------
Debt securities 68.5 68.4
Equity securities 15.2 22.6
Mortgage loans 10.1 9.8
Loans 4.4 4.6
Real estate 7.3 7.5
Other investments 8.6 3.8
---------------------------------------------------------------------------------
Investments, excluding separate account business 114.1 116.7
---------------------------------------------------------------------------------
Investments for separate account business 11.8 12.2
---------------------------------------------------------------------------------
Investments 125.9 128.9
---------------------------------------------------------------------------------
Insurance investments 27.4 27.6
Life & Pensions investments 98.5 101.3
---------------------------------------------------------------------------------
Investments 125.9 128.9
---------------------------------------------------------------------------------
1) Amounts exclude separate account business acquired as part of SLC Pooled
Pensions Limited.
Total investments decreased CHF 3.0 billion, or 2.3%, in the first half of 2002.
Excluding investments of CHF 4.0 billion associated with the sale of the
Austrian subsidiaries and the French branch, total investments increased CHF
1.0 billion. This increase primarily reflects new premium income partially
offset by a decrease in the fair value of equities resulting from a decline of
equity markets worldwide. Excluding the impact of CHF 2.0 billion associated
with the sale of the Austrian subsidiaries and the French branch, debt
securities increased CHF 2.1 billion in the first half of 2002 primarily due to
increased investment from premium income as well as higher investment in debt
securities due to the reduction in exposure to equity securities. Equity
securities decreased CHF 7.4 billion, or 32.7%, in the first half of 2002.
Excluding the decrease of CHF 1 billion associated with the sale of the Austrian
subsidiaries and the French branch, the primary decrease was due to the sale of
equities in an effort to reduce exposure to further declines in equity markets.
In addition, those securities where the decline in value below cost was
considered to be other than temporary were deemed to be impaired and
written-down through earnings. The proceeds of the sale of equity securities
were invested primarily in short-term deposits, which resulted in an increase of
CHF 4.8 billion.
Investments for separate account business decreased CHF 0.4 billion, or 3.3%, in
the six-month period ended June 30, 2002 primarily due to the sale of the
Austrian subsidiaries and the French branch. The majority of investments for
separate account business support the non-traditional separate account life
insurance products. The return to policyholders from these products is based on
the performance of investments as defined by contracts. The performance of the
unit-linked investments is offset by a corresponding adjustment in separate
account provision. Of the total amount of separate account life business, 78.4%
was in the United Kingdom and Switzerland, with funds invested predominantly in
equities.
26
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Credit Suisse First Boston
CSFB's income statement is presented below on an "operating basis," which
differs from our consolidated income statement presentation by excluding, among
other things, acquisition-related costs of acquisition interest from operating
income, amortization of retention payments from personnel expenses and
amortization of acquired intangible assets and goodwill from depreciation,
valuation adjustments and losses. These items are reported separately in the
income statement. A separate table presenting line items on a basis consistent
with our consolidated income statement and after giving effect to these
acquisition-related costs is also set forth below. Although we also present
CSFB's income statement on this basis, we discuss its results on an operating
basis. Management uses the operating basis to assess the financial results and
key performance indicators of CSFB.
Although the amounts for CSFB and its segments are presented in Swiss francs,
the US dollar is CSFB's functional currency.
The following table sets forth the results of CSFB on an operating basis for the
six months ended June 30, 2002 and 2001: 1)
6 months 6 months
in CHF m 2002 2001
---------------------------------------------------------------------------------
Operating income 11,103 14,628
---------------------------------------------------------------------------------
Personnel expenses 6,115 8,226
Other operating expenses 2,474 3,132
---------------------------------------------------------------------------------
Operating expenses 8,589 11,358
---------------------------------------------------------------------------------
Gross operating profit 2,514 3,270
---------------------------------------------------------------------------------
Depreciation of non-current assets 392 454
Valuation adjustments, provisions and losses 758 390
---------------------------------------------------------------------------------
Net operating profit before extraordinary items,
acquisition-related costs and taxes 1,364 2,426
---------------------------------------------------------------------------------
Extraordinary income/(expenses), net 26 (2)
Taxes 2) (315) (587)
---------------------------------------------------------------------------------
Net operating profit before acquisition-related costs and
minority interests 1,075 1,837
---------------------------------------------------------------------------------
Acquisition interest (325) (476)
Amortization of retention payments (359) (403)
Amortization of acquired intangible assets and goodwill (687) (709)
Tax impact 365 420
---------------------------------------------------------------------------------
Net profit 69 669
---------------------------------------------------------------------------------
Reconciliation to net operating profit
Amortization of acquired intangible assets and goodwill 687 709
Tax impact (126) (127)
---------------------------------------------------------------------------------
Net operating profit 630 1,251
---------------------------------------------------------------------------------
Other data
Pre-tax margin (operating) 3)4) 12.5% 16.6%
Return on average allocated capital (operating) 3) 8.5% 15.4%
---------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation. The operating basis income statement differs from the
presentation of the Group's consolidated results in a) including brokerage,
execution and clearing expenses as part of other operating expenses in line
with certain US competitors, rather than netted against operating income,
b) reporting contractor costs as part of other operating expenses instead of
personnel expenses, c) excluding acquisition-related costs of acquisition
interest from operating income, amortization of retention payments from
personnel expenses and amortization of acquired intangible assets and
goodwill from depreciation, valuation
27
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
adjustments and losses and d) deducting expenses related to certain
redeemable preferred securities classified as minority interests from
operating income. Acquisition-related costs are reported separately in the
income statement.
2) Excluding tax impact on acquisition-related costs.
3) Excluding amortization of acquired intangible assets and goodwill.
4) Excluding acquisition interest and amortization of retention payments.
The following table sets forth the results of CSFB for the six months ended
June 30, 2002 and 2001, and the percentage change from period to period,
including the effects of acquisition interest, amortization of retention
payments and amortization of acquired intangible assets and goodwill. For a
reconciliation of the results on an operating basis to the basis consistent with
our reported results please refer to note 1 "Segment reporting by operating
segments" in the notes to the interim financial statements: 1)
6 months 6 months
in CHF m 2002 2001 Change
------------------------------------------------------------------------------------------
Operating income 10,778 14,152 (23.8%)
------------------------------------------------------------------------------------------
Personnel expenses 6,474 8,629 (25.0%)
Other operating expenses 2,474 3,132 (21.0%)
------------------------------------------------------------------------------------------
Operating expenses 8,948 11,761 (23.9%)
------------------------------------------------------------------------------------------
Gross operating profit 1,830 2,391 (23.5%)
------------------------------------------------------------------------------------------
Depreciation of non-current assets 392 454 (13.7%)
Amortization of acquired intangible assets and goodwill 687 709 (3.1%)
Valuation adjustments, provisions and losses 758 390 94.4%
------------------------------------------------------------------------------------------
(Loss)/Profit before extraordinary items,
acquisition-related costs and taxes (7) 838 --
------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net 26 (2) --
Taxes 50 (167) --
------------------------------------------------------------------------------------------
Net profit 69 669 (89.7%)
------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation. This table differs from the presentation of the Group's
consolidated results in a) including brokerage, execution and clearing
expenses as part of other operating expenses in line with certain US
competitors, rather than netted against operating income, b) reporting
contractor costs as part of other operating expenses instead of personnel
expenses and c) deducting expenses related to certain redeemable preferred
securities classified as minority interests from operating income.
Six months ended June 30, 2002 compared to six months ended June 30, 2001
CSFB measures performance based on operating return on average allocated
capital, operating pre-tax margin and growth in market share/ranking. Operating
return on average allocated capital excludes amortization of acquired intangible
assets and goodwill. For the six months ended June 30, 2002, operating return on
average allocated capital was 8.5%, a decrease of 6.9 percentage points from
June 30, 2001. Operating pre-tax margin excludes acquisition-related costs
(acquisition interest, amortization of retention payments and amortization of
acquired intangible assets and goodwill). For the six months ended June 30,
2002, operating pre-tax margin was 12.5%, a decrease of 4.1 percentage points
from June 30, 2001.
Operating income decreased CHF 3,525 million, or 24.1%, to CHF 11,103 million in
the first six months of 2002 compared to the first six months of 2001. This
decrease was primarily due to a CHF 3,204 million, or 25.6%, decrease in the
Investment Banking segment that resulted from weaker Equity
28
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
results, reflecting difficult equity markets, and lower Fixed Income results,
reflecting stable, rather than declining, interest rates. A CHF 321 million, or
15.2%, decline in the CSFB Financial Services segment, as a result of the sale
of CSFBDIRECT and Autranet and continuing weak equity markets, also contributed
to the decrease. Approximately 60% of CSFB's operating income was generated in
North America, 30% in Europe and 10% in Asia/South America, which is generally
consistent with the geographic distribution in 2001. The source of such
operating income shifted slightly, however, with an increase in Fixed Income
revenue in North America, offset by increased CSFB Financial Services segment
revenue in Europe.
Operating expenses fell CHF 2,769 million, or 24.4%, to CHF 8,589 million,
reflecting the continuing results of CSFB's cost-cutting initiatives. Personnel
expenses decreased CHF 2,111 million, or 25.7%, primarily as a result of
headcount reduction and reduced incentive compensation. CSFB's ratio of
compensation to operating income on an operating basis decreased to 55.1% in the
six months ended June 30, 2002 from 56.2% in the six months ended June 30, 2001.
Other operating expenses decreased CHF 658 million, or 21.0%, to CHF
2,474 million, primarily as a result of significantly reduced variable expenses.
Valuation adjustments, provisions and losses increased CHF 368 million, or
94.4%, to CHF 758 million in the six months ended June 30, 2002 compared to the
same period in 2001. The increase was primarily related to increased credit
provisions for non-continuing real estate and commercial lending in the
Investment Banking segment.
Acquisition interest decreased CHF 151 million, or 31.7%, to CHF 325 million.
The decrease was attributable to lower interest rates and a decrease in the
amount of interest expense allocated to the acquisition. This corresponds with
the decline in the goodwill balance following the sale of CSFBDIRECT and
Autranet. Amortization of retention payments decreased CHF 44 million, or 10.9%,
to CHF 359 million, primarily because of forfeitures under the terms of the
retention awards, and amortization of acquired intangible assets and goodwill
decreased CHF 22 million, or 3.1%, to CHF 687 million, primarily because of the
sale of CSFBDIRECT and Autranet.
Investment Banking
The Investment Banking segment of CSFB provides financial advisory, lending and
capital raising services and sales and trading for users and suppliers of
capital globally and is operated and managed through two principal divisions:
- the Securities division, which is active in sales, trading and research in
fixed income, equity and equity-linked products, including foreign exchange,
listed and over-the-counter derivatives and risk management products and
securities lending and borrowing; and
- the Investment Banking division, which serves a broad range of users and
suppliers of capital, provides financial advisory and securities underwriting
and placement services and, through the private equity group, makes privately
negotiated equity investments.
Operating income for the Investment Banking segment consists primarily of
realized and unrealized net trading gains, net interest income from trading and
lending activities, fee-based earnings from capital market activities and
commissions on customer transactions. The results of certain non-continuing
activities are recorded within Other. For divisional reporting of operating
income, equity capital market underwriting fees are shared between the
Investment Banking division and the Equity business, and debt capital market
underwriting fees are shared between the Investment Banking division and the
Fixed
29
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Income business. In 2002, corporate derivatives income was shared among the
Investment Banking division, the Fixed Income business and the Equity business
based upon client relationships. Income from corporate lending was shared
between the Investment Banking division and the Fixed Income business in 2001
and among the Investment Banking division, the Fixed Income business and the
Equity business in 2002.
In 2002, CSFB determined that certain non-continuing businesses, including real
estate and distressed assets aggregating approximately CHF 2.5 billion and CHF
1.3 billion, respectively, would no longer be managed as part of the Fixed
Income business, and, accordingly, the related results for the current and prior
periods were reclassified from Fixed Income to Other. These assets will be
managed together with the already existing non-continuing real estate portfolios
held for disposition and previously reported in Other. These assets include real
estate and related loans and distressed assets, such as debt and equity
positions in companies that have experienced, or may experience, debt
restructuring.
The following table sets forth the results of the Investment Banking segment for
the six months ended June 30, 2002 and 2001: 1)
6 months 6 months
in CHF m 2002 2001
---------------------------------------------------------------------------------
Securities Division
Fixed Income 2) 4,153 5,226
Equity 2,648 4,249
Investment Banking Division 2,568 2,678
Other 2) (52) 368
---------------------------------------------------------------------------------
Operating income 9,317 12,521
---------------------------------------------------------------------------------
Personnel expenses 5,268 7,106
Other operating expenses 1,947 2,452
---------------------------------------------------------------------------------
Operating expenses 7,215 9,558
---------------------------------------------------------------------------------
Gross operating profit 2,102 2,963
---------------------------------------------------------------------------------
Depreciation of non-current assets 320 366
Valuation adjustments, provisions and losses 739 384
---------------------------------------------------------------------------------
Net operating profit before extraordinary items,
acquisition-related costs and taxes 1,043 2,213
---------------------------------------------------------------------------------
Extraordinary income/(expenses), net 26 (1)
Taxes (225) (569)
---------------------------------------------------------------------------------
Net operating profit before acquisition-related costs 844 1,643
---------------------------------------------------------------------------------
Other data
Pre-tax margin (operating) 3) 11.5% 17.7%
---------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation. The presentation of segment results differs from the
presentation of the Group's consolidated results in a) including brokerage,
execution and clearing expenses as part of other operating expenses in line
with certain US competitors, rather than netted against operating income,
b) reporting contractor costs as part of other operating expenses instead of
personnel expenses, c) excluding acquisition-related costs of acquisition
interest from operating income, amortization of retention payments from
personnel expenses and amortization of acquired intangible assets and
goodwill from depreciation, valuation adjustments and losses and
d) deducting expenses related to certain redeemable preferred securities
classified as minority interests from operating income. Acquisition-related
costs are reported separately at the business unit level only.
2) Reflects the movement of the results of certain non-continuing real estate
and distressed assets from Fixed Income to Other.
3) Excluding acquisition-related costs.
30
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Six months ended June 30, 2002 compared to six months ended June 30, 2001
Investment Banking reported a net operating profit before acquisition-related
costs of CHF 844 million in the six months ended June 30, 2002 compared to CHF
1,643 million in the six months ended June 30, 2001. Investment Banking measures
performance based on operating pre-tax margin and growth in market
share/ranking. Operating pre-tax margin excludes acquisition-related costs
(acquisition interest, amortization of retention payments and amortization of
acquired intangible assets and goodwill). At June 30, 2002, operating pre-tax
margin was 11.5%, a decrease of 6.2 percentage points from June 30, 2001.
Operating income decreased CHF 3,204 million, or 25.6%, to CHF 9,317 million in
the six months ended June 30, 2002, primarily due to decreases in the Securities
division. Equity operating income declined CHF 1,601 million as a result of weak
equity markets, and Fixed Income operating income declined CHF 1,073 million
primarily due to stable, rather than declining, interest rates.
Operating income from the Fixed Income business decreased CHF 1,073 million, or
20.5%, to CHF 4,153 million in the six months ended June 30, 2002 compared to
the strong first half of 2001. The decrease was primarily a result of an
approximate 35% decrease in interest rate products reflecting stable, rather
than declining, interest rates in the first six months of 2002, and reduced
proprietary trading in Europe. In addition, operating income from emerging
markets fell in Brazil, as a result of repayment uncertainty, in South Africa,
which experienced reduced liquidity due to the low level of government bond
issuance, and in Turkey, where the business reduced its exposure in response to
political uncertainty. This decrease was offset in part by increased income from
the Asia/Pacific region. Leveraged and bank finance operating income declined
approximately 25% from the six months ended June 30, 2001 due to decreases in
secondary trading and underwriting. Operating income from the foreign exchange
group also declined as a result of lower volume in the options markets and
write-downs of derivative exposures. In contrast, operating income from credit
products increased, primarily in mortgages and asset-backed securities.
Operating income from the Equity business decreased CHF 1,601 million, or 37.7%,
to CHF 2,648 million in the six months ended June 30, 2002. Operating income
from derivatives business fell approximately 50%, most significantly in
convertible instruments, as a result of ratings downgrades due to the general
widening of credit spreads, index arbitrage due to low market volatility and
reduced activity, and over-the-counter business, reflecting reduced client
activity, reduced option volatility and declining underlying stock prices. The
customer trading revenues and fees from capital markets activities also
declined. The reduction in customer business was consistent with lower volume in
the US markets as well as in Europe and Latin America and a decline in equity
new issuances.
Operating income from the Investment Banking division decreased CHF
110 million, or 4.1%, primarily due to a 31% decline in merger and acquisition
fee revenue. Fees from equity new issuances fell slightly, while fees from debt
new issuances increased slightly as a result of an increase in corporate
issuances to take advantage of low interest rates. The declines in the
Investment Banking division were partially offset by a new revenue-sharing
arrangement with Fixed Income and Equity for certain derivatives transactions.
Private equity improved significantly, reporting net gains (realized gains
adjusted for unrealized gains and unrealized losses) of CHF 199 million in the
six months ended June 30, 2002 compared to net losses of CHF 103 million in
2001. The gain reflects reduced net write-downs of investments as well as CHF
366 million of gains on the sale of a portion of the strategic investment in
31
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Swiss Re compared to gains of CHF 250 million on the sale of a portion of the
Swiss Re investment during the six months ended June 30, 2001. CSFB began to
explore the sale of certain private equity investments during the second quarter
of 2002, including investments in mature third party leveraged buyout funds.
During the first half of 2002, the private equity business incurred a loss of
CHF 135 million primarily related to unrealized gains/losses on these funds.
Management and performance fees were CHF 190 million in the six months ended
June 30, 2002 compared to CHF 203 million during the six months ended June 30,
2001, a decline of 6%.
For divisional reporting of operating income, equity capital market underwriting
fees are shared between the Investment Banking division and the Equity business,
and debt capital market underwriting fees are shared between the Investment
Banking division and the Fixed Income business. For the six months ended
June 30, 2002 and 2001, these capital markets revenues (before such sharing)
were as follows:
6 months 6 months
in CHF m 2002 2001
---------------------------------------------------------------------------------
Equity Capital Markets 820 995
Debt Capital Markets 643 633
---------------------------------------------------------------------------------
Other operating income decreased CHF 420 million to a loss of CHF 52 million,
primarily as a result of losses on non-continuing real estate and distressed
assets held for disposition. At June 30, 2002, real estate-related assets under
contract for sale totalled CHF 394 million. Excluding the assets under contract
for sale, the full exposure, including unfunded commitments, of the
non-continuing real estate portfolio was CHF 3.8 billion, of which CHF
2.3 billion was held for sale. This total was down from a peak of CHF
14.3 billion, of which CHF 12.0 billion was held for sale, as of January 1,
2000. At June 30, 2002, the amount of impaired assets in the non-continuing real
estate portfolio totalled CHF 1.5 billion, reflecting a decrease of CHF
0.4 billion from December 31, 2001, after giving effect to write-downs and
provisions. At June 30, 2002, the carrying amount of distressed portfolio assets
totalled CHF 1.3 billion, a decrease of CHF 593 million from December 31, 2001
and down from CHF 3.2 billion as of January 1, 2000. The aggregate amount of
charges related to these non-continuing businesses in the first six months of
2002 totalled CHF 531 million, of which CHF 345 million was reflected as a loss
in operating income and CHF 186 million was reflected as provisions.
Operating expenses decreased CHF 2,343 million, or 24.5%, to CHF 7,215 million
in the first six months of 2002 compared to the first six months of 2001, as a
result of CSFB's continuing cost-cutting initiatives. Personnel expenses
decreased CHF 1,838 million, or 25.9%, primarily due to reduced incentive
compensation accruals reflecting reduced operating income and reduced headcount.
Other operating expenses decreased CHF 505 million, or 20.6%, due to reductions
in discretionary expenses.
Depreciation on non-current assets decreased CHF 46 million, or 12.6%, to CHF
320 million as a result of reduced capital expenditures and reduced leasehold
improvements.
Valuation adjustments, provisions and losses increased CHF 355 million, or
92.4%, to CHF 739 million. During 2002, credit quality deteriorated, with
ratings for corporate credits more often downgraded than upgraded. In response,
credit provisions related to commercial lending increased by 31% compared to the
first six months of 2001. Non-performing loans declined 29% to CHF 2.5 billion,
and impaired assets increased 15% to CHF 4,248 million. Investment Banking had
aggregate credit reserves related to loans outstanding of CHF 2,359 million at
June 30, 2002, including CHF 1,122 million in the Americas, CHF 823 million in
Europe and the remainder in Asia. In addition, credit provisions against
32
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
non-continuing real estate lending activities increased substantially. At
June 30, 2002 and 2001, credit reserves related to the proprietary real estate
business totalled approximately CHF 672 million and CHF 728 million,
respectively. Aggregate credit provisions charged totalled CHF 600 million for
the first six months of 2002 compared to CHF 261 million for the first six
months of 2001.
CSFB Financial Services
The CSFB Financial Services segment provides international asset management to
institutional, mutual fund and private investors through Credit Suisse Asset
Management, financial services to broker-dealers and investment managers through
Pershing, and financial advisory services to high-net-worth individuals and
corporate investors through Private Client Services. Its main sources of
operating income are asset-based fee income and transaction fees from investment
advisory business.
In December 2001, CSFB Financial Services acquired SLC Asset Management Limited,
SLC Pooled Pensions Limited and Sun Life of Canada Unit Managers Limited, the
principal UK asset management subsidiaries of Sun Life Financial Services of
Canada Inc., which we refer to collectively as SLCAM. The companies are asset
management companies with contracts for the management of the insurance assets
(including property) of their former affiliate, Sun Life Assurance Company of
Canada (U.K.) Limited and third-party institutional and retail funds. In the
fourth quarter of 2001, CSFB announced the sale of its CSFBDIRECT business in
the United States and the United Kingdom and its brokerage service subsidiary
Autranet Inc. The sales closed during the first quarter of 2002. Because of the
acquisition of SLCAM and the disposition of CSFBDIRECT and Autranet, the results
for the six months ended June 30, 2002 are not fully comparable with the results
for the six months ended June 30, 2001. Beginning in the second quarter of 2002,
CSFB Financial Services results included the Swiss transaction services
business, which provides transactional services (cash clearing, payments,
custody) and solutions to financial institutions.
33
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following table sets forth the results of CSFB Financial Services for the
six months ended June 30, 2002 and 2001: 1)
6 months 6 months
in CHF m 2002 2001
---------------------------------------------------------------------------------
Net interest income 191 318
Net commission and service fee income 1,452 1,650
Net trading income 104 138
Other ordinary income 39 1
---------------------------------------------------------------------------------
Operating income 1,786 2,107
---------------------------------------------------------------------------------
Personnel expenses 847 1,120
Other operating expenses 527 680
---------------------------------------------------------------------------------
Operating expenses 1,374 1,800
---------------------------------------------------------------------------------
Gross operating profit 412 307
---------------------------------------------------------------------------------
Depreciation of non-current assets 72 88
Valuation adjustments, provisions and losses 19 6
---------------------------------------------------------------------------------
Net operating profit before extraordinary items,
acquisition-related costs and taxes 321 213
---------------------------------------------------------------------------------
Extraordinary income/(expenses), net 0 (1)
Taxes (90) (18)
---------------------------------------------------------------------------------
Net operating profit before acquisition-related costs 231 194
---------------------------------------------------------------------------------
Other data
Growth in discretionary institutional assets under
management (11.6%) 3.4%
of which net new assets (2.9%) 2.2%
Growth in net new assets Private Client Services 5.5% 8.7%
---------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation. The presentation of segment results differs from the
presentation of the Group's consolidated results in a) reporting contractor
costs as part of other operating expenses instead of personnel expenses, and
b) excluding acquisition-related costs of acquisition interest from
operating income, amortization of retention payments from personnel expenses
and amortization of acquired intangible assets and goodwill from
depreciation, valuation adjustments and losses. Acquisition-related costs
are reported separately in the business unit level only.
Six months ended June 30, 2002 compared to six months ended June 30, 2001
CSFB Financial Services measures business performance based on growth of
discretionary institutional net new assets and Private Client Services net new
assets. As a result of negative economic and market conditions, discretionary
institutional assets under management fell CHF 42.3 billion, or 11.6%, during
the six months ended June 30, 2002, compared to an increase of
CHF 12.3 billion, or 3.4%, in the six months ended June 30, 2001. Private Client
Services net new assets grew CHF 5.3 billion, or 5.5%, during the six months
ended June 30, 2002, compared to CHF 9.4 billion, or 8.7%, in the six months
ended June 30, 2001.
Operating income decreased CHF 321 million, or 15.2%, to CHF 1,786 million,
primarily as a result of the disposition of CSFBDIRECT as well as the negative
impact of weak equity markets. Consequently, net commission and service fee
income decreased CHF 198 million, or 12.0%, and net interest income decreased
CHF 127 million, or 39.9%. In addition, Pershing's operating income fell 12.4%
because of reduced trade volume and tighter interest rate spreads. In
June 2002, CSFB Financial Services agreed
34
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
to provide clearing services to the private client business of Deutsche Bank
Alex. Brown and to acquire certain assets of Deutsche Bank Securities Inc. 's
clearing business for retail broker-dealers.
Operating expenses decreased CHF 426 million, or 23.7%. Personnel expenses
decreased CHF 273 million, or 24.4%, and other operating expenses decreased
CHF 153 million, or 22.5%, primarily due to the sales of CSFBDIRECT and Autranet
and cost reduction measures.
The following tables provide details of assets under management at June 30, 2002
and December 31, 2001 and for the six months ended June 30, 2002 and 2001: 1)
in CHF bn 30.06.02 31.12.01
---------------------------------------------------------------------------------
Advisory 195.3 246.9
Discretionary 346.1 393.6
---------------------------------------------------------------------------------
Assets under management 541.4 640.5
---------------------------------------------------------------------------------
6 months 6 months
2002 2001
---------------------------------------------------------------------------------
Net new assets (2.9%) 2.2%
Market movement and other effects (8.7%) 1.2%
Growth/(decline) in discretionary institutional assets under
management (11.6%) 3.4%
---------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation.
Assets under management decreased CHF 99.1 billion, or 15.5%, in the six months
ended June 30, 2002, with institutional discretionary assets decreasing
CHF 42.3 billion, or 11.6%. The majority of the decrease in assets under
management was due to adverse market movements, including the weakening of the
US dollar against the Swiss franc.
Corporate Center
The results presented as Corporate Center include our parent company operations
including Group financing initiatives as well as income and expense items
related to centrally managed, own use real estate, mainly comprised of bank
premises within Switzerland. In addition, it includes consolidation adjustments
and adjustments to segment accounts related to management reporting policies and
reclassifications. For a discussion of these adjustments, please refer to "Item
5 -- Operating and Financial Review and Prospects -- Reporting principles" in
our annual report on Form 20-F for the year ended December 31, 2001 filed with
the SEC on May 15, 2002.
The Corporate Center performs typical parent company functions for the benefit
of the Group as a whole. Overhead costs attributable to operating businesses are
allocated to the respective segments. Certain Corporate Center expenses,
primarily if they are associated with Group-sponsored projects, as well as
restructuring provisions are not allocated to the segments.
Typically, the Corporate Center reports negative operating income, which is
primarily related to an offset of a reclassification between operating income
and expenses within the Investment Banking segment. Investment Banking's
operating income and expenses differ from the Group's consolidated operating
income and expenses because brokerage, execution and clearing expenses are
included in operating expenses instead of netted against operating income. This
allows CSFB's presentation of the income statement to be more consistent with
certain of its US competitors. Please refer to "--Credit Suisse First Boston"
for further information. The reclassification from operating income to operating
expenses
35
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
recorded at the Corporate Center was CHF 390 million for the six months ended
June 30, 2002 compared to CHF 346 million in the first half 2001.
The following table sets forth the results of the Corporate Center for the six
months ended June 30, 2002 and 2001:
6 months 6 months
in CHF m 2002 2001
---------------------------------------------------------------------------------
Operating income (825) (181)
Personnel expenses 262 437
Other operating expenses (784) (765)
---------------------------------------------------------------------------------
Operating expenses (522) (328)
---------------------------------------------------------------------------------
Gross operating profit/(loss) (303) 147
---------------------------------------------------------------------------------
Depreciation of non-current assets 130 202
Valuation adjustments, provisions and losses 81 9
---------------------------------------------------------------------------------
Loss before extraordinary items and taxes (514) (64)
---------------------------------------------------------------------------------
Extraordinary income/(expenses), net 61 13
Taxes (55) 29
---------------------------------------------------------------------------------
Net loss before minority interests (508) (22)
---------------------------------------------------------------------------------
Minority interests (67) (43)
---------------------------------------------------------------------------------
Net loss (575) (65)
---------------------------------------------------------------------------------
Six months ended June 30, 2002 compared to six months ended June 30, 2001
Because of the offsetting reclassifications from operating income to operating
expenses mentioned above, a comparison of the gross operating profit/(loss) is
more meaningful than discussing operating income and operating expenses on a
gross basis.
Gross operating loss was CHF 303 million in the first half of 2002 compared to a
gross operating profit of CHF 147 million in the first half of 2001. This was
primarily due to the income statement recognition of significantly lower
valuations of investments held at the Corporate Center. In addition, a realized
gain from the sale of our insurance branch in France was recorded as operating
income at Life & Pensions and Insurance and was reclassified to extraordinary
income/(expense), net within the Corporate Center result in line with the
treatment of other dispositions within the Group.
Depreciation of non-current assets decreased CHF 72 million, or 35.6%, in the
first half of 2002 compared to the first half of 2001. For the six months ended
June 30, 2001, we recorded a restructuring charge of CHF 48 million associated
with the closing of the Luxembourg-based Pan-European online brokerage platform.
In addition, depreciation on own use real estate decreased CHF 18 million.
Valuation adjustments, provisions and losses increased CHF 72 million in the
first half of 2002 primarily due to an increase of CHF 76 million related to a
valuation adjustment on a participation and increased loan provisions.
Extraordinary income/(expenses), net increased CHF 48 million in the first half
of 2002. This was primarily due to the sale of our insurance branch in France.
In the first half of 2001 extraordinary income/ (expenses) included a gain in
connection with the sale of WI which was partially offset by extraordinary
expenses related to the closing of the online brokerage platform.
For a discussion of our critical accounting policies please refer to
"Item 5 -- Operating and Financial Review and Prospects" in our annual report on
Form 20-F for the year ended December 31, 2001 filed with the SEC on May 15,
2002.
36
MARKET RISK
Market risk exposures in trading portfolios
The following table provides an overview of the value at risk, or VaR, estimates
in our material trading portfolios at:
in CHF m 30.06.02 31.12.01
---------------------------------------------------------------------------------
Interest rates 83 58
Foreign exchange rates 28 18
Equity prices 25 47
Commodity prices 1 4
---------------------------------------------------------------------------------
Subtotal 137 127
---------------------------------------------------------------------------------
Diversification benefit (70) (55)
---------------------------------------------------------------------------------
Total market risk exposure 67 72
---------------------------------------------------------------------------------
We compute the VaR estimates separately for each risk type and for the whole
portfolio using the historical simulation methodology. Diversification benefit
reflects the net difference between the sum of the 99th percentile loss for each
individual risk type and for the total loan portfolio. Estimates are based on
VaR methodology for a 99% confidence level with a one-day holding period.
CSFB and other businesses with trading portfolios use "backtesting" for the
assessment of the accuracy of the VaR model. Actual daily profit and loss is
compared to VaR with a one-day holding period. The one-day VaR measure is
intended to be larger than all but a certain fraction--as determined by the
confidence level--of trading outcomes. Backtesting is performed at various
levels, from segment level down to more specific trading areas. Results of the
backtesting process at the business unit and aggregate levels demonstrated no
exceptions in the six month period ended June 30, 2002.
Market risk exposures in other than trading portfolios
In the other than trading portfolios, including all non-trading books of the
banking segments and the financial investments of the Insurance segments, the
major elements of our market risk were exposures to changes in the CHF to USD
and EUR exchange rates and interest rates as well as equity instrument price
levels in Western Europe and North America.
The following table summarizes the market risk exposures in our material other
than trading portfolios at:
in CHF m 30.06.02 31.12.01
---------------------------------------------------------------------------------
Interest rates 675 530
Foreign exchange rates 443 561
Equity prices 1,485 2,676
Commodity prices 0 8
---------------------------------------------------------------------------------
Subtotal 2,603 3,775
---------------------------------------------------------------------------------
Diversification benefit (1,125) (1,444)
---------------------------------------------------------------------------------
Total market risk exposure 1,478 2,331
---------------------------------------------------------------------------------
(ESTIMATES ARE BASED ON VAR METHODOLOGY FOR A 99% CONFIDENCE LEVEL WITH A
TEN-DAY HOLDING PERIOD)
The Corporate Center undertakes certain corporate financing activities such as
the funding of business initiatives and holding of investments in other
financial services companies. The market risks associated with the Corporate
Center are managed according to the underlying objectives.
37
OVERVIEW OF CHANGES TO SEGMENTS AS A RESULT OF REALIGNMENT
Overview
Effective January 1, 2002, we realigned our existing operations into two
business units, CSFS and CSFB.
CSFS includes:
- Private Banking, constituting Credit Suisse Private Banking, or CSPB, Credit
Suisse Personal Finance, or CSPF, now called European Financial Services
Initiative, and the affluent client business of Credit Suisse Banking, or CSB;
- Corporate & Retail Banking, which includes CSB (excluding the affluent client
business) and youtrade, which was previously part of CSPF;
- Life & Pensions, formerly called Winterthur Life & Pensions, or WLP; and
- Insurance, formerly called Winterthur Insurance, or WIN.
CSFB includes:
- Investment Banking, which consists of the former CSFB but excludes Pershing
and Private Client Services; and
- CSFB Financial Services, which includes Credit Suisse Asset Management, or
CSAM, Pershing and Private Client Services.
38
OVERVIEW OF CHANGES TO SEGMENTS AS A RESULT OF REALIGNMENT
The following chart summarizes the changes in our reporting structure following
the realignment effective January 1, 2002:
[GRAPHIC]
The following tables present the results for the years ended December 31, 2001,
2000 and 1999 for the CSFS and CSFB business units on an operating basis and on
a basis consistent with our consolidated income statement. The results of the
CSFS business unit reflect the combined results of the former business units
WIN, WLP, CSB, CSPF and CSPB. The results of the CSFB business unit reflect the
combined results of the former business units CSFB and CSAM.
39
OVERVIEW OF CHANGES TO SEGMENTS AS A RESULT OF REALIGNMENT
Credit Suisse Financial Services
The following table sets forth the results of CSFS on an operating basis for the
years ended December 31: 1)
in CHF m 2001 2000 1999
--------------------------------------------------------------------------------------------
Operating income 15,382 15,771 11,559
--------------------------------------------------------------------------------------------
Personnel expenses 5,639 5,361 4,619
Other operating expenses 3,686 3,390 2,834
--------------------------------------------------------------------------------------------
Operating expenses 9,325 8,751 7,453
--------------------------------------------------------------------------------------------
Gross operating profit 6,057 7,020 4,106
--------------------------------------------------------------------------------------------
Depreciation of non-current assets 581 384 232
Amortization of present value of future profit (PVFP) 237 14 0
Valuation adjustments, provisions and losses from the
banking business 2) 383 723 665
--------------------------------------------------------------------------------------------
Net operating profit before extraordinary items and taxes 4,856 5,899 3,209
--------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net 25 21 52
Taxes 3) (1,113) (1,313) (692)
--------------------------------------------------------------------------------------------
Net operating profit before minority interests 3,768 4,607 2,569
--------------------------------------------------------------------------------------------
Amortization of acquired intangible assets and goodwill (116) (55) (29)
Tax impact 2 0 0
--------------------------------------------------------------------------------------------
Net profit before minority interests 3,654 4,552 2,540
--------------------------------------------------------------------------------------------
Minority interests (69) (176) (62)
--------------------------------------------------------------------------------------------
Net profit 3,585 4,376 2,478
--------------------------------------------------------------------------------------------
Reconciliation to net operating profit
Amortization of acquired intangible assets and goodwill 116 55 29
Tax impact (2) 0 0
--------------------------------------------------------------------------------------------
Net operating profit 3,699 4,431 2,507
--------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation. The operating basis income statement differs from the
presentation of the Group's consolidated results in excluding
acquisition-related costs of amortization of acquired intangible assets and
goodwill from depreciation, valuation adjustments and losses.
Acquisition-related costs are reported separately in the income statement.
2) Includes a valuation adjustment taken at Group level of CHF 22 million for
2001 and negative adjustments of CHF 191 million and CHF 99 million for
2000 and 1999, respectively, resulting from the difference between the
statistical and the actual credit provisions.
3) Excluding tax impact on amortization of acquired intangible assets and
goodwill.
40
OVERVIEW OF CHANGES TO SEGMENTS AS A RESULT OF REALIGNMENT
The following table presents the results of CSFS for each of the years in the
three-year period ended December 31, 2001 including the effects of amortization
of acquired intangible assets and goodwill: 1)
in CHF m 2001 2000 1999
--------------------------------------------------------------------------------------------
Operating income 15,382 15,771 11,559
--------------------------------------------------------------------------------------------
Personnel expenses 5,639 5,361 4,619
Other operating expenses 3,686 3,390 2,834
--------------------------------------------------------------------------------------------
Operating expenses 9,325 8,751 7,453
--------------------------------------------------------------------------------------------
Gross operating profit 6,057 7,020 4,106
--------------------------------------------------------------------------------------------
Depreciation of non-current assets 2) 818 398 232
Amortization of acquired intangible assets and goodwill 116 55 29
Valuation adjustments, provisions and losses from the
banking business 3) 383 723 665
--------------------------------------------------------------------------------------------
Profit before extraordinary items and taxes 4,740 5,844 3,180
--------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net 25 21 52
Taxes (1,111) (1,313) (692)
--------------------------------------------------------------------------------------------
Net profit before minority interests 3,654 4,552 2,540
--------------------------------------------------------------------------------------------
Minority interests (69) (176) (62)
--------------------------------------------------------------------------------------------
Net profit 3,585 4,376 2,478
--------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation.
2) Includes amortization of PVFP from the insurance business.
3) Includes a valuation adjustment taken at Group level of CHF 22 million for
2001 and negative adjustments of CHF 191 million and CHF 99 million for
2000 and 1999, respectively, resulting from the difference between the
statistical and the actual credit provisions.
41
OVERVIEW OF CHANGES TO SEGMENTS AS A RESULT OF REALIGNMENT
Credit Suisse First Boston
The following table sets forth the results of CSFB on an operating basis for the
years ended December 31: 1)
in CHF m 2001 2000 1999
--------------------------------------------------------------------------------------------
Operating income 25,262 22,151 15,702
--------------------------------------------------------------------------------------------
Personnel expenses 13,731 12,015 8,073
Other operating expenses 6,512 4,586 3,484
--------------------------------------------------------------------------------------------
Operating expenses 20,243 16,601 11,557
--------------------------------------------------------------------------------------------
Gross operating profit 5,019 5,550 4,145
--------------------------------------------------------------------------------------------
Depreciation of non-current assets 951 673 393
Valuation adjustments, provisions and losses 2) 1,541 537 786
--------------------------------------------------------------------------------------------
Net operating profit before extraordinary items,
acquisition-related costs, exceptional items and taxes 2,527 4,340 2,966
--------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net (15) (1) (2)
Taxes 3) (524) (1,107) (739)
--------------------------------------------------------------------------------------------
Net operating profit before acquisition-related costs,
exceptional items and minority interests 1,988 3,232 2,225
--------------------------------------------------------------------------------------------
Acquisition interest (828) (225) (21)
Amortization of retention payments (812) (181) 0
Amortization of acquired intangible assets and goodwill (1,455) (349) (90)
Exceptional items (1,428) 0 0
Tax impact 1,148 167 2
--------------------------------------------------------------------------------------------
Net (loss)/profit before minority interests (1,387) 2,644 2,116
--------------------------------------------------------------------------------------------
Minority interests (1) (3) (1)
--------------------------------------------------------------------------------------------
Net (loss)/profit (1,388) 2,641 2,115
--------------------------------------------------------------------------------------------
Reconciliation to net operating profit
Amortization of acquired intangible assets and goodwill 1,455 349 90
Exceptional items 4) 1,428 0 0
Tax impact (602) (43) (2)
--------------------------------------------------------------------------------------------
Net operating profit 893 2,947 2,203
--------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation. The operating basis income statement differs from the
presentation of the Group's consolidated results in a) including brokerage,
execution and clearing expenses as part of other operating expenses in line
with certain US competitors, rather than netted against operating income, b)
reporting contractor costs as part of other operating expenses instead of
personnel expenses, c) excluding acquisition-related costs of acquisition
interest from operating income, amortization of retention payments from
personnel expenses and amortization of acquired intangible assets and
goodwill from depreciation, valuation adjustments and losses, d) deducting
expenses related to certain redeemable preferred securities classified as
minority interests from operating income and e) excluding exceptional items
from operating income, personnel expenses, depreciation of non-current
assets and valuation adjustments, provisions and losses. Acquisition-related
costs and exceptional items are reported separately in the income statement.
2) Includes valuation adjustments taken at the Group level of CHF 194 million,
CHF 6 million and CHF 0 million for 2001, 2000 and 1999, respectively,
resulting from the difference between the statistical and the actual credit
provisions. In 2001, CSFB recorded credit provisions of CHF 800 million in
addition to the statistically derived provision level due to substantial
deterioration in the economic environment.
42
OVERVIEW OF CHANGES TO SEGMENTS AS A RESULT OF REALIGNMENT
3) Excluding tax impact on acquisition-related costs and exceptional items.
Prior to 2001, deferred tax assets for net operating loss carry-forwards
were not recorded. In 2001, the accounting policy was changed to allow such
deferred tax assets to be recorded in the event of sales of businesses at a
taxable gain, where realization of the deferred tax assets is certain. The
impact on the financial statements was a tax benefit of CHF 303 million in
2001. Prior-period financial statements disclosed herein would be unchanged
under the new policy.
4) Certain exceptional items are excluded from the calculation of the Group's
net operating profit. In 2001 these items included cost reduction
initiatives of CHF 1,259 million and a settlement of CHF 169 million with
the SEC and the NASDR regarding their investigations into certain IPO
allocation practices.
The following table presents the results of CSFB for each of the years in the
three-year period ended December 31, 2001 including the effects of acquisition
interest, amortization of retention payments, amortization of acquired
intangible assets and goodwill and the exceptional items described under "--Year
ended December 31, 2001 compared to year ended December 31, 2000" in the annual
report on Form 20-F for the year ended December 31, 2001: 1)
in CHF m 2001 2000 1999
--------------------------------------------------------------------------------------------
Operating income 24,400 21,926 15,681
--------------------------------------------------------------------------------------------
Personnel expenses 15,528 12,196 8,073
Other operating expenses 6,512 4,586 3,484
--------------------------------------------------------------------------------------------
Operating expenses 22,040 16,782 11,557
--------------------------------------------------------------------------------------------
Gross operating profit 2,360 5,144 4,124
--------------------------------------------------------------------------------------------
Depreciation of non-current assets 963 673 393
Amortization of acquired intangible assets and goodwill 1,455 349 90
Valuation adjustments, provisions and losses 2) 1,938 537 786
--------------------------------------------------------------------------------------------
(Loss)/Profit before extraordinary items and taxes (1,996) 3,585 2,855
--------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net (15) (1) (2)
Taxes 624 (940) (737)
--------------------------------------------------------------------------------------------
Net (loss)/profit before minority interests (1,387) 2,644 2,116
--------------------------------------------------------------------------------------------
Minority interests (1) (3) (1)
--------------------------------------------------------------------------------------------
Net (loss)/profit (1,388) 2,641 2,115
--------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation. This table differs from the presentation of the Group's
consolidated results in a) including brokerage, execution and clearing
expenses as part of other operating expenses in common with certain US
competitors rather than netted against operating income, b) reporting
contractor costs as part of other operating expenses instead of personnel
expenses and c) deducting expenses related to certain redeemable preferred
securities classified as minority interests from operating income.
2) Includes valuation adjustments taken at the Group level of CHF
194 million, CHF 6 million, CHF 0 million for 2001, 2000 and 1999,
respectively, resulting from the difference between the statistical and the
actual credit provisions. In 2001, CSFB recorded credit provisions of CHF
800 million in addition to the statistically derived provision level due to
substantial deterioration in the economic environment.
43
OVERVIEW OF CHANGES TO SEGMENTS AS A RESULT OF REALIGNMENT
The following tables present the results for the years ended December 31, 2001,
2000 and 1999 for the Private Banking and Corporate & Retail Banking segments of
the CSFS business unit and the Investment Banking and CSFB Financial Services
segments of the CSFB business unit on the original reported basis and on the new
basis, after giving effect to the realignment. In the tables for Investment
Banking and CSFB Financial Services, we have also reclassified contractor costs
from personnel expenses to other operating expenses to conform to the
presentation for the six months ended June 30, 2002. The Investment Banking
table also reflects the movement of the results of certain non-continuing
real-estate and distressed assets from Fixed Income to Other, to conform to
Investment Banking's presentation for the six months ended June 30, 2002. The
results of the Life & Pensions and Insurance segments of CSFS were not affected
by the realignment and, accordingly, are omitted.
Private Banking CSPB CSPF 2)
new reporting former reporting former reporting
------------------------------ ------------------------------ ----------------------
in CHF m 1) 2001 2000 1999 2001 2000 1999 2001 2000
-----------------------------------------------------------------------------------------------------------------------
Net interest income 1,976 2,121 1,655 1,171 1,247 898 -- --
Net commission and service
fee income 4,519 4,869 3,625 3,939 4,171 3,187 -- --
Net trading income 640 837 649 568 752 592 -- --
Other ordinary income 110 86 110 103 81 38 -- --
-----------------------------------------------------------------------------------------------------------------------
Operating income 7,245 7,913 6,039 5,781 6,251 4,715 56 61
-----------------------------------------------------------------------------------------------------------------------
Personnel expenses 2,502 2,420 1,947 1,706 1,734 1,418 194 113
Other operating expenses 1,522 1,350 1,006 1,001 883 768 290 223
-----------------------------------------------------------------------------------------------------------------------
Operating expenses 4,024 3,770 2,953 2,707 2,617 2,186 484 336
-----------------------------------------------------------------------------------------------------------------------
Gross operating profit/(loss) 3,221 4,143 3,086 3,074 3,634 2,529 (428) (275)
-----------------------------------------------------------------------------------------------------------------------
Depreciation of non-current
assets 215 101 60 66 41 39 43 13
Valuation adjustments,
provisions and losses 75 213 112 36 160 55 4 1
-----------------------------------------------------------------------------------------------------------------------
Net operating profit/(loss)
before extraordinary items
and taxes 2,931 3,829 2,914 2,972 3,433 2,435 (475) (289)
-----------------------------------------------------------------------------------------------------------------------
Extraordinary
income/(expenses), net 12 1 18 15 1 18 (5) 0
Taxes 3) (642) (865) (623) (631) (766) (516) 97 67
-----------------------------------------------------------------------------------------------------------------------
Net operating profit/(loss)
before minority interests 2,301 2,965 2,309 2,356 2,668 1,937 (383) (222)
-----------------------------------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation. The segment income statement differs from the presentation of
the Group's consolidated results in excluding acquisition-related costs of
amortization of acquired intangible assets and goodwill from depreciation,
valuation adjustments and losses. Acquisition-related costs and minority
interests are reported separately at the business unit level only.
2) As CSPF was a new initiative and not a separate operating segment, no
financial information was separately disclosed for 1999.
3) Excluding tax impact on amortization of acquired intangible assets and
goodwill.
44
OVERVIEW OF CHANGES TO SEGMENTS AS A RESULT OF REALIGNMENT
Corporate & Retail Banking CSB
new reporting former reporting
------------------------------ ------------------------------
in CHF m 1) 2001 2000 1999 2001 2000 1999
-----------------------------------------------------------------------------------------------------------------------
Net interest income 1,658 1,513 1,470 2,456 2,379 2,227
Net commission and service fee income 461 506 436 1,005 1,159 946
Net trading income 250 263 173 318 342 230
Other ordinary income 29 42 75 27 45 75
-----------------------------------------------------------------------------------------------------------------------
Operating income 2,398 2,324 2,154 3,806 3,925 3,478
-----------------------------------------------------------------------------------------------------------------------
Personnel expenses 1,000 940 872 1,602 1,513 1,401
Other operating expenses 620 673 628 851 917 866
-----------------------------------------------------------------------------------------------------------------------
Operating expenses 1,620 1,613 1,500 2,453 2,430 2,267
-----------------------------------------------------------------------------------------------------------------------
Gross operating profit 778 711 654 1,353 1,495 1,211
-----------------------------------------------------------------------------------------------------------------------
Depreciation of non-current assets 84 37 17 190 84 38
Valuation adjustments, provisions and losses 308 510 553 343 562 610
-----------------------------------------------------------------------------------------------------------------------
Net operating profit before extraordinary items and
taxes 386 164 84 820 849 563
-----------------------------------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net 13 20 34 15 20 34
Taxes 2) (94) (42) (23) (202) (208) (130)
-----------------------------------------------------------------------------------------------------------------------
Net operating profit before minority interests 305 142 95 633 661 467
-----------------------------------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation. The segment income statement differs from the presentation of
the Group's consolidated results in excluding acquisition-related costs of
amortization of acquired intangible assets and goodwill from depreciation,
valuation adjustments and losses. Acquisition-related costs and minority
interests are reported separately at the business unit level only.
2) Excluding tax impact on amortization of acquired intangible assets and
goodwill.
45
OVERVIEW OF CHANGES TO SEGMENTS AS A RESULT OF REALIGNMENT
Investment Banking CSFB
new reporting former reporting
------------------------------ ------------------------------
in CHF m 1) 2001 2000 1999 2001 2000 1999
--------------------------------------------------------------------------------------------------------------------
Fixed Income 2) 9,488 4,894 5,792 9,611 4,874 6,651
Equity 6,581 8,477 4,786 6,581 8,477 4,786
Investment Banking 4,697 6,147 3,454 4,696 6,148 3,453
Financial Services -- -- -- 2,569 447 --
Other 2) 451 574 500 172 593 (358)
--------------------------------------------------------------------------------------------------------------------
Operating income 21,217 20,092 14,532 23,629 20,539 14,532
--------------------------------------------------------------------------------------------------------------------
Personnel expenses 11,764 11,224 7,619 13,582 11,830 7,999
Other operating expenses 5,176 3,905 3,095 5,543 3,634 2,714
--------------------------------------------------------------------------------------------------------------------
Operating expenses 16,940 15,129 10,714 19,125 15,464 10,713
--------------------------------------------------------------------------------------------------------------------
Gross operating profit 4,277 4,963 3,818 4,504 5,075 3,819
--------------------------------------------------------------------------------------------------------------------
Depreciation of non-current assets 772 596 371 919 644 371
Valuation adjustments, provisions and losses 1,514 536 786 1,541 537 786
--------------------------------------------------------------------------------------------------------------------
Net operating profit before extraordinary items,
acquisition-related costs, exceptional items and
taxes 1,991 3,831 2,661 2,044 3,894 2,662
--------------------------------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net (1) 0 0 (1) 0 0
Taxes 3) (439) (1,033) (715) (455) (1,050) (715)
--------------------------------------------------------------------------------------------------------------------
Net operating profit before acquisition-related
costs, exceptional items and minority interests 1,551 2,798 1,946 1,588 2,844 1,947
--------------------------------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation. The segment income statement differs from the presentation of
the Group's consolidated results in a) including brokerage, execution and
clearing expenses as part of other operating expenses in line with certain
US competitors, rather than netted against operating income, b) reporting
contractor costs as part of other operating expenses instead of personnel
expenses, c) excluding acquisition-related costs of acquisition interest
from operating income, amortization of retention payments from personnel
expenses and amortization of acquired intangible assets and goodwill from
depreciation, valuation adjustments and losses, d) deducting expenses
related to certain redeemable preferred securities classified as minority
interests from operating income and e) excluding exceptional items from
operating income, personnel expenses, depreciation of non-current assets and
valuation adjustments, provisions and losses. Acquisition-related costs,
exceptional items and minority interests are reported separately at the
business unit level only.
2) Reflects the movement of the results of certain non-continuing real estate
and distressed assets from Fixed Income to Other.
3) Excluding tax impact on acquisition-related costs and exceptional items.
46
OVERVIEW OF CHANGES TO SEGMENTS AS A RESULT OF REALIGNMENT
CSFB Financial Services CSAM
new reporting former reporting
------------------------------ ------------------------------
in CHF m 1) 2001 2000 1999 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------
Operating income 4,045 2,059 1,170 1,633 1,612 1,170
---------------------------------------------------------------------------------------------------------------------------
Personnel expenses 1,967 791 454 646 656 467
Other operating expenses 1,336 681 389 472 481 377
---------------------------------------------------------------------------------------------------------------------------
Operating expenses 3,303 1,472 843 1,118 1,137 844
---------------------------------------------------------------------------------------------------------------------------
Gross operating profit 742 587 327 515 475 326
---------------------------------------------------------------------------------------------------------------------------
Depreciation of non-current assets 179 77 22 32 29 22
Valuation adjustments, provisions and losses 27 1 0 0 0 0
---------------------------------------------------------------------------------------------------------------------------
Net operating profit before extraordinary items,
acquisition-related costs, exceptional items and taxes 536 509 305 483 446 304
---------------------------------------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net (14) (1) (2) (14) (1) (2)
Taxes 2) (85) (74) (24) (69) (57) (24)
---------------------------------------------------------------------------------------------------------------------------
Net operating profit before acquisition-related costs,
exceptional items and minority interests 437 434 279 400 388 278
---------------------------------------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation. The segment income statement differs from the presentation of
the Group's consolidated results in a) reporting contractor costs as part of
other operating expenses instead of personnel expenses, b) excluding
acquisition-related costs of acquisition interest from operating income,
amortization of retention payments from personnel expenses and amortization
of acquired intangible assets and goodwill from depreciation, valuation
adjustments and losses, and c) excluding exceptional items from operating
income, personnel expenses, depreciation of non-current assets and valuation
adjustments, provisions and losses. Acquisition-related costs, exceptional
items and minority interests are reported separately at the business unit
level only.
2) Excluding tax impact on acquisition-related costs and exceptional items.
47
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
The following notes for the six months ended June 30, 2002 and 2001, including
the reconciliation to accounting principles generally accepted in the United
States, should be read in conjunction with the financial statements presented in
the Credit Suisse Group Q2 Quarterly Report 2002, furnished to the SEC on
Form 6-K on August 14, 2002.
TABLE OF CONTENTS
1 Segment reporting by operating segments..................... 49
2 Differences between Swiss and US accounting
principles--Interim period six months ended June 30, 2002
and 2001.................................................. 56
3a. Reconciliation of Swiss GAAP and US GAAP net profit......... 66
3b. Reconciliation of Swiss GAAP and US GAAP shareholders'
equity.................................................... 67
4a. Condensed consolidated statements of income................. 68
4b. Condensed consolidated balance sheets....................... 69
5. Earnings per share.......................................... 71
6. Consolidated cash flows..................................... 72
7. US GAAP consolidated changes in shareholders' equity........ 74
8. US GAAP accumulated other comprehensive income.............. 75
9. Recently issued US accounting standards..................... 76
10. Income taxes................................................ 79
11. Derivatives financial information........................... 80
12. Litigation.................................................. 81
48
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
1 Segment reporting by operating segments
The activities of the Group are managed and organized based on the different
types of products and services that the Group offers to its customers. Operating
income includes income directly attributable to the individual segments as
further described below.
The following presentation shows the Group's segment results for the six months
ended June 30, 2002 and 2001. Based on the Group's management reporting
principles, the Group reported results for six segments: Private Banking,
Corporate & Retail Banking, Life & Pensions, Insurance, Investment Banking and
CSFB Financial Services. The Credit Suisse Financial Services business unit
totals the results of the Private Banking, Corporate & Retail Banking, Life &
Pensions and Insurance segments. The Credit Suisse First Boston business unit
totals the results of the Investment Banking and CSFB Financial Services
segments.
The Group's consolidated results comprise the results of the segments and of the
Corporate Center. Corporate Center costs and revenues attributable to operating
businesses have been allocated to the respective segments. The Corporate Center
records expenses relating to projects sponsored by the Group, restructuring
costs, the difference between provisions for expected credit risk recorded by
each segment and actual credit loss experience, as well as other items as set
out in note 4.1 of our audited consolidated financial statements as of and for
each of the years in the three-year period ended December 31, 2001 beginning on
page F-1 of this Form 6-K.
49
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
1 Segment reporting by operating segments (continued)
Segment income statement for the six months ended June 30, 2002 1)
Corporate & Credit Suisse
Private Retail Life & Financial
in CHF m Banking Banking Pensions Insurance Subtotal Reclassifications Services
---------------------------------------------------------------------------------------------------------------------------------
Operating income 2) 3,544 1,245 608 627 6,024 -- 6,024
---------------------------------------------------------------------------------------------------------------------------------
Personnel expenses 1,252 468 432 765 2,917 -- 2,917
Other operating expenses 731 307 285 400 1,723 -- 1,723
---------------------------------------------------------------------------------------------------------------------------------
Operating expenses 1,983 775 717 1,165 4,640 -- 4,640
---------------------------------------------------------------------------------------------------------------------------------
Gross operating profit/(loss) 1,561 470 (109) (538) 1,384 -- 1,384
---------------------------------------------------------------------------------------------------------------------------------
Depreciation of non-current assets
3) 109 37 194 82 422 -- 422
Amortization of acquired intangible
assets and goodwill -- -- -- -- -- 75 75
Valuation adjustments, provisions
and losses 43 151 -- -- 194 -- 194
---------------------------------------------------------------------------------------------------------------------------------
Net operating profit/(loss) before
extraordinary items, acquisition-
related costs and taxes 1,409 282 (303) (620) 768 (75) 693
---------------------------------------------------------------------------------------------------------------------------------
Extraordinary income/(expenses),
net 19 (1) 0 0 18 -- 18
Taxes (308) (66) (109) (17) (500) 1 (499)
---------------------------------------------------------------------------------------------------------------------------------
Net operating profit/(loss) before
acquisition-related costs and
minority interests 1,120 215 (412) (637) 286 (74) 212
---------------------------------------------------------------------------------------------------------------------------------
Amortization of acquired intangible
assets and goodwill (75) 75 0
Tax impact 1 (1) 0
---------------------------------------------------------------------------------------------------------------------------------
Net profit before minority
interests 212 -- 212
---------------------------------------------------------------------------------------------------------------------------------
Minority interests 83 -- 83
---------------------------------------------------------------------------------------------------------------------------------
Net profit 295 -- 295
---------------------------------------------------------------------------------------------------------------------------------
1) The presentation of segment results differs from the presentation of the
Group's consolidated results in excluding acquisition-related costs of
amortization of acquired intangible assets and goodwill from depreciation,
valuation adjustments and losses. Acquisition-related costs and minority
interests are reported separately at the business unit level only.
2) For the purpose of the consolidated financial statements, operating income
for the insurance businesses is defined as net premiums earned, less claims
incurred and change in technical provisions and expenses for processing
claims, less commissions, plus net investment income from insurance
business.
3) Including amortization of Present Value of Future Profits, or PVFP, from the
insurance businesses.
50
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
1 Segment reporting by operating segments (continued)
Segment income statement for the six months ended June 30, 2002 1) (continued)
CSFB
Investment Financial Credit Suisse
in CHF m Banking Services Subtotal Reclassifications First Boston
-------------------------------------------------------------------------------------------------------------------
Operating income 9,317 1,786 11,103 (325) 10,778
-------------------------------------------------------------------------------------------------------------------
Personnel expenses 5,268 847 6,115 359 6,474
Other operating expenses 1,947 527 2,474 -- 2,474
-------------------------------------------------------------------------------------------------------------------
Operating expenses 7,215 1,374 8,589 359 8,948
-------------------------------------------------------------------------------------------------------------------
Gross operating profit/(loss) 2,102 412 2,514 (684) 1,830
-------------------------------------------------------------------------------------------------------------------
Depreciation of non-current assets 320 72 392 -- 392
Amortization of acquired intangible assets
and goodwill -- -- -- 687 687
Valuation adjustments, provisions and losses 739 19 758 -- 758
-------------------------------------------------------------------------------------------------------------------
Net operating profit/(loss) before
extraordinary items, acquisition-related
costs and taxes 1,043 321 1,364 (1,371) (7)
-------------------------------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net 26 0 26 -- 26
Taxes (225) (90) (315) 365 50
-------------------------------------------------------------------------------------------------------------------
Net operating profit before acquisition-
related costs 844 231 1,075 (1,006) 69
-------------------------------------------------------------------------------------------------------------------
Acquisition interest (325) 325 0
Amortization of retention payments (359) 359 0
Amortization of acquired intangible assets
and goodwill (687) 687 0
Tax impact 365 (365) 0
-------------------------------------------------------------------------------------------------------------------
Net profit 69 -- 69
-------------------------------------------------------------------------------------------------------------------
1) The presentation of segment results differs from the presentation of the
Group's consolidated results in a) including brokerage, execution and
clearing expenses as part of other operating expenses in line with certain
US competitors, rather than netted against operating income, b) reporting
contractor costs as part of other operating expenses instead of personnel
expenses, c) excluding acquisition-related costs of acquisition interest
from operating income, amortization of retention payments from personnel
expenses and amortization of acquired intangible assets and goodwill from
depreciation, valuation adjustments and losses and d) deducting expenses
related to certain redeemable preferred securities classified as minority
interests from operating income. Acquisition-related costs are reported
separately at the business unit level only.
51
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
1 Segment reporting by operating segments (continued)
Business unit income statement for the six months ended June 30, 2002
(continued)
Credit Suisse
Financial Credit Suisse Corporate Credit Suisse
in CHF m Services First Boston Subtotal Center Group
-----------------------------------------------------------------------------------------------------------------
Operating income 6,024 10,778 16,802 (825) 15,977
-----------------------------------------------------------------------------------------------------------------
Personnel expenses 2,917 6,474 9,391 262 9,653
Other operating expenses 1,723 2,474 4,197 (784) 3,413
-----------------------------------------------------------------------------------------------------------------
Operating expenses 4,640 8,948 13,588 (522) 13,066
-----------------------------------------------------------------------------------------------------------------
Gross operating profit/(loss) 1,384 1,830 3,214 (303) 2,911
-----------------------------------------------------------------------------------------------------------------
Depreciation of non-current assets 422 1) 392 814 133 947
Amortization of acquired intangible
assets and goodwill 75 687 762 (3) 759
Valuation adjustments, provisions and
losses 194 758 952 81 1,033
-----------------------------------------------------------------------------------------------------------------
Profit/(loss) before extraordinary items
and taxes 693 (7) 686 (514) 172
-----------------------------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net 18 26 44 61 105
Taxes (499) 50 (449) (55) (504)
-----------------------------------------------------------------------------------------------------------------
Net profit/(loss) before minority
interests 212 69 281 (508) (227)
-----------------------------------------------------------------------------------------------------------------
Minority interests 83 0 83 (67) 16
-----------------------------------------------------------------------------------------------------------------
Net profit/(loss) 295 69 364 (575) (211)
-----------------------------------------------------------------------------------------------------------------
Other data
Total assets as of June 30, 2002 2) 396,687 652,673 1,049,360 (61,775) 987,585
-----------------------------------------------------------------------------------------------------------------
1) Including amortization of PVFP from the insurance businesses.
2) Intersegment consolidation items have been eliminated in Corporate Center.
52
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
1 Segment reporting by operating segments (continued)
Segment income statement for the six months ended June 30, 2001 1)
Corporate & Credit Suisse
Private Retail Life & Financial
in CHF m Banking Banking Pensions Insurance Subtotal Reclassifications Services
-----------------------------------------------------------------------------------------------------------------------------
Operating income 2) 3,828 1,247 1,416 1,811 8,302 -- 8,302
-----------------------------------------------------------------------------------------------------------------------------
Personnel expenses 1,278 508 395 742 2,923 -- 2,923
Other operating expenses 756 338 300 407 1,801 -- 1,801
-----------------------------------------------------------------------------------------------------------------------------
Operating expenses 2,034 846 695 1,149 4,724 -- 4,724
-----------------------------------------------------------------------------------------------------------------------------
Gross operating profit 1,794 401 721 662 3,578 -- 3,578
-----------------------------------------------------------------------------------------------------------------------------
Depreciation of non-current
assets 3) 68 24 158 77 327 -- 327
Amortization of acquired
intangible assets and
goodwill -- -- -- -- -- 42 42
Valuation adjustments,
provisions and losses 102 149 -- -- 251 -- 251
-----------------------------------------------------------------------------------------------------------------------------
Net operating profit before
extraordinary items,
acquisition-related costs and
taxes 1,624 228 563 585 3,000 (42) 2,958
-----------------------------------------------------------------------------------------------------------------------------
Extraordinary
income/(expenses), net 2 9 0 0 11 -- 11
Taxes (405) (56) (129) (180) (770) 1 (769)
-----------------------------------------------------------------------------------------------------------------------------
Net operating profit before
acquisition-related costs and
minority interests 1,221 181 434 405 2,241 (41) 2,200
-----------------------------------------------------------------------------------------------------------------------------
Amortization of acquired
intangible assets and
goodwill (42) 42 0
Tax impact 1 (1) 0
-----------------------------------------------------------------------------------------------------------------------------
Net profit before minority
interests 2,200 -- 2,200
-----------------------------------------------------------------------------------------------------------------------------
Minority interests (88) -- (88)
-----------------------------------------------------------------------------------------------------------------------------
Net profit 2,112 -- 2,112
-----------------------------------------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation. The presentation of segment results differs from the
presentation of the Group's consolidated results in excluding
acquisition-related costs of amortization of acquired intangible assets and
goodwill from depreciation, valuation adjustments and losses.
Acquisition-related costs and minority interests are reported separately at
the business level only.
2) For the purpose of the consolidated financial statements, operating income
for the insurance businesses is defined as net premiums earned, less claims
incurred and change in technical provisions and expenses for processing
claims, less commissions, plus net investment income from the insurance
business.
3) Including amortization of PVFP from the insurance businesses.
53
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
1 Segment reporting by operating segments (continued)
Segment income statement for the six months ended June 30, 2001 1) (continued)
CSFB
Investment Financial Credit Suisse
in CHF m Banking Services Subtotal Reclassifications First Boston
-------------------------------------------------------------------------------------------------------------------
Operating income 12,521 2,107 14,628 (476) 14,152
-------------------------------------------------------------------------------------------------------------------
Personnel expenses 7,106 1,120 8,226 403 8,629
Other operating expenses 2,452 680 3,132 -- 3,132
-------------------------------------------------------------------------------------------------------------------
Operating expenses 9,558 1,800 11,358 403 11,761
-------------------------------------------------------------------------------------------------------------------
Gross operating profit 2,963 307 3,270 (879) 2,391
-------------------------------------------------------------------------------------------------------------------
Depreciation of non-current assets 366 88 454 -- 454
Amortization of acquired intangible assets
and goodwill -- -- -- 709 709
Valuation adjustments, provisions and losses 384 6 390 -- 390
-------------------------------------------------------------------------------------------------------------------
Net operating profit before extraordinary
items, acquisition-related costs and taxes 2,213 213 2,426 (1,588) 838
-------------------------------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net (1) (1) (2) -- (2)
Taxes (569) (18) (587) 420 (167)
-------------------------------------------------------------------------------------------------------------------
Net operating profit before acquisition-
related costs 1,643 194 1,837 (1,168) 669
-------------------------------------------------------------------------------------------------------------------
Acquisition interest (476) 476 0
Amortization of retention payments (403) 403 0
Amortization of acquired intangible assets
and goodwill (709) 709 0
Tax impact 420 (420) 0
-------------------------------------------------------------------------------------------------------------------
Net profit 669 -- 669
-------------------------------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation. The presentation of segment results differs from the
presentation of the Group's consolidated results in a) including brokerage,
execution and clearing expenses as part of other operating expenses in line
with certain US competitors, rather than netted against operating income,
b) reporting contractor costs as part of other operating expenses instead of
personnel expenses, c) excluding acquisition-related costs of acquisition
interest from operating income, amortization of retention payments from
personnel expenses and amortization of acquired intangible assets and
goodwill from depreciation, valuation adjustments and losses and
d) deducting expenses related to certain redeemable preferred securities
classified as minority interests from operating income. Acquisition-related
costs are reported separately at the business unit level only.
54
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
1 Segment reporting by operating segments (continued)
Business unit income statement for the six months ended June 30, 2001 1)
(continued)
Credit Suisse
Financial Credit Suisse Corporate Credit Suisse
in CHF m 1) Services First Boston Subtotal Center Group
------------------------------------------------------------------------------------------------------------------------
Operating income 8,302 14,152 22,454 (181) 22,273
------------------------------------------------------------------------------------------------------------------------
Personnel expenses 2,923 8,629 11,552 437 11,989
Other operating expenses 1,801 3,132 4,933 (765) 4,168
------------------------------------------------------------------------------------------------------------------------
Operating expenses 4,724 11,761 16,485 (328) 16,157
------------------------------------------------------------------------------------------------------------------------
Gross operating profit 3,578 2,391 5,969 147 6,116
------------------------------------------------------------------------------------------------------------------------
Depreciation of non-current assets 327 2) 454 781 204 985
Amortization of acquired intangible assets and
goodwill 42 709 751 (2) 749
Valuation adjustments, provisions and losses 251 390 641 9 650
------------------------------------------------------------------------------------------------------------------------
Profit before extraordinary items and taxes 2,958 838 3,796 (64) 3,732
------------------------------------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net 11 (2) 9 13 22
Taxes (769) (167) (936) 29 (907)
------------------------------------------------------------------------------------------------------------------------
Net profit before minority interests 2,200 669 2,869 (22) 2,847
------------------------------------------------------------------------------------------------------------------------
Minority interests (88) 0 (88) (43) (131)
------------------------------------------------------------------------------------------------------------------------
Net profit 2,112 669 2,781 (65) 2,716
------------------------------------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation.
2) Including amortization of PVFP from the insurance businesses.
55
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
2 Differences between Swiss and US accounting principles -- for the six months
ended June 30, 2002 and 2001
The following narratives provide additional details to support the tabular
reconciliation of net profit and shareholders' equity prepared under Swiss
generally accepted accounting principles, or Swiss GAAP, to net profit and
shareholders' equity prepared under US generally accepted accounting principles,
or US GAAP. For those reconciling items where the differences between the
methods under Swiss GAAP and US GAAP accounting are significant to a particular
segment, the segment has been identified. For a definition of Swiss GAAP please
refer to note 1 "Summary of significant accounting policies" in the notes to the
consolidated financial statements for the years ended December 31, 2001, 2000
and 1999.
Valuation and income recognition differences between Swiss and US accounting
principles
a) Debt and equity securities
VALUATION
Under Swiss GAAP, debt and equity securities for the banking business that are
held for sale and which do not constitute trading balances are carried at the
lower of cost or market value (LOCOM). Unrealized losses are recorded through
the income statement when market value is lower than cost. When market value
increases, unrealized gains are only recorded to the extent losses were
previously recognized.
Debt securities held until final maturity are valued at amortized cost (accrual
method). Premiums and discounts are deferred and accrued over the term of the
instrument until final maturity. Realized gains or losses that are interest
related and that arise from the early disposal or redemption of the instrument
are deferred and accrued over the remaining term of that instrument.
Under US GAAP, debt and equity securities must be classified as either:
- trading, which are valued at fair value with changes in fair value recorded
through earnings;
- held to maturity, which are carried at amortized cost (debt securities only);
or
- available-for-sale, which are carried at fair value, with changes in fair
value recorded in other comprehensive income--a separate component of
shareholders' equity.
In addition, premiums and discounts are amortized to interest income using the
effective yield method over the contractual life of the securities. Gains or
losses on the sales of debt and equity securities are recognized into income at
the time of sale on a specific identified cost basis.
The US GAAP adjustments to net profit attributable to securities valuation
differences were a decrease of CHF 100 million and an increase of CHF
48 million for the six months ended June 30, 2002 and 2001. The US GAAP
adjustments to shareholders' equity attributable to securities valuation
differences were an increase of CHF 1,497 million at June 30, 2002 and an
increase of CHF 2,269 million at December 31, 2001.
PRIVATE EQUITY
Under Swiss GAAP, private equity investments are carried at LOCOM.
56
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
2 Differences between Swiss and US accounting principles -- for the six months
ended June 30, 2002 and 2001 (continued)
Under US GAAP, in accordance with specialized industry accounting principles,
private equity investments, held by subsidiaries, that are considered investment
companies that engage exclusively in venture capital activities and other
similar activities, are carried at estimated fair value, with changes in fair
value recorded through current net profit.
The US GAAP adjustments to net profit attributable to private equity investments
were a decrease of CHF 7 million in the first half of 2002 and a decrease of CHF
230 million in the six months ended June 30, 2001. The US GAAP adjustments to
shareholders' equity attributable to private equity investments were an increase
of CHF 181 million as of June 30, 2002 and an increase of CHF 209 million as of
December 31, 2001.
b) Consolidation
SPECIAL PURPOSE ENTITIES
Under Swiss GAAP, consolidation of a special purpose entity (SPE) is required if
the Group holds more than 50% of the voting rights of the entity, or where it
has the ability to exercise control of the SPE. Consolidation would also be
required if the Group has a legal or de facto obligation to support the entity,
or the SPE is dependent on the Group for funding. Consolidation may be required
by application of the principle of substance over form.
Under US GAAP, a sponsored SPE must be considered for consolidation unless it
meets the criteria of a qualifying SPE as defined in the Statement of Financial
Accounting Standard (SFAS) No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities. If the SPE is not a
qualifying SPE then the following factors must be considered to determine if the
SPE has to be consolidated. The three criteria to be considered are:
(1) independent third parties have made a substantive equity investment;
(2) independent third parties control the SPE; and (3) independent third parties
have the substantive risks and rewards of the assets of the SPE throughout its
term. These criteria are subjective and must be analyzed together with all
relevant facts and circumstances to determine whether consolidation is required.
The US GAAP adjustments to net profit attributable to the consolidation of SPEs
not consolidated under Swiss GAAP were a decrease of CHF 3 million for the first
half of 2002 and a decrease of CHF 42 million in the first half of 2001. The US
GAAP adjustments to shareholders' equity attributable to the consolidation of
SPEs not consolidated under Swiss GAAP were a increase of CHF 14 million as of
June 30, 2002 and a decrease of CHF 15 million as of December 31, 2001.
DETERMINATION OF CONSOLIDATED SUBSIDIARIES AND EQUITY METHOD SUBSIDIARIES
Under Swiss GAAP, majority owned subsidiaries that do not operate in the core
business of the Group may be accounted for using the equity method. US GAAP has
no such exception to consolidating majority owned subsidiaries.
57
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
2 Differences between Swiss and US accounting principles -- for the six months
ended June 30, 2002 and 2001 (continued)
Additionally, under Swiss GAAP, the accounting for investments using the equity
method is generally the same as under US GAAP; however, US GAAP has stricter
guidelines for determining whether an entity has the ability to exercise
significant influence over the operating and financial policies of the investee.
The US GAAP adjustments to net profit attributable to differences in the
determination of consolidated subsidiaries and equity method subsidiaries were a
decrease of CHF 116 million in the first half of 2002 and a decrease of CHF
52 million in the first half of 2001. The US GAAP adjustments to shareholders'
equity attributable to differences in determination of consolidated subsidiaries
and equity method subsidiaries were a decrease of CHF 90 million as of June 30,
2002 and an increase of CHF 35 million as of December 31, 2001.
c) Transfer of financial assets
Swiss GAAP requires that, in transferring financial assets, the assets should be
removed from the transferor's balance sheet and a gain or loss should be
recognized when the following conditions are met:
- the securities are isolated from the transferor;
- the transferee obtains the right to pledge or exchange the transferred
securities; and
- the transferor does not maintain effective control.
In addition, under Swiss GAAP, repurchase and reverse repurchase transactions
held in the trading book (matched book repo transactions) are recorded at fair
value.
Under US GAAP, the accounting for transfers of financial assets that are
considered sales generally are based on the same conditions as under Swiss GAAP.
However, meeting the US GAAP criteria is dependent on a "true sale" legal
opinion, which is more stringent than Swiss GAAP. The resulting adjustment for
transfers not deemed as sales is that the assets securitized remain on the
balance sheet and the transaction is treated as a secured borrowing.
Under US GAAP, income from matched book repo transactions is recorded on an
accrual basis.
The US GAAP adjustments to net profit attributable to differences in the
accounting treatment of transfers of financial assets were a decrease of CHF
109 million in the first half of 2002 and a decrease of CHF 64 million in the
first half of 2001. The US GAAP adjustments to shareholders' equity attributable
to such differences in accounting treatment were a decrease of CHF 125 million
as of June 30, 2002 and a decrease of CHF 29 million as of December 31, 2001.
d) Real estate
Under Swiss GAAP, banking segments' real estate held for own use, which has been
designated as held for disposal, is carried at lower of cost less accumulated
depreciation or market. Until a contract for sale is executed, depreciation
continues on these properties.
Under US GAAP, real estate that is classified as held for disposal is carried at
the lower of carrying amount or fair value less costs to sell. No depreciation
is recorded on real estate held for disposal.
58
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
2 Differences between Swiss and US accounting principles -- for the six months
ended June 30, 2002 and 2001 (continued)
e) General provisions
Under Swiss GAAP, valuation adjustments and reserves are permitted to be
recorded when economically necessary or legally required. In accordance with
Swiss banking regulations, a reserve for general banking risks is recorded as a
separate component of shareholders' equity. Changes in shareholders' equity must
be recorded as an extraordinary item in the income statement or result from a
reclassification from valuation adjustments and provisions no longer required.
US GAAP does not allow general unallocated provisions. Probable and estimable
costs, which can be identified with an event or set of events that have occurred
prior to the balance sheet date, are accrued. The criteria for establishing such
liabilities under US GAAP are more stringent than under Swiss GAAP.
The balance sheet line item VALUATION ADJUSTMENTS AND PROVISIONS includes
provisions for restructuring, litigation, technology and other operational
risks. Reserve for general banking risks is recorded as a separate component of
shareholders' equity. For purposes of the US GAAP reconciliation, certain of
these provisions are not allowed and have been reversed.
The US GAAP adjustments to net profit attributable to general provisions not
allowed under US GAAP were a decrease of CHF 6 million in the first half 2002
and an increase of CHF 67 million in the first half of 2001. The US GAAP
adjustments to shareholders' equity attributable to such provisions were an
increase of CHF 163 million as of June 30, 2002 and an increase of CHF 169
million as of December 31, 2001.
f) Business combinations
Under Swiss GAAP, prior to January 1, 1997, goodwill was charged to
shareholders' equity in the year of acquisition. For acquisitions after
January 1, 1997, the Group capitalizes goodwill and amortizes it over its
estimated useful life on a straight-line basis.
Upon adoption of SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill
and Other Intangible Assets, all business combinations effected after June 30,
2001 are accounted for using the purchase method. The associated goodwill and
intangible assets with an indefinite life will not be amortized. Effective
January 1, 2002, for business combinations completed prior to June 30, 2001,
goodwill and intangible assets with an indefinite life are no longer amortized.
Instead, goodwill and intangible assets associated with all business
combinations are subject to an annual impairment test. To comply with this
standard the amortization amounts recorded under Swiss GAAP are reversed for US
GAAP presentation. For further detail please refer to the SFAS 142 transitional
disclosure in note 9.
Further US GAAP adjustments are the result of: (1) capitalization of goodwill
for pre-1997 acquisitions net of accumulated depreciation; (2) differences in
the valuation of net assets at the date of acquisition including certain amounts
which are expensed under US GAAP but capitalized under Swiss GAAP, including
adjustments for items such as retention payments and certain restructuring
charges; and differences related to share options plans.
59
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
2 Differences between Swiss and US accounting principles -- for the six months
ended June 30, 2002 and 2001 (continued)
The US GAAP adjustments to net profit attributable to the accounting for
business combinations were an increase of CHF 496 million in the first half of
2002 and a decrease of CHF 458 million for the six months ended June 30, 2001.
The US GAAP adjustments to shareholders' equity attributable to the accounting
for business combinations were an increase of CHF 1,378 million at June 30, 2002
and an increase of CHF 976 million at December 31, 2001.
g) Share-based compensation
Under Swiss GAAP, no expenses are recognized for share option plans upon grant
or exercise. For share awards the market value of shares granted for the
reporting period and for which no future service is required is accrued in the
period in which the service is rendered. For shares granted under the
requirement to provide future services the market value granted is deferred over
the required future service period and at each balance sheet date the accrued
cost is adjusted for the fair value change of the share price during the
reporting period. The accrual is recognized within liabilities.
US GAAP permits the recognition of compensation expense based on the estimated
fair value of the equity instruments issued or based on the intrinsic value of
the equity instruments issued with the disclosure of pro forma effects of share
compensation plans on net profit and earnings per share, as if the fair value
had been recorded. The Group has chosen to record its obligation for stock
compensation using the intrinsic value method. For share option plans, which
have no intrinsic value at the date of grant and which have no cash settlement
feature and no performance-based vesting requirements the fixed plan accounting
is applied and no compensation expenses are recognized. Credit Suisse Group also
has option plans outstanding, primarily related to the years 2000 and before,
which have either a cash settlement feature or which are linked to
performance-based vesting requirements. For those plans, variable plan
accounting is applied until settlement. For share awards, the market value of
shares granted for the reporting period and for which no future service is
required is accrued in the period in which the service is rendered. If shares
are granted under the requirement to provide future services the market value at
the grant date is recognized over the required future service period. For US
GAAP purposes, the Group's obligation to deliver shares in the future is
recognized in additional paid-in capital.
The US GAAP adjustments to net profit related to share-based compensation were a
decrease of CHF 32 million in the first half of 2002 and a decrease of CHF 75
million in the first half of 2001, and the related US GAAP adjustments to
shareholders' equity were increases of CHF 2,430 million as of June 30, 2002 and
CHF 3,421 million as of December 31, 2001.
h) Pension benefits
Most pension funds of Credit Suisse Group are separate legal entities and
employees have to pay contributions to a specific pension fund. The Group also
makes contributions to the pension plans.
Under Swiss GAAP, pension expense is equal to the amounts to be contributed by
the employer based on the scheme. However, certain plans record pension expense
based on a specific method of actuarial valuation of projected plan liabilities
for accrued service. Plan assets are recorded at fair value. Certain
assumptions, such as future salary increases, are not considered in the Swiss
GAAP valuation.
60
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
2 Differences between Swiss and US accounting principles -- for the six months
ended June 30, 2002 and 2001 (continued)
Under US GAAP, pension expense and liabilities for defined benefit plans are
valued based on specific actuarial assumptions such as future salary increases,
expected return on plan assets, employee turnover, mortality, retirement age and
administrative expenses of the pension plan. In calculating the current pension
benefit obligation, estimated future pension benefits are discounted to the
current period. The discount rate was established by examining the rates of
return of both high-quality, long-term corporate bonds and long-term government
bonds. The methodology for determination of appropriate discount rates has been
applied consistently groupwide.
The US GAAP adjustments attributable to pension benefits were increases of
CHF 207 million in the first half of 2002 and CHF 120 million in the first half
of 2001. The US GAAP adjustments to shareholders' equity attributable to pension
benefits were an increase of CHF 149 million at June 30, 2002 and a decrease of
CHF 65 million at December 31, 2001.
i) Taxation
Under Swiss GAAP, we generally do not recognize deferred tax assets for net
operating loss carry-forwards. Deferred tax assets on net operating losses are
recorded in the event management's assessment is that their realization in a
future period is certain, based on contracts existing at the balance sheet date
to sell businesses at a taxable gain.
Under US GAAP, a deferred tax asset is recognized for net operating loss
carry-forwards, net of an allowance for the estimated unrealizable amount.
The US GAAP adjustments to net profit attributable to the recognition of the tax
effect of net operating loss carry-forwards were an increase of CHF 676 million
in the first half of 2002 and an increase of CHF 31 million in the first half of
2001. The US GAAP adjustments to shareholders' equity attributable to the
recognition of the tax effect of net operating loss carry-forwards were an
increase of CHF 1,044 million as of June 30, 2002 and an increase of CHF 368 as
of December 31, 2001.
An additional adjustment arises from the aggregate differences between Swiss
GAAP and US GAAP accounting principles that will result in taxable or deductible
amounts in future years (temporary differences).
The US GAAP adjustment to net profit for such temporary differences were an
increase of CHF 136 million in the first half of 2002 and a decrease of
CHF 101 million in the first half of 2001, and the related US GAAP adjustments
to shareholders' equity were increases of CHF 159 million as of June 30, 2002
and CHF 104 million as of December 31, 2001.
61
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
2 Differences between Swiss and US accounting principles -- for the six months
ended June 30, 2002 and 2001 (continued)
j) Loans
LOAN FEES AND COSTS
Under Swiss GAAP, loan origination fee income is deferred but direct loan
origination costs are normally expensed.
Under US GAAP, certain qualifying direct loan origination costs must be deferred
and amortized over the life of the loan using the effective interest method.
LOAN IMPAIRMENT
Under Swiss GAAP, provisions for impaired loans are recorded based on either the
fair value of the underlying collateral or the undiscounted future cash flows if
the loans are not collateralized.
For certain non-collateral dependent impaired loans, US GAAP requires
measurement of impairment using the present value of future cash flows.
The Group has estimated that the difference to net profit or shareholders'
equity between impaired loan valuation recognized for Swiss GAAP and impaired
loan valuation that would have been recognized for US GAAP is not material.
k) Leasing
For Swiss GAAP purposes, the Group, as lessor, classifies lease contracts as
financial leases and records a leasing receivable based on the leased asset's
underlying value at lease inception. This balance is amortized over the life of
the lease using the interest method.
For US GAAP purposes, certain of these lease contracts are classified as
operating leases. The underlying leased asset is recorded as a fixed asset and
depreciated on a straight-line basis over its useful life. This adjustment
relates to the difference between the interest amortization of the lease
receivable under Swiss GAAP and the straight-line depreciation of leased assets
under US GAAP.
l) Derivatives
Under Swiss GAAP, trading derivatives are recorded on the balance sheet at fair
value as positive and negative replacement values. Changes in fair value are
reported in earnings unless the derivative is designated and qualifies as a
hedge. Gains and losses on hedging derivative instruments are recognized in
income on the same basis as the underlying item being hedged. There is no
requirement for an external transaction to lay off all risks associated with
intercompany hedges on a one-to-one basis.
Effective January 1, 2001 the Group adopted SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, and SFAS No. 138, Accounting for
Certain Derivative Instruments and Certain Hedging Activities--an amendment of
SFAS No. 133. Under SFAS No. 133, all derivatives are required to be recognized
as assets or liabilities in the consolidated balance sheet at fair value. The
recognition of the changes in the fair value depends upon the intended use and
designation of the derivative. If the derivative instrument is not a hedge, then
changes in fair value are recognized in earnings. If a derivative
62
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
2 Differences between Swiss and US accounting principles -- for the six months
ended June 30, 2002 and 2001 (continued)
qualifies as a hedge, depending on the nature of the hedge, changes in fair
value of the derivative will either be offset against the change in fair value
of the hedge asset, liability, or firm commitment through earnings or recognized
in other comprehensive income.
The US GAAP adjustments attributable to derivatives related to net profit were a
decrease of CHF 309 million in the first half of 2002 and an increase of
CHF 889 million in the first half of 2001, and the related US GAAP adjustments
to shareholders' equity were a decrease of CHF 162 million as of June 30, 2002
and an increase of CHF 33 million as of December 31, 2001.
m) Own shares and own bonds
OWN SHARES
Under Swiss GAAP, own shares included in securities trading portfolio and
financial investments are carried at fair value and LOCOM, respectively.
Derivatives on own shares are carried at fair value and are reported as positive
and negative replacement values in other assets and other liabilities,
respectively. Gains and losses on sales, dividends received and changes in
market value are recorded in net profit.
Under US GAAP, own shares are recorded at cost and reported as treasury shares
resulting in a reduction to total shareholders' equity. Derivatives on own
shares are classified as assets, liabilities or in shareholders' equity
depending on the manner of settlement. Unrealized and realized gains and losses
on own shares and derivatives on own shares where the Group has the choice or
obligation to settle in shares and dividends received on own shares are excluded
from net profit.
The US GAAP adjustments to net profit for own shares were an increase of
CHF 640 million in the first half of 2002 and a decrease of CHF 55 million in
the first half of 2001, and the related US GAAP adjustments to shareholders'
equity were decreases of CHF 4,158 million as of June 30, 2002 and CHF 5,165
million as of December 31, 2001.
OWN BONDS
Under Swiss GAAP, the Group's own bonds included in securities trading portfolio
are recorded at fair value with changes in fair value recorded in net profit.
Under US GAAP, the purchase of own bonds is treated as a reduction of the debt
outstanding. Any difference between the cost of repurchase and the carrying
value of the liability is treated as an extraordinary gain or loss during the
period. Any gain or loss on resale is treated as a premium or discount and
amortized over the remaining term of the liability.
The Group has estimated that the differences between own bond transactions
recognized under Swiss GAAP and own bond transactions that would have been
recognized under US GAAP is not material to net profit or shareholders' equity.
63
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
2 Differences between Swiss and US accounting principles -- for the six months
ended June 30, 2002 and 2001 (continued)
n) Foreign currency
Accounting for foreign currency is similar under Swiss and US GAAP.
Specifically, each Group entity must choose and document a functional currency
in which its financial statements will be prepared. Transactions denominated in
currencies other than the functional currency are considered foreign currency
transactions and result in gains and/or losses recognized in earnings. Foreign
currency gains and losses related to trading activity are included in trading
income. Foreign currency translation adjustments, resulting from consolidation
of financial statements with different functional currencies, are recorded in
equity.
For Swiss GAAP, the determination of the functional currency is generally the
same as under US GAAP. Under Swiss GAAP, the local currency is normally assumed
to be the functional currency. US GAAP has stricter guidelines and the
determination of the functional currency is made based on evaluation of the
primary economic environment in which the entity operates using specific salient
economic indicators. This difference results in certain Group affiliates having
different functional currencies for US GAAP than for Swiss GAAP and,
consequently, different amounts of foreign currency gains and losses reported in
the Group's consolidated net profit.
o) Capitalization of software
Under Swiss GAAP, certain costs related to the acquisition and development of
internal use computer software have been expensed as incurred. Beginning
January 1, 2002, such costs are capitalized and depreciated over the estimated
useful life of the software. This treatment is in line with the treatment under
US GAAP.
The US GAAP adjustments attributable to capitalization of software were a
decrease of CHF 134 million in the first half of 2002 compared to an increase of
CHF 175 million in the first half of 2001. The US GAAP adjustments to
shareholders' equity attributable to capitalization of software were an increase
of CHF 562 million at June 30, 2002 and an increase of CHF 700 million at
December 31, 2001.
p) Winterthur purchase accounting
Under Swiss GAAP, the Group accounted for the merger of Credit Suisse Group and
"Winterthur" Swiss Insurance Company using the pooling of interests method. The
balance sheets and income statements of the companies were combined and no
adjustments to carrying values of the assets and liabilities were made.
Under US GAAP, the business combination is accounted for under the purchase
method of accounting with Credit Suisse Group as the acquirer. Under the
purchase method, the acquirer reports the assets and liabilities of the acquired
company at fair market value on the date of acquisition. Any excess of the fair
market value of the consideration given over the fair market value of the net
tangible assets acquired
64
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
2 Differences between Swiss and US accounting principles -- for the six months
ended June 30, 2002 and 2001 (continued)
is allocated first to identifiable intangible assets based on their fair value,
if determinable, with the remainder allocated to goodwill.
Shareholders' Shareholders' Net profit Net profit
equity equity 6 months 6 months
in CHF m 30.06.02 31.12.01 2002 2001
---------------------------------------------------------------------------------------------------------------------
Investments 2,548 2,713 (609) (1,543)
Life insurance 236 148 96 2
Goodwill 3,489 3,681 (191) (268)
Retirement benefits 164 164 0 0
Taxation (841) (867) 156 408
---------------------------------------------------------------------------------------------------------------------
Total purchase accounting adjustments 5,596 5,839 (548) (1,401)
---------------------------------------------------------------------------------------------------------------------
Investments
Under purchase accounting, investments are restated to fair value at the date of
acquisition. The unrealized gains and losses on available-for-sale securities
existing before the date of acquisition are reclassified in shareholders' equity
from net unrealized gains to retained earnings. The fair value at the date of
acquisition becomes the new cost basis for the investments and the realized
gains and losses on disposal of investments, depreciation on real estate and the
unrealized gains and losses on available-for-sale securities are adjusted for
the new cost basis.
Life insurance
DEFERRED POLICY ACQUISITION COSTS
Under purchase accounting, the deferred policy acquisition costs for life
insurance existing at the date of acquisition are eliminated.
PRESENT VALUE OF FUTURE PROFITS
The Present Value of Future Profits (PVFP) is the present value of anticipated
profits embedded in the life and health insurance in force at the date of the
merger with "Winterthur" Swiss Insurance Company. Interest accrues on the
unamortized PVFP based upon the policy liability rate or contract rate. The PVFP
asset is amortized over the years that such profits are anticipated to be
received in proportion to the estimated gross margins or estimated gross profits
for participating traditional life products and non-traditional life products,
respectively, and over the premium paying period in proportion to premiums for
other traditional life products.
Any PVFP from previous acquisitions by Winterthur existing at the date of
acquisition is eliminated.
TECHNICAL PROVISIONS
Under purchase accounting, life insurance technical provisions are revalued at
the date of acquisition, using current assumptions at such date.
65
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
2 Differences between Swiss and US accounting principles -- for the six months
ended June 30, 2002 and 2001 (continued)
Goodwill
The excess of consideration paid of CHF 14,600 million for Winterthur over the
fair value of the net tangible assets received has been recorded as goodwill
which is subject to an annual impairment test.
A decrease of CHF 191 million has been recorded as goodwill adjustments in the
first half of 2002. This is related to the disposals of our insurance operations
in France and Austria.
Retirement benefits
Under purchase accounting, the projected benefit obligation and fair value of
plan assets are remeasured at the date of acquisition.
Taxation
This adjustment represents the tax effect of the purchase accounting adjustments
that result in temporary differences.
3a Reconciliation of Swiss GAAP and US GAAP net profit
References 6 months 6 months
in CHF m are to note 2 2002 2001
---------------------------------------------------------------------------------------------------
Swiss GAAP net (loss)/profit before minority interests (227) 2,847
Swiss GAAP minority interests 16 (131)
---------------------------------------------------------------------------------------------------
Swiss GAAP net (loss)/profit (211) 2,716
---------------------------------------------------------------------------------------------------
Adjustments in respect of
Debt and equity securities (a) (107) (182)
Consolidation (b) (119) (94)
Transfer of financial assets (c) (109) (64)
Real estate (d) 1 8
General provisions (e) (6) 67
Business combinations (f) 496 (458)
Share-based compensation (g) (32) (75)
Pension plans (h) 207 120
Taxation (i) 812 (70)
Loans (j) (37) 6
Leasing (k) 50 18
Derivatives (l) (309) 889
Own shares and own bonds (m) 640 (55)
Foreign currency (n) (23) 27
Capitalization of software (o) (134) 175
Winterthur purchase accounting (p) (548) (1,401)
---------------------------------------------------------------------------------------------------
Total adjustments 782 (1,089)
---------------------------------------------------------------------------------------------------
US GAAP net profit 571 1,627
---------------------------------------------------------------------------------------------------
US GAAP minority interests 18 (123)
---------------------------------------------------------------------------------------------------
US GAAP net profit before minority interests 553 1,750
---------------------------------------------------------------------------------------------------
66
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
3b Reconciliation of Swiss GAAP and US GAAP shareholders' equity
References
are to
in CHF m note 2 30.06.02 31.12.01
----------------------------------------------------------------------------------------------
Swiss GAAP shareholders' equity before minority interests 36,458 38,921
Swiss GAAP minority interests (2,892) (3,121)
----------------------------------------------------------------------------------------------
Swiss GAAP shareholders' equity 33,566 35,800
----------------------------------------------------------------------------------------------
Adjustments in respect of
Debt and equity securities (a) 1,678 2,478
Consolidation (b) (76) 20
Transfer of financial assets (c) (125) (29)
Real estate (d) 2 1
General provisions (e) 163 169
Business combinations (f) 1,378 976
Share-based compensation (g) 2,430 3,421
Pension plans (h) 149 (65)
Taxation (i) 1,203 472
Loans (j) 236 274
Leasing (k) 22 (28)
Derivatives (l) (162) 33
Own shares and own bonds (m) (4,158) (5,165)
Foreign currency (n) 0 0
Capitalization of software (o) 562 700
Winterthur purchase accounting (p) 5,596 5,839
----------------------------------------------------------------------------------------------
Total adjustments 8,898 9,096
----------------------------------------------------------------------------------------------
US GAAP shareholders' equity 42,464 44,896
----------------------------------------------------------------------------------------------
US GAAP minority interests (2,919) (3,155)
----------------------------------------------------------------------------------------------
US GAAP shareholders' equity before minority interests 45,383 48,051
----------------------------------------------------------------------------------------------
67
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
4a Condensed consolidated statements of income
The following are condensed consolidated statements of income for the six months
ended June 30, 2002 and 2001. In the following table US GAAP amounts reflect
adjustments for the valuation and income recognition differences as described in
note 2 and presentation differences described in note 46.3 of the audited
consolidated financial statements beginning on page F-1 of this Form 6-K. Swiss
GAAP has been reformatted to reflect US GAAP presentation.
Swiss GAAP Swiss GAAP
US GAAP US GAAP reformatted reformatted
6 months 6 months 6 months 6 months
in CHF m 2002 2001 2002 2001
-------------------------------------------------------------------------------------------------------------------
Interest income 16,492 25,105 16,537 25,743
Commissions and fees 9,245 10,235 9,301 10,239
Trading revenue 1,377 5,724 1,438 5,437
Realized gains/(losses) from sales of investments, net (2,572) 49 (2,067) 1,625
Insurance premiums 15,427 15,083 15,427 15,083
Other revenue 2,252 2,990 1,935 1,855
-------------------------------------------------------------------------------------------------------------------
Total revenue 42,221 59,186 42,571 59,982
-------------------------------------------------------------------------------------------------------------------
Interest expense 10,840 20,489 10,774 20,294
-------------------------------------------------------------------------------------------------------------------
Revenues, net of interest expense 31,381 38,697 31,797 39,688
-------------------------------------------------------------------------------------------------------------------
Provision for credit losses 844 237 853 405
Policyholder benefits and claims 14,101 13,736 14,165 13,790
-------------------------------------------------------------------------------------------------------------------
Total provisions for benefits, claims and credit
losses 14,945 13,973 15,018 14,195
-------------------------------------------------------------------------------------------------------------------
Insurance underwriting and acquisition expenses 2,023 2,223 1,982 2,093
Dividends to policyholders (827) 808 (787) 886
Salaries and employee benefits 9,177 11,957 9,611 11,956
Premises and equipment expenses, net 1,881 1,992 1,886 1,929
Restructuring charges 13 43 13 36
Other expenses 4,212 5,607 3,840 4,896
-------------------------------------------------------------------------------------------------------------------
Total operating expenses 16,479 22,630 16,545 21,796
-------------------------------------------------------------------------------------------------------------------
(Loss)/profit before taxes, extraordinary items,
cumulative effect of changes in accounting
principles and minority interests (43) 2,094 234 3,697
-------------------------------------------------------------------------------------------------------------------
Income taxes (538) 492 461 851
-------------------------------------------------------------------------------------------------------------------
Profit/(loss) before extraordinary items, cumulative
effect of changes in accounting principles and
minority interests 495 1,602 (227) 2,846
-------------------------------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net 0 1 0 1
Cumulative effect of changes in accounting principles 58 147 0 0
-------------------------------------------------------------------------------------------------------------------
Net profit/(loss) before minority interests 553 1,750 (227) 2,847
Minority interests (18) 123 (16) 131
-------------------------------------------------------------------------------------------------------------------
Net profit/(loss) 571 1,627 (211) 2,716
-------------------------------------------------------------------------------------------------------------------
68
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
4b Condensed consolidated balance sheets
The following are condensed consolidated balance sheets of the Group at
June 30, 2002 and December 31, 2001. In the following table US GAAP amounts
reflect adjustments for the valuation and income recognition differences as
described in note 2 and the presentation differences described in note 46.3 of
the audited consolidated financial statements beginning on page F-1 of this
Form 6-K. Swiss GAAP has been reformatted to reflect US GAAP presentation.
Swiss GAAP Swiss GAAP
US GAAP US GAAP reformatted reformatted
in CHF m 30.06.02 31.12.01 30.06.02 31.12.01
---------------------------------------------------------------------------------------------------------------
Assets
Cash and cash equivalents 20,985 9,524 20,950 9,361
Interest-bearing deposits with banks 35,723 34,055 29,055 28,176
Brokerage receivables 29,485 33,863 35,068 35,601
Investment securities 1) 120,189 130,217 120,678 130,012
Trading account assets 161,569 180,707 134,091 150,797
Encumbered assets 157,839 141,632 157,839 141,632
Real estate held for investment 10,131 10,395 7,708 7,938
Federal funds sold, securities purchased under resale
agreements,
and securities borrowing transactions 265,502 298,810 209,486 230,604
Loans, net of allowance for credit losses 2) 174,746 173,534 171,446 169,998
Tangible fixed assets 9,740 10,133 8,427 9,027
Premiums and insurance balances receivable, net 7,819 8,024 7,815 8,021
Reinsurance recoverables 3,821 4,509 3,821 4,509
Goodwill 18,301 17,997 12,000 13,664
Present value of future profits 4,540 4,749 2,186 2,335
Deferred policy acquisition costs 5,470 4,237 6,924 5,662
Other assets 44,877 58,067 45,840 59,429
Assets held for separate accounts 13,760 14,519 13,760 14,519
---------------------------------------------------------------------------------------------------------------
Total assets 1,084,497 1,134,972 987,094 1,021,285
---------------------------------------------------------------------------------------------------------------
1) Including venture capital of CHF 13,591 million and CHF 13,985 million for
US GAAP in 2002 and 2001, respectively, and CHF 13,956 million and CHF
14,457 million for Swiss GAAP reformatted for 2002 and 2001, respectively.
2) Net of allowance for credit losses of CHF 7,829 million and CHF
9,245 million for US GAAP in 2002 and 2001, respectively, and CHF
7,840 million and CHF 9,234 million for Swiss GAAP reformatted in 2002 and
2001, respectively.
69
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
4b Condensed consolidated balance sheets (continued)
Swiss GAAP Swiss GAAP
US GAAP US GAAP reformatted reformatted
in CHF m 30.06.02 31.12.01 30.06.02 31.12.01
----------------------------------------------------------------------------------------------------------------
Liabilities and shareholders' equity
Deposits 261,244 270,690 260,777 269,076
Short-term borrowings 14,133 24,957 14,135 27,397
Brokerage payables 33,815 44,013 36,826 38,073
Trading account liabilities 184,452 161,997 170,080 154,100
Insurance policy and claims reserves 102,392 100,946 102,058 100,555
Provision for dividends to policyholders 4,052 5,917 3,886 5,782
Provision for unearned premiums 8,783 6,914 8,783 6,914
Policyholder funds 14,673 15,028 14,667 15,021
Federal funds purchased, securities sold under repurchase
agreements, and securities lending transactions 236,606 276,621 191,293 209,019
Other liabilities 55,426 62,149 37,262 52,215
Long-term debt 109,625 102,591 96,956 89,114
Liabilities held for separate accounts 13,913 15,098 13,913 15,098
----------------------------------------------------------------------------------------------------------------
Total liabilities 1,039,114 1,086,921 950,636 982,364
----------------------------------------------------------------------------------------------------------------
Minority interests 2,919 3,155 2,892 3,121
----------------------------------------------------------------------------------------------------------------
Common shares 3,591 3,590 3,591 3,590
Additional paid in capital 24,388 25,490 19,931 19,886
Common shares in treasury, at cost (5,281) (5,602) 0 0
Retained earnings 18,925 19,612 10,803 9,198
Accumulated other comprehensive income 270 2,493 (548) 1,539
Net income after minority interests 571 (687) (211) 1,587
----------------------------------------------------------------------------------------------------------------
Total shareholders' equity 42,464 44,896 33,566 35,800
----------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity 1,084,497 1,134,972 987,094 1,021,285
----------------------------------------------------------------------------------------------------------------
70
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
5 Earnings per share
6 months 6 months
2002 2001
--------------------------------------------------------------------------------------------
Net (loss)/profit available for common shares (in CHF m)
Swiss GAAP--basic (211) 2,716
Interest on convertible debt 1 1
--------------------------------------------------------------------------------------------
Swiss GAAP--diluted (210) 2,717
--------------------------------------------------------------------------------------------
US GAAP--basic 571 1,627
Interest on convertible debt 0 0
--------------------------------------------------------------------------------------------
US GAAP--diluted 571 1,627
--------------------------------------------------------------------------------------------
Weighted-average number of shares outstanding
Swiss GAAP--basic 1,189,147,860 1,198,959,740
Potential dilutive common shares
Contingent issuable stock 0 132,594
Incremental shares from assumed conversions
Convertible bonds 616,805 815,108
Share options 5,740,345 10,338,615
--------------------------------------------------------------------------------------------
Potential dilutive common shares 6,357,150 11,286,317
--------------------------------------------------------------------------------------------
Swiss GAAP--diluted 1,195,505,010 1,210,246,057
--------------------------------------------------------------------------------------------
US GAAP--basic 1) 1,117,857,440 1,090,726,679
Potential dilutive common shares
Contingent issuable stock 56,198,604 61,832,167
Incremental shares from assumed conversions
Convertible bonds 616,805 815,108
Share options 5,614,388 9,700,316
--------------------------------------------------------------------------------------------
Potential dilutive common shares 62,429,797 72,347,591
--------------------------------------------------------------------------------------------
US GAAP--diluted 1,180,287,237 1,163,074,270
--------------------------------------------------------------------------------------------
Earnings per share (in CHF)
Swiss GAAP--basic
Earnings before extraordinary items (0.27) 2.25
Extraordinary items 0.09 0.02
--------------------------------------------------------------------------------------------
Net earnings per share--basic (0.18) 2.27
--------------------------------------------------------------------------------------------
Swiss GAAP--diluted
Earnings before extraordinary items (0.26) 2.23
Extraordinary items 0.08 0.01
--------------------------------------------------------------------------------------------
Net earnings per share--diluted (0.18) 2.24
--------------------------------------------------------------------------------------------
US GAAP basic
Earnings before extraordinary items 0.46 1.36
Effect of cumulative change in accounting principles 0.05 0.13
Extraordinary items 0.00 0.00
--------------------------------------------------------------------------------------------
US GAAP--basic 0.51 1.49
--------------------------------------------------------------------------------------------
US GAAP diluted
Earnings before extraordinary items 0.43 1.27
Effect of cumulative change in accounting principles 0.05 0.13
Extraordinary items 0.00 0.00
--------------------------------------------------------------------------------------------
US GAAP--diluted 0.48 1.40
--------------------------------------------------------------------------------------------
All share-related data have been adjusted for the 4-for-1 share split effective
as of August 15, 2001.
1) Own shares are deducted in the computation of the weighted-average number of
shares outstanding.
71
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
6 Consolidated cash flows
The following table of consolidated cash flows was prepared based on changes in
the Swiss GAAP balance sheet amounts presented in the categories specified by US
GAAP.
6 months 6 months
in CHF m 2002 2001
--------------------------------------------------------------------------------------------
Cash flows from operating activities
Net (loss)/profit (211) 2,716
Adjustments to reconcile net profit/(loss) to net cash from
operating activities
Depreciation and amortization 1,779 1,802
Provision for losses 876 601
Provision for deferred taxes (745) 568
Other provisions (700) (458)
Change in technical provisions for the insurance business 3,385 6,817
Loss/(gain) from investing activities, net 2,150 (1,621)
Equity in earnings of non-consolidated participations (62) (7)
Gain from disposal of non-consolidated participations, net (59) (4)
Change in minority interests (131) 241
Receivables from the insurance business 148 (2,543)
Payables from the insurance business (509) 1,460
Securities and precious metals trading positions (23,894) (30,987)
Deferred policy acquisition costs (1,078) (526)
(Increase)/decrease in accrued income and other assets (2,640) 2,403
Increase/(decrease) in accrued expenses and other
liabilities 2,188 (9,726)
Amortization of premiums/(accretion) of discounts, net 193 (173)
--------------------------------------------------------------------------------------------
Total adjustments (19,099) (32,153)
--------------------------------------------------------------------------------------------
Net cash used in operating activities (19,310) (29,437)
--------------------------------------------------------------------------------------------
Cash flows from investing activities
Decrease in money market papers 915 4,699
(Increase)/decrease in due from banks (19,253) 16,873
(Increase)/decrease in due from customers/mortgages 5,626 (35,112)
Investments in subsidiaries and participations (234) (551)
Disposal of subsidiaries and participations 378 225
Purchase of investments (63,086) (56,730)
Maturities of investments 3,345 6,198
Disposal of investments 55,496 45,994
Capital expenditures on tangible and intangible assets (663) (1,074)
Disposal of tangible and intangible assets 91 608
Other, net (92) (68)
--------------------------------------------------------------------------------------------
Net cash used in investing activities (17,477) (18,938)
--------------------------------------------------------------------------------------------
72
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
6 Consolidated cash flows (continued)
6 months 6 months
in CHF m 2002 2001
------------------------------------------------------------------------------------
Cash flows from financing activities
Decrease in money market papers issued (1,022) (3,069)
Increase in due to banks 6,905 14,763
Increase in due to customers 13,010 36,393
Issuance of medium-term notes and bonds 28,554 3,412
Repayments of medium-term notes and bonds (13,295) (2,542)
Deposits to policyowner account balances 1,578 1,008
Withdrawals from policyowner account balances (1,164) (1,061)
Increase from issuance / retirement of common shares 4,042 70
Dividends paid (including minority interests) (127) (144)
Other, net 75 (18)
------------------------------------------------------------------------------------
Net cash provided by financing activities 38,556 48,812
------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (218) 7
------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 1,551 444
------------------------------------------------------------------------------------
Cash and other liquid assets at beginning of financial year 3,092 2,928
------------------------------------------------------------------------------------
Cash and other liquid assets at end of the period 4,643 3,372
------------------------------------------------------------------------------------
73
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
7 US GAAP consolidated changes in shareholders' equity
The following table for the changes in shareholders' equity is in accordance
with US GAAP.
Accumulated Common
Common Additional other shares in
shares Common paid in Retained comprehensive treasury,
in CHF m (except number of shares) outstanding 1) shares capital 2) earnings income 3) at cost 4) Total
-------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000 1,103,882,156 6,009 25,497 19,439 6,236 (7,275) 49,906
-------------------------------------------------------------------------------------------------------------------------------
Net profit -- -- -- 1,627 -- -- 1,627
Other comprehensive income, net of tax -- -- -- -- (581) -- (581)
Issuance of common shares 1,847,328 9 60 -- -- -- 69
Share-based compensation -- -- 147 -- -- -- 147
Accrual for earned share compensation -- -- 944 -- -- -- 944
Release of treasury shares for share
compensation 22,035,769 -- (1,670) -- -- 1,670 0
Sale of treasury shares 120,383,439 -- 228 -- -- 9,337 9,565
Repurchase of treasury shares (150,869,392) -- (69) -- -- (11,655) (11,724)
Dividend on treasury shares -- -- -- (14) -- -- (14)
-------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2001 1,097,279,300 6,018 25,137 21,052 5,655 (7,923) 49,939
-------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2001 1,120,723,235 3,590 25,490 18,925 2,493 (5,602) 44,896
-------------------------------------------------------------------------------------------------------------------------------
Net profit -- -- -- 571 -- -- 571
Other comprehensive income, net of tax -- -- -- -- (2,223) -- (2,223)
Issuance of common shares 440,073 1 14 -- -- -- 15
Share-based compensation -- -- 21 -- -- -- 21
Accrual for earned share compensation -- -- 632 -- -- -- 632
Release of treasury shares for share
compensation 21,081,221 -- (1,592) -- -- 1,592 0
Sale of treasury shares 3,004,662 -- (163) -- -- 124 (39)
Repurchase of treasury shares (19,768,000) -- 0 -- -- (1,395) (1,395)
Net premium/discount on treasury share
and own share derivative activity -- -- (14) -- -- -- (14)
-------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2002 1,125,481,191 3,591 24,388 19,496 270 (5,281) 42,464
-------------------------------------------------------------------------------------------------------------------------------
All share-related data have been adjusted for the 4-for-1 share split effective
as of August 15, 2001.
1) At par value CHF 3 each, fully paid.
2) Balances include the accrued cost for shares to be delivered under the share
award plans. The cost attributable to share award plans at June 30, 2002
and 2001 amounted to CHF 2,292 million and CHF 2,578 million, respectively.
3) Unrealized investment gains and losses have been reduced to the extent that
there is a legal or contractual obligation to pass those gains and losses
to policyholders when recognized. As a result, unrealized gains and losses
have been reduced by CHF 506 m and CHF 11 in 2002 and 2001, respectively.
4) Comprising 71,568,693 and 106,319,988 treasury shares at June 30, 2002 and
2001, respectively. In addition to the treasury shares, a maximum of
229,611,840 and 191,718,152 unissued shares (conditional and authorized
capital) at June 30, 2002 and 2001, respectively, were available for
issuance without the approval of the shareholders.
74
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
8 US GAAP accumulated other comprehensive income
The following table of accumulated other comprehensive income is in accordance
with US GAAP.
Foreign Unrealized Unrealized Minimum Accumulated
currency gains/(losses) gains/(losses) pension other
translation on on cash liability comprehensive Comprehensive
in CHF m adjustments securities flow hedges adjustment income income
---------------------------------------------------------------------------------------------------------------------------------
As of December 31, 2000 347 5,890 0 (1) 6,236
---------------------------------------------------------------------------------------------------------------------------------
Net profit -- -- -- -- -- 1,627
Other comprehensive income, net of
tax:
Foreign currency translation
adjustments 1,517 -- -- -- 1,517 --
Unrealized gains/(losses) on
securities:
Unrealized holding gains/(losses)
arising during period, net of tax
of CHF 112 m -- (1,304) -- -- (1,304) --
Reclassification adjustment for
(gains)/losses included in net
income, net of tax of CHF 58 m -- (711) -- -- (711) --
Unrealized gains/(losses) on cash
flow hedges:
Unrealized holding gains/(losses)
arising during periods, net of tax
of CHF 1 m -- -- (60) -- (60) --
Reclassification adjustment for
(gains)/losses included in net
income, net of tax of CHF 0 m -- -- 0 -- 0 --
Cumulative effect of changes in
accounting principles, net of tax 0
m -- -- (23) -- (23) --
---------------------------------------------------------------------------------------------------------------------------------
Changes in other comprehensive income 1,517 (2,015) (83) 0 (581) (581)
---------------------------------------------------------------------------------------------------------------------------------
As of June 30, 2001 1,864 3,875 (83) (1) 5,655 --
---------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income for the
six months ended June 30, 2001 -- -- -- -- -- 1,046
---------------------------------------------------------------------------------------------------------------------------------
As of December 31, 2001 299 2,508 (98) (216) 2,493
---------------------------------------------------------------------------------------------------------------------------------
Net profit -- -- -- -- -- 571
Other comprehensive income, net of
tax:
Foreign currency translation
adjustments (1,598) -- -- -- (1,598) --
Unrealized gains/(losses) on
securities:
Unrealized holding gains/(losses)
arising during period, net of tax
of CHF 999 m -- (2,024) -- -- (2,024) --
Reclassification adjustment for
(gains)/losses included in net
income, net of tax of CHF (956) m -- 1,404 -- -- 1,404 --
Unrealized gains/(losses) on cash
flow hedges:
Unrealized holding gains/(losses)
arising during period, net of tax
of CHF 0 m -- -- (25) -- (25) --
Reclassification adjustment for
(gains)/losses included in net
income, net of tax of CHF 0 m -- -- 34 -- 34 --
Cumulative effect of changes in
accounting principles, net of tax 0
m -- -- 0 0 --
Minimum pension liability adjustment,
net of tax of CHF 8 m -- -- -- (14) (14) --
---------------------------------------------------------------------------------------------------------------------------------
Changes in other comprehensive income (1,598) (620) 9 (14) (2,223) (2,223)
---------------------------------------------------------------------------------------------------------------------------------
As of June 30, 2002 (1,299) 1,888 (89) (230) 270 --
---------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income for the
six months ended June 30, 2002 -- -- -- -- -- (1,652)
---------------------------------------------------------------------------------------------------------------------------------
75
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
9 Recently issued US accounting standards
Accounting for business combinations, goodwill and other intangible assets
In July 2001, the FASB issued SFAS No. 141, Business Combinations (SFAS
No. 141) and SFAS No. 142, Goodwill and Other Intangible Assets (SFAS No. 142).
SFAS No. 141 requires that the purchase method of accounting be used for all
business combinations. The use of the pooling of interests is prohibited. This
statement is effective for business combinations initiated after June 30, 2001
and for purchase method of accounting business combinations completed after
June 30, 2001. In addition, SFAS 141 requires certain intangible assets to be
recognized apart from goodwill and sets forth specific criteria relating to the
recognition of intangible assets acquired in business combinations.
SFAS No. 142 changes the accounting for goodwill and intangible assets with
indefinite lives from an amortization method to an impairment-only approach.
Accordingly, amortization of goodwill and intangible assets with indefinite
lives, including goodwill recorded in prior business combinations, has ceased
upon adoption of SFAS No. 142. Other intangible assets with finite lives will
continue to be amortized over their assigned useful lives. For the Group and
other calendar year companies, this statement is effective for financial years
beginning after December 15, 2001.
Effective July 1, 2001, the Group adopted the provisions of SFAS 141 and certain
provisions of SFAS 142 as required for goodwill and intangible assets resulting
from business combinations consummated after June 30, 2001. Effective
January 1, 2002, the Group adopted the remaining provisions of SFAS 142.
The Group completed the required transitional impairment test of goodwill and
indefinite life intangible assets as of January 1, 2002, and determined that
there was no impairment to goodwill or intangible assets and no effect on the
Group's consolidated financial condition or results of operations as of
January 1, 2002. Additionally, upon adoption, the Group reclassified certain
intangible assets as follows: CHF 1,946 million from finite life intangibles to
goodwill and CHF 71 million from goodwill to finite life intangibles. See below
for more information on goodwill and identifiable intangible assets.
The following table presents the net profit and earnings per share for the first
six months of 2002 and 2001 and the full years 2001, 2000 and 1999 adjusted to
exclude amortization expense (net of taxes)
76
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
9 Recently issued US accounting standards (continued)
related to goodwill which is no longer amortized. For the periods presented
there was no amortization of indefinite life intangible assets which, under SFAS
No. 142, are no longer amortized.
6 months 6 months Full year Full year Full year
in CHF m, except per share amounts 2002 2001 2001 2000 1999
------------------------------------------------------------------------------------------------------------------
Net profit/(loss)
Reported net profit/(loss) under US GAAP 571 1,627 (687) 4,487 2,775
Goodwill amortization 0 796 1,587 671 433
------------------------------------------------------------------------------------------------------------------
Adjusted net profit under US GAAP 571 2,423 900 5,158 3,208
------------------------------------------------------------------------------------------------------------------
Basic earnings per share
Reported basic earnings per share 0.51 1.49 (0.62) 4.27 2.67
Goodwill amortization 0.00 0.73 1.44 0.64 0.42
------------------------------------------------------------------------------------------------------------------
Adjusted basic earnings per share 0.51 2.22 0.82 4.91 3.09
------------------------------------------------------------------------------------------------------------------
Diluted earnings per share
Reported diluted earnings per share 0.48 1.40 (0.59) 4.12 2.58
Goodwill amortization 0.00 0.68 1.36 0.62 0.40
------------------------------------------------------------------------------------------------------------------
Adjusted diluted earnings per share 0.48 2.08 0.77 4.74 2.98
------------------------------------------------------------------------------------------------------------------
During the first six months of 2002, a goodwill write-off of CHF 220 million was
recorded in connection with the disposal of CSFBDIRECT and Autranet, Inc. A
CHF 191 million write-off resulted from the disposals of our insurance
operations in France and Austria. The Group recorded goodwill of
CHF 110 million during the first half of 2002 in connection with CSFB's
acquisition of HOLT Value Associates LP, a provider of independent research and
valuation services to asset managers based in Chicago, and other acquisitions.
The changes in goodwill during the first six months of 2002 were as follows:
Goodwill
Goodwill disposed/
acquired impaired
Balance at during the during the Balance at
in CHF m January 1, 2002 period period Other 1) June 30, 2002
--------------------------------------------------------------------------------------------------------------------
Private Banking 582 1 0 (21) 562
Corporate & Retail Banking 182 14 0 (1) 195
Life & Pensions 2,216 1 (17) (8) 2,192
Insurance 2,540 36 (174) (12) 2,390
Investment Banking 13,478 58 (220) (1,302) 12,014
CSFB Financial Services 874 0 0 74 948
--------------------------------------------------------------------------------------------------------------------
Total 19,872 110 (411) (1,270) 18,301
--------------------------------------------------------------------------------------------------------------------
1) Includes foreign exchange impact on non-CHF denominated goodwill and other
reclassifications.
At June 30, 2002, CHF 6 million of the Group's acquired intangible assets were
considered to be indefinite life and not subject to amortization. All other
acquired intangible assets are subject to amortization. During the first six
months of 2002, the Group recorded CHF 80 million of intangible
77
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
9 Recently issued US accounting standards (continued)
assets with amortization periods from three to six years. The components of
intangible assets were as follows:
30.06.02 31.12.01
-------------------------------------------- --------------------------------------------
Gross carrying Accumulated Net carrying Gross carrying Accumulated Net carrying
in CHF m amount amortization amount amount amortization amount
-------------------------------------------------------------------------------------------------------------------------
Present value of future
profits 5,900 1,360 4,540 5,904 1,155 4,749
Capitalization of software 3,833 1,441 2,392 3,886 997 2,889
Trade names / Trademarks 1,379 145 1,234 1,650 136 1,514
Client relationships 362 44 318 3,137 196 2,941
Other 196 88 108 1,130 271 859
-------------------------------------------------------------------------------------------------------------------------
Total amortizing intangible
assets 11,670 3,078 8,592 15,707 2,755 12,952
Indefinite life intangible
assets 6 6
-------------------------------------------------------------------------------------------------------------------------
Total intangible assets 8,598 12,958
-------------------------------------------------------------------------------------------------------------------------
Intangible assets amortization expense was CHF 646 million and CHF 791 million
for the six months ended June 30, 2002 and 2001, respectively. Intangible assets
amortization expense is estimated to be CHF 717 million for the remainder of
2002, CHF 1,295 million in 2003, CHF 1,164 million in 2004, CHF 889 million in
2005, CHF 494 million in 2006, and CHF 474 million in 2007.
Accounting for the impairment or disposal of long-lived assets
In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (SFAS No. 144).
SFAS No. 144 supersedes SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of (SFAS 121), and the
accounting and reporting provisions of APB opinion No. 30, Reporting the Results
of Operations--Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions (APB
30). This statement also amends ARB 51, Consolidated Financial Statements (ARB
51), to eliminate the exception to consolidation for a temporarily controlled
subsidiary.
SFAS No. 144 requires all long-lived assets to be disposed of and discontinued
operations to be measured at the lower of the carrying amount or fair value less
costs to sell. SFAS No. 144 establishes additional criteria for determining when
a long-lived asset is held-for-sale. It also broadens the definition of
discontinued operations but does not allow for the accrual of future operating
losses, as was previously permitted.
The Group adopted SFAS No. 144 on January 1, 2002. The provisions of the new
standard are generally to be applied prospectively. There was no impact on the
Group's consolidated financial condition or results of operations as a result of
adopting SFAS No. 144.
78
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
9 Recently issued US accounting standards (continued)
Future Application of Accounting Standards
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections
(SFAS No. 145). SFAS 145 rescinds SFAS No. 4, Reporting Gains and Losses from
Extinguishment of Debt (SFAS No. 4), and an amendment of that statement, SFAS
No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements (SFAS
No. 64). This statement amends SFAS No. 13, Accounting for Leases (SFAS
No. 13), to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback
transactions. The statement is effective for fiscal years beginning after
May 15, 2002. Management believes that the adoption of SFAS 145 will not have a
significant impact on the Group's consolidated financial condition or results of
operations.
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities (SFAS No. 146), which requires companies to
recognize costs associated with exit or disposal activities when they are
incurred, rather than at the date of a commitment to an exit or disposal plan.
In addition, SFAS No. 146 requires that the liability be measured at fair value
and be adjusted for changes in estimated cash flows. Examples of costs covered
by the standard include lease termination costs and certain employee severance
costs that are associated with restructuring, a discontinued operation, plant
closing, or other exit or disposal activity. The statement is effective for exit
or disposal activities initiated after December 31, 2002. The Group believes
that the adoption of SFAS 146 will not have a significant impact on the Group's
consolidated financial condition or results of operations.
10 Income taxes
The Group is incorporated in Switzerland and operates in various countries with
differing tax laws and rates. A substantial amount of the Group's income before
taxes and related taxes are generated outside of Switzerland. Consequently, the
effective tax rate may vary from period to period to reflect the generation of
taxable income in tax jurisdictions.
79
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
10 Income taxes (continued)
A reconciliation of taxes computed at the statutory rate of 25% to the actual
taxes is shown in the following table based on Swiss GAAP.
6 months 2002 6 months 2002 12 months 2001 12 months 2001
in CHF m in % in CHF m in %
-----------------------------------------------------------------------------------------------------------------
Statutory tax/tax rate (69) 25.0 (575) 25.0
Increase/(decrease) in taxes resulting from
effects of different tax rates 68 (24.5) 681 (29.6)
Net operating losses (NOL) for which no deferred
tax
asset is recognized (933) 337.1 (846) 36.8
Utilization of NOL 38 (13.8) 181 (7.9)
Changes in deferred tax valuation allowance 182 (65.8) (64) 2.8
Lower taxed income 311 (112.4) 487 (21.2)
Non deductible expenses, allowances and
deductions (436) 157.7 (616) 26.8
Other 336 (121.4) 266 (11.6)
-----------------------------------------------------------------------------------------------------------------
Effective tax/tax rate (503) 181.9 (486) 21.1
-----------------------------------------------------------------------------------------------------------------
At June 30, 2002 and December 31, 2001, deferred tax assets based on Swiss GAAP
totaled CHF 5,894 million and CHF 6,910 million, respectively, while deferred
tax liabilities based on Swiss GAAP totaled CHF 5,037 million and CHF 5,740
million at June 30, 2002 and December 31, 2001, respectively.
The gross deferred tax assets in accordance with US GAAP were
CHF 12,398 million at June 30, 2002 and CHF 10,256 million at December 31, 2001.
The valuation allowance in accordance with US GAAP was CHF 1,579 million at
June 30, 2002 and CHF 1,400 million at December 31, 2001. The valuation
allowance on the deferred tax assets on net operating losses from the Investment
Banking segment increased. The valuation allowance for our insurance businesses
remained unchanged. As a result, the total deferred tax assets net of valuation
allowance were CHF 10,819 million at June 30, 2002. Total deferred tax
liabilities were CHF 9,035 million and net deferred tax assets were
CHF 1,784 million at June 30, 2002.
11 Derivatives financial information
In the first half of 2002, Winterthur significantly increased the amount of
derivatives held compared to previous periods. This was primarily due to the put
options entered into in early June 2002 linked to equity market indices in an
effort to partially hedge the exposure to the equity markets for equity
securities held as available-for-sale, which were significantly impacted by the
decline in the equity markets worldwide.
These hedges are considered to be economic hedges but do not qualify for hedge
accounting under SFAS No. 133. Therefore, the hedged securities are accounted
for as available-for-sale while the derivatives are marked to market with the
gain/loss recognized through the income statement. This accounting treatment is
expected to result in a temporary mismatch between economic gain/loss and
reported investment result.
80
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
12 Litigation
Certain significant legal proceedings and matters have been previously disclosed
in the Company's Annual Report on Form 20-F for the year ended December 31, 2001
and in other reports furnished to the SEC on Form 6-K. The following is an
update of such proceedings.
World War II Settlement
Several post-settlement disputes have arisen regarding the implementation of the
settlement, including a dispute that involves an assertion, contested by us and
the other Swiss bank, that they owe approximately USD 4.8 million in additional
interest because of an alleged shortfall of interest payments on the Escrow
Fund. In addition, while the Group has received certain contributions from other
Swiss companies that did not participate in the litigation, it no longer expects
to receive significant additional contributions. On July 11, 2002, the
Winters/Schenker case against Life & Pensions was dismissed for lack of personal
jurisdiction.
Litigation Relating to South Africa
A purported class action claim has been filed in the United States District
Court for the Southern District of New York against us and two other banks
alleging that the defendants are liable under international law by virtue of
their business in South Africa during the apartheid era prior to 1995. Similar
suits have been filed against other companies, and the suits are being
consolidated. The Group believes it has meritorious dispositive motions, which
are due to be filed in the fall of this year.
IPO Allocation-related Litigation and Inquiries
IN RE INITIAL PUBLIC OFFERING ANTITRUST LITIGATION
On May 24, 2002, Credit Suisse First Boston Corporation, or CSFB Corp., moved to
dismiss the amended complaint filed in the US District Court for the Southern
District of New York alleging violations of the federal and state antitrust laws
in connection with alleged initial public offering, or IPO, allocation
practices.
IN RE INITIAL PUBLIC OFFERING SECURITIES LITIGATION
On July 1, 2002, CSFB Corp., Donaldson, Lufkin & Jenrette Securities Corporation
and several other investment banks moved to dismiss the consolidated amended
class action complaints filed in the US District Court for the Southern District
of New York in connection with alleged IPO allocation practices.
MDCM HOLDINGS, INC. LITIGATION
On June 25, 2002, the Court denied CSFB Corp.'s motion to dismiss the amended
complaint in the action pending in the US District Court for the Southern
District of New York brought by a putative class of issuers in IPOs in which
CSFB Corp. acted as lead manager.
81
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
12 Litigation (continued)
INQUIRIES
CSFB Corp. has received requests for information from a US Congressional
committee and the National Association of Securities Dealers Inc., as well as a
subpoena from the Secretary of the Commonwealth of Massachusetts Securities
Division, as part of their investigations into the practice known as "spinning,"
in connection with the allocation of IPOs. We are cooperating fully with these
inquiries.
Securities and Exchange Board of India Interim Order
On June 13, 2002, the Securities and Exchange Board of India, or SEBI, suspended
the stockbroker registration of CSFB India for two years, with the term of the
suspension beginning to run on April 18, 2001.
Enron-related Litigation and Inquiries
NEWPOWER HOLDINGS, INC. LITIGATION
On July 31, 2002, plaintiffs filed a consolidated complaint alleging violations
of the federal securities laws due to alleged material misrepresentations in,
and omissions of material fact from, the registration statement and prospectus
issued in connection with NewPower's October 5, 2000 IPO, and for alleged
misrepresentations and omissions regarding NewPower after the IPO. One former
CSFB employee, who was a director of NewPower, is also named as a defendant in
the consolidated complaint.
TITTLE V. ENRON CORP., ET AL.
On May 8, 2002, CSFB Corp. moved to dismiss this matter.
NEWBY V. ENRON CORP., ET AL.
On May 8, 2002, CSFB Corp. moved to dismiss the consolidated putative class
action complaint in this matter.
THE RETIREMENT SYSTEMS OF ALABAMA V. MERRILL LYNCH & CO., ET AL.
This matter has been remanded to Alabama state court, and on July 18, 2002, CSFB
Corp. moved to dismiss plaintiff's third amended complaint. On August 19, 2002,
the Court denied all defendants' motions to dismiss.
HUDSON SOFT CO., LTD., ET AL. V. CREDIT SUISSE FIRST BOSTON CORP., ET AL.
This lawsuit was filed on July 22, 2002, in the US District Court for the
Southern District of New York, by a purchaser of certain credit-linked notes
against certain executives and directors of Enron, Arthur Andersen and certain
partners, executives and employees of Arthur Andersen, the law firm of Vinson &
Elkins, L.L.P. and certain of its partners, CSFB Corp., Credit Suisse First
Boston International, Credit Suisse First Boston (Europe) Limited, Donaldson,
Lufkin & Jenrette and certain other investment banks. Three CSFB employees (as
well as certain employees of other investment banks) were also named as
82
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
12 Litigation (continued)
defendants in the complaint. The complaint alleges violations of the Racketeer
Influenced and Corrupt Organizations Act, or RICO, in connection with various
offerings of credit-linked notes.
BRAZOS ELECTRIC POWER COOPERATIVE, INC. V. PONDEROSA PINE ENERGY, L.L.C., ET AL.
On July 12, 2002, CSFB Corp. was named as an additional defendant in an action
brought by a non-profit electric power cooperative against various defendants,
including certain energy and power companies, financial institutions, other
investment banks and one individual, in the District Court of Johnson County in
the State of Texas. On July 25, 2002, certain defendants removed the case to the
US District Court for the Northern District of Texas. The complaint alleges
violations of Texas statutory and common law in connection with the purchase of
an electric generating plant in Texas by an Enron designee.
PUBLIC EMPLOYEES RETIREMENT SYSTEM OF OHIO, ET AL. V. FASTOW, ET AL.
On September 4, 2002, certain executives and directors of Enron, Arthur
Andersen, the law firm of Vinson & Elkins, L.L.P., CSFB Corp. and certain other
investment banks were named in an action filed in the Court of Common Pleas of
Franklin County, Ohio by four Ohio state retirement systems. The complaint
alleges violations of the Texas Securities Act, as well as violations of
statutory and common law due to alleged misstatements and omissions of material
fact from certain registration statements and prospectuses issued in connection
with the sales of certain Enron debt securities and common stock, alleged
material misstatements and omissions regarding the financial condition of Enron,
and alleged conspiracy in connection with the dissemination of such statements
and omissions.
WASHINGTON STATE INVESTMENT BOARD, ET AL. V. LAY, ET AL.
On September 9, 2002, certain executives and directors of Enron, Arthur Andersen
and certain partners, executives and employees of Arthur Andersen, the law firms
of Vinson & Elkins, L.L.P. and Kirkland & Ellis, and CSFB Corp. and certain
other investment banks, were named in a putative class action filed in the US
District Court for the Southern District of Texas by purchasers of Enron
publicly traded equity and debt securities between September 9, 1997 and
October 18, 1998. Although the complaint contains other allegations, CSFB Corp.
has been named only in connection with the claims under the federal securities
laws for alleged misstatements and omissions of material fact regarding the
financial condition of Enron and for controlling person liability.
INQUIRIES
CSFB Corp. has received additional requests for information from certain US
Congressional committees and additional requests for information and/or
subpoenas from governmental and regulatory agencies regarding certain
transactions and business relationships with Enron and its affiliates, including
certain Enron-related special purpose entities. We are cooperating fully with
such inquiries.
Research-related Litigation and Inquiries
On April 17, 2002, the claims against CSFB Corp. and four other investment
banks, in the Fadem trust putative class action filed with the US District Court
for the Southern District of New York alleging
83
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
12 Litigation (continued)
violations of the federal securities laws resulting from the issuance of
research reports on certain internet and technology company stocks, were
dismissed without prejudice.
COVAD COMMUNICATIONS LITIGATION
On August 30, 2002, CSFB Corp. and two other investment banks were named in an
action filed in the US District Court for the Southern District of New York by a
putative class consisting of individuals and entities who purchased shares in
Covad Communications Company. The defendants are alleged to have violated
federal securities law by issuing false and misleading analyst reports in an
effort to obtain investment banking business from Covad and other issuers.
INQUIRIES
CSFB Corp. has received a subpoena from the US Department of Justice and from
the Commonwealth of Massachusetts as well as a request for information from a US
Congressional Committee relating to research departments. On September 19, 2002,
the Commonwealth of Massachusetts through the Office of the Secretary referred
this matter to the New York State Attorney General for consideration as to
whether a criminal proceeding should be initiated. We are cooperating fully with
these inquiries.
Other
The Group and its subsidiaries are involved in a number of judicial, regulatory
and arbitration proceedings, including those described above, concerning matters
arising in connection with the conduct of the businesses of the Group and its
subsidiaries. Some of these actions have been brought on behalf of various
classes of claimants and seek damages of material and indeterminate amounts.
Management believes, based on currently available information, that the results
of such proceedings, in the aggregate, will not have a material adverse effect
on the financial condition of the Group as a whole, but could be material to the
Group's operating results for any particular period.
We intend to defend ourselves vigorously against all of the claims asserted in
these matters.
84
SUPPLEMENTAL INFORMATION REQUIRED BY INDUSTRY GUIDE 3
Banking average balances and interest rates
The following tables set forth average interest-earning assets, average
interest-bearing liabilities and average rates for our banking businesses for
the six months ended June 30, 2002 and 2001. Month-end balances were
predominately used in computing the averages disclosed below. We believe these
amounts approximate daily averages.
6 months 2002 6 months 2001
------------------------------------ ---------------------------------
Average Interest Average Average Interest Average
balance income rate balance income rate
in CHF m in CHF m in % in CHF m in CHF m in %
--------------------------------------------------------------------------------------------------------------------------
Money market papers
Switzerland 2,857 26 1.8% 2,464 50 4.1%
Foreign 26,061 368 2.8% 26,659 799 6.0%
Due from banks
Switzerland 8,905 137 3.1% 11,510 350 6.1%
Foreign 191,721 3,537 3.7% 216,602 7,743 7.2%
Due from customers
Switzerland 38,697 801 4.1% 42,099 1,031 4.9%
Foreign 122,063 2,207 3.6% 116,252 4,067 7.0%
Mortgages
Switzerland 71,080 1,525 4.3% 72,572 1,650 4.5%
Foreign 17,737 628 7.1% 20,668 778 7.5%
Interest-earning trading portfolios
Switzerland 10,834 107 2.0% 20,358 242 2.4%
Foreign 206,089 5,151 5.0% 207,914 6,374 6.1%
Interest-earning financial investments
Switzerland 4,960 84 3.4% 4,373 68 3.1%
Foreign 31,559 195 1.2% 21,270 145 1.4%
Net interest income/(expenses) on swaps
Switzerland -- 48 -- -- 78 --
Foreign -- 1 -- -- 0 --
--------------------------------------------------------------------------------------------------------------------------
Interest-earning assets 732,563 14,815 4.0% 762,741 23,375 6.1%
--------------------------------------------------------------------------------------------------------------------------
Specific allowance for losses (9,085) (10,246)
Participations 3,992 2,880
Non-interest earning assets 159,827 154,421
--------------------------------------------------------------------------------------------------------------------------
Total assets 887,297 14,815 3.3% 909,796 23,375 5.1%
--------------------------------------------------------------------------------------------------------------------------
Percentage of assets attributable to foreign
activities 81.4% 80.8%
--------------------------------------------------------------------------------------------------------------------------
85
SUPPLEMENTAL INFORMATION REQUIRED BY INDUSTRY GUIDE 3
Banking average balances and interest rates (continued)
6 months 2002 6 months 2001
------------------------------------ ---------------------------------
Average Interest Average Average Interest Average
balance expenses rate balance expenses rate
in CHF m in CHF m in % in CHF m in CHF m in %
--------------------------------------------------------------------------------------------------------------------------
Money market papers issued
Switzerland 111 2 3.6% -- -- --
Foreign 21,142 276 2.6% 29,606 742 5.0%
Due to banks
Switzerland 47,788 357 1.5% 59,142 983 3.3%
Foreign 268,409 5,357 4.0% 313,470 10,200 6.5%
Due to customers in savings and investment
deposits
Switzerland 32,894 229 1.4% 35,065 282 1.6%
Foreign 3,073 12 0.8% 3,505 17 1.0%
Due to customers, other
Switzerland 51,721 369 1.4% 54,700 660 2.4%
Foreign 182,515 2,259 2.5% 161,142 5,379 6.7%
Swiss cash bonds
Switzerland 3,027 54 3.6% 3,155 57 3.6%
Foreign -- -- -- -- -- --
Bonds and mortgage-backed bonds
Switzerland 10,397 229 4.4% 11,729 268 4.6%
Foreign 78,522 1,728 4.4% 56,725 1,650 5.8%
Net interest income/(expenses) on swaps
Switzerland -- 17 -- -- 6 --
Foreign -- (66) -- -- 6 --
--------------------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities 699,599 10,823 3.1% 728,239 20,250 5.6%
--------------------------------------------------------------------------------------------------------------------------
Non-interest bearing liabilities 155,654 145,154
--------------------------------------------------------------------------------------------------------------------------
Total liabilities 855,253 10,823 2.5% 873,393 20,250 4.6%
--------------------------------------------------------------------------------------------------------------------------
Shareholders' equity 32,044 36,403
--------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity 887,297 909,796
--------------------------------------------------------------------------------------------------------------------------
Percentage of liabilities attributable to
foreign activities 79.3% 79.5%
86
SUPPLEMENTAL INFORMATION REQUIRED BY INDUSTRY GUIDE 3
Banking average balances and interest rates (continued)
The average rates earned and paid on related assets and liabilities can
fluctuate within wide ranges and are influenced by several key factors; the most
significant factor is the changes in global interest rates. Additional factors
include changes in the mix of business of the Group, both geographic and product
types, and foreign exchange rate movements between the Swiss franc and the
currency of the underlying individual assets and liabilities.
6 months 2002 6 months 2001
-------------------- -------------------
Net Interest Net Interest
interest rate interest rate
Net interest income/ income spread income spread
Interest rate spread in CHF m in % in CHF m in %
--------------------------------------------------------------------------------------------------------
Switzerland 1,471 2.3% 1,213 1.7%
Foreign 2,521 0.6% 1,912 0.1%
--------------------------------------------------------------------------------------------------------
Total net 3,992 0.9% 3,125 0.5%
--------------------------------------------------------------------------------------------------------
The following table shows selected margin information applicable to our banking
businesses for the six months ended June 30, 2002 and 2001:
Average rate Average rate
6 months 6 months
in % 2002 2001
-----------------------------------------------------------------------------------------
Switzerland 2.1% 1.6%
Foreign 0.8% 0.6%
-----------------------------------------------------------------------------------------
Net interest margin 1.1% 0.8%
-----------------------------------------------------------------------------------------
87
SUPPLEMENTAL INFORMATION REQUIRED BY INDUSTRY GUIDE 3
Analysis of changes in net interest income
The following table allocates, by categories of interest-earning assets and
interest-bearing liabilities, changes in net interest income due to changes in
volume and in rates for the six months ended June 30, 2002 compared to the six
months ended June 30, 2001. Volume and rate variances have been calculated in
movements in average balances and changes in average rates. Changes due to a
combination of volume and rate have been allocated to the change due to average
rate.
6 months 2002 vs. 6 months 2001
Increase/(decrease) due to changes in
------------------------------------------
in CHF m Average volume Average rate Net change
--------------------------------------------------------------------------------------------------------
Money market papers
Switzerland 8 (32) (24)
Foreign (18) (413) (431)
Due from banks
Switzerland (79) (134) (213)
Foreign (889) (3,317) (4,206)
Due from customers
Switzerland (83) (147) (230)
Foreign 203 (2,063) (1,860)
Mortgages
Switzerland (34) (91) (125)
Foreign (110) (40) (150)
Interest-earning trading portfolios
Switzerland (113) (22) (135)
Foreign (56) (1,167) (1,223)
Interest-earning financial investments
Switzerland 9 7 16
Foreign 70 (20) 50
--------------------------------------------------------------------------------------------------------
Interest-earning assets
Switzerland (292) (419) (711)
Foreign (800) (7,020) (7,820)
--------------------------------------------------------------------------------------------------------
Change in interest income excluding swaps (1,092) (7,439) (8,531)
--------------------------------------------------------------------------------------------------------
Swaps
Switzerland (30)
Foreign 1
--------------------------------------------------------------------------------------------------------
Change in interest income (8,560)
--------------------------------------------------------------------------------------------------------
88
SUPPLEMENTAL INFORMATION REQUIRED BY INDUSTRY GUIDE 3
Analysis of changes in net interest income (continued)
6 months 2002 vs. 6 months 2001
Increase/(decrease) due to changes in
------------------------------------------
in CHF m Average volume Average rate Net change
--------------------------------------------------------------------------------------------------------
Money market papers issued
Switzerland 0 2 2
Foreign (212) (254) (466)
Due to banks
Switzerland (189) (437) (626)
Foreign (1,466) (3,377) (4,843)
Due to customers in savings and investment deposits
Switzerland (17) (36) (53)
Foreign (2) (3) (5)
Due to customers, other
Switzerland (36) (255) (291)
Foreign 713 (3,833) (3,120)
Swiss cash bonds
Switzerland (2) (1) (3)
Foreign -- -- --
Bonds and mortgage-backed bonds
Switzerland (30) (9) (39)
Foreign 634 (556) 78
--------------------------------------------------------------------------------------------------------
Interest-bearing liabilities
Switzerland (274) (736) (1,010)
Foreign (333) (8,023) (8,356)
--------------------------------------------------------------------------------------------------------
Change in interest expenses excluding swaps (607) (8,759) (9,366)
--------------------------------------------------------------------------------------------------------
Swaps
Switzerland 11
Foreign (72)
--------------------------------------------------------------------------------------------------------
Change in interest expenses (9,427)
--------------------------------------------------------------------------------------------------------
Change in net interest income
Switzerland (18) 317 299
Foreign (467) 1,003 536
--------------------------------------------------------------------------------------------------------
Change in net interest income excluding swaps (485) 1,320 835
--------------------------------------------------------------------------------------------------------
Swaps
Switzerland (41)
Foreign 73
--------------------------------------------------------------------------------------------------------
Net change in swaps 32
--------------------------------------------------------------------------------------------------------
Change in net interest income
Switzerland 258
Foreign 609
--------------------------------------------------------------------------------------------------------
Total change in net interest income 867
--------------------------------------------------------------------------------------------------------
89
SUPPLEMENTAL INFORMATION REQUIRED BY INDUSTRY GUIDE 3
Gross write-offs of loans by industry
The following table summarizes gross write-offs of loans by industry for the six
months ended June 30, 2002 and 2001:
6 months 6 months
in CHF m 2002 2001
---------------------------------------------------------------------------------
Due from banks 1 11
Commercial:
Financial services 80 534
Real estate companies 380 430
Other services including technology companies 180 199
Manufacturing 153 147
Wholesale and retail trade 181 120
Construction 112 110
Transportation and communication 395 43
Health and social services 26 44
Hotels and restaurants 43 53
Agriculture and mining 162 13
Non-profit and international organizations 1 7
---------------------------------------------------------------------------------
Commercial 1,713 1,700
---------------------------------------------------------------------------------
Consumers 389 275
Public authorities 0 0
Lease financings 8 0
---------------------------------------------------------------------------------
Total gross write-offs 2,111 1,986
---------------------------------------------------------------------------------
90
ITEM 18: CONSOLIDATED FINANCIAL STATEMENTS
Index to financial statements
Credit Suisse Group
Report of the independent auditors................................ F-4
Consolidated financial statements
Consolidated income statement..................................... F-5
Consolidated balance sheet........................................ F-6
Consolidated statement of source and application of funds......... F-7
Consolidated off-balance sheet and fiduciary business............. F-8
Notes to the consolidated financial statements
1 Summary of significant accounting policies.................. F-10
2 Changes to accounting policies.............................. F-19
3 Acquisitions and divestitures............................... F-19
4 Segment reporting........................................... F-20
4.1 Segment reporting by operating segments..................... F-20
4.2 Segment reporting by geographic segments.................... F-31
5 Subsequent events........................................... F-33
Income statement
6 Income statement of the banking and insurance business...... F-34
7 Income statement by origin.................................. F-35
8 Net interest income......................................... F-36
9 Net trading income.......................................... F-36
10 Depreciation and amortization............................... F-37
11 Valuation adjustments, provisions and losses from the
banking business.......................................... F-37
12 Extraordinary income........................................ F-38
13 Extraordinary expenses...................................... F-38
14 Taxes....................................................... F-39
15 Income statement of the insurance business.................. F-39
16 Insurance premiums, claims and related reinsurance.......... F-41
17 Net investment income from the insurance business........... F-42
Balance sheet: Assets
18 Money market papers......................................... F-43
19 Loans....................................................... F-44
19.1 Due from banks.............................................. F-44
19.2 Due from customers and mortgages............................ F-44
19.3 Collateral of due from customers and mortgages.............. F-45
19.4 Loan valuation allowance.................................... F-45
19.5 Impaired loans.............................................. F-45
20 Securities and precious metals trading portfolios........... F-47
21 Own shares included in securities trading portfolios........ F-48
F-1
ITEM 18: CONSOLIDATED FINANCIAL STATEMENTS
22 Financial investments from the banking business............. F-48
23 Investments from the insurance business..................... F-49
24 Own shares included in financial investments from the
banking and insurance business............................ F-51
25 Non-consolidated participations............................. F-51
26 Tangible fixed assets....................................... F-51
27 Operating leases............................................ F-52
28 Intangible assets........................................... F-53
29 Other assets................................................ F-53
30 Assets pledged or assigned and assets subject to ownership
reservation............................................... F-54
Balance sheet: Liabilities and shareholders' equity
31 Medium-term notes and bonds................................. F-54
32 Other liabilities........................................... F-55
33 Valuation allowances and provisions......................... F-55
34 Technical provisions for the insurance business............. F-56
35 Statement of shareholders' equity........................... F-57
Other information
36 Liabilities due to own pension funds........................ F-58
37 Loans to members of the Group's governing bodies............ F-59
38 Maturity structure of current assets and borrowed funds..... F-59
39 Securities lending and borrowing and repurchase
agreements................................................ F-60
40 Balance sheet by origin..................................... F-61
41 Balance sheet by currencies................................. F-62
42 Share-based compensation.................................... F-63
43 Foreign currency translation rates.......................... F-67
44 Principle participations.................................... F-68
45 Bonds issued................................................ F-75
46 Differences between Swiss and US accounting principles...... F-86
Additional disclosures required under US GAAP
47.1 Earnings per share.......................................... F-109
47.2 Consolidated cash flows..................................... F-110
47.3 US GAAP consolidated changes in shareholders' equity........ F-112
47.4 US GAAP accumulated other comprehensive income.............. F-114
47.5 Recently issued US accounting standards..................... F-115
47.6 Investments................................................. F-116
47.7 Real estate held for investment from the insurance F-119
business..................................................
47.8 Brokerage receivables and brokerage payables................ F-120
47.9 Securities borrowed, lent and subject to repurchase F-120
agreements................................................
47.10 Income taxes................................................ F-123
47.11 Reinsurance................................................. F-124
47.12 Present value of future profits............................. F-126
47.13 Deferred policy acquisition costs........................... F-127
47.14 Real estate................................................. F-127
47.15 Fair value of financial instruments......................... F-128
F-2
ITEM 18: CONSOLIDATED FINANCIAL STATEMENTS
47.16 Derivative financial instruments............................ F-130
47.17 Financial instruments with off-balance sheet risk........... F-136
47.18 Concentrations of credit risk............................... F-143
47.19 Deposits.................................................... F-144
47.20 Liabilities for loss and loss adjustment expenses from the F-144
non-life insurance business...............................
47.21 Participating policies of insurance business................ F-146
47.22 Business combinations....................................... F-147
47.23 Related party transactions.................................. F-150
47.24 Pension and post-retirement benefits........................ F-151
47.25 Capital requirements........................................ F-154
47.26 Credit Suisse Group (parent company only)................... F-157
Schedule I - Schedule of investments from the insurance business... F-161
Schedule III - Schedule of supplementary insurance information..... F-162
Schedule IV - Schedule of reinsurance.............................. F-163
F-3
[KPMG LOGO]
KPMG Klynveld Peat Marwick Goerdeler SA Telephone +41 1 249 31 31
Badenerstrasse 172 P.O. Box Fax +41 1 249 30 41
CH-8004 Zurich CH-8026 Zurich www.kpmg.ch
Report of the Independent Auditors
THE BOARD OF DIRECTORS OF CREDIT SUISSE GROUP
We have audited the accompanying consolidated balance sheets of Credit Suisse
Group and subsidiaries as of December 31, 2001 and 2000, and the related
consolidated statements of income and source and application of funds for each
of the years in the three-year period ended December 31, 2001. These
consolidated financial statements are the responsibility of Credit Suisse Group
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Credit Suisse Group
and subsidiaries as of December 31, 2001 and 2000, and the results of their
operations, and source and application of funds for each of the years in the
three-year period ended December 31, 2001, in conformity with accounting
principles generally accepted in Switzerland and comply with Swiss law.
Accounting principles generally accepted in Switzerland vary in certain
significant respects from accounting principles generally accepted in the United
States of America. Application of accounting principles generally accepted in
the United States of America would have affected shareholders' equity as of
December 31, 2001 and 2000 and the results of operations for each of the three
years then ended, to the extent summarised in Note 46 to the consolidated
financial statements.
Zurich, March 1, 2002, except Notes 46 and 47 which
are as of April 26, 2002
KPMG Klynveld Peat Marwick Goerdeler SA
[LOGO] [LOGO]
Brendan R. Nelson Peter Hanimann
Chartered accountant Certified accountant
Member Firm of
KPMG International Member of the Swiss Institute of Certified
/ / / / / / / / Accountants and Tax Consultants
F-4
ITEM 18: CONSOLIDATED FINANCIAL STATEMENTS
Consolidated income statement
in CHF m Notes 2001 2000 1999
-----------------------------------------------------------------------------------------------------------
Interest and discount income 8 28,687 30,181 19,380
Interest and dividend income from trading portfolios 8 13,078 8,021 4,127
Interest and dividend income from financial investments 8 514 706 471
Interest expenses 8 (35,528) (33,595) (18,640)
-----------------------------------------------------------------------------------------------------------
Net interest income 6, 7 6,751 5,313 5,338
-----------------------------------------------------------------------------------------------------------
Commission income from lending activities 780 717 594
Commissions income from securities and investment
transactions 16,609 16,039 10,504
Commissions income from other services 1,421 669 393
Commission expenses (965) (829) (635)
-----------------------------------------------------------------------------------------------------------
Net commission and service fee income 6, 7 17,845 16,596 10,856
-----------------------------------------------------------------------------------------------------------
Net trading income 6, 7, 9 9,183 8,791 6,578
-----------------------------------------------------------------------------------------------------------
Premiums earned, net 15 32,195 28,690 26,146
Claims incurred and actuarial provisions 16 (29,731) (28,900) (26,893)
Commission expenses, net (2,040) (2,113) (1,743)
Investment income from the insurance business 5,876 8,489 6,656
-----------------------------------------------------------------------------------------------------------
Net income from the insurance business 6, 7 6,300 6,166 4,166
-----------------------------------------------------------------------------------------------------------
Income from the sale of financial investments 1,146 1,023 505
Income from investments in associates 166 199 78
Income from other non-consolidated participations 24 18 12
Real estate income 171 140 24
Sundry ordinary income 1,091 1,243 574
Sundry ordinary expenses (3,523) (2,258) (1,487)
-----------------------------------------------------------------------------------------------------------
Other ordinary income/(expenses), net 6, 7 (925) 365 (294)
-----------------------------------------------------------------------------------------------------------
Operating income 39,154 37,231 26,644
-----------------------------------------------------------------------------------------------------------
Personnel expenses 6, 7 21,890 18,503 13,554
Other operating expenses 6, 7 8,394 6,645 5,227
-----------------------------------------------------------------------------------------------------------
Operating expenses 30,284 25,148 18,781
-----------------------------------------------------------------------------------------------------------
Gross operating profit 8,870 12,083 7,863
-----------------------------------------------------------------------------------------------------------
Depreciation of non-current assets 10 2,186 1,353 981
Amortization of acquired intangible assets 10 793 157 0
Amortization of goodwill 10 770 246 110
Valuation adjustments, provisions and losses from the
banking business 11 2,592 1,265 1,540
-----------------------------------------------------------------------------------------------------------
Depreciation, valuation adjustments and losses 6, 7 6,341 3,021 2,631
-----------------------------------------------------------------------------------------------------------
Profit before extraordinary items, taxes and minority
interests 2,529 9,062 5,232
-----------------------------------------------------------------------------------------------------------
Extraordinary income 6, 7, 12 52 105 93
Extraordinary expenses 6, 7, 13 (281) (1,796) (152)
Taxes 6, 7, 14 (486) (1,349) (855)
-----------------------------------------------------------------------------------------------------------
Net profit before minority interests 1,814 6,022 4,318
-----------------------------------------------------------------------------------------------------------
Minority interests 6, 7 (227) (237) (68)
-----------------------------------------------------------------------------------------------------------
Net profit 1,587 5,785 4,250
-----------------------------------------------------------------------------------------------------------
Certain reclassifications have been made to prior-period amounts to conform to
the current presentation.
The accompanying notes are an integral part of these financial statements.
F-5
ITEM 18: CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheet
in CHF m
Notes 31.12.01 31.12.00
-----------------------------------------------------------------------------------------------------
Assets
Cash and other liquid assets 38 3,092 2,928
Money market papers 18, 38 32,027 30,127
Due from banks 19, 38 203,785 218,521
Receivables from the insurance business 38 11,823 9,871
Due from customers 19, 38 186,151 170,428
Mortgages 19, 38 92,655 92,432
Securities and precious metals trading portfolios 20, 38 208,374 198,917
Financial investments from the banking business 22, 38 37,306 25,574
Investments from the insurance business 23 131,291 132,632
Non-consolidated participations 25 1,846 1,829
Tangible fixed assets 4, 26 9,422 9,913
Intangible assets 28 22,850 23,299
Accrued income and prepaid expenses 18,095 16,294
Other assets 29 63,796 54,668
-----------------------------------------------------------------------------------------------------
Total assets 4, 40, 41 1,022,513 987,433
-----------------------------------------------------------------------------------------------------
Subordinated assets 1,578 4,876
Receivables due from non-consolidated participations 276 771
-----------------------------------------------------------------------------------------------------
Liabilities and shareholders' equity
Money market papers issued 38 19,252 23,176
Due to banks 38 335,932 359,441
Payables from the insurance business 38 11,864 8,807
Due to customers in savings and investment deposits 38 38,547 39,233
Due to customers, other 38 261,752 213,549
Medium-term notes (cash bonds) 31, 38 3,019 3,225
Bonds and mortgage-backed bonds 31, 38 81,505 65,524
Accrued expenses and deferred income 25,512 28,021
Other liabilities 32 56,493 57,653
Valuation adjustments and provisions 33 11,362 13,107
Technical provisions for the insurance business 34 138,354 132,175
-----------------------------------------------------------------------------------------------------
Total liabilities 983,592 943,911
-----------------------------------------------------------------------------------------------------
Reserve for general banking risks 35 2,319 2,319
Share capital 35 3,590 6,009
Capital reserve 35 19,446 19,282
Revaluation reserves for the insurance business 35 749 4,789
Reserve for own shares 35 2,469 600
Retained earnings 35 5,640 2,167
Minority interests 35 3,121 2,571
Net profit 35 1,587 5,785
-----------------------------------------------------------------------------------------------------
Total shareholders' equity 38,921 43,522
-----------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity 40, 41 1,022,513 987,433
-----------------------------------------------------------------------------------------------------
Subordinated liabilities 20,892 21,801
Liabilities due to non-consolidated participations 1,098 779
-----------------------------------------------------------------------------------------------------
Certain reclassifications have been made to prior-year amounts to conform to the
current presentation.
The accompanying notes are an integral part of these financial statements.
F-6
ITEM 18: CONSOLIDATED FINANCIAL STATEMENTS
Consolidated statement of source and application of funds
in CHF m 2001 2000 1999
--------------------------------------------------------------------------------------------
Net profit 1,587 5,785 4,250
Provisions for credit and other risks 2,732 2,736 1,423
Losses 59 144 79
Provisions for taxes 486 1,349 855
Depreciation and amortization 3,749 1,756 1,091
Extraordinary income (4) (10) (32)
Extraordinary expenses 238 190 101
Participations valued according to the equity method (166) (199) (78)
Accrued income and prepaid expenses (1,801) (4,480) 673
Accrued expenses and deferred income (2,509) 13,069 2,552
--------------------------------------------------------------------------------------------
Operating activities 4,371 20,340 10,914
--------------------------------------------------------------------------------------------
Share capital (including par value reduction) (2,419) 565 62
Capital surplus and retained earnings (4,407) 7,478 225
Dividends paid (175) (1,986) (1,430)
Foreign currency translation impact 112 (703) 1,318
Minority interests 701 1,517 (381)
--------------------------------------------------------------------------------------------
Equity transactions (6,188) 6,871 (206)
--------------------------------------------------------------------------------------------
Investments in companies (171) 145 (463)
Real estate (134) 186 (267)
Other tangible fixed and intangible assets (2,588) (21,391) (4,585)
--------------------------------------------------------------------------------------------
Investments in long-term assets (2,893) (21,060) (5,315)
--------------------------------------------------------------------------------------------
Financial investments from the banking business (11,799) (6,746) (1,361)
Investments from the insurance business 1,341 (14,861) (7,575)
Valuation adjustments and provisions (4,395) (3,941) (591)
Technical provisions for the insurance business 1) 6,179 18,194 11,213
Other assets (8,074) (3,554) 7,072
Other liabilities (1,160) 6,426 (5,124)
--------------------------------------------------------------------------------------------
Financial investments, provisions, other assets and
liabilities (17,908) (4,482) 3,634
--------------------------------------------------------------------------------------------
From operations, equity transactions and investments (22,618) 1,669 9,027
--------------------------------------------------------------------------------------------
Money market papers (1,900) (1,133) (2,401)
Due from banks 14,759 (53,585) (24,647)
Receivables from the insurance business (1,952) (2,719) 1,042
Due from customers (17,293) (65,573) (2,324)
Mortgages (291) (15,696) (6,089)
--------------------------------------------------------------------------------------------
Assets (6,677) (138,706) (34,419)
--------------------------------------------------------------------------------------------
Money market papers issued (3,924) 1,056 7,385
Due to banks (23,509) 160,598 44,494
Payables from the insurance business 3,057 2,452 (2,109)
Due to customers in savings and investment deposits (686) (4,774) (2,611)
Due to customers, other 48,203 31,467 3,521
Medium-term notes and bonds 15,775 18,196 (244)
--------------------------------------------------------------------------------------------
Liabilities 38,916 208,995 50,436
--------------------------------------------------------------------------------------------
From other balance sheet items 32,239 70,289 16,017
--------------------------------------------------------------------------------------------
Change in liquid assets 9,621 71,958 25,044
--------------------------------------------------------------------------------------------
Securities and precious metals trading portfolios (9,457) (72,171) (24,231)
Cash and other liquid assets (164) 213 (813)
--------------------------------------------------------------------------------------------
Certain reclassifications have been made to prior-period amounts to conform to
the current presentation.
1) In line with insurance practice, the change in the technical provisions is
shown as a total amount under changes in provisions affecting the cash
flow.
The accompanying notes are an integral part of these financial statements.
F-7
ITEM 18: CONSOLIDATED FINANCIAL STATEMENTS
Consolidated off-balance sheet and fiduciary business
Maturity
Maturity greater Total Total
within than gross gross Book Book
1 year 1 year amount amount Value 1) Value 1)
in CHF m 31.12.01 31.12.01 31.12.01 31.12.00 31.12.01 31.12.00
--------------------------------------------------------------------------------------------------------------------------
Credit guarantees in form of bills of exchange and
other guarantees 28,684 2,846 31,530 8,550 29,789 2) 7,013
Bid bonds, delivery and performance bonds, letters
of indemnity, other performance-related guarantees 4,432 1,024 5,456 5,256 5,056 4,824
Irrevocable commitments in respect of documentary
credits 4,201 180 4,381 3,221 3,257 3,142
Other contingent liabilities 3,956 1,528 5,484 5,026 5,484 5,026
--------------------------------------------------------------------------------------------------------------------------
Contingent liabilities 41,273 5,578 46,851 22,053 43,586 20,005
--------------------------------------------------------------------------------------------------------------------------
Irrevocable commitments 92,727 37,137 129,864 126,998 129,864 126,998
Liabilities for calls on shares and other equity
instruments 167 627 794 305 794 305
Confirmed credits 75 1 76 150 76 150
--------------------------------------------------------------------------------------------------------------------------
Total off-balance sheet 134,242 43,343 177,585 149,506 174,320 147,458
--------------------------------------------------------------------------------------------------------------------------
Fiduciary transactions 41,448 41,974
--------------------------------------------------------------------------------------------------------------------------
1) Book value for off-balance sheet positions represents the amount at risk,
meaning gross amount less any subparticipations.
2) Including credit guarantees of securities lent as arranger of CHF 21,148 m.
Off-balance sheet collateral
Mortgage Other Without Total
in CHF m collateral collateral collateral 31.12.01
--------------------------------------------------------------------------------------------------------
Credit guarantees in form of bills of exchange and other
guarantees 30 25,537 4,222 29,789
Bid bonds, delivery and performance bonds, letters of
indemnity, other performance-related guarantees 130 2,484 2,442 5,056
Irrevocable commitments in respect of documentary credits 1 1,504 1,752 3,257
Other contingent liabilities 76 1,850 3,558 5,484
--------------------------------------------------------------------------------------------------------
Contingent liabilities 237 31,375 11,974 43,586
--------------------------------------------------------------------------------------------------------
Irrevocable commitments 832 68,585 60,447 129,864
Liabilities for calls on shares and other equity instruments 0 0 794 794
Confirmed credits 0 1 75 76
--------------------------------------------------------------------------------------------------------
Total off-balance sheet 1,069 99,961 73,290 174,320
--------------------------------------------------------------------------------------------------------
As of December 31, 2000 7,374 85,306 54,778 147,458
--------------------------------------------------------------------------------------------------------
Other information
in CHF m 31.12.01 31.12.00
---------------------------------------------------------------------------------
Outstanding commitments
to fund loans at fixed rates 7,677 7,803
to fund loans at variable rates 104,976 110,722
to sell loans 0 221
---------------------------------------------------------------------------------
Unused lines of credit granted to customers 12,598 7,314
---------------------------------------------------------------------------------
Exposure with respect to the debts of other guaranteed 21,122 8,425
---------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
F-8
ITEM 18: CONSOLIDATED FINANCIAL STATEMENTS
Derivative instruments
Positive Negative Positive Negative
Nominal replacement replacement Nominal replacement replacement
value value value value value value
in CHF bn 31.12.01 31.12.01 31.12.01 31.12.00 31.12.00 31.12.00
-------------------------------------------------------------------------------------------------------------------------------
Forward rate agreements 243.3 0.2 0.2 109.0 0.1 0.1
Swaps 5,469.0 80.1 79.8 3,674.8 55.0 54.4
Options bought and sold (OTC) 1,647.7 14.1 16.2 886.9 10.2 10.7
Forwards 74.7 2.3 2.3 268.8 1.1 1.1
Futures 581.1 0.1 0.1 466.9 0.0 0.0
Options bought and sold (traded) 1,105.0 0.2 0.1 386.9 0.0 0.1
-------------------------------------------------------------------------------------------------------------------------------
Interest rate products 9,120.8 97.0 98.7 5,793.3 66.4 66.4
-------------------------------------------------------------------------------------------------------------------------------
Forwards 1) 1,125.3 19.1 16.6 558.0 11.5 12.2
Swaps 2) 389.2 14.6 17.9 305.9 15.1 16.1
Options bought and sold (OTC) 419.9 5.8 5.7 273.4 3.8 3.8
Futures 1.3 0.0 0.0 1.7 0.0 0.0
Options bought and sold (traded) 0.6 0.1 0.0 0.4 0.0 0.0
-------------------------------------------------------------------------------------------------------------------------------
Foreign exchange products 1,936.3 39.6 40.2 1,139.4 30.4 32.1
-------------------------------------------------------------------------------------------------------------------------------
Forwards 1) 19.5 0.6 0.7 18.5 0.8 0.7
Options bought and sold (OTC) 10.0 0.7 1.1 16.1 0.7 1.3
Futures 0.0 0.0 0.0 0.1 0.0 0.0
Options bought and sold (traded) 0.0 0.0 0.0 0.1 0.0 0.0
-------------------------------------------------------------------------------------------------------------------------------
Precious metals products 29.5 1.3 1.8 34.8 1.5 2.0
-------------------------------------------------------------------------------------------------------------------------------
Forwards 38.3 3.5 1.5 22.6 1.9 2.6
Options bought and sold (OTC) 185.5 9.3 11.9 265.8 13.3 15.5
Futures 39.2 0.6 0.0 44.6 0.8 0.1
Options bought and sold (traded) 130.9 0.7 0.2 140.9 1.1 1.4
-------------------------------------------------------------------------------------------------------------------------------
Equity/index-related products 393.9 14.1 13.6 473.9 17.1 19.6
-------------------------------------------------------------------------------------------------------------------------------
Forwards 110.3 2.8 3.1 69.8 2.1 2.7
Options bought and sold (OTC) 6.6 0.6 0.2 6.4 0.6 0.6
Futures 1.7 0.0 0.0 2.4 0.0 0.0
Options bought and sold (traded) 2.1 0.1 0.2 1.8 0.1 0.0
-------------------------------------------------------------------------------------------------------------------------------
Other products 120.7 3.5 3.5 80.4 2.8 3.3
-------------------------------------------------------------------------------------------------------------------------------
Total derivative instruments 11,601.2 155.5 157.8 7,521.8 118.2 123.4
-------------------------------------------------------------------------------------------------------------------------------
Netting agreements (104.3) (104.3) (73.1) (73.1)
Replacement values from the insurance
business 3) (0.2) (0.3) (0.1) (0.2)
-------------------------------------------------------------------------------------------------------------------------------
Total replacement values according to
the balance sheet (other assets/
liabilities) 51.0 53.2 45.0 50.1
-------------------------------------------------------------------------------------------------------------------------------
1) Including outstanding spot transactions.
2) Cross-currency interest rate swaps.
3) Included in the investments from the insurance business.
The accompanying notes are an integral part of these financial statements.
F-9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 Summary of significant accounting policies
BASIS FOR ACCOUNTING
The Credit Suisse Group (the Group) consolidated financial statements are
prepared in accordance with the accounting rules of the Swiss Federal Law on
Banks and Savings Banks and the respective Implementing Ordinance, the Federal
Banking Commission guidelines and Swiss GAAP FER Financial Reporting Standards
for the insurance business of the Group, which collectively are the generally
accepted accounting principles for banks and insurance companies, respectively,
in Switzerland, or Swiss GAAP. The consolidation and valuation policies of the
Group are in compliance with the Swiss stock exchange listing regulations. The
financial year for the Group ends on December 31. In preparing the consolidated
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Certain
reclassifications have been made to prior-period amounts to conform to the
current presentation.
CONSOLIDATION
The consolidated financial statements include the accounts of Credit Suisse
Group and its subsidiaries. The Group consolidates subsidiaries in which it
holds, directly or indirectly, more than 50% of the voting rights of an entity
or where it has the ability to exercise control over an entity. The effects of
inter-company transactions are eliminated in preparing the consolidated
financial statements. Minority interests in shareholders' equity and net profit
are disclosed separately.
The Group accounts for participations in which it holds 20% to 50% of the voting
rights and/or has the ability to exercise a significant influence using the
equity method of accounting. The Group's profit or loss share is included in
OTHER ORDINARY INCOME. Certain majority-owned participations which operate
outside of the Group's core business are accounted for according to the equity
method.
Participations in which the Group holds less than 20% of the voting rights
and/or does not have the ability to exercise significant influence are held at
cost, less provision for other than temporary impairment. These items are
included in NON-CONSOLIDATED PARTICIPATIONS.
FOREIGN CURRENCY TRANSLATION
For the purpose of consolidation, the balance sheets of foreign Group companies
are translated into Swiss francs using the year-end exchange rate, and their
income statements are translated using the average exchange rate prevailing
throughout the year. Translation adjustments arising on consolidation are
recorded directly in shareholders' equity.
In the annual accounts of the individual Group companies, assets, liabilities
and off-balance sheet items denominated in foreign currencies are translated
into the relevant reporting currency using the year-end exchange rate. Income
and expense items denominated in foreign currencies are translated into the
reporting currency using the exchange rate as of the transaction date. Resulting
exchange differences are included in the consolidated income statement, except
for differences relating to debt and equity securities held as
available-for-sale by the insurance business, which are recorded directly in
shareholders' equity.
F-10
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OFFSETTING
In the banking business, receivables and payables are offset when all the
following conditions are met: receivables and payables arise from transactions
of similar nature, with the same counterparty, with the same or earlier maturity
of the receivable and in the same currency and which cannot lead to a
counterparty risk. Positive and negative replacement values are offset with the
same counterparty when bilateral agreements exist that are recognized and
legally enforceable. In the insurance business, receivables and payables are
offset when the Group has a legal right to offset amounts with the same
counterparty and transactions are expected to be settled on a net basis.
TRADE DATE/SETTLEMENT DATE ACCOUNTING
Proprietary and customer securities spot transactions are recorded on a trade
date basis. Foreign exchange, money market and precious metals transactions are
recorded on settlement (value) date. Prior to the settlement (value) date,
foreign exchange and precious metals transactions are reported with their
replacement values in OTHER ASSETS and OTHER LIABILITIES, respectively.
CASH, DUE FROM BANKS AND MONEY MARKET PAPERS
Cash and due from banks are accounted for at nominal value. Money market
instruments held for trading are carried at fair value. Money market instruments
not held for trading or for sale are recorded net of unamortized
premiums/discounts. The necessary provisions for recognizable risks and
potential losses are normally deducted from the appropriate asset items in the
balance sheet.
LOANS (DUE FROM CUSTOMERS AND MORTGAGES)
Loans are initially recorded at cost, which is for originated loans generally
equal to the principal amount. Loans held-to-maturity are recorded net of
unamortized premiums/discounts. Loans held-for-sale are recorded at lower of
cost or market value. Interest income is accrued as earned.
Loans are carried net of any provisions for impairment. The Group provides for
credit losses based on regular and detailed analysis of each loan in the
portfolio considering collateral and counterparty risk. If uncertainty exists as
to the repayment of either principal or interest, a provision is either
established or adjusted accordingly.
The Group considers a loan impaired when, based on current information and
events, it is probable that it will be unable to collect all amounts due
according to the contractual terms of the loan agreement. In the banking
business, a loan is classified as non-performing no later than when the
contractual payments of principal and/or interest are more than 90 days past
due. The Group continues to accrue interest for collection purposes; however, a
corresponding provision is set up against interest income. In addition, for any
accrued but unpaid interest at the date the loan is placed on non-performing
status, a corresponding provision is booked against the accrual through the
income statement. At this time and on a periodic basis going forward, the
remaining principal is evaluated for collectibility and a provision is
established for the shortfall between the net recoverable amount and the
remaining principal balance.
A loan can be further downgraded to non-interest earning when the collection of
interest is in such a doubtful state that further accrual of interest is deemed
not necessary and is ceased. At this time and on a periodic basis going forward,
any unreserved remaining principal balance is evaluated for collectibility and
an additional provision is established as required. Only loans classified as
non-interest earning can
F-11
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
be written-off (both principal and interest). Write-off of a loan occurs when
the Group is certain that there is no possibility to recover the principal.
Interest collected on non-performing loans is accounted for using the cash
basis, cost recovery method or a combination of both, as appropriate. Interest
collected on non-interest earning loans is accounted for using the cost recovery
method only. Generally, an impaired loan may be restored to performing status
when all delinquent principal and interest are brought up to date in accordance
with the terms of the loan agreement and when certain creditworthiness
performance criteria are met.
SECURITIES AND PRECIOUS METALS TRADING PORTFOLIOS
Debt and equity securities and precious metals held in the trading portfolio are
carried at fair value.
Fair value is determined using quoted market prices, where a price-efficient and
liquid market exists. In the absence of such a market, the fair value is
established on the basis of a valuation model. Unrealized and realized gains and
losses on these positions are recognized in NET TRADING INCOME. Interest and
dividend income from the trading portfolio is recorded in NET INTEREST INCOME.
FINANCIAL INVESTMENTS FROM THE BANKING BUSINESS
This position includes securities, private equity investments, real estate
held-for-sale as well as debt securities held-to-maturity. Participations
acquired and held for subsequent disposal are also included in FINANCIAL
INVESTMENTS.
Debt and equity securities and real estate held-for-sale are valued at lower of
cost or market. Unrealized losses are recorded in the income statement when the
market value is lower than the cost. When the market value increases, unrealized
gains are recorded only to the extent losses were previously recognized. Losses
on debt securities due to impairment in creditworthiness are recorded in
VALUATION ADJUSTMENTS, PROVISION AND LOSSES.
Debt securities held-to-maturity are carried at amortized cost (accrual method).
Premiums and discounts are recognized over the term of the instrument until
final maturity. Realized profits or losses, which are interest related and which
arise from the early disposal or redemption of the instrument are recognized
over the remaining term of the instrument sold. Losses due to impairment in
creditworthiness are recorded in VALUATION ADJUSTMENTS, PROVISIONS AND LOSSES.
DERIVATIVE INSTRUMENTS - BANKING BUSINESS
Positive and negative replacement values of all derivative instruments are
reported within OTHER ASSETS and OTHER LIABILITIES, respectively.
Trading derivative instruments are carried at fair value as positive and
negative replacement values. The replacement values are presented net by
counterparty for transactions in those products where the Group has a legal
right to set off; otherwise the replacement values are presented gross by
contract. Realized and unrealized gains and losses are included in NET TRADING
INCOME. The majority of the Group's derivative positions are trading related.
The Group uses derivatives to manage interest rate, foreign currency, equity
market and credit risks. When applying hedge accounting, gains and losses on the
derivative instruments are recognized in income on the same basis as the
underlying exposure. Derivatives in the banking book not used for
F-12
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
hedging purposes are typically valued at lower of cost or market. However,
certain derivative instruments used for interest rate risk management are valued
according to the accrual method. The interest component is accrued or deferred
over the term of the instrument. Realized gains or losses, which are interest
related and which arise from the early disposal or redemption of the instrument,
are also accrued or deferred over the remaining term of the instrument.
Gains and losses related to qualifying hedges of firm commitments and probable
anticipated transactions are deferred and recognized in income or as adjustments
to carrying amounts when the hedged transactions occur.
INVESTMENTS FROM THE INSURANCE BUSINESS
Debt and equity securities held as available-for-sale are carried at fair value.
Unrealized gains and losses including foreign exchange gains and losses are
recorded within REVALUATION RESERVES FOR THE INSURANCE BUSINESS in shareholders'
equity, net of deferred taxes. Realized gains and losses on securities are
determined using the specific identification method. Realized gains and losses
and the amortization of premiums and discounts relating to debt securities are
included in INVESTMENT INCOME FROM THE INSURANCE BUSINESS.
Debt and equity securities held as trading are carried at fair value. Debt
securities held-to-maturity are carried at amortized cost. Non-marketable
securities are valued at fair value which normally equals cost. Gains and losses
from the valuation of the trading portfolio and realized gains and losses on
these positions are recorded in INVESTMENT INCOME FROM THE INSURANCE BUSINESS.
A decline in the market value of any available-for-sale or held-to-maturity
securities below cost that is deemed to be other than temporary results in a
reduction in the carrying amount to fair value. The impairment is charged to
INVESTMENT INCOME FROM THE INSURANCE BUSINESS and a new cost basis for the
security is established.
Real estate held for investment, including capital improvements, is carried at
cost less accumulated depreciation over its estimated useful life, generally 40
to 67 years. In some of our operating regions, the economic useful lives are
substantially longer than in other regions, based on the materials used and
varying construction codes. Land is not depreciated. It is the Group's policy to
evaluate for impairment whenever events or circumstances indicate the carrying
value of an asset may not be recoverable. An impairment is deemed to have
occurred if the carrying value of a property exceeds its expected future cash
flows, computed undiscounted and without interest charges. Methods for measuring
impairment include market appraisals and cash flow analyses and recognizing
impairment results in a new cost basis. Depreciation and write-downs are
included in INVESTMENT INCOME FROM THE INSURANCE BUSINESS.
Investments for the benefit of life insurance policyholders who bear the
investment risk are carried at fair value.
Loans, mortgages and short-term investments are accounted for at nominal value,
net of any provisions for impairment. The Group considers a loan impaired when,
based on current information and events, it is probable that it will be unable
to collect all amounts due according to the contractual terms of the loan
agreement. The provision charge for credit losses is recorded in INVESTMENT
INCOME FROM THE INSURANCE BUSINESS.
Derivatives are used to manage interest rate, foreign currency and equity market
risks. Gains and losses on the hedging derivative instruments are recognized in
income on the same basis as the underlying
F-13
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
exposure. All derivatives are recognized on the balance sheet at their fair
value. The effective portion of derivative instruments used to hedge a position
is recorded in the income statement with an offsetting entry related to the
hedged item.
OWN SHARES AND OWN BONDS
The Group buys and sells own shares, own bonds and derivatives on own shares
within its normal trading and market-making activities. In addition, the Group
holds own shares to hedge commitments arising from employee compensation
schemes. Own shares are included in the trading portfolio and are carried at
fair value, or are held in FINANCIAL INVESTMENTS FROM THE BANKING BUSINESS and
are carried at lower of cost or market, or are held in INVESTMENTS FROM THE
INSURANCE BUSINESS and are carried at fair value. Own shares repurchased for
cancellation are carried at cost. Changes in fair value and realized gains and
losses on own shares and own bonds included in the trading portfolio are
reported in NET TRADING INCOME. Changes in the fair value of own shares and
bonds held in INVESTMENTS FROM THE INSURANCE BUSINESS are reported in
shareholders' equity, net of tax, and the realized gains and losses from such
investments are reported in INVESTMENTS INCOME FROM THE INSURANCE BUSINESS.
Interest earned and dividends received are reported as INTEREST INCOME.
Derivatives on own shares are carried at fair value and reported as positive and
negative replacement values in OTHER ASSETS and OTHER LIABILITIES, respectively.
Realized and unrealized gains and losses on derivatives on own shares are
recognized in NET TRADING INCOME.
TANGIBLE FIXED ASSETS
Real estate held for own use, including capital improvements, is carried at cost
less accumulated depreciation over its estimated useful life, generally 40 to
67 years. In some of our operating regions the economic useful lives are
substantially longer than in other regions, based on the materials used and
varying construction codes. Land is not depreciated. Other tangible fixed assets
such as computers, machinery, furnishings, vehicles and other equipment, as well
as alterations and improvements to rented premises, are depreciated using the
straight-line method over their estimated useful life, generally three to five
years.
It is the Group's policy to evaluate for impairment whenever events or
circumstances indicate that the carrying value of an asset may not be
recoverable. An impairment is deemed to have occurred if the carrying value of a
tangible fixed asset exceeds its expected future cash flows, computed
undiscounted and without interest charges. Methods for measuring impairment
include market appraisals and cash flow analyses and recognizing impairment
results in a new cost basis.
INTANGIBLE ASSETS
The Group capitalizes certain costs relating to the acquisition, installation
and development of software. The Group depreciates capitalized software costs on
a straight-line basis over the estimated useful life of the software, normally
not exceeding three years.
Identifiable intangible assets are generally acquired through business
combinations and other transfers of assets. Acquired intangible assets are
initially recorded at fair value and depreciated over their estimated useful
life, not to exceed 20 years. The useful life of intangible assets relating to
individuals does not exceed five years.
F-14
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Goodwill represents the excess of purchase price over the estimated fair value
of net assets acquired at the acquisition date. The goodwill included in this
balance sheet position arises from acquisitions after January 1, 1997. Prior to
January 1, 1997, goodwill was charged to equity. Goodwill is amortized using the
straight-line method over its estimated useful life, not to exceed 20 years.
The Present Value of Future Profits (PVFP) is the present value of anticipated
profits embedded in each life and health insurance portfolio purchased. Interest
accrues on the unamortized PVFP based upon the policy liability rate or contract
rate. The PVFP asset is amortized over the years that such profits are
anticipated to be received in proportion to the estimated gross margins or
estimated gross profits for participating traditional life products and
non-traditional life products, respectively, and over the premium-paying period
in proportion to premiums for other traditional life products.
Expected future profits used in determining the PVFP are based on actuarial
determinations of future premium collection, mortality, morbidity, surrenders,
operating expenses, and yields on assets supporting policy liabilities as well
as other factors.
The discount rate used to determine the PVFP is the rate of return required to
invest in the business being acquired. Additionally, the PVFP asset is adjusted
for the impact on estimated gross margins and profits net of unrealized gains
and losses on securities.
Periodically, the PVFP asset is evaluated for recoverability. If the present
value of future net cash flows from the blocks of business acquired is
insufficient to recover the PVFP, the difference is charged to expense as an
additional write-off of the PVFP.
It is the Group's policy to evaluate for impairment whenever events or
circumstances indicate that the carrying value of an asset may not be
recoverable. An impairment is deemed to have occurred if the carrying value of
an intangible asset exceeds its expected future cash flows, computed
undiscounted and without interest charges. Methods for measuring impairment
include where appropriate, market appraisals and cash flow analyses and
recognizing impairment results in a new cost basis.
DEFERRED POLICY ACQUISITION COSTS
Deferred policy acquisition costs consist primarily of commissions, underwriting
expense and policy issuance costs and are included in ACCRUED INCOME AND PREPAID
EXPENSE. Acquisition costs, which vary with and are directly related to the
acquisition of insurance contracts, are deferred to the extent they are deemed
recoverable.
Deferred policy acquisition costs on participating traditional life products are
amortized over the expected life of the contracts in proportion to the estimated
gross margins. Deferred policy acquisition costs on other traditional life
products are amortized over the premium paying period of the related policies in
proportion to net premiums using assumptions consistent with those used in
computing the provision for future policy benefits. Deferred policy acquisition
costs on non-traditional life products are amortized over the expected life of
the contracts as a constant percentage of the estimated gross profits.
The effect on the amortization of deferred policy acquisition costs of revisions
to estimated gross margins or profits for all contracts are reflected in the
current period income statement. The deferred policy acquisition costs asset
related to participating traditional life products and non-traditional life
products is adjusted for the impact on estimated gross margins or profits net of
unrealized gains and losses on securities.
F-15
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Deferred policy acquisition costs for non-life products are amortized over the
periods in which the premiums are earned. Future investment income attributable
to related premiums is taken into account in measuring the recoverability of the
carrying value of this asset.
TAXES
Income tax expense is calculated on the basis of the annual results of the
individual financial statements of the Group companies. Deferred tax assets and
liabilities are recognized for the expected future tax consequences of temporary
differences between the financial statement carrying amounts and the tax bases
of assets and liabilities. Deferred tax assets and liabilities are calculated
based on expected tax rates and are recorded in OTHER ASSETS and VALUATION
ADJUSTMENTS AND PROVISIONS, respectively. Deferred income tax expense represents
the net change in the deferred tax asset or liability balance during the year
and is charged to tax expense, except to the extent the change relates to
transactions recognized directly in shareholders' equity. This amount together
with income taxes payable or receivable in the current year represents the total
income tax expense for the year. Generally, deferred tax assets for net
operating loss carry-forwards are not recognized. Deferred tax assets on net
operating losses are recorded in the event management's assessment is that their
realization in a future period is certain, based on contracts existing at the
balance sheet date to sell businesses at a taxable gain. Other deferred tax
assets are recognized subject to management's judgment that realization is more
likely than not. No provision is made for non-recoverable withholding taxes on
undistributed profits of Group companies.
RESERVE FOR GENERAL BANKING RISKS
In accordance with Swiss banking regulations, the reserve for general banking
risks is recorded as a separate component of shareholders' equity. Changes to
this equity component are disclosed as an extraordinary item in the income
statement.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS (REPOS)
The Group enters into purchases of securities under agreements to resell as well
as sales of securities under agreements to repurchase substantially identical
securities. Such agreements normally do not constitute economic sales and are
therefore treated as financing transactions. Securities sold subject to such
agreements continue to be recognized in the balance sheet. The proceeds from the
sale of these securities are treated as liabilities. Securities purchased under
agreements to resell are recognized as loans collateralized by securities.
Receivables and liabilities are valued using the accrual method. Those held in
the trading book (matched book repo trading) are carried at fair value.
Transactions in which economic control over the securities transferred has been
relinquished are reported as either purchases or sales together with a related
forward commitment to resell or repurchase.
SECURITIES LENDING AND BORROWING
Securities borrowed and lent with cash collateral and daily margining are
reported as repurchase and reverse repurchase transactions. All other securities
borrowed and lent that are collateralized by cash are included in the balance
sheet at amounts equal to the cash advanced or received. Securities lent or
securities provided as collateral for securities borrowed continue to be
recognized in the balance sheet at their carrying value if control over the
securities transferred is not relinquished. Securities borrowed and securities
received as collateral for securities lent are only recognized in the balance
sheet if control
F-16
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
over the securities transferred is relinquished. Lending fees earned or incurred
are recognized as interest income and interest expense, respectively for the
banking business and as INVESTMENT INCOME FROM THE INSURANCE BUSINESS for the
insurance business.
PENSION PLANS
The Group sponsors various retirement benefit plans for its employees worldwide.
These plans include both defined benefit and defined contribution plans, as well
as other retirement benefits such as post-retirement life insurance and
post-employment medical benefits. Pension expense is recorded in PERSONNEL
EXPENSES and is based on either actual contributions or actuarial valuation
methods and projected plan liabilities for accrued service.
PREMIUM INCOME AND RELATED EXPENSES
Premiums from traditional life products, both participating and
non-participating, are recognized as revenue when due from the policyholder.
Profit for contracts with a limited number of premium payments is deferred and
recognized over the period that coverage is provided.
Premiums from non-traditional life products are recognized as revenue when due
from the policyholder. For contracts with front-end fees, any excess front-end
fees are deferred and recognized in proportion to the estimated gross profits.
These deferred fees are adjusted for the impact on estimated gross profits net
of unrealized gains and losses on securities.
Premiums from non-life products are recorded at inception of the contract and
are earned primarily on a pro-rata basis over the term of the related policy
coverage with the unearned portion deferred in the balance sheet as unearned
premiums.
REINSURANCE
Contracts providing for indemnification against loss or liability relating to
insurance risk are accounted for as reinsurance. Reinsurance contracts that do
not transfer significant insurance risk are accounted for as deposits.
Gains on retroactive reinsurance ceded are deferred and amortized over the
estimated remaining settlement period.
TECHNICAL PROVISIONS FOR THE INSURANCE BUSINESS
PROVISION FOR FUTURE POLICYHOLDER BENEFITS
The provision for future policyholder benefits for participating traditional
life products is computed using the net level premium method, which represents
the present value of future policy benefits less the present value of future net
premiums. The method uses assumptions for mortality and interest rates
guaranteed in the contracts or used in determining dividends.
The provision for future policyholder benefits for other traditional life
products is computed using the net level premium method. The assumptions are
based on the Group's experience and industry standards including provision for
adverse deviations that were in effect as of the issue date of the contract.
F-17
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The provision for future policyholder benefits for non-traditional life products
is equal to the account value, which represents premiums received and allocated
investment return credited to the policy less deductions for mortality costs and
expense charges.
When the provision for future policyholder benefits plus the present value of
expected future gross premiums for a product are insufficient to provide for
expected future benefits and expenses for the line of business, deferred policy
acquisition costs are written-off to income and, if required, a premium
deficiency reserve is established by a charge to income. A premium deficiency
reserve is adjusted for the impact of net unrealized gains and losses.
PROVISION FOR DEATH AND OTHER BENEFITS
Claim reserves represent amounts due on life and accident and health claims that
have accrued as of the balance sheet date, but have not yet been paid. This
includes incurred but not reported claims (IBNR) and claims expense liability.
The interest rate used to discount future payments is impacted by the net
unrealized gains and losses on securities, resulting in an adjustment to claim
reserves.
PROVISION FOR FUTURE DIVIDENDS TO POLICYHOLDERS
Dividends on participating traditional life products are accrued when earned and
calculated in accordance with local statutory or contractual regulations. The
provision for policyholder dividends also includes a deferred bonus reserve
(DBR), which represents amounts that result from differences between these
presented financial statements and the local statutory financial statements and
that will reverse and enter into future policyholder dividends calculations. The
calculation of the DBR reflects only the contractual or regulatory defined
minimum distribution to policyholders.
The provision for policyholder dividends is adjusted for the impact of net
unrealized gains and losses on securities to the extent that the policyholder
will participate in such gains and losses on the basis of contractual or
regulatory requirements when they are realized.
LIFE PRODUCTS, WHERE THE INVESTMENT RISK IS BORNE BY POLICYHOLDERS
Assets and liabilities are maintained separately for non-traditional life
products designed to meet specific investment objectives of policyholders. The
policyholder bears the investment risk associated with the products, and
investment income and investment gains and losses accrue directly to the
policyholders. Assets and liabilities associated with these products are carried
at fair value. Changes in the fair value of assets and liabilities are
recognized in INVESTMENT INCOME FROM THE INSURANCE BUSINESS and CLAIMS INCURRED
AND ACTUARIAL PROVISIONS.
PROVISION FOR UNPAID CLAIMS AND CLAIM ADJUSTMENT EXPENSES
Claim and claim adjustment expenses are recorded as incurred. Claim provisions
comprise estimates of the unpaid portion of the reported losses and estimates of
the amount of losses incurred but not yet reported to the insurer. Management
periodically reviews the estimates, which may change in light of new
information. Any subsequent adjustments are recorded in the period in which they
are determined.
Certain claim reserves for which the payment pattern and ultimate cost are fixed
and reliably determinable on an individual claim basis are discounted at a
maximum of the risk-free rate.
F-18
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 Changes to accounting policies
Prior to 2001, deferred tax assets for net operating loss carry-forwards were
not recorded. The new policy only allows such deferred tax assets to be recorded
in the event of a sale of a business at a taxable gain where the realization of
the deferred tax asset is certain. The impact on the 2001 financial statements
was a tax benefit of CHF 303 million (USD 179 million). The 2000 and 1999
consolidated financial statements would be unchanged had they been prepared
under the new policy.
3 Acquisitions and divestitures
The scope of consolidation has undergone the following material changes:
Acquisitions
VOJENSKY OTEVRENY PENZIJNI FOND (VOPF)
On April 4, 2001, Winterthur Life & Pensions acquired one of the largest Czech
pension funds, Vojensky Otevreny Penzijni Fond (VOPF). The Group acquired 93.28%
of total capital on January 18, 2001 and 6.66% of total capital on May 9, 2001.
JO HAMBRO INVESTMENT MANAGEMENT LIMITED
On February 7, 2001, Credit Suisse Private Banking acquired JO Hambro Investment
Management Ltd., an investment company targeting high-net-worth individuals.
COMMERCIAL GENERAL UNION
On September 30, 2001, Winterthur Insurance acquired the non-life insurance
activities of Commercial General Union in Belgium.
SLC ASSET MANAGEMENT
On December 7, 2001, Credit Suisse Asset Management acquired SLC Asset
Management Limited, SLC Pooled Pensions Limited and Sun Life of Canada Unit
Managers Limited, the principal UK asset management subsidiaries of Sun Life
Financial Services of Canada Inc. The companies are asset management companies
with contracts for management of the insurance assets (including property) of
their former affiliate Sun Life Assurances Company of Canada (UK) Limited and
third-party institutional and retail funds.
Divestitures
WINTERTHUR INTERNATIONAL
Effective June 30, 2001, Winterthur Insurance sold its large multinational
corporate insurance business Winterthur International to the Bermuda-based
financial services group XL Capital Ltd.
F-19
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CSFBDIRECT, INC.
On February 1, 2002, Credit Suisse First Boston (USA), Inc. completed the
previously announced sale of CSFBDIRECT, Inc., its US-based online trading
operations, to the Bank of Montreal.
DLJDIRECT, LTD.
On January 25, 2002, Credit Suisse First Boston (USA), Inc. completed the
previously announced sale of DLJDIRECT, Ltd., its UK-based online trading
operations, to TD Waterhouse.
AUTRANET
On February 1, 2002, Credit Suisse First Boston (USA), Inc. completed the
previously announced sale of Autranet, a broker-dealer subsidiary active in the
distribution to institutional investors of investment research products
purchased from independent research specialists, to The Bank of New York.
4 Segment reporting
4.1 Segment reporting by operating segments
The activities of the Group are managed and organized based on the different
types of products and services that the Group offers to its customers. Operating
income includes income directly attributable to the individual segments as
further described below.
The following presentation shows the Group's segment results for the years ended
December 31, 2001, 2000 and 1999 based on the structure in effect from
January 1, 2002. Based on the Group's management reporting principles after
giving effect to the realignment, the Group reports six segments: Private
Banking, Corporate & Retail Banking, Life & Pensions, Insurance, Investment
Banking and CSFB Financial Services. The Credit Suisse Financial Services
business unit totals the results of the Private Banking, Corporate & Retail
Banking, Life & Pensions and Insurance segments. The Credit Suisse First Boston
business unit totals the results of the Investment Banking and CSFB Financial
Services segments.
The Group's consolidated results comprise the results of the segments and of the
Corporate Center. Corporate Center costs and revenues attributable to operating
businesses have been allocated to the respective segments. The Corporate Center
also records expenses relating to projects sponsored by the Group, restructuring
costs, the difference between provisions for expected credit risk recorded by
each segment and actual credit loss experience, as well as other items as set
out below.
INTER-SEGMENT REVENUE SHARING AND COST ALLOCATION
Responsibility for each of the Group's products is allocated to one of the
segments. In cases where one segment contributes to the performance of another,
revenue sharing agreements are in place to compensate for such efforts. These
agreements are negotiated periodically by the relevant segments on a
product-by-product basis. Allocated revenues are added to, or deducted from, the
revenue line item of the respective segments.
Certain administrative, processing and information technology services may be
based in one segment but shared by other segments. The segment supplying the
service receives compensation from the recipient
F-20
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.1 Segment reporting by operating segments (continued)
segment on the basis of service level agreements and transfer payments. Service
level agreements are negotiated periodically by the relevant segments with
regard to each individual product or service. The cost of shared services and
their related allocations are added to, or deducted from, OTHER OPERATING
EXPENSES in the respective segments.
The aim of the revenue sharing and cost allocation agreements is to reflect the
pricing structure of an unrelated third-party transaction, although this is not
achieved in all cases.
OWN USE REAL ESTATE
Own use real estate in Switzerland, which consists primarily of bank premises,
is managed centrally. Real estate costs reflect market rent plus an additional
charge if actual costs exceed market rent. These costs are included in the OTHER
OPERATING EXPENSES line of each segment.
VALUATION ADJUSTMENTS, PROVISIONS AND LOSSES
Provisions for credit risk at the segment level are generally based on expected
credit losses, which are determined according to a statistical model derived
from historical average losses. Management believes that the statistical model
provides a long-term view of credit loss experience. In any year, statistically
determined provisions may be higher or lower than the actual credit experience
relating to the credit risks covered by this model, depending on the economic
environment, interest rates and other factors. The segments record an expense
item for statistically determined expected credit provisions. On a consolidated
basis, the VALUATION ADJUSTMENTS, PROVISIONS AND LOSSES line in the income
statement reflects actual credit provisions for the year. To reflect the
difference between the expected credit provisions recorded by the segment and
the actual credit provisions for the year, an adjustment is recorded at the
Corporate Center.
Non-credit related losses and counterparty defaults other than those relating to
the lending business are not covered by the statistical model. Provisions for
these losses and defaults are based on actual experience and are recorded by the
relevant segment.
TAXES
Taxes are calculated individually for each segment, on the basis of average tax
rates across its various geographic markets, as if the segment operated on a
stand-alone basis. The difference between these average tax rates and the actual
consolidated tax expense results in an adjustment to taxes at the Corporate
Center.
F-21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.1 Segment reporting by operating segments (continued)
Segment income statement for the year ended December 31, 2001 1)
Credit
Corporate & Suisse
Private Retail Life & Financial
in CHF m Banking Banking Pensions Insurance Subtotal Reclassifications Services
---------------------------------------------------------------------------------------------------------------------------------
Operating income 2) 7,245 2,398 2,503 3,236 15,382 -- 15,382
---------------------------------------------------------------------------------------------------------------------------------
Personnel expenses 2,502 1,000 749 1,388 5,639 -- 5,639
Other operating expenses 1,522 620 671 873 3,686 -- 3,686
---------------------------------------------------------------------------------------------------------------------------------
Operating expenses 4,024 1,620 1,420 2,261 9,325 -- 9,325
---------------------------------------------------------------------------------------------------------------------------------
Gross operating profit 3,221 778 1,083 975 6,057 -- 6,057
---------------------------------------------------------------------------------------------------------------------------------
Depreciation of non-current assets 3) 215 84 350 169 818 -- 818
Amortization of acquired intangible
assets and goodwill -- -- -- -- -- 116 116
Valuation adjustments, provisions and
losses 75 308 -- -- 383 -- 383
---------------------------------------------------------------------------------------------------------------------------------
Net operating profit before
extraordinary items,
acquisition-related costs and taxes 2,931 386 733 806 4,856 (116) 4,740
---------------------------------------------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net 12 13 0 0 25 25
Taxes (642) (94) (153) (224) (1,113) 2 (1,111)
---------------------------------------------------------------------------------------------------------------------------------
Net operating profit before
acquisition-related costs and
minority interests 2,301 305 580 582 3,768 (114) 3,654
---------------------------------------------------------------------------------------------------------------------------------
Amortization of acquired intangible
assets and goodwill (116) 116 0
Tax impact 2 (2) 0
---------------------------------------------------------------------------------------------------------------------------------
Net profit before minority interests 3,654 -- 3,654
---------------------------------------------------------------------------------------------------------------------------------
Minority interests (69) -- (69)
---------------------------------------------------------------------------------------------------------------------------------
Net profit 3,585 -- 3,585
---------------------------------------------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation. The presentation of segment results differs from the
presentation of the Group's consolidated results in excluding
acquisition-related costs of amortization of acquired intangible assets and
goodwill from depreciation, valuation adjustments and losses.
Acquisition-related costs and minority interests are reported separately at
the business unit level only.
2) Operating income for the insurance business is defined as net premiums
earned, less claims incurred and change in technical provisions and
expenses for processing claims, less commissions, plus net investment income
from the insurance business.
3) Including amortization of Present Value of Future Profits, or PVFP from the
insurance businesses.
F-22
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.1 Segment reporting by operating segments (continued)
Segment income statement for the year ended December 31, 2001 (continued) 1)
CSFB Reclassifications Credit
Investment Financial Exceptional Suisse First
in CHF m Banking Services Subtotal Reclassifications items Boston
---------------------------------------------------------------------------------------------------------------------------------
Operating income 21,217 4,045 25,262 (828) (34) 24,400
---------------------------------------------------------------------------------------------------------------------------------
Personnel expenses 11,764 1,967 13,731 812 985 15,528
Other operating expenses 5,176 1,336 6,512 -- -- 6,512
---------------------------------------------------------------------------------------------------------------------------------
Operating expenses 16,940 3,303 20,243 812 985 22,040
---------------------------------------------------------------------------------------------------------------------------------
Gross operating profit 4,277 742 5,019 (1,640) (1,019) 2,360
---------------------------------------------------------------------------------------------------------------------------------
Depreciation of non-current assets 772 179 951 -- 12 963
Amortization of acquired intangible
assets and goodwill -- -- -- 1,455 -- 1,455
Valuation adjustments, provisions and
losses 1,514 27 1,541 -- 397 1,938
---------------------------------------------------------------------------------------------------------------------------------
Net operating profit/(loss) before
extraordinary items,
acquisition-related costs,
exceptional items and taxes 1,991 536 2,527 (3,095) (1,428) (1,996)
---------------------------------------------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net (1) (14) (15) -- -- (15)
Taxes (439) (85) (524) 812 336 624
---------------------------------------------------------------------------------------------------------------------------------
Net operating profit/(loss) before
acquisition-related costs,
exceptional items and minority
interests 1,551 437 1,988 (2,283) (1,092) (1,387)
---------------------------------------------------------------------------------------------------------------------------------
Acquisition interest (828) 828 -- 0
Amortization of retention payments (812) 812 -- 0
Amortization of acquired intangible
assets and goodwill (1,455) 1,455 -- 0
Exceptional items (1,428) -- 1,428 0
Tax impact 1,148 (812) (336) 0
---------------------------------------------------------------------------------------------------------------------------------
Net profit/(loss) before minority
interests (1,387) -- -- (1,387)
---------------------------------------------------------------------------------------------------------------------------------
Minority interests (1) -- -- (1)
---------------------------------------------------------------------------------------------------------------------------------
Net profit/(loss) (1,388) -- -- (1,388)
---------------------------------------------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation. The presentation of segment results differs from the
presentation of the Group's consolidated results in a) including brokerage,
execution and clearing expenses as part of other operating expenses in line
with certain US competitors, rather than netted against operating income,
b) reporting contractor costs as part of other operating expenses instead of
personnel expenses, c) excluding acquisition-related costs of acquisition
interest from operating income, amortization of retention payments from
personnel expenses and amortization of acquired intangible assets and
goodwill from depreciation, valuation adjustments and losses, d) deducting
expenses related to certain redeemable preferred securities classified as
minority interests from operating income and e) excluding exceptional items
from operating income, personnel expenses, depreciation of non-current
assets and valuation adjustments, provisions and losses. Acquisition-related
costs, exceptional items and minority interests are reported separately at
the business unit level only.
F-23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.1 Segment reporting by operating segments (continued)
Business unit income statement for the year ended December 31, 2001 (continued)
1)
Credit
Suisse Credit Credit
Financial Suisse First Corporate Suisse
in CHF m Services Boston Subtotal Center Group
-------------------------------------------------------------------------------------------------------------------------
Operating income 15,382 24,400 39,782 (628) 39,154
-------------------------------------------------------------------------------------------------------------------------
Personnel expenses 5,639 15,528 21,167 723 21,890
Other operating expenses 3,686 6,512 10,198 (1,804) 8,394
-------------------------------------------------------------------------------------------------------------------------
Operating expenses 9,325 22,040 31,365 (1,081) 30,284
-------------------------------------------------------------------------------------------------------------------------
Gross operating profit 6,057 2,360 8,417 453 8,870
-------------------------------------------------------------------------------------------------------------------------
Depreciation of non-current assets 818 2) 963 1,781 405 2,186
Amortization of acquired intangible assets and goodwill 116 1,455 1,571 (8) 1,563
Valuation adjustments, provisions and losses 383 1,938 2,321 271 2,592
-------------------------------------------------------------------------------------------------------------------------
Profit/(loss) before extraordinary items and taxes 4,740 (1,996) 2,744 (215) 2,529
-------------------------------------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net 25 (15) 10 (239) (229)
Taxes (1,111) 624 (487) 1 (486)
-------------------------------------------------------------------------------------------------------------------------
Net profit/(loss) before minority interests 3,654 (1,387) 2,267 (453) 1,814
-------------------------------------------------------------------------------------------------------------------------
Minority interests (69) (1) (70) (157) (227)
-------------------------------------------------------------------------------------------------------------------------
Net profit/(loss) 3,585 (1,388) 2,197 (610) 1,587
-------------------------------------------------------------------------------------------------------------------------
Other data
Total assets as of December 31, 2001 3) 395,164 698,518 1,093,682 (71,169) 1,022,513
-------------------------------------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation.
2) Including amortization of PVFP from the insurance businesses.
3) Intersegment consolidation items have been eliminated in Corporate Center.
F-24
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.1 Segment reporting by operating segments (continued)
Segment income statement for the year ended December 31, 2000 1)
Credit
Corporate & Suisse
Private Retail Life & Financial
in CHF m Banking Banking Pensions Insurance Subtotal Reclassifications Services
---------------------------------------------------------------------------------------------------------------------------------
Operating income 2) 7,913 2,324 2,075 3,459 15,771 -- 15,771
---------------------------------------------------------------------------------------------------------------------------------
Personnel expenses 2,420 940 664 1,337 5,361 -- 5,361
Other operating expenses 1,350 673 544 823 3,390 -- 3,390
---------------------------------------------------------------------------------------------------------------------------------
Operating expenses 3,770 1,613 1,208 2,160 8,751 -- 8,751
---------------------------------------------------------------------------------------------------------------------------------
Gross operating profit 4,143 711 867 1,299 7,020 -- 7,020
---------------------------------------------------------------------------------------------------------------------------------
Depreciation of non-current assets 3) 101 37 101 159 398 -- 398
Amortization of acquired intangible
assets and goodwill -- -- -- -- -- 55 55
Valuation adjustments, provisions and
losses 213 510 -- -- 723 -- 723
---------------------------------------------------------------------------------------------------------------------------------
Net operating profit before
extraordinary items,
acquisition-related costs and taxes 3,829 164 766 1,140 5,899 (55) 5,844
---------------------------------------------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net 1 20 0 0 21 -- 21
Taxes (865) (42) (101) (305) (1,313) -- (1,313)
---------------------------------------------------------------------------------------------------------------------------------
Net operating profit before
acquisition-related costs and
minority interests 2,965 142 665 835 4,607 (55) 4,552
---------------------------------------------------------------------------------------------------------------------------------
Amortization of acquired intangible
assets and goodwill (55) 55 0
---------------------------------------------------------------------------------------------------------------------------------
Net profit before minority interests 4,552 -- 4,552
Minority interests (176) -- (176)
---------------------------------------------------------------------------------------------------------------------------------
Net profit 4,376 -- 4,376
---------------------------------------------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation. The presentation of segment results differs from the
presentation of the Group's consolidated results in excluding
acquisition-related costs of amortization of acquired intangible assets and
goodwill from depreciation, valuation adjustments and losses.
Acquisition-related costs and minority interests are reported separately at
the business unit level only.
2) Operating income for the insurance business is defined as net premiums
earned, less claims incurred and change in technical provisions and expenses
for processing claims, less commissions, plus net investment income from the
insurance business.
3) Including amortization of PVFP from the insurance businesses.
F-25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.1 Segment reporting by operating segments (continued)
Segment income statement for the year ended December 31, 2000 (continued) 1)
CSFB Credit
Investment Financial Suisse First
in CHF m Banking Services Subtotal Reclassifications Boston
-------------------------------------------------------------------------------------------------------------------------------
Operating income 20,092 2,059 22,151 (225) 21,926
-------------------------------------------------------------------------------------------------------------------------------
Personnel expenses 11,224 791 12,015 181 12,196
Other operating expenses 3,905 681 4,586 -- 4,586
-------------------------------------------------------------------------------------------------------------------------------
Operating expenses 15,129 1,472 16,601 181 16,782
-------------------------------------------------------------------------------------------------------------------------------
Gross operating profit 4,963 587 5,550 (406) 5,144
-------------------------------------------------------------------------------------------------------------------------------
Depreciation of non-current assets 596 77 673 -- 673
Amortization of acquired intangible assets and goodwill -- -- -- 349 349
Valuation adjustments, provisions and losses 536 1 537 -- 537
-------------------------------------------------------------------------------------------------------------------------------
Net operating profit before extraordinary items,
acquisition-related costs and taxes 3,831 509 4,340 (755) 3,585
-------------------------------------------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net 0 (1) (1) -- (1)
Taxes (1,033) (74) (1,107) 167 (940)
-------------------------------------------------------------------------------------------------------------------------------
Net operating profit before acquisition-related costs and
minority interests 2,798 434 3,232 (588) 2,644
-------------------------------------------------------------------------------------------------------------------------------
Acquisition interest (225) 225 0
Amortization of retention payments (181) 181 0
Amortization of acquired intangible assets and goodwill (349) 349 0
Tax impact 167 (167) 0
-------------------------------------------------------------------------------------------------------------------------------
Net profit before minority interests 2,644 -- 2,644
-------------------------------------------------------------------------------------------------------------------------------
Minority interests (3) -- (3)
-------------------------------------------------------------------------------------------------------------------------------
Net profit 2,641 -- 2,641
-------------------------------------------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation. The presentation of segment results differs from the
presentation of the Group's consolidated results in a) including brokerage,
execution and clearing expenses as part of other operating expenses in line
with certain US competitors, rather than netted against operating income,
b) reporting contractor costs as part of other operating expenses instead of
personnel expenses, c) excluding acquisition-related costs of acquisition
interest from operating income, amortization of retention payments from
personnel expenses and amortization of acquired intangible assets and
goodwill from depreciation, valuation adjustments and losses and
d) deducting expenses related to certain redeemable preferred securities
classified as minority interests from operating income. Acquisition-related
costs and minority interests are reported separately at the business unit
level only.
F-26
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.1 Segment reporting by operating segments (continued)
Business unit income statement for the year ended December 31, 2000 (continued)
1)
Credit
Suisse Credit Credit
Financial Suisse First Corporate Suisse
in CHF m 1) Services Boston Subtotal Center Group
------------------------------------------------------------------------------------------------------------------------
Operating income 15,771 21,926 37,697 (466) 37,231
------------------------------------------------------------------------------------------------------------------------
Personnel expenses 5,361 12,196 17,557 946 18,503
Other operating expenses 3,390 4,586 7,976 (1,331) 6,645
------------------------------------------------------------------------------------------------------------------------
Operating expenses 8,751 16,782 25,533 (385) 25,148
------------------------------------------------------------------------------------------------------------------------
Gross operating profit 7,020 5,144 12,164 (81) 12,083
------------------------------------------------------------------------------------------------------------------------
Depreciation of non-current assets 398 2) 673 1,071 282 1,353
Amortization of acquired intangible assets and goodwill 55 349 404 (1) 403
Valuation adjustments, provisions and losses 723 537 1,260 5 1,265
------------------------------------------------------------------------------------------------------------------------
Profit before extraordinary items and taxes 5,844 3,585 9,429 (367) 9,062
------------------------------------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net 21 (1) 20 (1,711) (1,691)
Taxes (1,313) (940) (2,253) 904 (1,349)
------------------------------------------------------------------------------------------------------------------------
Net profit before minority interests 4,552 2,644 7,196 (1,174) 6,022
------------------------------------------------------------------------------------------------------------------------
Minority interests (176) (3) (179) (58) (237)
------------------------------------------------------------------------------------------------------------------------
Net profit 4,376 2,641 7,017 (1,232) 5,785
------------------------------------------------------------------------------------------------------------------------
Other data
Total assets as of December 31, 2000 3) 365,176 684,713 1,049,889 (62,456) 987,433
------------------------------------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation.
2) Including amortization of PVFP from the insurance businesses.
3) Intersegment consolidation items have been eliminated in Corporate Center.
F-27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.1 Segment reporting by operating segments (continued)
Segment income statement for the year ended December 31, 1999 1)
Credit
Corporate & Suisse
Private Retail Life & Financial
in CHF m Banking Banking Pensions Insurance Subtotal Reclassifications Services
---------------------------------------------------------------------------------------------------------------------------------
Operating income 2) 6,039 2,154 626 2,740 11,559 -- 11,559
---------------------------------------------------------------------------------------------------------------------------------
Personnel expenses 1,947 872 533 1,267 4,619 -- 4,619
Other operating expenses 1,006 628 413 787 2,834 -- 2,834
---------------------------------------------------------------------------------------------------------------------------------
Operating expenses 2,953 1,500 946 2,054 7,453 -- 7,453
---------------------------------------------------------------------------------------------------------------------------------
Gross operating profit/(loss) 3,086 654 (320) 686 4,106 -- 4,106
---------------------------------------------------------------------------------------------------------------------------------
Depreciation of non-current assets 3) 60 17 84 71 232 -- 232
Amortization of acquired intangible
assets and goodwill -- -- -- -- -- 29 29
Valuation adjustments, provisions and
losses 112 553 -- -- 665 -- 665
---------------------------------------------------------------------------------------------------------------------------------
Net operating profit/(loss) before
extraordinary items,
acquisition-related costs and taxes 2,914 84 (404) 615 3,209 (29) 3,180
---------------------------------------------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net 18 34 0 0 52 -- 52
Taxes (623) (23) 132 (178) (692) -- (692)
---------------------------------------------------------------------------------------------------------------------------------
Net operating profit/(loss) before
acquisition-related costs and
minority interests 2,309 95 (272) 437 2,569 (29) 2,540
---------------------------------------------------------------------------------------------------------------------------------
Amortization of acquired intangible
assets and goodwill (29) 29 0
---------------------------------------------------------------------------------------------------------------------------------
Net profit before minority interests 2,540 -- 2,540
---------------------------------------------------------------------------------------------------------------------------------
Minority interests (62) -- (62)
---------------------------------------------------------------------------------------------------------------------------------
Net profit 2,478 -- 2,478
---------------------------------------------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation. The presentation of segment results differs from the
presentation of the Group's consolidated results in excluding
acquisition-related costs of amortization of acquired intangible assets and
goodwill from depreciation, valuation adjustments and losses.
Acquisition-related costs and minority interests are reported separately at
the business unit level only.
2) Operating income for the insurance business is defined as net premiums
earned, less claims incurred and change in technical provisions and
expenses for processing claims, less commissions, plus net investment income
from the insurance business.
3) Including amortization of PVFP from the insurance businesses.
F-28
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.1 Segment reporting by operating segments (continued)
Segment income statement for the year ended December 31, 1999 (continued) 1)
CSFB Credit
Investment Financial Suisse First
in CHF m Banking Services Subtotal Reclassifications Boston
-------------------------------------------------------------------------------------------------------------------------------
Operating income 14,532 1,170 15,702 (21) 15,681
-------------------------------------------------------------------------------------------------------------------------------
Personnel expenses 7,619 454 8,073 -- 8,073
Other operating expenses 3,095 389 3,484 -- 3,484
-------------------------------------------------------------------------------------------------------------------------------
Operating expenses 10,714 843 11,557 -- 11,557
-------------------------------------------------------------------------------------------------------------------------------
Gross operating profit 3,818 327 4,145 (21) 4,124
-------------------------------------------------------------------------------------------------------------------------------
Depreciation of non-current assets 371 22 393 -- 393
Amortization of acquired intangible assets and goodwill -- -- -- 90 90
Valuation adjustments, provisions and losses 786 0 786 -- 786
-------------------------------------------------------------------------------------------------------------------------------
Net operating profit before extraordinary items,
acquisition-related costs and taxes 2,661 305 2,966 (111) 2,855
-------------------------------------------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net 0 (2) (2) -- (2)
Taxes (715) (24) (739) 2 (737)
-------------------------------------------------------------------------------------------------------------------------------
Net operating profit before acquisition-related costs and
minority interests 1,946 279 2,225 (109) 2,116
-------------------------------------------------------------------------------------------------------------------------------
Acquisition interest (21) 21 0
Amortization of acquired intangible assets and goodwill (90) 90 0
Tax impact 2 (2) 0
-------------------------------------------------------------------------------------------------------------------------------
Net profit before minority interests 2,116 -- 2,116
-------------------------------------------------------------------------------------------------------------------------------
Minority interests (1) -- (1)
-------------------------------------------------------------------------------------------------------------------------------
Net profit 2,115 -- 2,115
-------------------------------------------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation. The presentation of segment results differs from the
presentation of the Group's consolidated results in a) including brokerage,
execution and clearing expenses as part of other operating expenses in line
with certain US competitors, rather than netted against operating income,
b) reporting contractor costs as part of other operating expenses instead of
personnel expenses, c) excluding acquisition-related costs of acquisition
interest from operating income and amortization of acquired intangible
assets and goodwill from depreciation, valuation adjustments and losses and
d) deducting expenses related to certain redeemable preferred securities
classified as minority interests from operating income. Acquisition-related
costs and minority interests are reported separately at the business unit
level only.
F-29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.1 Segment reporting by operating segments (continued)
Business unit income statement for the year ended December 31, 1999 (Continued)
1)
Credit
Suisse Credit Credit
Financial Suisse First Corporate Suisse
in CHF m Services Boston Subtotal Center Group
------------------------------------------------------------------------------------------------------------------------
Operating income 11,559 15,681 27,240 (596) 26,644
------------------------------------------------------------------------------------------------------------------------
Personnel expenses 4,619 8,073 12,692 862 13,554
Other operating expenses 2,834 3,484 6,318 (1,091) 5,227
------------------------------------------------------------------------------------------------------------------------
Operating expenses 7,453 11,557 19,010 (229) 18,781
------------------------------------------------------------------------------------------------------------------------
Gross operating profit 4,106 4,124 8,230 (367) 7,863
------------------------------------------------------------------------------------------------------------------------
Depreciation of non-current assets 232 2) 393 625 356 981
Amortization of acquired intangible assets and goodwill 29 90 119 (9) 110
Valuation adjustments, provisions and losses 665 786 1,451 89 1,540
------------------------------------------------------------------------------------------------------------------------
Profit before extraordinary items and taxes 3,180 2,855 6,035 (803) 5,232
------------------------------------------------------------------------------------------------------------------------
Extraordinary income/(expenses), net 52 (2) 50 (109) (59)
Taxes (692) (737) (1,429) 574 (855)
------------------------------------------------------------------------------------------------------------------------
Net profit before minority interests 2,540 2,116 4,656 (338) 4,318
------------------------------------------------------------------------------------------------------------------------
Minority interests (62) (1) (63) (5) (68)
------------------------------------------------------------------------------------------------------------------------
Net profit 2,478 2,115 4,593 (343) 4,250
------------------------------------------------------------------------------------------------------------------------
Other data
Total assets as of December 31, 1999 3) 342,608 452,906 795,514 (66,492) 729,022
------------------------------------------------------------------------------------------------------------------------
1) Certain reclassifications have been made to conform to the current
presentation.
2) Including amortization of PVFP from the insurance businesses.
3) Intersegment consolidation items have been eliminated in Corporate Center.
F-30
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.2 Segment reporting by geographic segments
Segment reporting by geographic location
The geographic analysis of income and assets is provided in order to comply with
the STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) 131, DISCLOSURE ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION and does not reflect the way
the Group is managed. Management believes "Note 4.1 Segment reporting by
operating segments" is a more meaningful representation of the way in which the
Group is managed.
Other Asia/
Gross operating income 2001 1) European Pacific/
in CHF m Switzerland Countries Americas Africa Total
--------------------------------------------------------------------------------------------------------------------
Interest income 7,188 10,999 22,324 1,768 42,279
Commission and service fee income 5,099 3,263 9,634 814 18,810
Net trading income 1,386 3,541 3,582 674 9,183
Insurance premiums earned, net 11,505 17,122 2,777 791 32,195
Investment income from the insurance business 3,373 2,266 276 (39) 5,876
Other ordinary income 1,030 822 155 591 2,598
--------------------------------------------------------------------------------------------------------------------
Gross operating income 29,581 38,013 38,748 4,599 110,941
--------------------------------------------------------------------------------------------------------------------
Expenses 2) -- -- -- -- (71,787)
--------------------------------------------------------------------------------------------------------------------
Operating income -- -- -- -- 39,154
--------------------------------------------------------------------------------------------------------------------
Other Asia/
Gross operating income 2000 1) European Pacific/
in CHF m Switzerland Countries Americas Africa Total
-------------------------------------------------------------------------------------------------------------------
Interest income 7,474 10,508 19,444 1,482 38,908
Commission and service fee income 5,492 3,445 7,627 861 17,425
Net trading income 1,790 3,477 2,311 1,213 8,791
Insurance premiums earned, net 10,975 14,543 2,458 714 28,690
Investment income from the insurance business 3,962 4,358 338 (169) 8,489
Other ordinary income 1,379 645 336 263 2,623
-------------------------------------------------------------------------------------------------------------------
Gross operating income 31,072 36,976 32,514 4,364 104,926
-------------------------------------------------------------------------------------------------------------------
Expenses 2) - - - - (67,695)
-------------------------------------------------------------------------------------------------------------------
Operating income - - - - 37,231
-------------------------------------------------------------------------------------------------------------------
Certain reclassifications have been made to prior-period amounts to conform to
the current presentation.
1) The geographic analysis is based on the location of the office recording the
transactions.
2) Includes interest expenses, commission expenses, claims incurred and
technical provisions for the insurance business, commission expenses from
the insurance business and sundry ordinary expenses.
F-31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.2 Segment reporting by geographic segments (continued)
Other Asia/
Gross operating income 1999 1) European Pacific/
in CHF m Switzerland Countries Americas Africa Total
---------------------------------------------------------------------------------------------------------------------
Interest income 5,159 7,900 9,821 1,098 23,978
Commission and service fee income 4,379 2,355 4,205 552 11,491
Net trading income 1,371 2,464 1,552 1,191 6,578
Insurance premiums earned, net 10,851 12,876 2,072 347 26,146
Investment income from the insurance business 2,545 3,802 295 14 6,656
Other ordinary income 565 255 108 265 1,193
---------------------------------------------------------------------------------------------------------------------
Gross operating income 24,870 29,652 18,053 3,467 76,042
---------------------------------------------------------------------------------------------------------------------
Expenses 2) - - - - (49,398)
---------------------------------------------------------------------------------------------------------------------
Operating income - - - - 26,644
---------------------------------------------------------------------------------------------------------------------
Certain reclassifications have been made to prior-period amounts to conform to
the current presentation.
1) The geographic analysis is based on the location of the office recording the
transactions.
2) Includes interest expenses, commission expenses, claims incurred and
technical provisions for the insurance business, commission expenses from
the insurance business and sundry ordinary expenses.
Tangible fixed assets Total assets
Assets by countries/regions 1) --------------------- --------------------
in CHF m 31.12.01 31.12.00 31.12.01 31.12.00
----------------------------------------------------------------------------------------------------------
Switzerland 4,692 4,708 208,427 210,704
United Kingdom 1,270 1,330 146,415 107,480
Germany 591 533 74,553 66,634
Other European countries 474 462 107,411 113,608
North America 1,663 2,148 380,009 378,687
Central and South America 513 521 33,161 23,321
Asia/Pacific 214 206 66,388 81,207
Middle Eastern countries 4 4 3,820 3,560
Africa 1 1 2,329 2,232
----------------------------------------------------------------------------------------------------------
Total 9,422 9,913 1,022,513 987,433
----------------------------------------------------------------------------------------------------------
1) The geographic analysis of tangible fixed assets is based on the location of
the reporting entities, whereas the analysis of total assets is driven by
the customers' domicile.
F-32
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5 Subsequent events
Acquisitions and divestitures
HOLT VALUE ASSOCIATES L.P.
On January 31, 2002, Credit Suisse First Boston (USA), Inc. acquired HOLT Value
Associates, L.P., a leading provider of independent research and valuation
services to asset managers.
Changes in capital structure
The Group's Board of Directors will propose a par value reduction of CHF 2 per
share in lieu of a dividend to the Annual General Meeting on May 31, 2002. If
approved by the Annual General Meeting, this capital reduction will be paid out
on August 14, 2002.
F-33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 Income statement of the
banking and insurance
business 1)
Banking business Insurance business Credit Suisse Group
------------------------------ ------------------------------ ------------------------------
in CHF m 2001 2000 1999 2001 2000 1999 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net interest income 6,680 5,239 5,252 -- -- -- 6,751 5,313 5,338
Net commission and service
income 17,866 16,629 10,870 -- -- -- 17,845 16,596 10,856
Net trading income 9,183 8,791 6,578 -- -- -- 9,183 8,791 6,578
Income from the insurance
business 2) -- -- -- 6,352 6,197 4,226 6,300 6,166 4,166
Other ordinary
income/(expenses), net (538) 1,046 577 (380) (666) (853) (925) 365 (294)
---------------------------------------------------------------------------------------------------------------------------------
Operating income 33,191 31,705 23,277 5,972 5,531 3,373 39,154 37,231 26,644
---------------------------------------------------------------------------------------------------------------------------------
Salaries and other compensation 17,414 14,616 10,331 1,675 1,523 1,298 19,089 16,139 11,629
Employee benefits 1,452 1,159 908 358 359 297 1,810 1,518 1,205
Other personnel expenses 886 724 515 105 122 205 991 846 720
---------------------------------------------------------------------------------------------------------------------------------
Personnel expenses 2) 19,752 16,499 11,754 2,138 2,004 1,800 21,890 18,503 13,554
---------------------------------------------------------------------------------------------------------------------------------
Premises and real estate
expenses 1,155 811 731 238 248 132 1,394 1,059 863
Expenses for IT, machinery,
furnishings, vehicles and
other equipment 1,536 985 898 325 250 287 1,853 1,212 1,152
Sundry operating expenses 4,162 3,483 2,397 984 868 782 5,147 4,374 3,212
---------------------------------------------------------------------------------------------------------------------------------
Other operating expenses 2) 6,853 5,279 4,026 1,547 1,366 1,201 8,394 6,645 5,227
---------------------------------------------------------------------------------------------------------------------------------
Operating expenses 26,605 21,778 15,780 3,685 3,370 3,001 30,284 25,148 18,781
---------------------------------------------------------------------------------------------------------------------------------
Gross operating profit 6,586 9,927 7,497 2,287 2,161 372 8,870 12,083 7,863
---------------------------------------------------------------------------------------------------------------------------------
Depreciation of non-current
assets 1,667 1,092 828 519 261 153 2,186 1,353 981
Amortization of acquired
intangible assets 793 157 0 0 0 0 793 157 0
Amortization of goodwill 697 215 101 73 31 9 770 246 110
Valuation adjustments,
provisions and losses from
the banking business 2,592 1,265 1,540 -- -- -- 2,592 1,265 1,540
---------------------------------------------------------------------------------------------------------------------------------
Depreciation, valuation
adjustments and losses 5,749 2,729 2,469 592 292 162 6,341 3,021 2,631
---------------------------------------------------------------------------------------------------------------------------------
Profit before extraordinary
items, taxes and minority
interests 837 7,198 5,028 1,695 1,869 210 2,529 9,062 5,232
---------------------------------------------------------------------------------------------------------------------------------
Extraordinary income 52 105 93 0 0 0 52 105 93
Extraordinary expenses (50) (1,796) (152) (231) 0 0 (281) (1,796) (152)
Taxes (108) (943) (809) (378) (406) (45) (486) (1,349) (855)
---------------------------------------------------------------------------------------------------------------------------------
Net profit before minority
interests 731 4,564 4,160 1,086 1,463 165 1,814 6,022 4,318
---------------------------------------------------------------------------------------------------------------------------------
Minority interests (179) (91) (28) (48) (146) (40) (227) (237) (68)
---------------------------------------------------------------------------------------------------------------------------------
Net profit 552 4,473 4,132 1,038 1,317 125 1,587 5,785 4,250
---------------------------------------------------------------------------------------------------------------------------------
1) Income statements for the banking and insurance business are presented on a
stand-alone basis.
2) Expenses due to the handling of both claims and investments are allocated to
the income from the insurance business, of which CHF 599 m (2000:
CHF 525 m, 1999: CHF 579 m) are related to personnel expenses and CHF 371 m
(2000: CHF 355 m, 1999: CHF 511 m) to other operating expenses.
F-34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7 Income statement by origin 1) Switzerland Foreign Switzerland Foreign Switzerland Foreign
in CHF m 2001 2001 2000 2000 1999 1999
---------------------------------------------------------------------------------------------------------------------------------
Net interest income 2,921 3,830 3,357 1,956 2,718 2,620
Net commission and service fee income 4,699 13,146 5,344 11,252 4,211 6,645
Net trading income 1,386 7,797 1,790 7,001 1,371 5,207
Income from the insurance business 2,426 3,874 2,574 3,592 1,651 2,515
Other ordinary income/(expenses), net 114 (1,039) 261 104 (234) (60)
---------------------------------------------------------------------------------------------------------------------------------
Operating income 11,546 27,608 13,326 23,905 9,717 16,927
---------------------------------------------------------------------------------------------------------------------------------
Personnel expenses 4,370 17,520 4,386 14,117 3,780 9,774
Other operating expenses 2,325 6,069 2,315 4,330 2,032 3,195
---------------------------------------------------------------------------------------------------------------------------------
Operating expenses 6,695 23,589 6,701 18,447 5,812 12,969
---------------------------------------------------------------------------------------------------------------------------------
Gross operating profit 4,851 4,019 6,625 5,458 3,905 3,958
---------------------------------------------------------------------------------------------------------------------------------
% of total 55% 45% 55% 45% 50% 50%
---------------------------------------------------------------------------------------------------------------------------------
Depreciation of non-current assets 995 1,191 696 657 287 694
Amortization of acquired intangible assets 0 793 0 157 0 0
Amortization of goodwill 85 685 47 199 48 62
Valuation adjustments, provisions and
losses from the banking business 616 1,976 706 559 732 808
---------------------------------------------------------------------------------------------------------------------------------
Depreciation, valuation adjustments and
losses 1,696 4,645 1,449 1,572 1,067 1,564
---------------------------------------------------------------------------------------------------------------------------------
Profit before extraordinary items, taxes
and minority interests 3,155 (626) 5,176 3,886 2,838 2,394
---------------------------------------------------------------------------------------------------------------------------------
Extraordinary income/(expenses) (225) (4) (152) (1,539) (6) (53)
Taxes (799) 313 (983) (366) (173) (682)
---------------------------------------------------------------------------------------------------------------------------------
% of total 164% (64%) 73% 27% 20% 80%
---------------------------------------------------------------------------------------------------------------------------------
Net profit before minority interests 2,131 (317) 4,041 1,981 2,659 1,659
---------------------------------------------------------------------------------------------------------------------------------
Minority interests 126 (353) 27 (264) 1 (69)
---------------------------------------------------------------------------------------------------------------------------------
Net profit 2,257 (670) 4,068 1,717 2,660 1,590
---------------------------------------------------------------------------------------------------------------------------------
% of total 142% (42%) 70% 30% 63% 37%
---------------------------------------------------------------------------------------------------------------------------------
1) The analysis is based on the location of the office recording the
transactions.
F-35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8 Net interest income
in CHF m 2001 2000 1999
------------------------------------------------------------------------------------------------------
Interest income on loans due from customers 13,438 13,853 10,497
Interest income on loans due from banks 13,179 14,225 7,526
Interest income from money market papers 1,590 1,725 1,019
Credit commissions treated as interest earnings 329 252 242
Interest income from leasing operations 151 126 96
------------------------------------------------------------------------------------------------------
Interest and discount income 28,687 30,181 19,380
------------------------------------------------------------------------------------------------------
Interest income 11,351 7,136 3,488
Dividend income 1,727 885 639
------------------------------------------------------------------------------------------------------
Interest and dividend income from trading portfolios 13,078 8,021 4,127
------------------------------------------------------------------------------------------------------
Interest income 352 345 339
Dividend income 162 361 132
------------------------------------------------------------------------------------------------------
Interest and dividend income from financial investments 514 706 471
------------------------------------------------------------------------------------------------------
Interest income 42,279 38,908 23,978
------------------------------------------------------------------------------------------------------
Interest expenses for liabilities due to customers (15,786) (15,475) (12,268)
Interest expenses for liabilities due to banks (19,742) (18,120) (6,372)
------------------------------------------------------------------------------------------------------
Interest expenses (35,528) (33,595) (18,640)
------------------------------------------------------------------------------------------------------
of which interest expenses for subordinated liabilities (916) (879) (833)
------------------------------------------------------------------------------------------------------
Total net interest income 6,751 5,313 5,338
------------------------------------------------------------------------------------------------------
Certain reclassifications have been made to prior-period amounts to conform to the current
presentation.
9 Net trading income
in CHF m 2001 2000 1999
------------------------------------------------------------------------------------------------------
Debt instruments 1,932 2,243 2,711
Equity instruments 4,897 4,963 2,368
Foreign exchange and banknote trading 1,648 1,075 1,344
Precious metals 3 123 114
Other 703 387 41
------------------------------------------------------------------------------------------------------
Total net trading income 9,183 8,791 6,578
------------------------------------------------------------------------------------------------------
Certain reclassifications have been made to prior-period amounts to conform to the current
presentation.
F-36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10 Depreciation and amortization
in CHF m 2001 2000 1999
------------------------------------------------------------------------------------------------------
Real estate 207 239 115
Other tangible fixed assets 1,269 933 790
Present value of future profits (PVFP) 1) 237 14 39
Other intangible assets 387 151 37
Non-consolidated participations 86 16 0
------------------------------------------------------------------------------------------------------
Depreciation of non-current assets 2,186 1,353 981
------------------------------------------------------------------------------------------------------
Amortization of acquired intangible assets 793 157 0
Amortization of goodwill 770 246 110
------------------------------------------------------------------------------------------------------
Total depreciation and amortization 3,749 1,756 1,091
------------------------------------------------------------------------------------------------------
1) Interest accrued of CHF 157 m (2000: CHF 156 m, 1999: CHF 50 m) on the unamortized PVFP balance is
presented net against amortization.
11 Valuation adjustments, provisions and losses from the banking business
in CHF m 2001 2000
1999
------------------------------------------------------------------------------------------------------
Valuation allowances 1,634 973 1,016
of which losses from lending activities 13 62 34
Balance sheet risks 4 (83) 37
Off-balance sheet risks 80 (11) 7
Other provisions 828 304 435
Losses on financial investments 46 82 45
------------------------------------------------------------------------------------------------------
Total valuation adjustments, provisions and losses from the
banking business 2,592 1,265 1,540
------------------------------------------------------------------------------------------------------
Non-technical provisions for the insurance business 1) 136 95 96
------------------------------------------------------------------------------------------------------
1) Included in other expenses from the insurance business.
F-37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12 Extraordinary income
in CHF m 2001 2000 1999
----------------------------------------------------------------------------------------------------
Gains from the disposal of participations 4 2 11
Release of reserve for general banking risks 0 8 21
Other extraordinary income 48 95 61
----------------------------------------------------------------------------------------------------
Total extraordinary income 52 105 93
----------------------------------------------------------------------------------------------------
13 Extraordinary expenses
in CHF m 2001 2000 1999
----------------------------------------------------------------------------------------------------
Losses from the disposal of participations 238 0 0
Allocation to reserve for general banking risks 0 190 101
Restructuring charges 19 1,501 12
Other extraordinary expenses 24 105 39
----------------------------------------------------------------------------------------------------
Total extraordinary expenses 281 1,796 152
----------------------------------------------------------------------------------------------------
Restructuring charges 1)
in CHF m 2001 2000 1999
----------------------------------------------------------------------------------------------------
Personnel 43 932 46
Premises 2) 7 268 0
Other 3) 13 342 0
----------------------------------------------------------------------------------------------------
Total restructuring charges 63 1,542 46
----------------------------------------------------------------------------------------------------
of which included in extraordinary expenses 19 1,501 12
of which included in ordinary expenses 44 41 34
----------------------------------------------------------------------------------------------------
1) See note 33 "Valuation allowances and provisions" for further details.
2) Premises charges include lease termination costs, moving expenses and losses
related to the closure and sale of property.
3) Other charges include technology write-offs, rebranding and advertising
costs and consultancy fees.
In 2001, restructuring charges of CHF 44 million related to the insurance
business and CHF 19 million related to e-business activities.
During 2000, the Group recorded restructuring charges of CHF 1,499 million
related to the acqusition of Donaldson, Lufkin & Jenrette, Inc. Personnel
charges of CHF 900 million included CHF 664 million for announced and
anticipated termination benefits and CHF 236 million for other personnel-related
expenses including retention awards. Substantially all of the remaining CHF 43
million of restructuring costs in 2000 related to Winterthur Life & Pensions'
acquisition of Colonial UK.
In 1999, restructuring charges of CHF 34 million related to Credit Suisse Asset
Management's acquisition of Warburg Pincus Asset Management.
F-38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14 Taxes
in CHF m 2001 2000 1999
-----------------------------------------------------------------------------------------------------
Switzerland 659 953 382
Foreign 755 1,981 1,148
-----------------------------------------------------------------------------------------------------
Current taxes 1,414 2,934 1,530
-----------------------------------------------------------------------------------------------------
Switzerland 140 30 (209)
Foreign (1,068) (1,615) (466)
-----------------------------------------------------------------------------------------------------
Deferred taxes (928) (1,585) (675)
-----------------------------------------------------------------------------------------------------
Total taxes 486 1,349 855
-----------------------------------------------------------------------------------------------------
15 Income statement of the insurance business
in CHF m 2001 2000 1999
---------------------------------------------------------------------------------------------------
Non-life
Net premiums written 16,840 14,632 12,604
Change in provision for unearned premiums
and in provision for future policy benefits (health) (1,833) (1,113) (548)
---------------------------------------------------------------------------------------------------
Net premiums earned 15,007 13,519 12,056
---------------------------------------------------------------------------------------------------
Claims and annuities paid (10,311) (10,108) (8,835)
Change in provision for unpaid claims and annuities (1,198) (324) (310)
---------------------------------------------------------------------------------------------------
Claims and annuities incurred (11,509) (10,432) (9,145)
---------------------------------------------------------------------------------------------------
Dividends paid to policyholder (290) (309) (341)
Change in provision for future dividends to policyholders (21) (66) (46)
---------------------------------------------------------------------------------------------------
Dividends to policyholders incurred (311) (375) (387)
---------------------------------------------------------------------------------------------------
Operating expenses (4,336) (3,971) (3,639)
---------------------------------------------------------------------------------------------------
Underwriting result (1,149) (1,259) (1,115)
---------------------------------------------------------------------------------------------------
Net investment income 2,217 2,385 1,691
Interest received on deposits and bank accounts 29 96 90
Interest paid (97) (114) (77)
Other income/(expenses), including foreign currency
translation impact (165) 53 28
---------------------------------------------------------------------------------------------------
Profit before taxes and minority interests 835 1,161 617
---------------------------------------------------------------------------------------------------
F-39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15 Income statement of the insurance business (continued)
in CHF m 2001 2000 1999
----------------------------------------------------------------------------------------------------
Life
Net premiums written 17,203 15,172 14,088
Change in provisions for unearned premiums (15) (1) 2
----------------------------------------------------------------------------------------------------
Net premiums earned 17,188 15,171 14,090
----------------------------------------------------------------------------------------------------
Death and other benefits paid (11,922) (9,417) (7,649)
Change in provisions for death and other benefits (245) (317) (384)
----------------------------------------------------------------------------------------------------
Death and other benefits incurred (12,167) (9,734) (8,033)
----------------------------------------------------------------------------------------------------
Change in provision for future policy benefits (5,457) (6,377) (7,945)
----------------------------------------------------------------------------------------------------
Dividends paid to policyholders (1,449) (1,439) (1,415)
Change in provision for future dividends to policyholders 1,162 (543) 31
----------------------------------------------------------------------------------------------------
Dividends to policyholders incurred (287) (1,982) (1,384)
----------------------------------------------------------------------------------------------------
Operating expenses (1,870) (1,685) (1,252)
Net investment income 3,651 6,051 5,048
Interest received on deposits and bank accounts 86 88 135
Interest on bonuses credited to policyholders (135) (116) (117)
Interest paid (193) (215) (220)
Other income/(expenses), including foreign currency
translation impact (53) (416) (716)
----------------------------------------------------------------------------------------------------
Profit before taxes and minority interests 763 785 (394)
----------------------------------------------------------------------------------------------------
Combined
Profit before taxes and minority interests 1,598 1,946 223
Interest on debentures (61) (46) (4)
Amortization of goodwill (73) (31) (9)
Taxes (378) (406) (45)
----------------------------------------------------------------------------------------------------
Profit before minority interests 1,086 1,463 165
----------------------------------------------------------------------------------------------------
Minority interests (48) (146) (40)
----------------------------------------------------------------------------------------------------
Net profit 1,038 1,317 125
----------------------------------------------------------------------------------------------------
F-40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16 Insurance premiums, claims and related reinsurance
in CHF m 2001 2000 1999
------------------------------------------------------------------------------------------
Non-life
Switzerland 2,949 2,933 2,873
Other European countries 10,920 9,716 7,839
North America 3,536 3,213 2,627
Asia-Pacific 149 199 243
Other regions 52 64 42
------------------------------------------------------------------------------------------
Direct written premiums 17,606 16,125 13,624
------------------------------------------------------------------------------------------
Assumed 806 383 277
Ceded (1,572) (1,876) (1,297)
------------------------------------------------------------------------------------------
Net premiums written 16,840 14,632 12,604
------------------------------------------------------------------------------------------
Direct 16,162 14,711 13,084
Assumed 524 340 216
Ceded (1,679) (1,532) (1,244)
------------------------------------------------------------------------------------------
Net premiums earned 15,007 13,519 12,056
------------------------------------------------------------------------------------------
Direct (12,489) (11,644) (9,894)
Assumed (451) 141 (406)
Ceded 1,431 1,071 1,155
------------------------------------------------------------------------------------------
Claims and annuities incurred, net (11,509) (10,432) (9,145)
------------------------------------------------------------------------------------------
Life
Switzerland 8,340 7,814 7,813
Other European countries 8,146 7,059 6,223
Asia-Pacific 707 564 148
------------------------------------------------------------------------------------------
Direct written premiums 17,193 15,437 14,184
------------------------------------------------------------------------------------------
Assumed 220 15 20
Ceded (210) (280) (116)
------------------------------------------------------------------------------------------
Net premiums written 17,203 15,172 14,088
------------------------------------------------------------------------------------------
Direct 17,190 15,438 14,178
Assumed 208 14 20
Ceded (210) (281) (108)
------------------------------------------------------------------------------------------
Net premiums earned 17,188 15,171 14,090
------------------------------------------------------------------------------------------
Direct (12,189) (9,788) (8,086)
Assumed (52) (48) (4)
Ceded 74 102 57
------------------------------------------------------------------------------------------
Death and other benefits incurred, net (12,167) (9,734) (8,033)
------------------------------------------------------------------------------------------
Combined
Direct written premiums 34,799 31,562 27,808
Assumed 1,026 398 297
Ceded (1,782) (2,156) (1,413)
------------------------------------------------------------------------------------------
Net premiums written 34,043 29,804 26,692
------------------------------------------------------------------------------------------
F-41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17 Net investment income from the insurance business
in CHF m 2001 2000 1999
---------------------------------------------------------------------------------------
Non-life
Debt securities and loans 974 1,029 933
Equity securities 161 160 115
Real estate 127 120 128
Mortgages 60 59 58
Short-term investments 95 109 79
Non-consolidated participations 15 48 6
---------------------------------------------------------------------------------------
Investment income 1,432 1,525 1,319
---------------------------------------------------------------------------------------
Realized gains/(losses) on real estate 170 38 20
Realized gains/(losses) on other investments 750 1,022 482
(Depreciation)/appreciation on investments (31) (28) (30)
---------------------------------------------------------------------------------------
Gains/(losses) on investments 889 1,032 472
---------------------------------------------------------------------------------------
Investment expenses (104) (172) (100)
---------------------------------------------------------------------------------------
Net investment income 2,217 2,385 1,691
---------------------------------------------------------------------------------------
Life
Debt securities and loans 2,798 2,793 2,592
Equity securities 462 404 387
Real estate 395 372 360
Mortgages 421 398 408
Short-term investments 85 67 49
Non-consolidated participations 14 9 0
---------------------------------------------------------------------------------------
Investment income 4,175 4,043 3,796
---------------------------------------------------------------------------------------
Realized gains/(losses) on real estate 31 40 (78)
Realized gains/(losses) on other investments 926 2,670 930
(Depreciation)/appreciation on investments (123) (105) (86)
---------------------------------------------------------------------------------------
Gains/(losses) on investments 834 2,605 766
---------------------------------------------------------------------------------------
Investment income 224 214 111
Gains/(losses) (1,338) (544) 639
---------------------------------------------------------------------------------------
Net investment income where the investment risk is borne by
policyholders (1,114) (330) 750
---------------------------------------------------------------------------------------
Investment expenses (244) (267) (264)
---------------------------------------------------------------------------------------
Net investment income 3,651 6,051 5,048
---------------------------------------------------------------------------------------
F-42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17 Net investment income from the insurance business (continued)
in CHF m 2001 2000 1999
------------------------------------------------------------------------------------------
Combined
Debt securities and loans 3,772 3,822 3,525
Equity securities 623 564 502
Real estate 522 492 488
Mortgages 481 457 466
Short-term investments 180 176 128
Non-consolidated participations 29 57 6
------------------------------------------------------------------------------------------
Investment income 5,607 5,568 5,115
------------------------------------------------------------------------------------------
Gains/(losses) on investments 1,723 3,637 1,238
Net investment income where the investment risk is borne by
policyholders (1,114) (330) 750
Investment expenses (348) (439) (364)
------------------------------------------------------------------------------------------
Net investment income from the insurance business 5,868 8,436 6,739
------------------------------------------------------------------------------------------
18 Money market papers
in CHF m 31.12.01 31.12.00
---------------------------------------------------------------------------------------
Government treasury notes and bills 10,612 7,236
Money market placements 15,595 17,298
Other bills of exchange and money market papers 5,820 5,593
---------------------------------------------------------------------------------------
Total money market papers 32,027 30,127
---------------------------------------------------------------------------------------
of which rediscountable or pledgeable with central banks 12,698 9,162
---------------------------------------------------------------------------------------
F-43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19 Loans
19.1 Due from banks
in CHF m 31.12.01 31.12.00
----------------------------------------------------------------------------------------
Due from banks, gross 203,821 218,614
Valuation allowance (36) (93)
----------------------------------------------------------------------------------------
Total due from banks, net 203,785 218,521
----------------------------------------------------------------------------------------
Certain reclassifications have been made to prior-year amounts to conform to the
current presentation.
19.2 Due from customers and mortgages
in CHF m 31.12.01 31.12.00
---------------------------------------------------------------------------------------
Due from customers, gross 192,349 176,627
Valuation allowance (6,198) (6,199)
---------------------------------------------------------------------------------------
Due from customers, net 186,151 170,428
---------------------------------------------------------------------------------------
Mortgages, gross 95,685 96,926
Valuation allowance (3,030) (4,494)
---------------------------------------------------------------------------------------
Mortgages, net 92,655 92,432
---------------------------------------------------------------------------------------
Total due from customers and mortgages, net 278,806 262,860
---------------------------------------------------------------------------------------
Due from customers and mortgages by sector
in CHF m 31.12.01 31.12.00
----------------------------------------------------------------------------------------
Financial services 39,213 39,013
Real estate companies 17,627 16,870
Other services including technology companies 22,860 22,000
Manufacturing 12,791 12,536
Wholesale and retail trade 10,970 13,411
Construction 3,676 3,970
Transportation and communication 10,904 5,005
Health and social services 1,854 2,813
Hotels and restaurants 2,866 3,103
Agriculture and mining 1,600 2,706
Non-profit and international organizations 27 210
----------------------------------------------------------------------------------------
Commercial 124,388 121,637
----------------------------------------------------------------------------------------
Consumers 86,358 87,436
Public authorities 5,000 4,817
Lease financings 3,135 2,653
Professional securities transactions and securitized loans 69,153 57,010
----------------------------------------------------------------------------------------
Due from customers and mortgages, gross 288,034 273,553
----------------------------------------------------------------------------------------
Valuation allowance (9,228) (10,693)
----------------------------------------------------------------------------------------
Total due from customers and mortgages, net 278,806 262,860
----------------------------------------------------------------------------------------
Certain reclassifications have been made to prior-year amounts to conform to the
current presentation.
F-44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19.3 Collateral of due from customers and mortgages
Total
Mortgage Other Without
in CHF m collateral collateral collateral
31.12.01
-------------------------------------------------------------------------------------------------------------------
Due from customers 5,902 121,338 58,911 186,151
Residential properties 64,856
Business and office properties 11,487
Commercial and industrial properties 11,117
Other properties 5,195
-------------------------------------------------------------------------------------------------------------------
Mortgages 92,655 92,655
-------------------------------------------------------------------------------------------------------------------
Total collateral 98,557 121,338 58,911 278,806
-------------------------------------------------------------------------------------------------------------------
As of December 31, 2000 98,389 105,801 58,670 262,860
-------------------------------------------------------------------------------------------------------------------
Certain reclassifications have been made to prior-year amounts to conform to the
current presentation.
19.4 Loan valuation allowance
in CHF m 31.12.01 31.12.00
--------------------------------------------------------------------------------------------------------------------
Due from banks 36 93
Due from customers 6,198 6,199
Mortgages 3,030 4,494
--------------------------------------------------------------------------------------------------------------------
Total loan valuation allowance 9,264 10,786
--------------------------------------------------------------------------------------------------------------------
of which on principal 7,553 8,741
of which on interest 1,711 2,045
--------------------------------------------------------------------------------------------------------------------
Roll forward of loan valuation allowance
in CHF m 2001 2000 1999
--------------------------------------------------------------------------------------------------------------------
At beginning of financial year 10,786 12,489 13,307
Net additions charged to income statement 1,613 973 1,015
Net write-offs (3,805) (3,509) (2,821)
Balances acquired/(sold) (3) 352 0
Provisions for interest 400 248 489
Foreign currency translation impact and other 273 233 499
--------------------------------------------------------------------------------------------------------------------
At end of financial year 9,264 10,786 12,489
--------------------------------------------------------------------------------------------------------------------
19.5 Impaired loans
in CHF m 31.12.01 31.12.00
--------------------------------------------------------------------------------------------------------------------
With a specific allowance 12,957 14,493
Without a specific allowance 912 1,186
--------------------------------------------------------------------------------------------------------------------
Total impaired loans, gross 13,869 15,679
--------------------------------------------------------------------------------------------------------------------
F-45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19.5 Impaired loans (continued)
in CHF m 31.12.01 31.12.00
--------------------------------------------------------------------------------------------------------------------
Non-performing loans 7,992 7,989
Non-interest earning loans 2,808 3,615
Restructured loans 114 268
Potential problem loans 2,955 3,807
--------------------------------------------------------------------------------------------------------------------
Total impaired loans, gross 13,869 15,679
--------------------------------------------------------------------------------------------------------------------
Impaired loans include non-performing loans, non-interest earning loans,
troubled debt restructuring and potential problem loans. Troubled debt
restructuring consists of: loans that are accruing at interest rates different
from the original terms of such loans; restructurings involving the forgiveness
of principal and/or accrued interest; or restructurings involving the receipt of
an equity interest from the counterparty. On receipt of cash, suspended interest
is recovered first, except when amounts are outstanding for costs and other late
payment charges, in which case cash received is first applied to these costs and
other late payment charges.
Potential problem loans consist of loans where interest payments are being made.
However, there exists some doubt in the credit officer's assessment as to the
timing and/or certainty of the repayment of contractual principal. At
December 31, 2001, the Group did not have any commitments to lend additional
funds to debtors whose terms have been modified in troubled debt restructuring.
Other information
in CHF m 2001 2000 1999
------------------------------------------------------------------------------------------------------
Average balance of impaired loans 14,197 16,545 20,398
Interest income which was recognized 184 314 245
Interest income recognized on a cash basis 169 308 237
------------------------------------------------------------------------------------------------------
Recognized in connection with the sales of loans were CHF 162 million and
CHF 39 million net losses during 2001 and 2000, respectively, and
CHF 83 million net gains in 1999.
F-46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20. Securities and precious metals trading portfolios
in CHF m 31.12.01 31.12.00
------------------------------------------------------------------------------------------------------
Listed on stock exchange 66,308 63,684
Unlisted 91,434 65,678
------------------------------------------------------------------------------------------------------
Debt instruments 157,742 129,362
------------------------------------------------------------------------------------------------------
of which own bonds and medium-term notes 1,037 837
Listed on stock exchange 44,202 59,454
Unlisted 5,123 8,081
------------------------------------------------------------------------------------------------------
Equity instruments 49,325 67,535
------------------------------------------------------------------------------------------------------
of which own shares 4,410 7,474
Precious metals 1,307 2,020
------------------------------------------------------------------------------------------------------
Total securities and precious metals trading portfolios 208,374 198,917
------------------------------------------------------------------------------------------------------
of which rediscountable or pledgeable with central banks 77,306 72,618
------------------------------------------------------------------------------------------------------
Substantial assets and liabilities included
in other balance sheet positions 1)
Lent trading positions (due from banks and customers) 76 183
Borrowed trading positions (due to banks and customers) 2,996 2,613
Derivative instruments from trading activities
Positive replacement values (other assets) 49,651 43,919
Negative replacement values (other liabilities) 52,386 49,300
------------------------------------------------------------------------------------------------------
1) These are valued at fair value and any related profit/loss is shown in net
trading income.
F-47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21 Own shares included in securities trading portfolios
2001 2000
No. of 2001 No. of 2000
shares in CHF m shares in CHF m
------------------------------------------------------------------------------------------------------------------------------
In registered share equivalents, including
derivatives
At beginning of financial year 6,035,628 465 438,760 36
At end of financial year (92,891) (7) 6,035,628 465
------------------------------------------------------------------------------------------------------------------------------
The number of shares has been adjusted for the 4-for-1 share split effective as
of August 15, 2001.
22 Financial investments from the banking business
Cost Market value Book value
------------------- ------------------- -------------------
in CHF m 31.12.01 31.12.00 31.12.01 31.12.00 31.12.01 31.12.00
------------------------------------------------------------------------------------------------------------------------------
Listed on stock exchange -- -- -- -- 14,055 12,230
Unlisted -- -- -- -- 2,242 1,734
------------------------------------------------------------------------------------------------------------------------------
Debt instruments - - - - 16,297 13,964
------------------------------------------------------------------------------------------------------------------------------
of which valued according to the accrual method -- - -- - 15,219 13,035
of which valued at lower of cost or market 1,176 965 1,098 946 1,078 929
of which own bonds and medium-term notes - - - - 31 1
Listed on stock exchange 3,849 3,564 5,706 6,758 3,537 3,360
Unlisted -- - -- - 15,387 5,772
------------------------------------------------------------------------------------------------------------------------------
Equity instruments -- - -- - 18,924 9,132
------------------------------------------------------------------------------------------------------------------------------
of which own shares - - - - 773 0
of which qualifying participations - - - - 2,713 3,139
Repossessed commodities 16 0 6 0 6 0
Precious metals 9 9 9 9 9 9
Real estate 2,291 2,620 2,080 2,469 2,070 2,469
------------------------------------------------------------------------------------------------------------------------------
Total financial investments from the banking business -- -- -- -- 37,306 25,574
------------------------------------------------------------------------------------------------------------------------------
of which valued at lower of cost or market 7,341 7,158 8,899 10,182 6,700 6,767
of which securities rediscountable or pledgeable with
central banks - - - - 13,275 11,056
------------------------------------------------------------------------------------------------------------------------------
F-48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23 Investments from the insurance business
Gross Gross
December 31, 2001 Amortized unrealized unrealized
in CHF m Book value cost gains losses Fair value
------------------------------------------------------------------------------------------------------------------------
Debt securities issued by Swiss Federal Government,
cantonal or local governmental entities 8,287 8,205 152 70 8,287
Debt securities issued by foreign governments 19,503 19,252 474 223 19,503
Corporate debt securities 22,947 22,542 672 267 22,947
Other 15,823 15,409 543 129 15,823
------------------------------------------------------------------------------------------------------------------------
Debt securities 66,560 65,408 1,841 689 66,560
------------------------------------------------------------------------------------------------------------------------
Equity securities 22,332 22,145 2,406 2,219 22,332
------------------------------------------------------------------------------------------------------------------------
Total securities - available-for-sale 88,892 87,553 4,247 2,908 88,892
------------------------------------------------------------------------------------------------------------------------
Debt securities 1,858 -- -- -- --
Equity securities 37 -- -- -- --
------------------------------------------------------------------------------------------------------------------------
Total securities - trading 1,895 -- -- -- --
------------------------------------------------------------------------------------------------------------------------
Own shares 184 -- -- -- --
Mortgage loans 9,811 -- -- -- --
Other loans 4,648 -- -- -- --
Real estate 7,549 -- -- -- 10,376
Short-term investments and other 3,793 -- -- -- --
------------------------------------------------------------------------------------------------------------------------
Investments from the insurance business 116,772 -- -- -- --
------------------------------------------------------------------------------------------------------------------------
Equity securities 10,934 -- -- -- --
Debt securities 2,495 -- -- -- --
Short-term investments 794 -- -- -- --
Real estate 296 -- -- -- --
------------------------------------------------------------------------------------------------------------------------
Investments where the investment risk is borne by
the policyholders 14,519 -- -- -- --
------------------------------------------------------------------------------------------------------------------------
Total investments from the insurance business 131,291 -- -- -- --
------------------------------------------------------------------------------------------------------------------------
F-49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23 Investments from the insurance business (continued)
Gross Gross
December 31, 2000 Amortized unrealized unrealized
in CHF m Book value cost gains losses Fair value
------------------------------------------------------------------------------------------------------------------------
Debt securities issued by Swiss Federal
Government, cantonal or local governmental
entities 5,748 5,645 128 25 5,748
Debt securities issued by foreign governments 18,497 18,012 648 163 18,497
Corporate debt securities 36,381 35,829 1,111 559 36,381
Other 2,952 2,736 260 44 2,952
------------------------------------------------------------------------------------------------------------------------
Debt securities 63,578 62,222 2,147 791 63,578
------------------------------------------------------------------------------------------------------------------------
Equity securities 31,718 24,114 9,021 1,417 31,718
------------------------------------------------------------------------------------------------------------------------
Total securities - available-for-sale 95,296 86,336 11,168 2,208 95,296
------------------------------------------------------------------------------------------------------------------------
Own shares 59 -- -- -- --
Mortgage loans 9,424 -- -- -- --
Other loans 4,316 -- -- -- --
Real estate 7,098 -- -- -- 10,072
Short-term investments and other 3,550 -- -- -- --
------------------------------------------------------------------------------------------------------------------------
Investments from the insurance business 119,743 -- -- -- --
------------------------------------------------------------------------------------------------------------------------
Equity securities 10,136 -- -- -- --
Debt securities 1,233 -- -- -- --
Short-term investments 1,402 -- -- -- --
Real estate 118 -- -- -- --
------------------------------------------------------------------------------------------------------------------------
Investments where the investment risk is borne by
the policyholders 12,889 -- -- -- --
------------------------------------------------------------------------------------------------------------------------
Total investments from the insurance business 132,632 -- -- -- --
------------------------------------------------------------------------------------------------------------------------
F-50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24. Own shares included in financial investments from
the banking and insurance business
2000
2001 2001 No. of 2000
No. of shares in CHF m shares in CHF m
---------------------------------------------------------------------------------------------------------------------------
In registered share equivalents, including derivatives
At beginning of financial year 471,484 36 76,936 6
At end of financial year 11,048,553 777 471,484 36
---------------------------------------------------------------------------------------------------------------------------
The number of shares has been adjusted for the 4-for-1 share split effective as
of August 15, 2001.
25 Non-consolidated participations
Foreign
Net currency
book Balances translation Net
Accumulated value acquired/ and book value
in CHF m Cost write-offs 31.12.00 Additions Disposals Write-offs (sold) transfers 31.12.01
---------------------------------------------------------------------------------------------------------------------------------
Investments in associates 1,459 0 1,459 173 (267) (15) (4) 133 1,479
Other non-consolidated
participations 385 (15) 370 217 (86) (71) 0 (63) 367
---------------------------------------------------------------------------------------------------------------------------------
Total non-consolidated
participations 1,844 (15) 1,829 390 (353) (86) (4) 70 1,846
---------------------------------------------------------------------------------------------------------------------------------
Listed on stock exchange 0 178
Unlisted 1,829 1,668
---------------------------------------------------------------------------------------------------------------------------------
26. Tangible fixed assets Own use Real estate Leasehold Other Total
in CHF m premises investment improvements physical assets 2001
---------------------------------------------------------------------------------------------------------------------------
Historical cost
At beginning of financial year 6,772 508 2,175 5,152 14,607
Additions 349 22 377 1,154 1,902
Disposals and write-offs (91) (16) (414) (462) (983)
Balances acquired/(sold) (14) (3) (82) (13) (112)
Reclassifications 1) (233) (56) (53) (13) (355)
Foreign currency translation impact (5) 7 41 28 71
---------------------------------------------------------------------------------------------------------------------------
At end of financial year 6,778 462 2,044 5,846 15,130
---------------------------------------------------------------------------------------------------------------------------
Accumulated depreciation
At beginning of financial year 1,186 61 471 2,976 4,694
Depreciation 192 15 206 1,063 1,476
Disposals and write-offs (39) 1 (56) (224) (318)
Balances acquired/(sold) (9) (3) 2 (6) (16)
Reclassifications 1) (116) (6) 7 (27) (142)
Foreign currency translation impact (3) (1) 8 10 14
---------------------------------------------------------------------------------------------------------------------------
At end of financial year 1,211 67 638 3,792 5,708
---------------------------------------------------------------------------------------------------------------------------
Net book value at end of financial year 5,567 395 1,406 2,054 9,422
---------------------------------------------------------------------------------------------------------------------------
Net book value at beginning of financial year 5,586 447 1,704 2,176 9,913
---------------------------------------------------------------------------------------------------------------------------
1) Including CHF 148 m transfer to real estate held for investment from the
insurance business, CHF 45 m to real estate held for sale and CHF 33 m to
intangible assets.
F-51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fire insurance values
in CHF m 31.12.01 31.12.00
---------------------------------------------------------------------------------
Real estate (including investments from the insurance
business) 18,462 18,625
Other tangible fixed assets 3,911 3,889
---------------------------------------------------------------------------------
27. Operating leases
The following is a schedule of future minimum rental payments required under operating leases-lessee
transactions that have initial or remaining non-cancelable lease terms in excess of one year, as of
December 31, 2001.
in CHF m 31.12.01
----------------------------------------------------------------------------------------------------
2002 803
2003 715
2004 649
2005 601
2006 534
Thereafter 5,123
----------------------------------------------------------------------------------------------------
Future operating lease commitments 8,425
Minimum non-cancelable sublease rentals (291)
----------------------------------------------------------------------------------------------------
Total net future minimum lease commitments 8,134
----------------------------------------------------------------------------------------------------
The following shows the composition of total rent expense for all operating leases except those with a
term of one month or less that were not renewed for the years ended December 31:
Rental expenses
in CHF m 2001 2000 1999
--------------------------------------------------------------------------------------------------------
Minimum rentals 860 585 507
Contingent rentals 0 3 0
--------------------------------------------------------------------------------------------------------
Gross rental expenses 860 588 507
Sublease rental income (43) (17) (38)
--------------------------------------------------------------------------------------------------------
Total net rental expenses 817 571 469
--------------------------------------------------------------------------------------------------------
F-52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28. Intangible assets
Present
Acquired value of Other
intangible future intangible Total
in CHF m assets Goodwill profits 1) Software assets 2001
---------------------------------------------------------------------------------------------------------------------------
Historical cost
At beginning of financial year 7,291 13,201 2,575 1,084 144 24,295
Additions 39 1,607 59 673 23 2,401
Disposals and write-offs (739) (283) 0 (196) (3) (1,221)
Unrealized gains/(losses) -- -- 31 -- -- 31
Balances acquired/(sold) 0 0 0 (27) (74) (101)
Reclassifications 2) 0 (52) 11 1 0 (40)
Foreign currency translation impact 199 247 (46) 1 1 402
---------------------------------------------------------------------------------------------------------------------------
At end of financial year 6,790 14,720 2,630 1,536 91 25,767
---------------------------------------------------------------------------------------------------------------------------
Accumulated depreciation
At beginning of financial year 171 332 53 331 109 996
Depreciation and amortization 793 770 237 3) 377 10 2,187
Disposals and write-offs (69) (36) 0 (51) 0 (156)
Balances acquired/(sold) 0 0 0 (14) (61) (75)
Reclassifications 2) 0 (4) 11 (25) 0 (18)
Foreign currency translation impact (3) (6) (6) (3) 1 (17)
---------------------------------------------------------------------------------------------------------------------------
At end of financial year 892 1,056 295 615 59 2,917
---------------------------------------------------------------------------------------------------------------------------
Net book value at end of financial year 5,898 13,664 2,335 921 32 22,850
---------------------------------------------------------------------------------------------------------------------------
Net book value at beginning of financial year 7,120 12,869 2,522 753 35 23,299
---------------------------------------------------------------------------------------------------------------------------
1) PVFP: Present value of future profits embedded in each life and health
insurance portfolio purchased, see note 1 Summary of significant accounting
policies.
2) Including CHF 33 m transfer from tangible assets and CHF 46 m to provisions.
3) Interest accrued of CHF 157 m on the unamortized PVFP balance is presented
net against amortization.
29. Other assets
in CHF m 31.12.01 31.12.00
---------------------------------------------------------------------------------
Trading derivative instruments 49,651 43,919
Other derivative instruments 1,378 1,118
---------------------------------------------------------------------------------
Positive replacement value of derivative instruments 51,029 45,037
---------------------------------------------------------------------------------
Deferred tax assets 6,910 6,883
Other 5,857 2,748
---------------------------------------------------------------------------------
Total other assets 63,796 54,668
---------------------------------------------------------------------------------
F-53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30. Assets pledged or assigned and assets subject to ownership reservation 1)
in CHF m 31.12.01 31.12.00
--------------------------------------------------------------------------------------------------
Assets pledged and assigned as collateral
of which assets provided with the right to sell or repledge with respect to 141,993 108,770
securities lending 125,274 91,968
Actual commitments secured 114,785 92,940
--------------------------------------------------------------------------------------------------
1) None of the Group's assets were under reservation of ownership, either in
the current or in the previous year.
Other information
in CHF m 31.12.01 31.12.00
---------------------------------------------------------------------------------
Cash restricted under Swiss and foreign banking regulations 13,529 9,872
---------------------------------------------------------------------------------
31. Medium-term notes and bonds
in CHF m 31.12.01 31.12.00
---------------------------------------------------------------------------------
Medium-term notes (cash bonds) 3,019 3,225
Bonds issued by Credit Suisse Group and subsidiaries 80,015 63,985
Bond issued by central issuing office of the Association of
Swiss Regional Banks 0 38
Mortgage bonds issued by the Swiss Mortgage Bond Bank 1,490 1,501
---------------------------------------------------------------------------------
Bonds and mortgage-backed bonds 81,505 65,524
---------------------------------------------------------------------------------
Total medium-term notes and bonds 84,524 68,749
---------------------------------------------------------------------------------
of which subordinated bonds 20,746 21,769
---------------------------------------------------------------------------------
Maturity structure Medium-term Total
in CHF m notes Bonds 31.12.01
------------------------------------------------------------------------------------------------
2002 991 18,267 19,258
2003 986 11,000 11,986
2004 698 7,790 8,488
2005 183 11,166 11,349
2006 100 13,280 13,380
Thereafter 61 20,002 20,063
------------------------------------------------------------------------------------------------
Total 3,019 81,505 84,524
------------------------------------------------------------------------------------------------
For further details see note 45 bonds issued.
In addition, as of December 31, 2001, the Group had unused lines of credit for
short-term financing arrangements of CHF 8,328 million.
F-54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
32 Other liabilities
in CHF m 31.12.01 31.12.00
---------------------------------------------------------------------------------------------------------------------------------
Trading derivative instruments 52,386 49,300
Other derivative instruments 808 782
---------------------------------------------------------------------------------------------------------------------------------
Negative replacement value of derivative instruments 53,194 50,082
---------------------------------------------------------------------------------------------------------------------------------
Compensation account 462 325
Other 2,837 7,246
---------------------------------------------------------------------------------------------------------------------------------
Total other liabilities 56,493 57,653
---------------------------------------------------------------------------------------------------------------------------------
33 Valuation allowances and provisions
Total
Provision Provision Provision Provision excluding
Valuation for credit for other for Other for Total allowances
in CHF m allowances 1) risks 2) business risks restructuring 3) provisions taxes 2001 2001
------------------------------------------------------------------------------------------------------------------------------------
At beginning of
financial year 10,789 391 702 1,033 1,199 9,782 23,896 13,107
Net additions
charged to income
statement 1,634 84 157 63 807 1,540 4) 4,285 2,651
Net additions
charged to equity -- -- -- -- -- (1,152 )5) (1,152) (1,152)
Net write-offs (3,805) (14) (180) (844) (582) (1,108) (6,533) (2,728)
Balances
acquired/(sold) (3) 0 (1) 0 (1) 23 18 21
Provisions for
interest 402 0 0 0 0 0 402 0
Change in definition
of purpose
(reclassifications) 252 (178) (103) (1) 107 (333) (256) (508)
Foreign currency
translation impact 50 8 8 38 9 (92) 21 (29)
------------------------------------------------------------------------------------------------------------------------------------
At end of financial
year 9,319 291 583 289 1,539 8,660 20,681 11,362
------------------------------------------------------------------------------------------------------------------------------------
1) Including valuation allowances for money market papers and debt instruments
included in financial investments from the banking business.
2) Including off-balance sheet risks.
3) In 2001, the restructuring provision for Donaldson, Lufkin & Jenrette, Inc.
declined by CHF 676 m from CHF 854 m to CHF 178 m.
4) The increase in deferred tax assets of CHF 1,054 m is not included in
provisions for taxes and deferred taxes.
5) Change owing to deferred taxes on unrealized gains/(losses) on investments
from the insurance business.
F-55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
34 Technical provisions for the insurance business
Gross Net Gross Net
in CHF m 31.12.01 31.12.01 31.12.00 31.12.00
---------------------------------------------------------------------------------------------------------------------------------
Non-life
Provision for unearned premiums 6,415 5,987 5,823 4,996
Provision for future policyholder benefits (health) 3,414 3,413 3,071 3,071
Provision for unpaid claims and claim adjustment expenses 18,656 15,486 19,962 15,560
Actuarial provision for annuities 1,507 1,409 1,330 1,324
Provision for future dividends to policyholders 1,454 1,443 1,702 1,702
---------------------------------------------------------------------------------------------------------------------------------
Technical provisions 31,446 27,738 31,888 26,653
---------------------------------------------------------------------------------------------------------------------------------
Life
Provision for unearned premiums 15 13 24 21
Provision for future policyholder benefits 84,829 84,085 78,496 77,852
Provision for death and other benefits 3,712 3,635 3,990 3,929
Provision for future dividends to policyholders 4,328 4,327 6,909 6,908
Bonuses held on deposit 3,458 3,458 3,395 3,395
---------------------------------------------------------------------------------------------------------------------------------
Technical provisions 96,342 95,518 92,814 92,105
---------------------------------------------------------------------------------------------------------------------------------
Provisions for insurance policies, where the investment risk is borne by
policyholders 15,098 15,098 13,417 13,417
---------------------------------------------------------------------------------------------------------------------------------
Total technical provisions for the insurance business 142,886 138,354 138,119 132,175
---------------------------------------------------------------------------------------------------------------------------------
F-56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
35 Statement of shareholders' equity
Reserve
for Retained
general earnings Minority
banking Share Capital Revaluation including interests
in CHF m risks capital reserves reserves net profit 1)
--------------------------------------------------------------------------------------------------------------------------
As of December 31, 1998 2,048 5,382 10,994 5,994 523 1,619
Dividends paid (1,375) (55)
Capital increases, par value and capital surplus 62 701 3
Transfer of reserves 5 (5)
Balances acquired/(sold) 226
Acquisition of minority interests (643)
Change in revaluation reserves, net (479) (36)
Foreign currency translation impact 1,346 (28)
Reclassifications from provisions 3
Allocation to reserve for general banking risks 101
Release of reserve for general banking risks (21)
Net profit 4,250 68
--------------------------------------------------------------------------------------------------------------------------
As of December 31, 1999 2,131 5,444 11,700 5,515 4,739 1,154
--------------------------------------------------------------------------------------------------------------------------
of which reserve for own shares 600 0
Dividends paid (1,931) (55)
Capital increases, par value and capital surplus 565 8,151 911
Transfer of reserves 31 (31)
Balances acquired/(sold) 190
Acquisition of minority interests (1)
Change in revaluation reserves, net (726) 228
Foreign currency translation impact (610) (93)
Reclassifications from provisions 6
Allocation to reserve for general banking risks 190
Release of reserve for general banking risks (8)
Net profit 5,785 237
--------------------------------------------------------------------------------------------------------------------------
As of December 31, 2000 2,319 6,009 19,882 4,789 7,952 2,571
--------------------------------------------------------------------------------------------------------------------------
of which reserve for own shares 600 0
Dividends paid (14) (161)
Repayment out of share capital (2,392)
Capital increases, par value and capital surplus 11 164 985
Cancellation of repurchased shares (38) (531)
Balances acquired/(sold) (241)
Acquisition of minority interests (12)
Change in revaluation reserves, net (4,040) (258)
Foreign currency translation impact 102 10
Net profit 1,587 227
--------------------------------------------------------------------------------------------------------------------------
As of December 31, 2001 2,319 3,590 19,515 749 9,627 3,121
--------------------------------------------------------------------------------------------------------------------------
of which reserve for own shares 69 2,400
--------------------------------------------------------------------------------------------------------------------------
in CHF m Total
---------------------------------------------------
As of December 31, 1998 26,560
Dividends paid (1,430)
Capital increases, par value and capital surplus 766
Transfer of reserves 0
Balances acquired/(sold) 226
Acquisition of minority interests (643)
Change in revaluation reserves, net (515)
Foreign currency translation impact 1,318
Reclassifications from provisions 3
Allocation to reserve for general banking risks 101
Release of reserve for general banking risks (21)
Net profit 4,318
---------------------------------------------------
As of December 31, 1999 30,683
---------------------------------------------------
of which reserve for own shares 600
Dividends paid (1,986)
Capital increases, par value and capital surplus 9,627
Transfer of reserves 0
Balances acquired/(sold) 190
Acquisition of minority interests (1)
Change in revaluation reserves, net (498)
Foreign currency translation impact (703)
Reclassifications from provisions 6
Allocation to reserve for general banking risks 190
Release of reserve for general banking risks (8)
Net profit 6,022
---------------------------------------------------
As of December 31, 2000 43,522
---------------------------------------------------
of which reserve for own shares 600
Dividends paid (175)
Repayment out of share capital (2,392)
Capital increases, par value and capital surplus 1,160
Cancellation of repurchased shares (569)
Balances acquired/(sold) (241)
Acquisition of minority interests (12)
Change in revaluation reserves, net (4,298)
Foreign currency translation impact 112
Net profit 1,814
---------------------------------------------------
As of December 31, 2001 38,921
---------------------------------------------------
of which reserve for own shares 2,469
---------------------------------------------------
1) For information relating to redeemable preferred securities see next page.
F-57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
35 Statement of shareholders' equity (continued)
Significant shareholders
BZ Group Holding has notified Credit Suisse Group that it held as of
December 31, 2001, on a consolidated basis 86,526,357 registered shares,
corresponding to 7.2% of the total issued and outstanding registered shares of
Credit Suisse Group, of which 1.3% were recorded for the benefit of BZ Group
Holding in the share register of Credit Suisse Group with the right to vote.
Redeemable preferred securities
The Group has non-cumulative guaranteed perpetual preferred securities
(preferred securities) outstanding as listed below. They are issued through
fully owned special purpose subsidiaries in Guernsey, Channel Islands, that are
established for the exclusive purpose of issuing such preferred securities and
investing the gross proceeds in notes receivable of the Group. The preferred
securities are classified as minority interests. The Group has made unsecured,
subordinated guarantees for the benefit of the holders of the preferred
securities.
Related notes
issued by CSG
Notional Liquidation solely redeemable
Issue amount value by issuer
Issuer date Currency in m in CHF m Coupon rate on and after
----------------------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston Capital
(Guernsey) I Ltd. June 1999 USD 125 209 3.683%1) June 29, 2004
Credit Suisse Group Capital (Guernsey)
II Ltd. June 2000 EUR 250 371 7.974% June 21, 2010
Credit Suisse Group Capital (Guernsey)
III Ltd. June 2000 GBP 150 364 8.514% June 15, 2015
Credit Suisse Group Capital (Guernsey)
IV Ltd. June 2000 CHF 150 150 6.500% June 30, 2010
Credit Suisse Group Capital (Guernsey)
V Ltd. November 2001 EUR 400 593 6.905% November 7, 2011
Credit Suisse Group Capital (Guernsey)
VI Ltd. December 2001 JPY 30,500 389 3.570% December 18, 2011
----------------------------------------------------------------------------------------------------------------------------------
Total as of December 31, 2001 2,076
----------------------------------------------------------------------------------------------------------------------------------
1) Based on six-month LIBOR as of December 29, 2001, plus 1.70%
36 Liabilities due to own pension funds
in CHF m 31.12.01 31.12.00
-------------------------------------------------------------------------------------------------------------------
Liabilities due to own pension funds 1,650 722
-------------------------------------------------------------------------------------------------------------------
F-58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
37 Loans to members of the Group's governing bodies 1)
in CHF m 31.12.01 31.12.00 31.12.99
---------------------------------------------------------------------------------------------------------------------------------
At beginning of financial year 88 75 57
Additions 2 24 22
Reductions (36) (11) (4)
---------------------------------------------------------------------------------------------------------------------------------
At end of financial year 54 88 75
---------------------------------------------------------------------------------------------------------------------------------
Loans to companies controlled by members of the Group's governing bodies 0 112 112
Contingent liabilities towards companies controlled by members of the Group's
governing bodies 0 105 107
---------------------------------------------------------------------------------------------------------------------------------
1) Members of the Group's governing bodies are defined as members of the
Credit Suisse Group Board of Directors and the Group Executive Board.
38 Maturity structure of current assets and borrowed funds
Due Due Due within Due
Redeemable within 3 within 3 to 12 months after No Total
in CHF m At sight by notice months 12 months to 5 years 5 years maturity 31.12.01
------------------------------------------------------------------------------------------------------------------------------------
Current assets
Cash and other
liquid assets 3,092 3,092
Money market papers 10,519 233 18,488 2,555 219 13 32,027
Due from banks 18,774 64,790 103,754 14,688 1,508 271 203,785
Receivables from the
insurance business 11,823 11,823
Due from customers 36,159 40,315 65,388 18,846 16,009 9,434 186,151
Mortgages 1 24,008 8,066 14,292 31,968 14,320 92,655
Securities and
precious metals
trading portfolios 208,374 208,374
Financial
investments from
the banking
business 18,940 476 423 4,301 10,715 381 2,070 37,306
------------------------------------------------------------------------------------------------------------------------------------
Total current assets 295,859 141,645 196,119 54,682 60,419 24,419 2,070 775,213
------------------------------------------------------------------------------------------------------------------------------------
As of December 31,
2000 276,648 54,012 291,022 45,958 50,180 28,509 2,469 748,798
------------------------------------------------------------------------------------------------------------------------------------
Borrowed funds
Money market papers
issued 0 0 16,479 1,603 1,160 10 19,252
Due to banks 126,483 35,939 148,910 23,262 503 835 335,932
Payables from the
insurance business 11,864 11,864
Due to customers in
savings and
investment
deposits 11 37,903 119 91 109 314 38,547
Due to customers,
other 88,143 25,228 122,458 9,786 12,503 3,634 261,752
Medium-term notes
(cash bonds) 0 0 140 851 1,967 61 3,019
Bonds and
mortgage-backed
bonds 0 0 4,224 14,043 43,236 20,002 81,505
------------------------------------------------------------------------------------------------------------------------------------
Total borrowed funds 226,501 99,070 292,330 49,636 59,478 24,856 751,871
------------------------------------------------------------------------------------------------------------------------------------
As of December 31,
2000 226,768 63,304 317,156 45,136 34,866 25,725 712,955
------------------------------------------------------------------------------------------------------------------------------------
F-59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
39 Securities lending and borrowing and repurchase agreements
in CHF m 31.12.01 31.12.00
---------------------------------------------------------------------------------
Due from banks 71 174
Due from customers 5 9
---------------------------------------------------------------------------------
Securities lending 76 183
---------------------------------------------------------------------------------
Due from banks 163,666 179,494
Due from customers 66,921 53,100
---------------------------------------------------------------------------------
Reverse repurchase agreements 230,587 232,594
---------------------------------------------------------------------------------
Due to banks 2,823 2,287
Due to customers 173 326
---------------------------------------------------------------------------------
Securities borrowing 2,996 2,613
---------------------------------------------------------------------------------
Due to banks 138,450 130,331
Due to customers 67,688 40,844
---------------------------------------------------------------------------------
Repurchase agreements 206,138 171,175
---------------------------------------------------------------------------------
Certain reclassifications have been made to prior-year amounts to conform to the
current presentation.
Other information
in CHF m
31.12.01
31.12.00
---------------------------------------------------------------------------------
Collateral received at fair value with the right to sell or
repledge of which sold or repledged at fair value 368,020 300,929
362,962 291,539
---------------------------------------------------------------------------------
F-60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
40 Balance sheet by origin 1) Switzerland Foreign Switzerland Foreign
in CHF m 31.12.01 31.12.01 31.12.00 31.12.00
----------------------------------------------------------------------------------------------------------
Assets
Cash and other liquid assets 2,725 367 2,589 339
Money market papers 3,758 28,269 3,203 26,924
Due from banks 3,829 199,956 6,510 212,011
Receivables from the insurance business 5,734 6,089 3,751 6,120
Due from customers 35,473 150,678 35,624 134,804
Mortgages 74,740 17,915 72,012 20,420
Securities and precious metals trading portfolios 8,962 199,412 15,108 183,809
Financial investments from the banking business 5,100 32,206 4,109 21,465
Investments from the insurance business 50,800 80,491 53,396 79,236
Non-consolidated participations 986 860 580 1,249
Tangible fixed assets 4,666 4,756 4,675 5,238
Intangible assets 904 21,946 778 22,521
Accrued income and prepaid expenses 3,879 14,216 2,847 13,447
Other assets 6,871 56,925 5,522 49,146
----------------------------------------------------------------------------------------------------------
Total assets 208,427 814,086 210,704 776,729
----------------------------------------------------------------------------------------------------------
Liabilities and shareholders' equity
Money market papers issued 361 18,891 175 23,001
Due to banks 34,032 301,900 42,051 317,390
Payables from the insurance business 6,999 4,865 3,563 5,244
Due to customers in savings and investment deposits 35,152 3,395 35,555 3,678
Due to customers, other 76,070 185,682 58,215 155,334
Medium-term notes (cash bonds) 3,019 0 3,225 0
Bonds and mortgage-backed bonds 10,248 71,257 11,688 53,836
Accrued expenses and deferred income 3,845 21,667 3,966 24,055
Other liabilities 4,555 51,938 9,305 48,348
Valuation adjustments and provisions 2,673 8,689 4,347 8,760
Technical provisions for the insurance business 57,984 80,370 55,580 76,595
Shareholders' equity (excluding minority interests) 12,217 23,583 15,087 25,864
Minority interests 306 2,815 128 2,443
----------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity 247,461 775,052 242,885 744,548
----------------------------------------------------------------------------------------------------------
Certain reclassifications have been made to prior-year amounts to conform to the
current presentation.
1) The analysis is based on customers' domicile.
F-61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
41 Balance sheet by currencies Other Total
in CHF m Swiss francs US dollars currencies 31.12.01
--------------------------------------------------------------------------------------------------------------
Assets
Cash and other liquid assets 2,475 63 554 3,092
Money market papers 3,724 17,666 10,637 32,027
Due from banks 6,636 118,093 79,056 203,785
Receivables from the insurance business 5,734 870 5,219 11,823
Due from customers 37,292 120,485 28,374 186,151
Mortgages 75,879 16,076 700 92,655
Securities and precious metals trading portfolios 10,351 110,666 87,357 208,374
Financial investments from the banking business 9,858 16,994 10,454 37,306
Investments from the insurance business 50,827 3,723 76,741 131,291
Non-consolidated participations 945 755 146 1,846
Tangible fixed assets 4,763 2,663 1,996 9,422
Intangible assets 909 18,023 3,918 22,850
Accrued income and prepaid expenses 3,987 6,108 8,000 18,095
Other assets 4,703 47,243 11,850 63,796
--------------------------------------------------------------------------------------------------------------
Total assets 218,083 479,428 325,002 1,022,513
--------------------------------------------------------------------------------------------------------------
As of December 31, 2000 218,531 483,055 285,847 987,433
--------------------------------------------------------------------------------------------------------------
Liabilities and shareholders' equity
Money market papers issued 162 18,866 224 19,252
Due to banks 28,600 173,822 133,510 335,932
Payables from the insurance business 6,999 132 4,733 11,864
Due to customers in savings and investment deposits 38,252 0 295 38,547
Due to customers, other 53,667 160,422 47,663 261,752
Medium-term notes (cash bonds) 3,019 0 0 3,019
Bonds and mortgage-backed bonds 13,981 47,755 19,769 81,505
Accrued expenses and deferred income 3,279 17,932 4,301 25,512
Other liabilities 3,557 47,796 5,140 56,493
Valuation adjustments and provisions 2,578 3,887 4,897 11,362
Technical provisions for the insurance business 57,984 2,943 77,427 138,354
Shareholders' equity (excluding minority interests) 11,925 14,644 9,231 35,800
Minority interests 448 278 2,395 3,121
--------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity 224,451 488,477 309,585 1,022,513
--------------------------------------------------------------------------------------------------------------
As of December 31, 2000 226,624 463,693 297,116 987,433
--------------------------------------------------------------------------------------------------------------
F-62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
42 Share-based compensation
All share-related data have been adjusted for the 4-for-1 share split effective
as of August 15, 2001. The Group has adopted several share-based compensation
programs, which are a key feature of the overall compensation package to
employees and senior executives. These programs generally represent a portion of
employee bonuses. They are also awarded as retention incentives or special
awards. At December 31, 2001, the Group had conditional capital of 45,206,248
shares available for future share-based option and award programs. However, the
Group is also able to satisfy its obligation for these programs through share
repurchases.
INCENTIVE SHARE OPTION PLANS
The Group has share option plans under which incentive options may be
periodically granted to key employees. The options are granted at an exercise
price generally not less than the fair value of the shares at the date of grant,
have a vesting term of between zero and three years following the date of grant,
are generally blocked from exercise for four years following the date of grant
and generally expire from four to ten years from the date of grant.
Additionally, some plans are subject to performance-based vesting criteria.
Most of the options granted through and including the year 1999 have performance
features that allow vesting upon the attainment of specified share prices or
earnings levels. Options granted in 1996 included a five year performance-based
feature and were granted at a price of CHF 33.13 per share, and options granted
in 1998 included a five year performance-based feature and were granted at a
price of CHF 67.50 per share. Options vesting due to the attainment of
performance criteria totaled 3,780,000 and 13,180,000, respectively, during 1999
and 1998. At December 31, 2001, no outstanding options were subject to
performance-based vesting requirements.
In connection with the acquisition of DLJ, the Group replaced certain
outstanding options to purchase shares of DLJ previously granted by DLJ.
Specifically, in November 2000, the Group granted 24,400,144 vested and unvested
options to the holders of the DLJ options. The following tables and amounts
include the effect of these grants. There were no compensation charges at the
date of grant.
The Group recognized no other compensation expense related to options plans in
2001, 2000 or 1999. For certain share option plans, the employee may elect to
receive cash in lieu of shares. In 2001, 2000 and 1999, options totaling
3,135,000, 5,264,000 and 3,604,000, respectively, were exercised in this manner.
In January 2002, pursuant to the Group's incentive compensation plan, 32,181,261
options were granted at an exercise price of CHF 65.75.
During 2001, certain vesting schedules were accelerated according to the terms
and conditions of the plans. As a consequence, 1,087,900 options vested and
became immediately exercisable. In addition, 1,038,836 already vested options
also became immediately exercisable. These options are included in the number of
exercisable options and in the pro forma expenses for 2001.
F-63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
42 Share-based compensation (continued)
Share option activities during the periods indicated are as follows: 1)
Weighted- Weighted- Weighted-
average average average
Number of exercise Number exercise Number of exercise
options price of options price options price
in CHF (except no. of options) 2001 2001 2000 2000 1999 1999
--------------------------------------------------------------------------------------------------------------------------------
Outstanding at beginning of financial year 54,988,916 62.03 18,092,396 49.02 19,608,396 42.94
Granted during the year 2) 39,890,090 68.21 47,977,904 3) 60.04 2,356,000 73.92
Exercised during the year (5,752,475) 39.53 (9,906,516) 30.46 (3,832,000) 33.13
Forfeited during the year (1,550,108) 34.42 (1,174,868) 46.11 (40,000) 61.65
--------------------------------------------------------------------------------------------------------------------------------
Outstanding at end of financial year 87,576,423 66.81 54,988,916 62.03 18,092,396 49.02
--------------------------------------------------------------------------------------------------------------------------------
Exercisable at end of financial year 15,742,784 45.45 11,547,612 29.18 10,100,000 34.96
--------------------------------------------------------------------------------------------------------------------------------
1) Certain restatements have been made to prior-period amounts to conform to
the current presentation.
2) Includes a substantial amount of share options granted to employees
subsequent to the financial year-end as part of the financial year
compensation.
3) Includes options totaling 24,400,144, granted to former holders of DLJ
options at a weighted-average exercise price of CHF 36.22.
The table below provides additional information for options outstanding as of
December 31, 2001.
Options outstanding Options excercisable
------------------------------------------- ---------------------------
Weighted- Weighted- Weighted-
Range of Number of average average Number of average
exercise price options remaining life exercise price options exercise price
in CHF outstanding in years in CHF exercisable in CHF
-----------------------------------------------------------------------------------------------------------
12.50 - 25.00 4,556,920 4.08 15.44 4,556,920 15.44
25.01 - 37.50 1,987,600 5.98 34.90 1,826,376 35.31
37.51 - 50.00 4,615,516 7.37 44.58 2,013,256 44.50
50.01 - 62.50 7,414,993 7.68 53.83 2,589,284 54.27
62.51 - 75.00 41,209,174 9.25 66.79 3,060,696 67.45
75.01 - 100.00 27,792,220 9.00 84.72 1,696,252 84.94
-----------------------------------------------------------------------------------------------------------
87,576,423 8.60 66.81 15,742,784 45.45
-----------------------------------------------------------------------------------------------------------
Share option plans -- pro forma information
The Group has adopted the pro forma disclosure only requirement of SFAS
NO. 123, ACCOUNTING FOR STOCK BASED COMPENSATION (SFAS No. 123), which requires
companies to measure and disclose pro forma employee share compensation based on
the fair value based method of accounting. For option plans with a cash
settlement feature the pro forma expense of the period is the change of the
intrinsic value of the options outstanding during the period. The pro forma
expense for option plans with no cash
F-64
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
42 Share-based compensation (continued)
settlement feature is calculated based on the fair value at the grant date for
those options, which have vested during the period.
in CHF m, except the per share amounts 2001 2000 1999
--------------------------------------------------------------------------------------------------------------
Net profit As reported 1,587 5,785 4,250
Pro forma1) 2) 3) 1,026 5,428 3,921
--------------------------------------------------------------------------------------------------------------
Earnings per share As reported 1.33 5.21 3.92
Pro forma1) 2) 3) 0.86 4.89 3.61
--------------------------------------------------------------------------------------------------------------
Earnings per share - diluted As reported 1.32 5.19 3.89
Pro forma1) 2) 3) 0.85 4.87 3.59
--------------------------------------------------------------------------------------------------------------
1) The above pro forma amounts are not indicative of future reported net
profits.
2) The pro forma net profit calculation includes options granted subsequent to
the financial year-end as part of the financial year compensation.
3) Certain restatements have been made to prior-period amounts to conform to
the current presentation.
The following amounts are the weighted-average of fair values of options at the
date of grant relating to options whose exercise price was equal to the market
price of the Group's shares at the date of grant. 1) 2)
in CHF 2001 2000 3) 1999
--------------------------------------------------------------------------------------------
Weighted-average fair values of options at the date of grant 19.61 23.11 20.35
Weighted-average exercise prices per share option granted 68.21 84.69 73.92
--------------------------------------------------------------------------------------------
1) Weighted-average calculation includes options granted subsequent to the
financial year-end as part of the financial year compensation.
2) Certain restatements have been made to prior-period amounts to conform to
the current presentation.
3) For certain options which were granted during 2000, related to the
DLJ acquisition, the exercise price was less than market price of the
Group's shares at the date of grant. For these options, the per share
weighted-average of both the fair values at the date of grant and the
exercise prices were CHF 57.77 and CHF 36.22, respectively.
The fair values were estimated using the Black-Scholes option pricing model and
the following weighted-average assumptions were made: 1) 2)
Share option plans 2001 2000 1999
--------------------------------------------------------------------------------------------
Expected dividend yield 2.75% 2.75% 2.27%
Expected life of share options, in years 5 5 5
Expected volatility 37.70% 35.12% 32.54%
Expected CHF risk-free interest rates 2.98% 3.19% 3.64%
--------------------------------------------------------------------------------------------
1) Weighted-average calculation includes options granted subsequent to the
financial year-end as part of the financial year compensation.
2) Certain restatements have been made to prior-period amounts to conform to
the current presentation.
F-65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
42 Share-based compensation (continued)
SHARE AWARD PLANS
The Group also has share award plans, which provide shares to its employees.
Awards are generally a fixed monetary amount with the actual number of shares
being determined by the Compensation and Appointments Committee on the date of
the grant. The most significant plans are the CSG Swiss Share Plan and the CSG
International Share Plan which includes the DLJ Retention Plan.
Awards under the CSG Swiss Share Plan vest 100% and are owned by the recipient
upon grant. Awards under the CSG International Share Plan are subject to
forfeiture provisions for two years. Longevity premium awards under both plans
vest on the third anniversary of the date of the grant. Most of the shares
granted under these plans cannot be sold before the fourth anniversary of the
date of grant. Awards made in November 2000 under the DLJ Retention Plan vest
over three years and can be sold upon vesting.
During 2001, certain vesting schedules were accelerated according to the terms
and conditions of the plans. As a consequence 468,764 shares under the
DLJ Retention Plan vested immediately and were delivered during 2001. Since
these activities continued in 2002, 1,669,792 shares under the DLJ Retention
Plan vested immediately and were delivered during 2002. The expenses due to
accelerated vesting are included in the profit and loss of the respective
period.
The table below shows the details of shares granted under all the share award
plans during the periods indicated. 1)
2001 2000 1999
-------------------------------------------------------------------------------------------------------
Shares awarded 1) 2) 23,504,774 50,381,996 3) 24,623,344
Weighted-average fair value at the date of grant, in
CHF 1) 2) 71.73 81.72 72.11
-------------------------------------------------------------------------------------------------------
1) Includes a substantial amount of shares granted to employees subsequent to
the financial year-end as part of the financial year compensation.
2) Certain restatements have been made to prior-period amounts to conform to
the current presentation.
3) Specifically, 25,782,568 shares were awarded under the DLJ Retention Plan in
November 2000.
In January 2002, pursuant to the Group's share award plans, 7,120,931 shares
were granted at a price of CHF 70.65 per share for 2001. The expense for
share-based compensation for the years ended December 31, 2001, 2000 and 1999
was CHF 2.1 billion, CHF 2.0 billion and CHF 0.8 billion, respectively. These
amounts include charges related to awards earned for the reporting period, but
granted in the following years.
F-66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
43 Foreign currency translation rates
Year-end rate used in the Average rate used in the
balance sheet income statement
-------------------------- ----------------------------------------
in CHF 31.12.01 31.12.00 2001 2000 1999
----------------------------------------------------------------------------------------------------------
1 US dollar (USD) 1.6754 1.6346 1.6900 1.6700 1.4900
1 Euro (EUR) 1.4824 1.5242 1.5100 1.5400 1.5800
1 British pound sterling (GBP) 2.4282 2.4442 2.4300 2.5300 2.4000
1 Canadian dollar (CAD) 1.0534 1.0899 1.0900 1.1200 1.0000
1 Singapore dollar (SGD) 0.9056 0.9437 0.9400 0.9700 0.8800
1 Hong Kong dollar (HKD) 0.2149 0.2096 0.2165 0.2140 0.1910
100 German marks (DEM) 75.7939 77.9311 77.2300 78.8000 81.0000
100 Dutch guilders (NLG) 67.2684 69.1652 68.5500 69.9500 71.9000
100 French francs (FRF) 22.5990 23.2363 23.0300 23.5000 24.1500
100 Italian lire (ITL) 0.0766 0.0787 0.0780 0.0795 0.0820
100 Japanese yen (JPY) 1.2759 1.4252 1.3900 1.5500 1.3100
100 Spanish pesetas (ESP) 0.8909 0.9160 0.9080 0.9260 0.9520
----------------------------------------------------------------------------------------------------------
F-67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44 Principal participations
Principal fully consolidated participations as of December 31, 2001
% of equity Capital
capital held Company name Domicile Currency in m
-------------------------------------------------------------------------------------------------------------------------------
Credit Suisse Group Zurich, Switzerland
100 Credit Suisse Zurich, Switzerland CHF 3,114.7
100 Credit Suisse First Boston Zurich, Switzerland CHF 4,399.7
100 "Winterthur" Swiss Insurance Company Winterthur, Switzerland CHF 193.7
99 Neue Aargauer Bank Aarau, Switzerland CHF 273.8
50 Swisscard AECS AG Zurich, Switzerland CHF 0.1
100 Bank Leu AG Zurich, Switzerland CHF 200.0
100 1) Bank Hofmann AG Zurich, Switzerland CHF 30.0
88 Clariden Holding AG Zurich, Switzerland CHF 8.1
100 BGP Banca di Gestione Patrimoniale S.A. Lugano, Switzerland CHF 50.0
100 Bank Leu (Luxembourg) S.A. Luxembourg, Luxembourg CHF 25.0
100 Credit Suisse Fides Zurich, Switzerland CHF 5.0
100 Credit Suisse Trust AG Zurich, Switzerland CHF 5.0
100 Credit Suisse Trust Holdings Ltd. St. Peter Port, Guernsey GBP 2.0
100 Credit Suisse IT Assets AG Zurich, Switzerland CHF 2.4
100 Fides Information Services Zurich, Switzerland CHF 1.0
100 Credit Suisse Group Finance (Guernsey) Ltd. St. Peter Port, Guernsey CHF 0.0
100 Credit Suisse Group Capital (Guernsey) II Ltd. St. Peter Port, Guernsey EUR 0.0
100 Credit Suisse Group Capital (Guernsey) III Ltd. St. Peter Port, Guernsey GBP 0.0
100 Credit Suisse Group Capital (Guernsey) IV Ltd. St. Peter Port, Guernsey CHF 0.0
100 Credit Suisse Group Capital (Guernsey) V Ltd. St. Peter Port, Guernsey EUR 0.0
100 Credit Suisse Group Capital (Guernsey) VI Ltd. St. Peter Port, Guernsey JPY 0.0
100 Credit Suisse Group Finance (US) Inc. Wilmington, DE, USA USD 600.0
100 Credit Suisse Group Finance (Luxembourg) S.A. Luxembourg, Luxembourg EUR 0.1
100 Credit Suisse First Boston Private Equity Zug, Switzerland CHF 0.0
100 Merban Equity Zug, Switzerland CHF 0.0
100 CSFB IGP Zug, Switzerland CHF 0.0
100 PE Portfolio Investment Holding Zug, Switzerland CHF 0.0
100 Credit Suisse Group PE Holding AG Zug, Switzerland CHF 12.0
100 2) Credit Suisse First Boston International London, United Kingdom USD 682.3
88 Hotel Savoy Baur en Ville Zurich, Switzerland CHF 7.5
100 Wincasa Winterthur, Switzerland CHF 1.5
1) 33.33% held by Credit Suisse.
2) 80% held by Credit Suisse First Boston.
F-68
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44 Principal participations (continued)
Principal fully consolidated participations as of December 31, 2001
% of equity Capital
capital held Company name Domicile Currency in m
------------------------------------------------------------------------------------------------------------------------
100 Credit Suisse Zurich, Switzerland CHF 3,114.7
94 City Bank Zurich, Switzerland CHF 7.5
100 Schweizerische Schiffshypothekenbank Basle, Switzerland CHF 10.0
100 Credit Suisse Immobilien Leasing AG Zurich, Switzerland CHF 3.0
50 Credit Suisse Fleetmanagement Zurich, Switzerland CHF 7.0
94 Innoventure Capital AG Zurich, Switzerland CHF 10.0
100 WECO Inkasso AG Zurich, Switzerland CHF 0.5
100 ABZ Finanz- und Beteiligungsgesellschaft AG Zug, Switzerland CHF 4.0
100 Credit Suisse (UK) Ltd. London, United Kingdom GBP 24.5
100 Credit Suisse (Guernsey) Ltd. St. Peter Port, Guernsey GBP 4.0
100 Credit Suisse (Gibraltar) Ltd. Marina Bay, Gibraltar GBP 5.0
100 Credit Suisse (Bahamas) Ltd. Nassau, Bahamas USD 12.0
100 Credit Suisse Hottinguer S.A. Paris, France EUR 52.9
100 Credit Suisse (Deutschland) Aktiengesellschaft Frankfurt, Germany DEM 20.0
100 Credit Suisse (Italy) S.p.A. Milan, Italy ITL 66,017.0
100 Credit Suisse Gestion S.G.I.I.C. S.A. Madrid, Spain EUR 2.4
100 Credit Suisse Asesoramiento y Servicios S.A. Madrid, Spain EUR 0.1
100 Credit Suisse Investment Consulting (Taiwan) Ltd. Taipei, Taiwan TWD 30.0
100 Credit Suisse Investment Advisory (Hong Kong) Ltd. Hong Kong, China HKD 1.0
100 Credit Suisse (Luxembourg) S.A. Luxembourg, Luxembourg CHF 25.0
100 Credit Suisse (Monaco) S.A.M. Monte Carlo, Monaco EUR 12.0
100 Credit Suisse (Austria) Vermogensverwaltungs AG Vienna, Austria EUR 0.1
100 Credit Suisse Securities Ltd. London, United Kingdom GBP 10.0
100 Swiss American Corporation New York, NY, USA USD 38.9
100 JOHIM (Holdings) Ltd. London, United Kingdom GBP 0.0
100 EFFUS AG Zurich, Switzerland CHF 15.0
100 General de Valores y Cambios, S.V.B., S.A. (GVC) Barcelona, Spain EUR 5.4
100 GVC, Gestion, S.G.I.I.C., S.A. Barcelona, Spain EUR 0.7
100 Frye-Louis Capital Management Holding Co., Inc. Wilmington, DE, USA USD 12.1
60 1) Swiss Egyptian Portfolio Management Cairo, Egypt EGP 4.5
100 Capital.e AG Zug, Switzerland CHF 0.1
100 Credit Suisse International Services Ltd. St. Peter Port, Guernsey USD 0.0
100 CSFB Non-Traditional Investments Ltd. Nassau, Bahamas USD 0.1
100 Pearl Investment Management Ltd. Nassau, Bahamas USD 0.0
100 Credit Suisse First Boston Zurich, Switzerland CHF 4,399.7
100 2) Credit Suisse First Boston, Inc. New York, NY, USA USD 187.0
100 Credit Suisse First Boston Corp. New York, NY, USA USD 1.0
100 Credit Suisse First Boston Mortgage Capital LLC New York, NY, USA USD 0.0
100 Credit Suisse First Boston Management Corp. New York, NY, USA USD 30.3
100 Credit Suisse First Boston (USA) Inc. New York, NY, USA USD 389.6
100 Donaldson, Lufkin & Jenrette Securities Corp. New York, NY, USA USD 0.0
100 Banco de Investimentos Credit Suisse First Boston S.A. Sao Paulo, BRL 164.8
Brazil
100 Credit Suisse First Boston (Bahamas) Ltd. Nassau, Bahamas USD 16.9
100 Credit Suisse First Boston Canada Toronto, Canada CAD 157.3
100 AJP Cayman Ltd. George Town, Cayman Islands USD 101.2
100 Credit Suisse First Boston Aktiengesellschaft Frankfurt, Germany EUR 109.9
100 Bank Credit Suisse First Boston AO Moscow, Russia USD 37.8
1) 75% voting rights.
2) 43% voting rights held by Credit Suisse Group.
F-69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44 Principal participations (continued)
Principal fully consolidated participations as of December 31, 2001
% of equity Capital
capital held Company name Domicile Currency in m
------------------------------------------------------------------------------------------------------------------------
100 Credit Suisse First Boston (Cyprus) Ltd. Limassol, Cyprus USD 725.0
75 Credit Suisse First Boston (India) Securities Ltd. Mumbai, India INR 979.8
100 Credit Suisse First Boston Investments (Guernsey) St. Peter Port, Guernsey USD 300.0
Ltd.
100 Credit Suisse First Boston Capital (Guernsey) I Ltd. St. Peter Port, Guernsey USD 0.0
80 1) Credit Suisse First Boston International London, United Kingdom USD 682.3
100 Credit Suisse First Boston (International) Holding AG Zug, Switzerland CHF 37.5
100 Credit Suisse First Boston International (Guernsey) St. Peter Port, Guernsey USD 0.2
Ltd.
100 Credit Suisse First Boston (Europe) Ltd. London, United Kingdom USD 27.3
100 Credit Suisse First Boston Equities Ltd. London, United Kingdom GBP 15.0
100 Credit Suisse First Boston Finance B.V. Amsterdam, The Netherlands EUR 0.0
100 Credit Suisse First Boston Pacific Capital Markets Sydney, Australia AUD 10.0
Ltd.
100 Credit Suisse First Boston (Cayman) Ltd. George Town, Cayman Islands USD 0.0
100 Credit Suisse First Boston (Hong Kong) Ltd. Hong Kong, China HKD 381.1
100 Credit Suisse First Boston NZ Restructuring No. 1 Wellington, New Zealand NZD 10.0
Ltd.
100 Credit Suisse First Boston (Singapore) Ltd. Singapore, Singapore SGD 163.7
100 Credit Suisse First Boston Singapore Futures Pte. Singapore, Singapore USD 11.1
Ltd.
100 Credit Suisse First Boston Australia (Holdings) Ltd. Sydney, Australia AUD 42.0
100 Credit Suisse First Boston Australia Securities Ltd. Sydney, Australia AUD 29.9
100 Credit Suisse First Boston Australia Ltd. Sydney, Australia AUD 14.1
100 Credit Suisse First Boston (Australia) Equities Ltd. Melbourne, Australia AUD 13.0
100 Credit Suisse First Boston Securities (Japan) Ltd. Tokyo, Japan USD 165.0
100 Credit Suisse First Boston Latam Holdings, LLC George Town, Cayman Islands USD 29.6
100 Credit Suisse First Boston Australia (Finance) Ltd. Melbourne, Australia AUD 10.0
100 Credit Suisse First Boston Finance (Guernsey) Ltd. St. Peter Port, Guernsey USD 0.2
100 Credit Suisse First Boston New Zealand Investments Wellington, New Zealand NZD 1.6
Ltd.
100 Credit Suisse Asset Management (Australia) Sydney, Australia AUD 0.3
100 Credit Suisse Asset Management (UK) Holding Ltd. London, United Kingdom GBP 16.0
100 Credit Suisse Asset Management Ltd. London, United Kingdom GBP 0.0
100 Credit Suisse Trust & Banking Co. Ltd. Tokyo, Japan JPY 9,000.0
100 Credit Suisse Asset Management LLC New York, NY, USA USD 0.0
100 Credit Suisse Bond Fund Management Company S.A. Luxembourg, Luxembourg CHF 0.3
100 Credit Suisse Equity Fund Management Company S.A. Luxembourg, Luxembourg CHF 0.3
100 Credit Suisse Money Market Fund Management Company Luxembourg, Luxembourg CHF 0.3
S.A.
100 Credit Suisse Portfolio Fund Management Company S.A. Luxembourg, Luxembourg CHF 0.3
100 Credit Suisse Asset Management Funds Zurich, Switzerland CHF 7.0
100 Credit Suisse Asset Management (Deutschland) GmbH Frankfurt, Germany EUR 2.6
100 Credit Suisse Asset Management SIM S.p.A. Milan, Italy EUR 6.2
100 Credit Suisse Asset Management (France) S.A. Paris, France EUR 25.1
100 Credit Suisse Asset Management Holding, Corp. New York, NY, USA USD 0.0
100 GTN Global Properties Holding Ltd. Limassol, Cyprus USD 0.0
100 Credit Suisse First Boston S.A. Securities Parktown, South Africa ZAR 1.0
(Proprietary) Ltd.
100 SLC Asset Management Ltd. London, United Kingdom GBP 19.5
100 Sun Life of Canada Unit Managers Ltd. London, United Kingdom GBP 0.2
100 SLC Pooled Pensions Ltd. London, United Kingdom GBP 1.0
100 Olympus Servicing LP Austin, TX, USA USD 13.7
100 Column Financial Inc. Atlanta, GA, USA USD 0.0
100 DLJ Mortgage Capital Inc. New York, NY, USA USD 0.0
100 Credit Suisse First Boston Finance (USA) LLC Wilmington, DE, USA USD 0.0
1) 20% held by Credit Suisse Group.
F-70
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44 Principal participations (continued)
Principal fully consolidated participations as of December 31, 2001
% of equity Capital
capital held Company name Domicile Currency in m
------------------------------------------------------------------------------------------------------------------------
100 "Winterthur" Swiss Insurance Company Winterthur, Switzerland CHF 193.7
100 Winterthur Life Winterthur, Switzerland CHF 175.0
100 The Federal Zurich, Switzerland CHF 10.0
67 Winterthur-ARAG Legal Assistance Winterthur, Switzerland CHF 9.0
100 Gartenhotel Winterthur, Switzerland CHF 2.5
100 Swissline Wallisellen, Switzerland CHF 0.5
100 Xenum Services Zurich, Switzerland CHF 0.1
100 Credit Suisse Life & Pensions Vaduz, Liechtenstein CHF 15.0
100 Winterthur Beteiligungsgesellschaft m.b.H. Wiesbaden, Germany EUR 0.3
100 WINCOM Versicherungs-Holding AG Wiesbaden, Germany DEM 102.7
70 DBV-Winterthur Group Wiesbaden, Germany EUR 87.2
100 Credit Suisse Leasing Deutschland GmbH Wiesbaden, Germany EUR 0.0
100 Medvantis Group Wiesbaden, Germany EUR 6.2
100 Winterthur Insurance Health & Accident Wiesbaden, Germany EUR 0.1
100 Winterthur Italia Holding S.p.A. Milan, Italy EUR 132.6
100 Winterthur Assicurazioni S.p.A. Milan, Italy ITL 250,882.2
100 Winterthur Vita S.p.A. Milan, Italy EUR 74.9
100 Hispanowin S.A. Barcelona, Spain ESP 16,165.4
100 Winterthur Inmuebles 2 Barcelona, Spain EUR 55.9
100 Winterthur Seguros Generales Barcelona, Spain EUR 48.7
100 Winterthur Inmuebles Barcelona, Spain EUR 56.8
100 Winterthur Iberica Barcelona, Spain ESP 4,423.5
100 Winterthur Asistencia Barcelona, Spain EUR 4.0
100 Winterthur Vida Espanola Barcelona, Spain EUR 35.0
100 WINVALOR Agencia de Valores Barcelona, Spain EUR 0.9
90 Winterthur Salud de Seguros Barcelona, Spain EUR 8.3
100 Winterthur Pensiones Barcelona, Spain EUR 8.2
100 Webinsurance Partners Barcelona, Spain EUR 0.0
85 Winterthur-Europe Assurances Brussels, Belgium EUR 198.3
100 Les Assures Reunis Brussels, Belgium BEF 524.0
100 Commercial General Union Brussels, Belgium EUR 23.7
99 Sofimmocentrale Brussels, Belgium BEF 471.9
70 Touring Assurances Brussels, Belgium BEF 1,000.0
100 I.S.C.C. International Service Call Centre Brussels, Belgium BEF 3.6
51 Jean Verheyen Brussels, Belgium BEF 5.0
100 Winterthur-Europe Vie Luxembourg, Luxembourg EUR 8.7
100 Winterthur (UK) Holdings London, United Kingdom GBP 42.6
100 Churchill Insurance Group Bromley, United Kingdom GBP 159.4
100 Churchill Insurance Bromley, United Kingdom GBP 312.0
93 Churchill Management Bromley, United Kingdom GBP 2.6
100 National Insurance & Guarantee Group London, United Kingdom GBP 140.0
100 Winterthur UK Financial Services Group Ltd. Basingstoke, United Kingdom GBP 0.0
F-71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44 Principal participations (continued)
Principal fully consolidated participations as of December 31, 2001
% of equity Capital
capital held Company name Domicile Currency in m
------------------------------------------------------------------------------------------------------------------------
80 Capital.e Ltd. St Peter Port, Guernsey CHF 4.4
100 Winterthur Versicherungs AG Vienna, Austria ATS 127.5
100 Winterthur Pensionskassen AG Vienna, Austria ATS 70.0
100 Wintisa Management und Consulting AG Vienna, Austria ATS 1.0
100 Credit Suisse Life & Pensions Management GmbH Vienna, Austria EUR 0.4
100 Companhia Europeia de Seguros Lisbon, Portugal PTE 5,936.1
100 Winterthur Pensiones Lisbon, Portugal EUR 1.7
97 Rhodia Assurance Lyon, France EUR 18.3
65 Winterthur pojist'ovna, a.s. Prague, Czech Republic CZK 374.0
85 Winterthur penzijni fond, a.s. Brno, Czech Republic CZK 142.4
100 Vojenski otevreny penzijni fond, a.s. Prague, Czech Republic CZK 75.7
65 Winterthur Elso Svajci-Magyar Pentarszolgaltato Rt. Budapest, Hungary HUF 700.0
65 Winterthur Biztosito Resvenyt Rt. Budapest, Hungary HUF 3,600.0
100 Winterthur, Towarzystwo Ubezpieczeniowe S.A. Warsaw, Poland PLN 40.0
66 Winterthur Zycie Towarzystwo Ubezpieczeniowe S.A. Warsaw, Poland PLN 135.0
70 Winterthur Powszechne Towarzystwo Enerytalne S.A. Warsaw, Poland PLN 105.0
100 Winterthur US Holdings Wilmington, DE, USA USD 0.0
100 General Casualty Sun Prairie, WI, USA USD 3.0
100 Republic Financial Services Dallas, TX, USA USD 0.0
100 Southern Guaranty Montgomery, AL, USA USD 2.0
100 Unigard Bellevue, WA, USA USD 0.0
100 Winterthur Canada Financial Corp. Toronto, Canada CAD 0.0
100 The Citadel General Toronto, Canada CAD 34.1
100 L' Unique Quebec, Canada CAD 7.0
100 Winterthur Holdings Australia Ltd. Sydney, Australia AUD 23.2
97 Winterthur Insurance (Far East) Singapore, Singapore SGD 25.0
52 Winterthur Insurance (Asia) Hong Kong, China HKD 176.6
100 Winterthur Insurance Services Asia Ltd. Hong Kong, China HKD 38.8
60 Winterthur Life Indonesia Jakarta, Indonesia IDR 44,500.0
100 CS Life Japan Tokyo, Japan JPY 16,725.0
100 Winterthur Overseas Hamilton, Bermuda USD 0.3
100 Winterthur Capital Hamilton, Bermuda EUR 0.0
100 Winterthur Atlantic Hamilton, Bermuda GBP 0.1
100 SRS Holding Group Hamilton, Bermuda USA 70.0
100 Winterthur Swiss Insurance (Macau) Macau, Macau MOP 20.0
78 Winterthur Alternative Investments Strategies Limited George Town, Cayman Islands USD 130.0
F-72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44 List of principal participations (continued)
Principal participations as of December 31, 2001, valued according to the equity method
Capital Equity interest
Company name Domicile Currency in m in %
---------------------------------------------------------------------------------------------------------------------
Credit Suisse Group Zurich, Switzerland
Inreska Ltd. St. Peter Port, Guernsey GBP 3.0 100.0
Capital Union Dubai, UAE USD 50.0 25.0
SECB Swiss Euro Clearing Bank GmbH Frankfurt, Germany EUR 9.2 25.0
Credit Suisse Zurich, Switzerland
Corner Banca S.A. Lugano, Switzerland CHF 12.0 27.3
Credit Suisse First Boston Zurich, Switzerland
Valcambi S.A. Balerna, Switzerland CHF 12.0 100.0
Innovent Capital Ltd. George Town, Cayman Islands CHF 10.6 13.1
Banco Comercial S.A. Montevideo, Uruguay UYP 39.8 19.9 1)
"Winterthur" Swiss Insurance Company Winterthur, Switzerland
Norwich Winterthur Holdings Norwich, United Kingdom GBP 54.5 48.5
Norwich Winterthur Reinsurance Norwich, United Kingdom GBP 57.8 46.5
Expertisa Winterthur, Switzerland CHF 0.2 100.0
Technopark Immobilien Zurich, Switzerland CHF 40.0 25.0
Wincare Versicherungen Winterthur, Switzerland CHF 0.1 100.0
Winterthur Financial Services Winterthur, Switzerland CHF 0.5 100.0
Zurcher Freilager Zurich, Switzerland CHF 4.0 36.2
Zentrum Regensdorf Regensdorf, Switzerland CHF 4.5 50.0
Swiss Prime Site Olten, Switzerland CHF 604.0 23.3
Allgemeine Hypothekenbank Frankfurt, Germany EUR 100.0 7.1
Winterthur Fund Management Co. Luxembourg, Luxembourg EUR 0.1 100.0
Winterthur Research S.A. Barcelona, Spain EUR 0.1 100.0
Bahosa Barcelona, Spain ESP 1,536.2 38.2
Winterthur-Service S.A. Barcelona, Spain EUR 0.2 100.0
Seguros Atlas Mexico City, Mexico MXN 125.0 30.0
---------------------------------------------------------------------------------------------------------------------
1) 27.4% voting rights
F-73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44 List of principal participations (continued)
Principal participations as of December 31, 2001 valued at cost
Capital Equity interest
Company name Domicile Currency in m in %
---------------------------------------------------------------------------------------------------------------------
Credit Suisse Group Zurich, Switzerland
GSTP Global Straight Through Processing AG Zurich, Switzerland CHF 139.8 5.7
Credit Suisse Zurich, Switzerland
Swiss Mortgage Bond Bank Zurich, Switzerland CHF 300.0 9.5
Swiss Steel AG Emmen, Switzerland CHF 137.7 30.7
Credit Suisse First Boston Zurich, Switzerland
Telekurs Holding AG Zurich, Switzerland CHF 45.0 17.4
Swiss Financial Services Group AG Zurich, Switzerland CHF 26.0 20.0
SNOC Swiss Nominee Company Zurich, Switzerland CHF 2.0 25.0
Euro-Clear Clearance System Ltd. London, United Kingdom USD 2.5 4.8
Central Banco Investimento S.A. Lisbon, Portugal EUR 9.4 5.0
SWIFT La Hulpe, Belgium EUR 10.8 1.7
Banco General de Negocios Buenos Aires, Argentina ARS 163.0 26.4 1)
---------------------------------------------------------------------------------------------------------------------
1) 12.1% voting rights.
F-74
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
45 Bonds issued
All underlying cashflows related to bonds denominated in currencies superseded
by the Euro will take place in Euro from January 1, 2002.
as of December 31, 2001
Year Earliest date Par value
Maturity date Interest rate of issue callable Currency in m
----------------------------------------------------------------------------------------------------------------------------------
Bonds issued by Credit Suisse Group
15.12.2003 6.00% 1994 CHF 250 1)
04.10.2004 4.13% 2000 CHF 600
31.10.2006 4.00% 1997 CHF 800
23.05.2007 4.00% 1997 CHF 1,000
15.09.2008 3.50% 1998 CHF 500
02.07.2009 3.50% 1999 CHF 500
Bonds issued by subsidiaries
Credit Suisse Group Finance (Guernsey) Ltd., St. Peter Port
----------------------------------------------------------------------------------------------------------------------------------
19.11.2002 4.88% Convertible Bond 1992 USD 11 1)
24.02.2003 5.50% 1999 USD 250
17.02.2004 3.75% 1999 EUR 250
04.03.2004 2.50% 1999 CHF 250
07.06.2013 6.38% 2001 EUR 750
29.07.2019 floating 1999 EUR 400
All bonds issued by Credit Suisse Group Finance (Guernsey) Ltd. are guaranteed by Credit Suisse Group.
Credit Suisse Group Finance (US) Inc., Wilmington
----------------------------------------------------------------------------------------------------------------------------------
05.10.2003 floating 2000 USD 1,000
05.10.2005 5.75% 2000 EUR 1,250
05.10.2010 6.63% 2000 EUR 500 1)
05.10.2010 floating Step-up callable bonds 2000 05.10.05 EUR 300 1)
05.10.2010 floating Step-up callable bonds 2000 05.10.05 USD 750 1)
05.10.2020 7.00% 2000 GBP 250 1)
All bonds issued by Credit Suisse Group Finance (US) Inc. are guaranteed by Credit Suisse Group.
Neue Aargauer Bank, Aarau
-------------------------------------------------------------------------------------------------------------------------------
28.06.2002 4.25% 1996 CHF 100
07.04.2010 5.00% 2000 CHF 130 1)
Bank Leu AG, Zurich
-------------------------------------------------------------------------------------------------------------------------------
17.11.2006 5.00% 1986 CHF 100 1)
F-75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
45 Bonds issued (continued)
Year Earliest date Par value
Maturity date Interest rate of issue callable Currency in m
-----------------------------------------------------------------------------------------------------------------------
Credit Suisse, Zurich
-----------------------------------------------------------------------------------------------------------------------
20.02.2002 7.50% 1991 CHF 125 1)7)
16.03.2002 6.75% 1992 CHF 200
30.06.2002 7.25% 1992 CHF 100
25.09.2002 7.75% 1992 CHF 100 1)
15.01.2003 7.75% 1991 CHF 100 1)7)
15.01.2003 7.25% 1992 CHF 100 1)7)
31.03.2003 5.25% 1993 CHF 250
02.02.2005 5.50% 1995 CHF 100 7)
28.04.2005 5.75% 1995 CHF 120 1)
12.10.2005 5.00% 1995 CHF 150 1)
13.11.2005 3.13% 1995 CHF 300 1)6)7)
05.01.2006 4.38% 1996 CHF 150 1)
08.02.2008 4.50% 1996 CHF 200 1)7)
31.07.2009 4.00% 1997 CHF 200 1)
12.11.2009 5.00% 1999 CHF 600 1)
10.02.2010 4.63% 2000 CHF 300 1)
07.09.2010 4.75% 2000 CHF 200 1)
28.03.2011 4.38% 2001 CHF 300 1)
Credit Suisse (Luxembourg) S.A., Luxembourg
-----------------------------------------------------------------------------------------------------------------------
31.12.2001 9.13% 1991 LUF 2,500 1)
06.08.2003 7.25% 1993 LUF 1,500 1)
Credit Suisse Guernsey Branch, St. Peter Port
-----------------------------------------------------------------------------------------------------------------------
perpetual 6.25% 1999 09.07.2009 EUR 125 1)
27.07.2011 4.25% 2001 CHF 300 1)
JOHIM (Holdings) Ltd., London
-----------------------------------------------------------------------------------------------------------------------
15.02.2004 variable 2001 GBP 50 8)
Credit Suisse First Boston, Zurich
-----------------------------------------------------------------------------------------------------------------------
11.01.2002 2.67% 2001 USD 160.0 4)9)
15.01.2002 7.00% 1992 CHF 100.0
15.01.2002 0.00% 1999-2001 USD 13.9 4)9)
21.01.2002 6.00% 2000 CHF 47.0 3)9)
25.01.2002 2.56% 2001 USD 250.0 4)9)
01.02.2002 various 2000-2001 EUR 132.0 3)9)
02.02.2002 0.00% 1999-2001 USD 17.5 3)4)9)
11.02.2002 4.50% 1999 CHF 127.2 3)9)
15.02.2002 15.25% 2000 USD 20.0 3)9)
20.02.2002 7.50% 1991 CHF 75.0 1)
21.02.2002 0.00% 2001 TRL 3,935,677.0 4)9)
01.03.2002 various 1999-2001 USD 49.4 3)4)9)
11.03.2002 0.00% 2000 EUR 8.7 3)9)
21.03.2002 6.50% 2000 CHF 13.0 3)9)
28.03.2002 4.50% 2000 EUR 2.5 3)9)
04.04.2002 7.90% 2001 USD 2.0 4)9)
12.04.2002 0.00% 2001 USD 5.7 3)4)9)
20.04.2002 various 2001 EUR 30.0 4)9)
07.05.2002 12.25% 2001 CHF 35.0 3)9)
F-76
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
45 Bonds issued (continued)
Year Earliest date Par value
Maturity date Interest rate of issue callable Currency in m
-----------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston, Zurich
-----------------------------------------------------------------------------------------------------------------------
10.05.2002 7.70% 2001 USD 5.0 4)9)
15.05.2002 6.75% 1992 CHF 60.0
20.05.2002 variable 2001 USD 11.5 4)9)
31.05.2002 12.50% 2001 USD 3.0 3)9)
06.06.2002 various 2000-2001 USD 56.9 4)9)
11.06.2002 variable 2001 CHF 70.0 3)9)
14.06.2002 variable 2001 EUR 4.5 3)9)
18.06.2002 6.80% 2001 USD 5.0 4)9)
27.06.2002 9.50% 2001 CHF 30.0 3)9)
27.06.2002 11.75% 2001 EUR 13.1 3)9)
03.07.2002 various 1999-2001 USD 82.6 3)4)9)
05.07.2002 various 1999-2001 EUR 40.0 3)9)
03.08.2002 0.00% 2001 USD 20.0 4)9)
09.08.2002 7.75% 2000 CHF 81.0 3)9)
16.08.2002 4.20% 2001 USD 1.0 4)9)
20.08.2002 various 2001 EUR 34.2 3)4)9)
04.09.2002 16.00% 2000 EUR 65.0 3)9)
05.09.2002 0.00% 2001 USD 5.0 4)9)
13.09.2002 0.00% 2000 CHF 5.7 3)9)
26.09.2002 10.75% 2001 USD 3.8 4)9)
27.09.2002 24.80% 2001 EUR 10.0 3)9)
15.10.2002 variable 1997 USD 1,500.0 2)
16.10.2002 6.00% 2000 CHF 15.0 3)9)
17.10.2002 10.00% 2000 SEK 70.0 3)9)
14.11.2002 various 2000-2001 CHF 140.0 3)9)
15.11.2002 0.00% 2001 USD 30.0 4)9)
19.11.2002 6.02% 2001 NOK 137.5 3)9)
22.11.2002 7.00% 2000 EUR 15.0 3)9)
03.12.2002 various 2001 CHF 110.0 3)9)
15.12.2002 various 2001 USD 9.5 4)9)
22.01.2003 7.00% 2001 EUR 15.0 3)9)
24.01.2003 0.00% 2001 USD 15.0 4)9)
21.02.2003 various 2001 EUR 10.0 3)9)
24.03.2003 8.13% 2001 USD 1.5 4)9)
31.03.2003 3.50% 1993 CHF 125.0 1)
31.03.2003 3.50% 1993 CHF 75.0 1)
02.04.2003 11.00% 2001 USD 20.0 3)9)
04.04.2003 7.00% 2001 EUR 10.0 3)9)
25.04.2003 1.00% 1996 USD 75.0 3)
30.04.2003 various 2001 USD 8.0 4)9)
03.05.2003 15.75% 2001 VEB 7,000.0 4)9)
19.05.2003 9.35% 2001 USD 3.5 4)9)
25.06.2003 0.00% 2001 EUR 225.0 3)9)
27.06.2003 6.50% 2001 CHF 15.0 3)9)
12.07.2003 8.30% 2001 USD 5.0 4)9)
18.07.2003 8.00% 2001 CHF 20.0 3)9)
31.07.2003 0.00% 1997 USD 28.0 3)9)
29.08.2003 7.90% 2001 USD 12.0 4)9)
29.08.2003 0.00% 2000 USD 20.0 3)9)
F-77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
45 Bonds issued (continued)
Year Earliest date Par value
Maturity date Interest rate of issue callable Currency in m
-----------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston, Zurich
-----------------------------------------------------------------------------------------------------------------------
08.09.2003 0.00% 2000-2001 EUR 35.8 3)9)
14.09.2003 7.65% 2001 USD 2.3 4)9)
18.09.2003 3.29% 1997 USD 23.0 3)9)
29.09.2003 6.04% 1993 USD 200.0 1)3)
09.10.2003 0.00% 2001 CHF 25.0 3)9)
10.10.2003 0.00% 2001 USD 30.0 4)9)
12.10.2003 9.75% 2001 USD 5.0 4)9)
23.10.2003 9.50% 2001 EUR 15.0 3)9)
13.11.2003 5.00% 1998-2000 CHF 63.0 3)9)
14.11.2003 0.00% 2001 EUR 9.5 3)9)
17.11.2003 6.16% 1993 DEM 600.0 1)3)
21.11.2003 0.00% 2001 USD 2.5 4)9)
08.12.2003 various 2000-2001 USD 50.0 3)4)9)
29.12.2003 1.00% 2001 EUR 13.0 3)9)
20.01.2004 11.70% 2001 USD 3.0 4)9)
02.03.2004 0.00% 2001 EUR 21.1 3)9)
22.03.2004 various 2001 EUR 28.0 3)9)
22.03.2004 2.50% 2001 GBP 3.5 3)9)
22.03.2004 2.50% 2001 USD 3.1 3)9)
06.04.2004 0.00% 2001 USD 10.0 4)9)
22.04.2004 4.38% 1996 CHF 200.0
28.05.2004 0.00% 2001 EUR 5.4 3)9)
04.06.2004 8.50% 2001 USD 3.0 4)9)
25.06.2004 8.05% 2001 EUR 2.0 4)9)
02.07.2004 9.80% 2001 USD 40.0 4)9)
27.07.2004 0.00% 2001 JPY 2,500.0 4)9)
23.08.2004 various 2001 USD 9.0 3)4)9)
11.09.2004 various 2001 USD 15.0 3)4)9)
15.10.2004 0.00% 2001 USD 14.0 3)4)9)
16.11.2004 9.15% 2001 USD 5.0 4)9)
18.11.2004 8.38% 1994 USD 300.0 1)3)
19.11.2004 0.00% 2001 EUR 47.5 3)4)9)
17.12.2004 various 1999-2001 USD 60.3 3)4)9)
20.12.2004 3.85% 2001 EUR 21.9 3)9)
30.12.2004 6.04% 1994 DEM 100.0 1)3)
27.01.2005 various 1999-2001 USD 11.6 3)4)9)
22.02.2005 0.00% 2000 USD 26.0 3)9)
08.03.2005 2.50% 2001 USD 2.0 4)9)
31.03.2005 5.75% 1995 CHF 225.0 1)
06.04.2005 1.29% 2000 USD 3.0 4)9)
05.05.2005 0.00% 1999 EUR 2.9 3)9)
27.05.2005 1.00% 1999 USD 50.0 3)9)
09.06.2005 0.00% 2000 EUR 5.1 3)9)
05.07.2005 various 2001 USD 18.0 4)9)
05.08.2005 1.81% 1999-2000 USD 50.0 3)9)
09.11.2005 1.25% 2001 USD 8.3 3)9)
10.11.2005 2.00% 1998 USD 200.0 3)9)
30.12.2005 0.00% 2001 USD 6.5 4)9)
29.01.2006 0.00% 2001 USD 22.0 3)4)9)
F-78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
45 Bonds issued (continued)
Year Earliest date Par value
Maturity date Interest rate of issue callable Currency in m
-----------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston, Zurich
-----------------------------------------------------------------------------------------------------------------------
30.06.2006 7.21% 1996 USD 237.5 1)4)
30.06.2006 6.84% 1997 USD 95.0 1)4)
13.07.2006 0.00% 2001 EUR 10.0 3)9)
09.08.2006 7.00% 2001 USD 35.0 3)9)
21.08.2006 0.00% 2001 USD 81.2 3)4)9)
13.09.2006 6.75% 2001 USD 40.5 3)9)
18.09.2006 0.00% 2001 USD 77.2 3)9)
21.09.2006 0.00% 2001 EUR 20.0 3)9)
10.10.2006 0.00% 2001 USD 190.5 3)9)
26.10.2006 2.82% 2000 USD 3.0 4)9)
11.11.2006 2.20% 2000 USD 5.0 4)9)
13.11.2006 0.00% 2001 USD 35.1 3)9)
21.12.2006 2.25% 2001 USD 10.0 3)9)
13.03.2007 various 2000-2001 USD 11.0 4)9)
01.05.2007 7.90% 1997 USD 500.0 1)3)
12.06.2007 6.41% 1997 FFR 750.0 1)3)
12.06.2007 6.50% 1997 FFR 500.0 1)3)
29.06.2007 1.38% 2001 USD 5.0 4)9)
06.07.2007 5.25% 1995 CHF 100.0 1)
06.07.2007 5.25% 1995 CHF 150.0 1)
23.07.2007 4.38% 1997 CHF 497.7 1)3)
26.10.2007 0.00% 2001 USD 128.1 3)9)
16.11.2007 0.00% 2001 USD 38.2 3)9)
06.12.2007 0.00% 2001 USD 48.93)9)
19.02.2008 2.00% 2000 USD 165.0 3)9)
01.05.2008 6.50% 1998 USD 200.0 1)5)
03.11.2008 0.00% 2001 USD 52.5 3)9)
10.07.2009 8.25% 1997 GBP 150.0 1)3)
13.10.2009 6.25% 1999 EUR 225.0 1)3)
01.12.2009 0.00% 1999 USD 6.7 3)9)
15.12.2009 6.00% 1999 EUR 150.0 1)3)
01.03.2010 6.50% 2000 EUR 100.0 1)4)
25.04.2010 4.43% 2000 USD 250.0 1)4)
25.04.2010 4.66% 2000 USD 160.0 1)4)
11.05.2010 5.75% 1998 DEM 415.0 1)3)
09.08.2010 2.19% 2000 JPY 3,000.0 1)4)
07.11.2011 6.90% 2001 EUR 400.0 1)4)
12.12.2011 0.00% 2001 USD 20.2 3)9)
07.06.2013 6.58% 2001 EUR 750.0 1)4)
22.10.2014 8.68% 1999 EUR 15.0 1)3)
27.01.2015 9.00% 2000 EUR 15.0 1)4)
10.03.2016 5.00% 1986 CHF 176.2 1)
10.03.2016 5.00% 1986 CHF 23.8 1)
20.04.2017 variable 2000 AUD 24.8 2)
31.12.2018 3.57% 2001 JPY 30,500.0 1)4)
15.10.2019 7.15% 1999 EUR 12.0 1)3)
03.01.2022 0.00% 1999 USD 5.0 1)3)
15.01.2022 variable 2000 USD 63.9 1)4)
30.12.2024 0.00% 1999 USD 24.0 1)3)
F-79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
45 Bonds issued (continued)
Year Earliest date Par value
Maturity date Interest rate of issue callable Currency in m
-----------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston, Zurich
-----------------------------------------------------------------------------------------------------------------------
02.01.2025 0.00% 1999 USD 15.0 1)3)
02.01.2026 0.00% 1999 USD 20.0 1)3)
30.12.2026 0.00% 1999 USD 46.0 1)3)
30.12.2027 0.00% 1999 USD 19.0 1)3)
03.01.2028 0.00% 1999 USD 40.3 1)3)
15.10.2029 9.35% 1999 EUR 25.0 1)3)
15.10.2029 7.05% 1999 EUR 25.0 1)3)
perpetual 4.51% 1998 01.12.2028 JPY 10,000.0 1)3)
perpetual 7.74% 1997 10.07.2007 USD 100.0 1)4)
Credit Suisse First Boston Finance (Guernsey) Ltd., St. Peter Port
-----------------------------------------------------------------------------------------------------------------------
22.10.2002 0.00% 1992 DEM 500.0
Credit Suisse First Boston International (Guernsey) Ltd., St. Peter Port
-----------------------------------------------------------------------------------------------------------------------
05.03.2002 variable 2001 USD 300.0
20.03.2002 variable 2001 USD 100.0
29.08.2003 2.67% 1998 CHF 19.0
Credit Suisse First Boston Finance B.V., Amsterdam
-----------------------------------------------------------------------------------------------------------------------
26.05.2003 5.88% 1993 USD 200.0 1)
01.07.2003 7.75% 1993 LUF 3,000.0 1)
25.08.2003 5.50% 1993 USD 200.0 1)
perpetual 5.69% 1986 USD 150.0
Credit Suisse First Boston (Cayman) Ltd., George Town
-----------------------------------------------------------------------------------------------------------------------
06.02.2002 variable 2001 RUR 15.2
22.05.2002 variable 1999-2001 RUR 136.6
05.06.2002 variable 1999-2000 RUR 4.3
18.09.2002 variable 1999-2000 RUR 4.3
09.10.2002 variable 1999-2001 RUR 367.5
22.01.2003 variable 1999-2001 RUR 432.7
05.02.2003 variable 1999-2001 RUR 769.5
21.05.2003 variable 1999-2001 RUR 353.8
04.06.2003 variable 1999-2001 RUR 436.6
17.09.2003 variable 1999-2001 RUR 424.0
08.10.2003 variable 1999-2001 RUR 449.5
19.11.2003 variable 1999-2001 RUR 404.1
21.01.2004 variable 1999-2001 RUR 580.1
15.12.2004 variable 2001 RUR 121.0
Credit Suisse First Boston (Cyprus) Ltd., Limassol
-----------------------------------------------------------------------------------------------------------------------
19.12.2002 7.00% 2000-2001 RUR 1,210.2
Banco de Investimentos Credit Suisse First Boston S.A., Sao Paulo
-----------------------------------------------------------------------------------------------------------------------
14.03.2002 1.95% 2001 JPY 438.5
01.04.2002 various 2001 JPY 4,876.9
12.06.2003 11.00% 1995 USD 74.2
01.11.2003 6.29% 1995 USD 5.0
F-80
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
45 Bonds issued (continued)
Year Earliest date Par value
Maturity date Interest rate of issue callable Currency in m
-----------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston Inc., New York
-----------------------------------------------------------------------------------------------------------------------
09.01.2002 6.98% 2000 USD 10.0
13.02.2002 various 2001 USD 387.1
25.02.2002 7.25% 2000 USD 10.0
15.03.2002 7.18% 2000 USD 60.0
27.03.2002 various 2000 JPY 11,500.0
01.04.2002 5.88% 1999 USD 650.0
23.04.2002 various 2001 USD 500.0
30.05.2002 6.96% 2000 USD 30.0
19.06.2002 6.85% 1997 USD 10.0
25.06.2002 4.32% 2001 USD 350.0
10.07.2002 various 2000 USD 8.5
01.08.2002 8.04% 1994 USD 5.0 1)
22.08.2002 various 2000 USD 26.0
23.08.2002 0.00% 2001 USD 472.0
03.09.2002 7.83% 1992 USD 3.0
09.09.2002 0.00% 2001 USD 400.0
23.10.2002 0.00% 2001 USD 275.0
23.10.2002 various 2001 USD 200.0
07.11.2002 various 2001 USD 715.0
08.11.2002 0.00% 2001 USD 150.0
06.12.2002 various 2001 USD 550.0
06.12.2002 various 1999 USD 210.0
15.01.2003 7.65% 1993 USD 5.0 1)
17.01.2003 various 1999/2000 USD 60.0
03.02.2003 8.10% 1993 USD 5.0 1)
10.02.2003 various 1993-2000 USD 65.0
21.03.2003 7.17% 2000 USD 10.0
21.04.2003 various 1992-2000 USD 132.9
27.04.2003 7.26% 1993 USD 17.0 1)
28.04.2003 various 2001 USD 285.0
07.05.2003 various 2001 USD 362.0
12.05.2003 various 1998-2000 USD 45.0
27.06.2003 5.08% 2000 EUR 400.0
15.07.2003 various 1998-2000 USD 325.0
15.08.2003 various 2000 USD 50.0
25.08.2003 various 2001 USD 191.0
10.09.2003 0.00% 2001 USD 100.0
23.10.2003 0.00% 2001 USD 190.0
02.11.2003 0.00% 2001 USD 244.8
08.01.2004 7.49% 1999 USD 20.0
02.02.2004 various 1999 USD 40.0
20.02.2004 6.20% 1994 USD 150.0 1)
08.03.2004 various 1992-2000 USD 116.3
15.03.2004 5.69% 1994 USD 164.8 1)
05.04.2004 6.94% 1995 DEM 150.0 1)
16.04.2004 various 1992-1999 USD 130.0
04.05.2004 various 1999 USD 70.0
06.06.2004 7.28% 2000 USD 10.0
01.07.2004 various 1999 USD 33.3
01.08.2004 2.59% 2001 USD 65.0
F-81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
45 Bonds issued (continued)
Year Earliest date Par value
Maturity date Interest rate of issue callable Currency in m
-----------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston Inc., New York
-----------------------------------------------------------------------------------------------------------------------
07.09.2004 0.00% 2001 USD 375.0
20.10.2004 7.08% 2000 USD 1.0
25.10.2004 0.00% 2001 USD 170.0
09.11.2004 0.00% 2001 USD 365.0
03.12.2004 0.00% 2001 USD 55.0
01.02.2005 various 2000 USD 208.5
01.03.2005 8.00% 2000 USD 500.0
11.05.2005 7.27% 2000 USD 400.0
06.06.2005 7.09% 2000 USD 13.3
15.08.2005 7.20% 2000 USD 1.0
05.09.2005 7.05% 2000 USD 1.0
27.10.2005 7.18% 1993 USD 200.0 1)
01.11.2005 6.88% 1995 USD 500.0
07.11.2005 6.95% 1995 USD 5.0 1)
15.11.2005 12.85% 2000 USD 5.3
02.03.2006 7.09% 2000 USD 1.0
15.05.2006 7.75% 1996 USD 268.9 1)
01.08.2006 5.88% 2001 USD 5,250.0
31.08.2006 7.08% 2000 USD 4.0
02.11.2006 7.33% 1999 USD 33.7
27.02.2007 various 1995 USD 60.0 1)
28.03.2007 7.47% 2000 USD 60.0
17.07.2007 7.29% 2000 USD 1.0
01.10.2007 various 1997 USD 250.0
30.11.2007 0.00% 2001 USD 91.6
01.04.2008 6.50% 1998 USD 150.0
01.06.2008 6.50% 1998 USD 500.0
15.09.2008 7.42% 1999 USD 10.0
15.02.2013 8.50% 1993 USD 3.0
14.11.2013 0.00% 2001 USD 3.6
15.02.2016 5.63% 1996 USD 1.7
02.04.2018 7.71% 1993 USD 5.2
03.12.2021 0.00% 2001 USD 22.2
Credit Suisse First Boston International, London
-----------------------------------------------------------------------------------------------------------------------
03.01.2002 various 1996-2001 USD 714.6
04.01.2002 various 1996-2001 JPY 170,298.8
04.01.2002 various 2001 HKD 1,101.5
11.01.2002 0.00% 2001 SGD 21.8
31.01.2002 various 2001 CHF 86.0
22.02.2002 various 2001 EUR 174.7
11.03.2002 various 2001 NOK 360.0
24.04.2002 various 1992 LUF 3,500.0 1)
01.05.2002 0.00% 2001 USD 30.3
30.07.2002 0.00% 1997 EUR 10.0
15.10.2002 various 1996-1998 DEM 70.0
31.10.2002 variable 1997 CHF 75.0 1)
19.12.2002 0.00% 1997 ITL 20,000.0 1)
31.01.2003 various 2000-2001 EUR 95.5
F-82
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
45 Bonds issued (continued)
Year Earliest date Par value
Maturity date Interest rate of issue callable Currency in m
-----------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston International, London
-----------------------------------------------------------------------------------------------------------------------
04.02.2003 various 1997-1998 GBP 39.2
09.03.2003 various 1997-1999 JPY 4,200.0
19.03.2003 7.63% 1993 LUF 1,500.0 1)
21.03.2003 various 1995-2001 USD 150.8
16.04.2003 0.00% 1998 GRD 14,393.0
05.05.2003 various 1998 ITL 109,000.0
13.06.2003 8.00% 1997 BEF 200.0
13.08.2003 various 1998 ATS 400.0
06.11.2003 0.00% 1995 FRF 25.0
16.01.2004 various 1996-2001 USD 149.3
03.02.2004 various 1997-2001 EUR 137.1
07.02.2004 0.00% 1997 NOK 70.0
16.03.2004 various 1997-1998 ITL 441,000.0
01.03.2004 0.00% 2001 EUR 2.4
19.03.2004 variable 2001 SEK 100.0
02.04.2004 variable 2001 NOK 100.0
26.04.2004 various 1995-1998 JPY 1,600.0
11.05.2004 0.00% 1997-1998 ITL 105,000.0 1)
13.05.2004 variable 2001 CHF 20.0
30.07.2004 variable 1997 DEM 15.0
01.12.2004 0.00% 1994 CHF 13.0 1)
01.12.2004 0.00% 1994 EUR 10.0 1)
18.01.2005 various 1995-2001 USD 1,273.1
24.01.2005 various 1997-2000 ITL 485,900.0
17.04.2005 0.00% 1997 PTE 9,362.0 1)
26.04.2005 variable 1998 PTE 500.0
28.04.2005 various 1996-1998 JPY 3,300.0
08.06.2005 8.25% 1995 BEF 200.0 1)
01.12.2005 0.00% 1997 ITL 60,000.0 1)
08.12.2005 0.00% 1997 FRF 200.0
16.02.2006 9.13% 1998 GBP 4.5
09.03.2006 various 2000-2001 EUR 124.7
15.03.2006 various 1995-2001 USD 177.1
16.03.2006 various 1998 ITL 331,200.0
11.05.2006 0.00% 1998 ITL 30,000.0
15.05.2006 0.00% 2001 JPY 500.0
25.05.2006 various 1996-1998 DEM 19.3 1)
01.06.2006 0.00% 2001 EUR 1.0
28.07.2006 0.00% 1994 USD 40.0 1)
06.11.2006 0.00% 1997 FIM 50.0
01.11.2006 0.00% 2001 JPY 1,000.0
19.12.2006 5.70% 1996 JPY 500.0
27.01.2007 various 1997 ITL 103,600.0
31.01.2007 various 2000-2001 EUR 110.6
01.02.2007 0.00% 2001 USD 290.0
28.03.2007 various 1997-2001 USD 52.8
03.04.2007 various 1996-1997 CHF 120.0
10.04.2007 various 1997 DEM 70.0
30.04.2007 variable 2001 NOK 150.0
F-83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
45 Bonds issued (continued)
Year Earliest date Par value
Maturity date Interest rate of issue callable Currency in m
-----------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston International, London
-----------------------------------------------------------------------------------------------------------------------
15.05.2007 various 1997 JPY 2,500.0
23.05.2007 variable 1997 DEM 80.0 1)
02.07.2007 variable 1997 USD 40.0 1)
06.11.2007 0.00% 1997 FIM 50.0
01.12.2007 0.00% 2001 EUR 220.0
23.01.2008 various 1998-2001 USD 246.4
24.02.2008 variable 1998 ITL 100,000.0 1)
04.03.2008 various 1998 DEM 155.0
18.03.2008 0.00% 1998 ITL 68,000.0
30.04.2008 various 2000-2001 EUR 186.1
08.05.2008 various 1997-1998 JPY 200.0
02.06.2008 variable 1998 PTE 500.0
01.08.2008 0.00% 1998 DEM 140.0
30.11.2008 0.00% 1993-1994 DEM 152.7 1)
10.03.2009 various 1997-1998 DEM 108.0
15.05.2009 various 1997 JPY 1,500.0
30.05.2009 6.70% 1997 ITL 17,000.0
28.06.2009 0.00% 1994-1996 DEM 212.6 1)
24.08.2009 0.00% 1999-2001 EUR 42.0
06.01.2010 0.00% 1997 DEM 20.0
01.03.2010 0.00% 1995 ITL 30,000.0 1)
20.06.2010 0.00% 1997 DEM 59.9 1)
27.09.2010 0.00% 2000 EUR 39.0
18.10.2010 10.00% 1998 ITL 27,500.0
17.12.2010 0.00% 1997 USD 51.0
31.01.2011 various 1999-2001 EUR 387.6
30.06.2011 various 1993-2001 USD 74.1
01.11.2011 0.00% 2001 EUR 7.5
30.01.2012 various 1999-2001 EUR 74.3
18.04.2012 variable 1998 ITL 12,000.0
24.04.2012 variable 1997 USD 4.0
30.04.2012 8.00% 1998 ITL 20,000.0 1)
04.06.2012 0.00% 1997 DEM 15.0
01.07.2012 0.00% 2001 EUR 25.0
02.01.2013 0.00% 2000-2001 EUR 50.5
02.04.2013 6.50% 1998 ITL 27,500.0
29.07.2013 variable 1998-2001 JPY 4,300.0
20.12.2014 0.00% 1994 ITL 250,000.0
22.06.2016 various 2001 EUR 75.7
22.09.2016 variable 1998 USD 36.4
01.09.2017 0.00% 1997 PTE 1,700.0
15.09.2017 0.00% 1997 DEM 15.0
16.02.2018 6.00% 1998 DEM 30.0 1)
26.03.2018 various 1998 JPY 1,800.0
01.08.2018 various 1998 ITL 24,000.0
15.12.2021 0.00% 1995 USD 81.3 1)
02.10.2022 0.00% 1997 DEM 40.0
14.12.2028 10.76% 1998 USD 66.7
perpetual variable 1992-1997 USD 220.0
F-84
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
45 Bonds issued (continued)
Year Earliest date Par value
Maturity date Interest rate of issue callable Currency in m
-----------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston International, London
-----------------------------------------------------------------------------------------------------------------------
perpetual various 1993-1995 JPY 20,000.0
perpetual 10.25% 1995 GBP 100.0
perpetual various 1995-1998 CHF 130.0
perpetual various 1995-1997 NLG 60.0
perpetual various 1998 DEM 610.0
perpetual variable 1998 PTE 1,650.0
perpetual 0.00% 2001 EUR 125.1
perpetual variable 1997 USD 250.0
Winterthur Capital Ltd., Hamilton
-----------------------------------------------------------------------------------------------------------------------
14.04.2005 5.38% 2000 EUR 500
"Winterthur" Swiss Insurance Company, Winterthur
-----------------------------------------------------------------------------------------------------------------------
31.03.2006 4.00% 2000 CHF 500
DBV-Winterthur Group, Wiesbaden
-----------------------------------------------------------------------------------------------------------------------
28.07.2003 0.88% Convertible Bonds 1998 DEM 100
28.07.2003 0.75% Convertible Bonds 1998 DEM 100
-----------------------------------------------------------------------------------------------------------------------
1) Subordinated bonds.
2) Credit linked notes issued by Credit Suisse First Boston, Guernsey branch.
3) Issued by Credit Suisse First Boston, London branch.
4) Issued by Credit Suisse First Boston, Nassau branch.
5) Issued by Credit Suisse First Boston, New York branch.
6) Issued bonds with warrants: ex warrant.
7) Subparticipations of Credit Suisse First Boston issued bonds.
8) Preference shares.
9) Structured notes, reclassed from "Due to customers" to "Other bonds" per
December 31, 2001.
F-85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46 Differences between Swiss and US accounting principles
The following narratives provide additional details to support the tabular
reconciliation in notes 46.2a and 46.2b of net profit and shareholders' equity
prepared under Swiss GAAP to net profit and shareholders' equity prepared under
US GAAP. For those reconciling items, where the differences between the methods
under Swiss GAAP and US GAAP accounting are significant to a particular segment,
the segment has been identified.
Additional information concerning Swiss accounting principles can be found in
note 1.
46.1 Valuation and income recognition differences between Swiss and US
accounting principles
a) Debt and equity securities
VALUATION
Under Swiss GAAP, debt and equity securities for the banking business that
are held for sale and which do not constitute trading balances are carried
at the lower of cost or market value (LOCOM). Unrealized losses are recorded
through the income statement when market value is lower than cost. When
market value increases, unrealized gains are only recorded to the extent
losses were previously recognized.
Debt securities held until final maturity are valued at amortized cost
(accrual method). Premiums and discounts are deferred and accrued over the
term of the instrument until final maturity. Realized gains or losses, which
are interest related and which arise from the early disposal or redemption
of the instrument, are deferred and accrued over the remaining term of that
instrument.
Under US GAAP, debt and equity securities must be classified as either:
- trading, which are valued at fair value with changes in fair value
recorded through earnings;
- held-to-maturity, which are carried at amortized cost (debt securities
only); or
- available-for-sale, which are carried at fair value, with changes in fair
value recorded in other comprehensive income - a separate component of
shareholders' equity.
In addition, premiums and discounts are amortized to interest income using
the effective yield method over the contractual life of the securities.
Gains or losses on the sales of debt and equity securities are recognized
into income at the time of sale on a specific identified cost basis.
The US GAAP adjustments to net profit attributable to securities valuation
differences were a decrease of CHF 48 million, an increase of CHF
46 million and a decrease of CHF 31 million for 2001, 2000 and 1999,
respectively. The US GAAP adjustments to shareholders' equity attributable
to securities valuation differences were increases of CHF 2,269 million, CHF
3,402 million and CHF 2,767 million for 2001, 2000 and 1999, respectively.
PRIVATE EQUITY
Under Swiss GAAP, private equity investments are carried at LOCOM.
Under US GAAP, in accordance with specialized industry accounting
principles, private equity investments held by subsidiaries, that are
considered investment companies that engage exclusively
F-86
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.1 Valuation and income recognition differences between Swiss and US
accounting principles (continued)
in venture capital activities and other related activities, are carried at
estimated fair value, with changes in fair value recorded through current
net profit.
The US GAAP adjustments to net profit attributable to private equity
investments were decreases of CHF 168 million, CHF 87 million and an
increase of CHF 190 million for 2001, 2000 and 1999, respectively. The US
GAAP adjustment to shareholders' equity attributable to private equity
investments were increases of CHF 209 million, CHF 391 million and CHF
467 million for 2001, 2000 and 1999, respectively.
b) Consolidation
SPECIAL PURPOSE ENTITIES
Under Swiss GAAP, consolidation of a special purpose entity (SPE) is
required if the Group holds more than 50% of the voting rights of the
entity, or where it has the ability to exercise control of the SPE. Also
consolidation would be required if the Group has a legal or defacto
obligation to support the entity, or the SPE is dependent on the Group for
funding. Consolidation may be required by application of the substance over
form principle.
Under US GAAP, a sponsored SPE must be considered for consolidation unless
it meets the criteria of a qualifying SPE as defined in the Statement of
Financial Accounting Standard (SFAS) NO. 140, ACCOUNTING FOR TRANSFERS AND
SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENT OF LIABILITIES. If the SPE
is not a qualifying SPE then the following factors must be considered to
determine if the SPE has to be consolidated. The three criteria to be
considered are: (1) independent third-parties have made a substantive equity
investment; (2) independent third-parties control the SPE; and
(3) independent third-parties have the substantive risks and rewards of the
assets of the SPE throughout its term. These criteria are subjective and
must be analyzed together with all relevant facts and circumstances to
determine whether consolidation is required.
The US GAAP adjustments to net profit attributable to the consolidation of
SPEs not consolidated under Swiss GAAP were a decrease of CHF 52 million for
2001 and increases of CHF 73 million and CHF 3 million for 2000 and 1999,
respectively. The US GAAP adjustments to shareholders' equity attributable
to the consolidation of SPEs not consolidated under Swiss GAAP were a
decrease of CHF 15 million, an increase of CHF 51 million and a decrease of
CHF 14 million for 2001, 2000 and 1999, respectively.
DETERMINATION OF CONSOLIDATED SUBSIDIARIES AND EQUITY METHOD SUBSIDIARIES
Under Swiss GAAP, majority owned subsidiaries that do not operate in the
core business of the Group may be accounted for using the equity method. US
GAAP has no such exception to consolidating majority owned subsidiaries.
Additionally, for Swiss GAAP, the accounting for investments using the
equity method is generally the same as under US GAAP; however, US GAAP has
stricter guidelines for determining whether an entity has the ability to
exercise significant influence over the operating and financial policies of
the investee.
F-87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.1 Valuation and income recognition differences between Swiss and US
accounting principles (continued)
The US GAAP adjustments to net profit attributable to differences in the
determination of consolidated subsidiaries and equity method subsidiaries
was a decrease of CHF 97 million and CHF 47 million for 2001 and 1999,
respectively. The net profit adjustment was less than CHF 1 million for
2000. The US GAAP adjustments to shareholders' equity attributable to
differences in determination of consolidated subsidiaries and equity method
subsidiaries were increases of CHF 35 million, CHF 16 million and CHF
14 million for 2001, 2000 and 1999, respectively.
c) Transfer of financial assets
Swiss GAAP requires that, in transferring financial assets, the assets
should be removed from the transferor's balance sheet and a gain or loss
should be recognized when the following conditions are met:
- the securities are isolated from the transferor;
- the transferee obtains the right to pledge or exchange the transferred
securities; and
- the transferor does not maintain effective control.
In addition, under Swiss GAAP, repurchase and reverse repurchase
transactions held in the trading book (matched book repo transactions) are
recorded at fair value.
Under US GAAP, the accounting for transfers of financial assets that are
considered sales generally are based on the same conditions as Swiss GAAP.
However, meeting the US GAAP criteria is dependent on a legal opinion of
"true sale" which is more stringent than Swiss GAAP. The resulting
adjustment for transfers not deemed as sales is a gross up of the balance
sheet where the assets securitized remain on the balance sheet and the
transaction is treated as a secured borrowing.
Under US GAAP, income from matched book repo transactions is recorded on an
accrual basis.
d) Real estate
Under Swiss GAAP, banking segments' real estate held for own use, which has
been designated as held for disposal, is carried at lower of cost less
accumulated depreciation or market. Until a contract for sale is executed,
depreciation continues on these properties.
Under US GAAP, real estate that is classified as held for disposal is
carried at the lower of carrying amount or fair value less costs to sell. No
depreciation is recorded on real estate held for disposal.
e) General provisions
Under Swiss GAAP, valuation adjustments and reserves are permitted to be
recorded when economically necessary or legally required. In accordance with
Swiss banking regulations, reserve for general banking risks is recorded as
a separate component of shareholders' equity. Changes in the equity
component must be recorded as an extraordinary item in the income statement
or result from a reclassification from valuation adjustments and provisions
no longer required.
F-88
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.1 Valuation and income recognition differences between Swiss and US
accounting principles (continued)
US GAAP does not allow general unallocated provisions. Probable and
estimable costs, which can be identified with an event or set of events that
have occurred prior to the balance sheet date, are accrued. The criteria for
establishing such liabilities under US GAAP are more stringent than under
Swiss GAAP.
The balance sheet line item VALUATION ADJUSTMENTS AND PROVISIONS includes
provisions for restructuring, litigation, technology and other operational
risks. Reserve for general banking risks is recorded as a separate component
of shareholders' equity. For purposes of the US GAAP reconciliation, certain
of these provisions are not allowed and have been reversed.
RESTRUCTURING PROVISIONS
Under Swiss GAAP, restructuring provisions are recognized when a legal
obligation exists or it is likely to materialize.
Under US GAAP provisions are made for those costs which are directly
associated with a plan to exit an activity, such as employee termination
benefits and other restructuring costs, provided there is a clear commitment
to the exit plan. The costs qualify for restructuring costs if they are not
associated with nor incurred to generate revenues or benefit future periods.
Restructuring charges are recognized in the period when management having
appropriate authority approves and commits the entity to a restructuring
plan that identifies an expected completion date and all significant actions
required to be taken to complete the plan. The plan should commence as soon
as possible and the timetable for completion should not accommodate
significant plan changes.
The US GAAP adjustments to net profit attributable to disallowed
restructuring provisions were decreases of CHF 25 million, CHF 75 million
and CHF 56 million for 2001, 2000 and 1999, respectively. The US GAAP
adjustments to shareholders' equity attributable to non-allowed
restructuring provisions were increases of CHF 43 million and CHF
112 million for 2000 and 1999, respectively. There was no adjustment to
shareholders' equity for 2001.
OTHER BUSINESS RISKS AND OTHER PROVISIONS
Valuation adjustments and provisions for OTHER BUSINESS RISK principally
include provisions for miscellaneous operating receivables and technology
risks and OTHER PROVISIONS consists primarily of litigation reserves. Under
Swiss GAAP these reserves are permitted to be recorded when economically
necessary or legally required.
Under US GAAP, probable and estimable costs, which can be identified with an
event or set of events that have occurred prior to the balance sheet date
are accrued.
The US GAAP adjustments to net profit attributable to provisions for other
business risks and other provisions were decreases of CHF 176 million, CHF
215 million and CHF 102 million in 2001, 2000 and 1999, respectively. The US
GAAP adjustments to shareholders' equity attributable to provisions for
other business risks and other provisions were increases of CHF
169 million, CHF 326 million and CHF 549 million in 2001, 2000 and 1999,
respectively.
F-89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.1 Valuation and income recognition differences between Swiss and US
accounting principles (continued)
RESERVE FOR GENERAL BANKING RISKS
In accordance with Swiss banking regulations, reserve for general banking
risks is recorded as a separate component of shareholders' equity. Changes
in the equity component must be recorded as an extraordinary item in the
income statement or result from reclassification from valuation adjustments
and provisions no longer required.
US GAAP does not allow general unallocated provisions. For purposes of the
US GAAP reconciliation, the reserve for general banking risks has been
reversed.
The US GAAP adjustments to net profit to reverse the reserve for general
banking risks were increases of CHF 188 million and CHF 81 million for 2000
and 1999, respectively. There was no net profit adjustment for 2001. There
is no adjustment to shareholders' equity because the reserve for general
banking risks is included in shareholders' equity for Swiss GAAP.
f) Business combinations
Under Swiss GAAP, prior to January 1, 1997, goodwill was charged to
shareholders' equity in the year of acquisition. For acquisitions after
January 1, 1997, the Group capitalizes goodwill and amortizes it over its
estimated useful life on a straight-line basis.
Under US GAAP, generally, the accounting for goodwill is the same as Swiss
GAAP. Adjustments are the result of: (1) capitalization of goodwill for
pre-1997 acquisitions net of accumulated depreciation; (2) differences in
the valuation of net assets at the date of acquisition including certain
amounts which are expensed under US GAAP but capitalized under Swiss GAAP,
including adjustments for items such as retention payments and certain
restructuring charges; and differences related to share options plans.
Upon adoption of SFAS NO. 141 BUSINESS COMBINATIONS and SFAS NO. 142
GOODWILL AND OTHER INTANGIBLE ASSETS, all business combinations acquired
after June 30, 2001 are accounted for using the purchase method. The
associated goodwill and intangible assets with an indefinite life will not
be amortized. Effective January 1, 2002, for business combinations completed
prior to June 30, 2001, goodwill and intangible assets with an indefinite
life will no longer be amortized. Instead, goodwill and intangible assets
associated with all business combinations will be subject to an annual
impairment test. Business combinations acquired after June 30, 2001 resulted
in a US GAAP adjustment to net profit and shareholders' equity of an
increase of CHF 6 million for 2001. Please refer to note 47.5 for a more
detailed discussion of SFAS 141 and 142.
The US GAAP adjustments to net profit attributable to the goodwill charged
to shareholders' equity prior to January 1997 were decreases of CHF
117 million, CHF 127 million and CHF 128 million for 2001, 2000 and 1999,
respectively. The US GAAP adjustments to shareholders' equity attributable
to the goodwill charged to shareholders' equity prior to January 1997 were
increases of CHF 868 million, CHF 990 million and CHF 1,116 million for
2001, 2000 and 1999, respectively.
The US GAAP adjustments to net profit attributable to valuation of net
assets at the date of acquisition were decreases of CHF 512 million, CHF
160 million and CHF 319 million for 2001,
F-90
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.1 Valuation and income recognition differences between Swiss and US
accounting principles (continued)
2000 and 1999, respectively. The US GAAP adjustments to shareholders' equity
attributable to valuation of net assets at the date of acquisition were an
increase of CHF 102 million and CHF 670 million and a decrease of CHF
300 million for 2001, 2000 and 1999, respectively.
Specifically, the 2000 adjustments to net profit and shareholders' equity
for the DLJ acquisition were a decrease of CHF 168 million and an increase
of CHF 924 million, respectively. The adjustments are included in the
related amounts above.
g) Share-based compensation
Under Swiss GAAP, no expenses are recognized for share options plans upon
grant or exercise. For share awards the market value of shares granted for
the reporting period and for which no future service is required is accrued
in the period in which the service is rendered. For shares granted under the
requirement to provide future services the market value granted is deferred
over the required future service period and at each balance sheet date the
accrued cost is adjusted for the fair value change of the share price during
the reporting period. The accrual is recognized within liabilities.
US GAAP permits the recognition of compensation expense based on the
estimated fair value of the equity instruments issued or based on the
intrinsic value of the equity instruments issued with the disclosure of pro
forma effects of share compensation plans on net profit and earnings per
share, as if the fair value had been recorded. The Group has chosen to
record its obligation for stock compensation using the intrinsic value
method. For share option plans, which have no intrinsic value at the date of
grant and which have no cash settlement feature and no performance based
vesting requirements the fixed plan accounting is applied and no
compensation expenses are recognized. Credit Suisse Group has also option
plans outstanding, primarily related to the years 2000 and before, which
have either a cash settlement feature or which are linked to performance
based vesting requirements. For those plans, variable plan accounting is
applied until settlement. For share awards, the market value of shares
granted for the reporting period and for which no future service is required
is accrued in the period in which the service is rendered. If shares are
granted under the requirement to provide future services the market value at
the grant date is recognized over the required future service period. For US
GAAP purposes the Group's obligation to deliver shares in the future is
recognized in additional paid-in capital.
h) Pension benefits
Most pension funds of CSG are separate legal entities and employees have to
pay contributions to a specific pension fund. In addition, the Group also
makes contributions to the pension plans. Under Swiss GAAP, pension expense
is equal to the amounts to be contributed by the employer based on the
scheme. However, certain plans record pension expense based on a specific
method of actuarial valuation of projected plan liabilities for accrued
service. Plan assets are recorded at fair value. Certain assumptions, such
as future salary increases, are not considered in the Swiss GAAP valuation.
F-91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.1 Valuation and income recognition differences between Swiss and US
accounting principles (continued)
Under US GAAP, pension expense and liabilities for defined benefit plans are
valued based on specific actuarial assumptions such as future salary
increases, expected return on plan assets, employee turnover, mortality,
retirement age and administrative expenses of the pension plan. In
calculating the current pension benefit obligation, estimated future pension
benefits are discounted to the current period. This discount rate was
established by examining the rates of return of both high-quality, long-term
corporate bonds and long-term government bonds. The methodology for
determination of appropriate discount rates has been applied consistently
groupwide.
i) Taxation
Under Swiss GAAP, generally no deferred tax asset is recognized for net
operating loss carry-forwards. Deferred tax assets on net operating losses
are recorded in the event management's assessment is that their realization
in a future period is certain, based on contracts existing at the balance
sheet date to sell businesses at a taxable gain.
Under US GAAP, a deferred tax asset is recognized for net operating loss
carry-forwards, net of an allowance for the estimated unrealizable amount.
The US GAAP adjustments to net profit attributable to the recognition of the
tax effect of net operating loss carry-forwards were an increase of
CHF 25 million for 2001 and decreases of CHF 191 million and CHF
368 million for 2000 and 1999, respectively. The US GAAP adjustments to
shareholders' equity attributable to the recognition of the tax effect of
net operating loss carry-forwards were increases of CHF 368 million, CHF
230 million and CHF 496 million for 2001, 2000 and 1999, respectively.
An additional adjustment arises from the aggregate differences between Swiss
GAAP and US GAAP accounting principles that will result in taxable or
deductible amounts in future years (temporary differences).
The related US GAAP adjustment to net profit were decreases of CHF
169 million, CHF 109 million and CHF 168 million for 2001, 2000 and 1999,
respectively, and the related US GAAP adjustments to shareholders' equity
were an increase of CHF 104 million, a decrease of CHF 115 million and an
increase of CHF 107 million for 2001, 2000 and 1999, respectively.
F-92
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.1 Valuation and income recognition differences between Swiss and US
accounting principles (continued)
j) Loans
LOAN FEES AND COSTS
Under Swiss GAAP, loan origination fee income is deferred but direct loan
origination costs are normally expensed.
Under US GAAP, certain qualifying direct loan origination fees and costs
must be deferred and amortized over the life of the loan using the effective
interest method.
LOAN IMPAIRMENT
Under Swiss GAAP, provisions for impaired loans are recorded based on either
the fair value of the underlying collateral or on the undiscounted future
cash flows if the loans are not collateralized.
For certain non-collateral dependent impaired loans, US GAAP requires
measurement of impairment using the present value of future cash flows.
The Group has estimated that the difference between impaired loan valuation
recognized for Swiss GAAP and impaired loan valuation that would have been
recognized for US GAAP is not material.
k) Leasing
For Swiss GAAP purposes, the Group, as lessor, classifies lease contracts as
financial leases and records a leasing receivable based on the leased
asset's underlying value at lease inception. This balance is amortized over
the life of the lease using the interest method.
For US GAAP purposes, certain of these lease contracts are classified as
operating leases. The underlying leased asset is recorded as a fixed asset
and straight-line depreciated over its useful life. This adjustment relates
to the difference between the interest amortization of the lease receivable
under Swiss GAAP and the straight-line depreciation of leased assets under
US GAAP.
l) Derivatives
Under Swiss GAAP, trading derivatives are recorded on the balance sheet at
fair value as positive and negative replacement values. Changes in fair
value are reported in earnings unless the derivative is designated and
qualifies as a hedge. Gains and losses on hedging derivative instruments are
recognized in income on the same basis as the underlying item being hedged.
There is no requirement for an external transaction to lay off all risks
associated with intercompany hedges on a one-to-one basis.
Under US GAAP, prior to January 1, 2001 derivatives are reported on the
balance sheet at fair value, which is the same as replacement value. Changes
in fair value are recorded in income unless specific criteria are met to
obtain hedge accounting treatment. The criteria to obtain hedge accounting
are different than what is required for Swiss GAAP. If the criteria are met,
US GAAP permits off-balance sheet or amortized cost treatment of certain
hedging instruments. For intercompany hedging, US GAAP requires there to be
a one-to-one link between the internal
F-93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.1 Valuation and income recognition differences between Swiss and US
accounting principles (continued)
transaction and a transaction with an external third-party for hedge
accounting to take place. If this is not evident, then the internal
derivative is eliminated upon consolidation.
Effective January 1, 2001 the Group adopted SFAS No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES AND SFAS No. 138 ACCOUNTING
FOR CERTAIN DERIVATIVE INSTRUMENTS AND CERTAIN HEDGING ACTIVITIES--AN
AMENDMENT OF SFAS NO. 133. Under SFAS 133, all derivatives are required to
be recognized as assets or liabilities in the consolidated balance sheet at
fair value. The recognition of the changes in the fair value depends upon
the intended use and designation of the derivative. If the derivative
instrument is not a hedge, then changes in fair value are recognized in
earnings. If a derivative qualifies as a hedge, depending on the nature of
the hedge, changes in fair value of the derivative will either be offset
against the change in fair value of the hedge asset, liability, or firm
commitment through earnings or recognized in other comprehensive income. The
cumulative effect of the change in accounting for derivatives resulted in a
net adjustment to earnings of CHF 123 million for 2001. For further
information, please refer to Note 47.16.
m) Own shares and own bonds
OWN SHARES
Under Swiss GAAP, own shares included in securities trading portfolio and
financial investments are carried at fair value and LOCOM, respectively.
Derivatives on own shares are carried at fair value and are reported as
positive and negative replacement values in other assets and other
liabilities, respectively. Gains and losses on sales, dividends received and
changes in market value are recorded in net profit.
Under US GAAP, own shares are recorded at cost and reported as treasury
shares resulting in a reduction to total shareholders' equity. Derivatives
on own shares are classified as assets, liabilities or in shareholders'
equity depending on the manner of settlement. Unrealized and realized gains
and losses on own shares and derivatives on own shares where the Group has
the choice or obligation to settle in shares and dividends received on own
shares are excluded from net profit.
OWN BONDS
Under Swiss GAAP, the Group's own bonds included in securities trading
portfolio are recorded at fair value with changes in fair value recorded in
net profit.
Under US GAAP the purchase of own bonds is treated as a reduction of the
debt outstanding. Any difference between the cost of repurchase and the
carrying value of the liability is treated as an extraordinary gain or loss
during the period. Any gain or loss on resale is treated as a premium or
discount and amortized over the remaining term of the liability.
The Group has estimated that the differences between own bond transactions
recognized under Swiss GAAP and own bond transactions that would have been
recognized for US GAAP is not material to net profit or shareholders'
equity.
F-94
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.1 Valuation and income recognition differences between Swiss and US
accounting principles (continued)
n) Foreign currency
Accounting for foreign currency is similar under Swiss and US GAAP.
Specifically, each Group entity must choose and document a functional
currency in which its financial statements will be prepared. Transactions
denominated in currencies other than the functional currency are considered
foreign currency transactions and result in gains and/or losses recognized
in earnings. Foreign currency gains and losses related to trading activity
are included in trading income. Foreign currency translation adjustments,
resulting from consolidation of financial statements with different
functional currencies, are recorded in equity.
For Swiss GAAP, the determination of the functional currency is generally
the same as under US GAAP. Under Swiss GAAP, the local currency is normally
assumed to be the functional currency. US GAAP has stricter guidelines and
the determination of the functional currency is made based on evaluation of
the primary economic environment in which the entity operates using specific
salient economic indicators. This difference results in certain Group
affiliates having different functional currencies for US GAAP than for Swiss
GAAP and, consequently, different amounts of foreign currency gains and
losses reported in the Group's consolidated net profit.
o) Capitalization of software
Under Swiss GAAP, only third-party costs relating to the purchase and
installation of software are capitalized and depreciated using the
straight-line method over the estimated useful life. Internal costs related
to the acquisition and development of internal use computer software are
mostly expensed.
Under US GAAP, effective January 1, 1999, external third-party costs as well
as certain internal costs related to the acquisition and development of
internal use computer software must be capitalized and depreciated over its
useful life.
p) Winterthur purchase accounting
Under Swiss GAAP, the Group accounted for the merger of Credit Suisse Group
and "Winterthur" Swiss Insurance Company using the pooling of interests
method. The balance sheets and income statements of the companies were
combined and no adjustments to carrying values of the assets and liabilities
were made.
Under US GAAP, the business combination is accounted for under the purchase
method of accounting with Credit Suisse Group as the acquirer. Under the
purchase method, the acquirer reports the assets and liabilities of the
acquired company at fair market value on the date of acquisition. Any excess
of the fair market value of the consideration given over the fair market
value of the net tangible assets acquired is allocated first to identifiable
intangible assets based on their fair value, if determinable, with the
remainder allocated to goodwill.
F-95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.1 Valuation and income recognition differences between Swiss and US
accounting principles (continued)
The following table details purchase accounting adjustments described below
at and for the years ended December 31:
Shareholders' Shareholders' Shareholders' Net Net Net
equity equity equity profit profit profit
in CHF m 31.12.01 31.12.00 31.12.99 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------
Investments 2,713 3,158 3,536 (2,558) (1,747) (1,234)
Life insurance
Deferred policy acquisition
costs (1,627) (1,679) (1,933) 37 215 60
Present value of future profits 2,556 2,806 3,037 (225) (174) (194)
Technical provisions (781) (1,153) (1,461) 360 273 496
Goodwill 3,681 4,069 4,308 (388) (239) (239)
Retirement benefits 164 102 95 29 11 46
Taxation (867) (926) (960) 632 389 213
Other 0 0 0 21 0 0
---------------------------------------------------------------------------------------------------------------------
Total purchase accounting
adjustments 5,839 6,377 6,622 (2,092) (1,272) (852)
---------------------------------------------------------------------------------------------------------------------
Investments
Under purchase accounting, investments are restated to fair value at the
date of acquisition. The unrealized gains and losses on available-for-sale
securities existing before the date of acquisition are reclassified in
shareholders' equity from net unrealized gains to retained earnings. The
fair value at the date of acquisition becomes the new cost basis for the
investments and the realized gains and losses on disposal of investments,
depreciation on real estate and the unrealized gains and losses on
available-for-sale securities are adjusted for the new cost basis.
Life insurance
DEFERRED POLICY ACQUISITION COSTS
Under purchase accounting, the deferred policy acquisition costs for life
insurance existing at the date of acquisition are eliminated.
PRESENT VALUE OF FUTURE PROFITS
The Present Value of Future Profits (PVFP) is the present value of
anticipated profits embedded in the life and health insurance in force at
the date of the merger with "Winterthur" Swiss Insurance Company. Interest
accrues on the unamortized PVFP based upon the policy liability rate or
contract rate. The PVFP asset is amortized over the years that such profits
are anticipated to be received in proportion to the estimated gross margins
or estimated gross profits for participating traditional life products and
non-traditional life products, respectively, and over the premium paying
period in proportion to premiums for other traditional life products.
Any PVFP from previous acquisitions by Winterthur existing at the date of
acquisition is eliminated.
F-96
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.1 Valuation and income recognition differences between Swiss and US
accounting principles (continued)
TECHNICAL PROVISIONS
Under purchase accounting, life insurance technical provisions are revalued
at the date of acquisition, using current assumptions at such date.
Goodwill
Under purchase accounting, goodwill and other intangible assets are
capitalized and amortized over the expected periods of benefit, less any
impairment. The excess of consideration paid of CHF 14,600 million for
Winterthur over the fair value of the net tangible assets received has been
recorded as goodwill and is being amortized on a straight-line basis over
20 years beginning in 1998. Goodwill of CHF 720 million was written-off in
1998 upon the sale of the Group's principal reinsurance operations and HIH
Australia.
Retirement benefits
Under purchase accounting, the projected benefit obligation and fair value
of plan assets are remeasured at the date of acquisition.
Taxation
This adjustment represents the tax effect of the purchase accounting
adjustments that result in temporary differences.
F-97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.2a Reconciliation of Swiss GAAP and US GAAP net profit
References are
in CHF m to note 46.1 2001 2000 1999
------------------------------------------------------------------------------------------------------------
Swiss GAAP net profit before minority interests 1,814 6,022 4,318
Swiss GAAP minority interests (227) (237) (68)
------------------------------------------------------------------------------------------------------------
Swiss GAAP net profit 1,587 5,785 4,250
------------------------------------------------------------------------------------------------------------
Adjustments in respect of
Debt and equity securities a) (216) (41) 159
Consolidation b) (149) 73 (44)
Transfer of financial assets c) (74) 100 (43)
Real estate d) 21 10 18
General provisions e) (201) (102) (77)
Business combinations f) (623) (287) (447)
Share-based compensation g) (119) 81 (143)
Pension plans h) 282 201 158
Taxation i) (144) (300) (536)
Loans j) 14 14 14
Leasing k) (25) (9) (3)
Derivatives l) 1,072 12 237
Own shares and own bonds m) (310) (52) (66)
Foreign currency n) (6) 5 17
Capitalization of software o) 296 269 133
Winterthur purchase accounting p) (2,092) (1,272) (852)
------------------------------------------------------------------------------------------------------------
Total adjustments (2,274) (1,298) (1,475)
------------------------------------------------------------------------------------------------------------
US GAAP net (loss)/profit (687) 4,487 2,775
------------------------------------------------------------------------------------------------------------
US GAAP minority interests (241) (317) (56)
------------------------------------------------------------------------------------------------------------
US GAAP net (loss)/profit before minority interests (446) 4,804 2,831
------------------------------------------------------------------------------------------------------------
F-98
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.2b Reconciliation of Swiss GAAP and US GAAP shareholders' equity
References are
in CHF m to note 46.1 31.12.01 31.12.00 31.12.99
-----------------------------------------------------------------------------------------------------------
Swiss GAAP shareholders' equity before minority interests 38,921 43,522 30,683
Swiss GAAP minority interests (3,121) (2,571) (1,154)
-----------------------------------------------------------------------------------------------------------
Swiss GAAP shareholders' equity 35,800 40,951 29,529
-----------------------------------------------------------------------------------------------------------
Adjustments in respect of
Debt and equity securities a) 2,478 3,793 3,234
Consolidation b) 20 67 0
Transfer of financial assets c) (29) 43 (54)
Real estate d) 1 (21) (30)
General provisions e) 169 369 661
Business combinations f) 976 1,660 816
Share-based compensation g) 3,421 3,327 2,323
Pension plans h) (65) (93) (301)
Taxation i) 472 115 603
Loans j) 274 260 246
Leasing k) (28) (3) 6
Derivatives l) 33 (718) (904)
Own shares and own bonds m) (5,165) (6,619) (2,498)
Foreign currency n) 0 (4) 1
Capitalization of software o) 700 402 133
Winterthur purchase accounting p) 5,839 6,377 6,622
-----------------------------------------------------------------------------------------------------------
Total adjustments 9,096 8,955 10,858
-----------------------------------------------------------------------------------------------------------
US GAAP shareholders' equity 44,896 49,906 40,387
-----------------------------------------------------------------------------------------------------------
US GAAP minority interests (3,155) (3,926) (1,180)
-----------------------------------------------------------------------------------------------------------
US GAAP shareholders' equity before minority interests 48,051 53,832 41,567
-----------------------------------------------------------------------------------------------------------
F-99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.3 Presentation differences between Swiss and US accounting principles
In addition to differences related to valuation and income recognition
principle, financial statement presentation differences exist between Swiss GAAP
and US GAAP. Although these differences do not result in adjustments between
Swiss GAAP and US GAAP reported net profit and shareholders' equity, it may be
useful to understand these differences to interpret the balance sheet and income
statement presented in accordance with US GAAP. The following is a summary of
these differences.
These presentation differences include differences between Swiss GAAP and US
GAAP offsetting policies.
Under Swiss GAAP, in the insurance business assets and liabilities are offset
when the Group has a legal right to offset amounts with the same counterparty
and the transaction is expected to settle net. Additionally, insurance technical
provisions are presented net of reinsurance. In the banking segments assets and
liabilities are offset when the following conditions are all met:
- receivables and payables arise from transactions of a similar nature;
- with the same counterparty;
- with the same or earlier maturity;
- in the same currency; and
- which cannot lead to counterparty risk.
Positive and negative replacement values are offset with the same counterparty
insofar as bilateral agreements exist that are recognized and enforceable at
law.
Under US GAAP, offsetting of assets and liabilities in the balance sheet is
improper except where a right of set off exists. A right of set off exists when
all of the following criteria are met:
- each of the two parties owes the other determinable amounts;
- the reporting party has the right to set off the amount owed by the other
party;
- the reporting party intends to set off; and
- the right of set off is enforceable at law.
Presentation differences exist between Swiss GAAP and US GAAP related to
offsetting of assets and liabilities of certain repurchase and reverse
repurchase transactions and certain securities lending and borrowing
transactions that did not meet the US GAAP criteria. These are illustrated in
note 46.3b to the "Condensed consolidated balance sheet."
The gross up of insurance balances for US GAAP is described in the presentation
differences below and is reflected in 46.3b to the "Condensed consolidated
balance sheet."
Condensed consolidated statements of income
a. NET INTEREST INCOME has been presented in the US GAAP and Swiss GAAP
reformatted income statements based on the respective products' interest
income and expense line items.
b. NET COMMISSION AND SERVICE FEE INCOME is presented gross of related
expense in the line item COMMISSIONS AND FEES. Commission expenses are
presented in the line item OTHER EXPENSE.
F-100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.3 Presentation differences between Swiss and US accounting principles
(continued)
c. NET TRADING INCOME includes realized and unrealized gains and losses on
trading securities, trading income, foreign exchange, interest and
dividends from trading securities, and other trading income.
In the US GAAP and Swiss GAAP reformatted income statements, income on
securities lending and borrowing of securities classified as trading is
included in COMMISSION AND FEES. All foreign exchange related income is
included in OTHER REVENUE, NET. Interest and dividends from trading
securities is presented in the line item INTEREST INCOME. All other
components of net trading income are included in TRADING REVENUE.
NET INCOME FROM THE INSURANCE BUSINESS is presented in the US GAAP and
Swiss GAAP reformatted income statements as follows:
PREMIUMS EARNED, NET which includes premiums for non-traditional products
which are recognized when due are presented in the line item INSURANCE
PREMIUMS except for premiums from separate account business and premiums
for non-traditional products which are not reported as insurance premiums
but are included in the provisions for policyholder benefits. Revenue
from these products represent amounts assessed against the policyholder
and are presented in the line item OTHER REVENUE.
CLAIMS INCURRED AND ACTUARIAL PROVISIONS are presented in the line item
POLICYHOLDER BENEFITS AND CLAIMS except for dividends to policyholders,
which are presented in the line item DIVIDENDS TO POLICYHOLDERS and
claims associated with separate account business, which are presented in
the line item OTHER EXPENSE.
COMMISSION EXPENSES, NET are reclassified to INSURANCE UNDERWRITING AND
ACQUISITION EXPENSES except for premium taxes, which are presented in the
line item INSURANCE PREMIUMS.
INVESTMENT INCOME FROM THE INSURANCE BUSINESS is presented primarily in
two line items, INTEREST INCOME and REALISED GAINS/(LOSSES) FROM SALES OF
INVESTMENTS, NET. In addition, investment income from separate account
business is reclassified to OTHER REVENUE and investment and asset
management expenses are reclassified to OTHER EXPENSE.
d. OTHER ORDINARY INCOME/(EXPENSE), NET includes realized and unrealized
gains/(losses) from investments from the banking business.
In the US GAAP and Swiss GAAP reformatted income statements, all such
realized and unrealized gains/(losses) from financial investments are
included in REALIZED GAINS/(LOSSES) FROM SALES OF INVESTMENTS, NET. The
remaining components of OTHER ORDINARY INCOME/(EXPENSE), NET are
presented in the line items OTHER REVENUE or OTHER EXPENSE.
e. Amortization of PVFP, which is recorded in DEPRECIATION AND WRITE-OFFS
ON NON-CURRENT ASSETS, is presented in the line item INSURANCE
UNDERWRITING AND ACQUISITION EXPENSES in the US GAAP income statement.
f. VALUATION ADJUSTMENTS, PROVISIONS AND LOSSES FROM THE BANKING BUSINESS
are presented in the line item PROVISION FOR CREDIT LOSSES. All other
provisions and write-downs are presented in the line item OTHER EXPENSE.
F-101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.3 Presentation differences between Swiss and US accounting principles
(continued)
g. EXTRAORDINARY INCOME and EXTRAORDINARY EXPENSES include realized
gains/(losses) on sales of participations and physical assets, recoveries
of charge-off loans, allocation of contingency reserves, personnel costs
related to restructurings, IT systems, expenses for consultants and other
extraordinary income and expenses.
In the US GAAP and Swiss GAAP reformatted income statements, those
gains/(losses) associated with extraordinary events are presented, net of
income taxes, in the line item EXTRAORDINARY INCOME/(EXPENSE), NET.
Recoveries of charge-off loans are presented in the line item PROVISION
FOR CREDIT LOSSES. Personnel costs, IT systems, and expenses for
consultants related to restructuring projects are presented under the
caption RESTRUCTURING CHARGES. All other components are presented in
either OTHER REVENUE or OTHER EXPENSE.
Condensed consolidated balance sheets
h. The line item CASH AND OTHER LIQUID ASSETS includes cash, bank notes and
certain interest bearing and non-interest bearing accounts. The line item
MONEY MARKET PAPERS includes non-trading banker's acceptances and
commercial papers with original maturities of greater than 90 days,
certain trading instruments, non-trading certificates of deposit, cash
instruments and money market instruments with an original maturity less
than 90 days. The amount is shown net of the respective specific
allowances.
In the US GAAP and Swiss GAAP reformatted balance sheets, cash, bank
notes, non-interest bearing accounts, cash instruments and money market
instruments with original maturities less than 90 days are presented in
the line item CASH AND CASH EQUIVALENTS. Interest bearing accounts and
non-trading time deposits are presented in the line item INTEREST-BEARING
DEPOSITS WITH BANKS. Non-trading bankers' acceptances and commercial
papers with original maturities greater than 90 days are presented in the
line items INVESTMENT SECURITIES. Trading instruments are presented in
the line item TRADING ACCOUNT ASSETS. Specific allowances for money
market claims are presented in line items consistent with the related
assets.
i. For Swiss GAAP, the line item DUE FROM BANKS includes demand and time
accounts, precious metals demand and time accounts, federal funds sold,
securities purchased under resale agreements and securities borrowing
accounts. The amount is shown net of the respective specific allowances.
In the US GAAP and Swiss GAAP reformatted balance sheets, precious metals
demand accounts and certain demand accounts are presented in the line
item CASH AND CASH EQUIVALENTS. Certain demand accounts, precious metals
time accounts and all other time accounts with an original maturity less
than one year are presented in the line item INTEREST-BEARING DEPOSITS
WITH BANKS. Demand accounts, time accounts and precious metals time
accounts related to certain brokerage transactions are presented in the
line item BROKERAGE RECEIVABLES. Securities lending, certain securities
borrowing accounts and certain time accounts are presented in the line
item TRADING ACCOUNT ASSETS. Reverse repurchases, certain securities
borrowing and federal funds sold accounts are presented in the line item
FEDERAL FUNDS SOLD, SECURITIES PURCHASED UNDER RESALE AGREEMENTS AND
SECURITIES BORROWING TRANSACTIONS. Precious metals time accounts and all
other time accounts with an original maturity greater than one year
F-102
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.3 Presentation differences between Swiss and US accounting principles
(continued)
are presented in the line item LOANS, NET OF ALLOWANCE FOR CREDIT LOSSES.
Specific allowances for due from banks are presented in line items
consistent with the related assets.
j. The line item RECEIVABLES FROM THE INSURANCE BUSINESS includes premiums
and other receivables from agents and policyholders, policy loans and
other miscellaneous receivables.
In the US GAAP and Swiss GAAP reformatted balance sheets, receivables
from agents and policyholders are presented in the line item PREMIUMS AND
INSURANCE BALANCES RECEIVABLE, NET. Policy loans and miscellaneous
receivables are presented in the line item OTHER ASSETS.
k. The line item DUE FROM CUSTOMERS includes precious metals demand and
time accounts, demand and time accounts, reverse repurchase, securities
lending, securities borrowing and lease financing accounts. The amount is
shown net of the respective specific allowances.
In the US GAAP and Swiss GAAP reformatted balance sheets, precious metals
demand accounts are presented in the line item CASH AND CASH EQUIVALENTS.
Demand and time accounts and precious metals time accounts related to
brokerage transactions are presented in the line item BROKERAGE
RECEIVABLES. Securities lending, certain securities borrowing accounts
and certain time accounts are presented in the line item TRADING ACCOUNT
ASSETS. Precious metals time accounts and time accounts are presented in
the line item OTHER ASSETS. Securities purchased under resale agreements
and certain securities borrowing accounts are presented in the line item
FEDERAL FUNDS SOLD, REVERSE REPURCHASE AGREEMENTS AND SECURITIES LENDING
TRANSACTIONS. Demand accounts, precious metals time accounts and time
accounts not held for sale and lease financing accounts are presented in
the line item LOANS, NET OF ALLOWANCE FOR CREDIT LOSSES. Specific
allowances for due from customers' accounts are presented in line items
consistent with the related assets.
l. The line item MORTGAGES includes mortgages and real estate related
lease financings. The amount is shown net of the respective specific
allowances.
In the US GAAP and Swiss GAAP reformatted balance sheets, mortgages are
included in the line item OTHER ASSETS or the line item LOANS, NET OF
ALLOWANCE FOR CREDIT LOSSES, depending on management's intent. Certain
mortgages are presented in the line items TRADING ASSETS.
m. The line item SECURITIES AND PRECIOUS METALS TRADING PORTFOLIOS includes
certain trading securities and precious metal physical stocks.
In the US GAAP and Swiss GAAP reformatted balance sheets, these accounts
are presented in the line item TRADING ACCOUNT ASSETS.
n. The line item FINANCIAL INVESTMENTS FROM THE BANKING BUSINESS includes
equity securities, investments in venture capital, debt securities, money
market papers, real estate and repossessed assets. INVESTMENTS FROM THE
INSURANCE BUSINESS includes equity securities, debt securities,
derivative instruments, real estate held for investment, real estate held
for sale, loans, money market investments and investments held for
separate accounts.
In the US GAAP and Swiss GAAP reformatted balance sheets, equity
securities and debt securities classified as available for sale, interest
rate instruments classified as held-to-maturity and investments in
venture capital are presented in the line item INVESTMENT SECURITIES.
Real
F-103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.3 Presentation differences between Swiss and US accounting principles
(continued)
estate held for sale is presented in the line item REAL ESTATE HELD FOR
SALE and real estate investments are presented in the line item REAL
ESTATE HELD FOR INVESTMENT. Real estate held for own use is presented in
the line item TANGIBLE FIXED ASSETS. Other repossessed assets are
presented in the line item OTHER ASSETS. Investments held for separate
accounts are presented in the line item ASSETS HELD IN SEPARATE ACCOUNTS.
Money market investments and loans and mortgages of the insurance
business are presented in the line items INTEREST BEARING DEPOSITS WITH
BANKS and OTHER ASSETS, respectively.
o. The line item MONEY MARKET PAPERS ISSUED includes time deposits,
commercial papers and bankers' acceptances. In the US GAAP and Swiss GAAP
reformatted balance sheets, time deposits are presented in the line item
DEPOSITS. Commercial papers is presented in the line item SHORT-TERM
BORROWINGS.
p. The line items DUE TO BANKS and DUE TO CUSTOMERS, OTHER include demand
deposits, time deposits, precious metals demand and time deposits,
fiduciary deposits, liabilities from short positions, mortgages on own
real estate, federal funds purchased and sold, securities lending and
borrowing, repurchase agreements and lease finance accounts.
In the US GAAP and Swiss GAAP reformatted balance sheets, precious metals
demand and time deposits, demand deposits and certain time deposits are
presented in the line item DEPOSITS. Certain time deposits with an
original maturity less than one year are presented in the line item
SHORT-TERM BORROWINGS. Certain time deposits with an original maturity
greater than one year are presented in the line item LONG-TERM DEBT. DUE
TO BANKS and DUE TO CUSTOMERS, OTHER accounts related to certain
brokerage transactions are presented in the line item BROKERAGE PAYABLES.
Time deposits, commercial papers, interest bearing precious metals time
deposits and interest bearing demand and time deposits used to finance
investment banking or brokerage activities are presented in the line item
INVESTMENT BANKING and BROKERAGE BORROWINGS. Liabilities from short
positions and obligations to return collateral that has been resold are
presented in the line item TRADING ACCOUNT LIABILITIES. Mortgages on own
real estate and certain interest bearing time deposits are presented in
the line item LONG-TERM DEBT. Securities lending, repurchase agreements
and certain securities borrowing accounts are included in the line item
FEDERAL FUNDS PURCHASED, SECURITIES SOLD UNDER REPURCHASE AGREEMENTS AND
SECURITIES LENDING TRANSACTIONS. Lease liabilities are presented in the
line item OTHER LIABILITIES.
q. The line item DUE TO CUSTOMERS IN SAVINGS AND INVESTMENT DEPOSITS, is
presented in the line item DEPOSITS in the US GAAP and Swiss GAAP
reformatted balance sheets.
r. The line item TECHNICAL PROVISIONS FOR THE INSURANCE BUSINESS includes:
provisions for future policyholder benefits; provisions for future
dividends to policyholders; bonuses held on deposits; actuarial
provisions for annuities; provisions for death and other benefits;
provisions for unearned premiums; loss and loss adjustment expense
reserves, net of reinsurance reserves and policyholder funds.
F-104
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.3 Presentation differences between Swiss and US accounting principles
(continued)
In the US GAAP and Swiss GAAP reformatted balance sheets, provisions for
future policyholder benefits, loss and loss adjustment expense reserves
are presented gross of reinsurance reserves in the line item INSURANCE
POLICY AND CLAIMS RESERVES. Reinsurance reserves are presented separately
on the balance sheet in REINSURANCE RECOVERABLES. The provision for
future dividends to policyholders, provision for unearned premiums and
policyholder funds are presented in separate line items.
s. In the US GAAP and Swiss GAAP reformatted balance sheets, the line items
RESERVE FOR GENERAL BANKING RISKS and RESERVE FOR OWN SHARES are included
in the line item Retained earnings.
F-105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.3a Condensed consolidated statements of income
The following are condensed consolidated statements of income for the years
ended December 31, 2001, 2000 and 1999. In the following table US GAAP amounts
reflect adjustments for the valuation and income recognition differences as
described in note 46.2 and the presentation differences described in note 46.3.
Swiss GAAP has been reformatted to reflect US GAAP presentation differences.
Swiss GAAP Swiss GAAP Swiss GAAP
US GAAP US GAAP US GAAP reformatted reformatted reformatted
in CHF m 2001 2000 1999 2001 2000 1999
--------------------------------------------------------------------------------------------------------------------
Interest income 46,211 42,820 27,821 46,647 43,303 28,526
Commissions and fees 19,150 17,590 11,785 19,226 17,563 11,692
Trading revenue 8,955 9,361 6,706 8,430 8,976 5,942
Realised gains/(losses) from
sales of investments, net (1,770) 3,004 920 799 4,262 1,608
Insurance premiums 28,170 25,078 23,127 28,170 25,078 23,127
Other revenue 3,926 2,582 2,062 3,130 1,879 1,225
--------------------------------------------------------------------------------------------------------------------
Total revenue 104,642 100,435 72,421 106,402 101,061 72,120
--------------------------------------------------------------------------------------------------------------------
Interest expense 36,154 33,803 19,009 35,915 33,676 18,635
--------------------------------------------------------------------------------------------------------------------
Revenue, net of interest expense 68,488 66,632 53,412 70,487 67,385 53,485
--------------------------------------------------------------------------------------------------------------------
Provision for credit losses 1,569 1,041 1,044 1,717 910 1,044
Policyholder benefits and claims 25,079 22,401 20,334 25,202 22,257 20,580
--------------------------------------------------------------------------------------------------------------------
Total provisions for benefits,
claims and credit losses 26,648 23,442 21,378 26,919 23,167 21,624
--------------------------------------------------------------------------------------------------------------------
Insurance underwriting and
acquisition expenses 4,230 3,647 2,793 4,041 3,687 2,658
Dividends to policyholders 497 2,090 1,650 733 2,473 1,887
Salaries and employee benefits 21,641 18,904 14,003 21,821 18,503 13,554
Premises and equipment expenses,
net 4,208 3,201 2,717 3,993 3,055 2,519
Restructuring charges 33 607 0 26 1,499 12
Other expenses 10,674 7,844 6,495 9,980 7,472 6,027
Amortization of goodwill 1,269 635 452 770 246 96
--------------------------------------------------------------------------------------------------------------------
Total operating expenses 42,552 36,928 28,110 41,364 36,935 26,753
--------------------------------------------------------------------------------------------------------------------
(Loss)/profit before taxes,
extraordinary items and
minority interests (712) 6,262 3,924 2,204 7,283 5,108
--------------------------------------------------------------------------------------------------------------------
Income taxes (144) 1,495 1,093 389 1,261 790
--------------------------------------------------------------------------------------------------------------------
(Loss)/profit before
extraordinary items and
minority interests (568) 4,767 2,831 1,815 6,022 4,318
--------------------------------------------------------------------------------------------------------------------
Extraordinary income/(expenses),
net (1) 37 0 (1) 0 0
Cumulative effect of changes in
accounting principles 123 0 0 0 0 0
--------------------------------------------------------------------------------------------------------------------
Net (loss)/profit before minority
interests (446) 4,804 2,831 1,814 6,022 4,318
--------------------------------------------------------------------------------------------------------------------
Minority interests 241 317 56 227 237 68
--------------------------------------------------------------------------------------------------------------------
Net (loss)/profit (687) 4,487 2,775 1,587 5,785 4,250
--------------------------------------------------------------------------------------------------------------------
Certain reclassifications have been made to prior-year amounts to conform to the
current presentation.
F-106
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.3b Condensed consolidated balance sheets
The following are condensed consolidated balance sheets of the Group, at
December 31, 2001 and 2000. In the following table US GAAP amounts reflect
adjustments for the valuation and income recognition differences as described in
note 46.2 and the presentation differences described in note 46.3. Swiss GAAP
has been reformatted to reflect US GAAP presentation differences.
Swiss GAAP Swiss GAAP
US GAAP US GAAP reformatted reformatted
in CHF m 31.12.01 31.12.00 31.12.01 31.12.00
----------------------------------------------------------------------------------------------------------------
Assets
Cash and cash equivalents 9,524 13,982 9,361 14,059
Interest-bearing deposits with banks 34,055 22,886 28,176 25,986
Brokerage receivables 33,863 36,345 35,601 34,526
Investment securities 1) 130,217 126,348 130,012 124,769
Trading account assets 180,707 171,843 150,797 171,214
Encumbered assets 141,632 102,162 141,632 102,162
Real estate held for investment 10,395 10,214 7,938 7,531
Federal funds sold, securities purchased under resale
agreements, and securities borrowing transactions 298,810 284,224 230,604 232,456
Loans, net of allowance for credit losses 2) 173,534 167,663 169,998 162,174
Tangible fixed assets 10,133 10,293 9,027 9,465
Premiums and insurance balances receivable, net 8,024 6,932 8,021 6,929
Reinsurance recoverables 4,509 5,938 4,509 5,938
Goodwill 17,997 18,052 13,664 12,869
Present value of future profits 4,749 4,937 2,335 2,522
Deferred policy acquisition costs 4,237 2,783 5,662 3,965
Other assets 58,067 59,965 59,429 58,464
Assets held for separate accounts 14,519 12,888 14,519 12,888
----------------------------------------------------------------------------------------------------------------
Total assets 1,134,972 1,057,455 1,021,285 987,917
----------------------------------------------------------------------------------------------------------------
1) Including venture capital of CHF 13,985 m and CHF 4,745 m for US GAAP in
2001 and 2000, respectively, and CHF 14,457 m and CHF 4,007 m for Swiss
GAAP reformatted for 2001 and 2000, respectively.
2) Net of allowance for credit losses of CHF 9,245 m and CHF 10,699 m for US
GAAP in 2001 and 2000, respectively and CHF 9,234 m and CHF 10,579 m for
Swiss GAAP reformatted in 2001 and 2000, respectively.
F-107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
46.3b Condensed consolidated balance sheets (continued)
Swiss GAAP Swiss GAAP
US GAAP US GAAP reformatted reformatted
in CHF m 31.12.01 31.12.00 31.12.01 31.12.00
---------------------------------------------------------------------------------------------------------------
Liabilities and shareholders' equity
Deposits 270,690 267,494 269,076 267,965
Short-term borrowings 24,957 22,540 27,397 23,798
Brokerage payables 44,013 38,860 38,073 33,261
Trading account liabilities 161,997 172,170 154,100 174,415
Insurance policy and claims reserves 100,946 96,789 100,555 96,956
Provision for dividends to policyholders 5,917 9,611 5,782 8,611
Provision for unearned premiums 6,914 6,162 6,914 6,162
Policyholder funds 15,028 13,301 15,021 13,292
Federal funds purchased, securities sold under repurchase
agreements, and securities lending transactions 276,621 227,230 209,019 177,643
Other liabilities 62,149 56,984 52,215 56,423
Long-term debt 102,591 79,065 89,114 72,452
Liabilities held for separate accounts 15,098 13,417 15,098 13,417
---------------------------------------------------------------------------------------------------------------
Total liabilities 1,086,921 1,003,623 982,364 944,395
---------------------------------------------------------------------------------------------------------------
Minority interests 3,155 3,926 3,121 2,571
---------------------------------------------------------------------------------------------------------------
Common shares 3,590 6,009 3,590 6,009
Additional paid in capital 25,490 25,497 19,886 20,253
Common shares in treasury, at cost (5,602) (7,275) 0 0
Retained earnings 19,612 14,952 9,198 3,427
Accumulated other comprehensive income 2,493 6,236 1,539 5,477
Net income after minority interests (687) 4,487 1,587 5,785
---------------------------------------------------------------------------------------------------------------
Total shareholders' equity 44,896 49,906 35,800 40,951
---------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity 1,134,972 1,057,455 1,021,285 987,917
---------------------------------------------------------------------------------------------------------------
Certain reclassifications have been made to prior-year amounts to conform to the
current presentation.
F-108
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47 Additional disclosures required under US GAAP
The following disclosures within note 47 are required under US GAAP and unless
otherwise noted support the Swiss GAAP consolidated financial statements and are
presented on a Swiss GAAP basis.
47.1 Earnings per share
2001 2000 1999
-------------------------------------------------------------------------------------------------------------
Net profit/(loss) available for common shares (in CHF m)
Swiss GAAP - basic 1,587 5,785 4,250
Interest on convertible debt 1 4 6
-------------------------------------------------------------------------------------------------------------
Swiss GAAP - diluted 1,588 5,789 4,256
-------------------------------------------------------------------------------------------------------------
US GAAP - basic (687) 4,487 2,775
Interest on convertible debt 1 4 6
-------------------------------------------------------------------------------------------------------------
US GAAP - diluted (686) 4,491 2,781
-------------------------------------------------------------------------------------------------------------
Weighted-average number of shares outstanding
Swiss GAAP - basic 1,194,090,788 1,111,100,088 1,085,243,040
Potential dilutive common shares
Contingent issuable stock 69,028 139,084 1,743,392
Incremental shares from assumed conversions
Convertible bonds 770,152 2,064,896 7,884,608
Share options 8,517,586 2,387,608 366,400
-------------------------------------------------------------------------------------------------------------
Potential dilutive common shares 9,356,766 4,591,588 9,994,400
-------------------------------------------------------------------------------------------------------------
Swiss GAAP - diluted 1,203,447,554 1,115,691,676 1,095,237,440
-------------------------------------------------------------------------------------------------------------
US GAAP - basic 1) 1,101,915,935 1,051,796,048 1,040,262,440
Potential dilutive common shares
Contingent issuable stock 59,629,756 34,957,620 28,194,556
Incremental shares from assumed conversions
Convertible bonds 770,152 2,064,896 7,884,608
Share options 8,093,228 1,704,012 0
-------------------------------------------------------------------------------------------------------------
Potential dilutive common shares 68,493,136 38,726,528 36,079,164
-------------------------------------------------------------------------------------------------------------
US GAAP - diluted 1,170,409,071 1,090,522,576 1,076,341,604
-------------------------------------------------------------------------------------------------------------
Earnings per share (in CHF)
Swiss GAAP basic
Earnings before extraordinary items 1.52 6.73 3.97
Extraordinary items (0.19) (1.52) (0.05)
-------------------------------------------------------------------------------------------------------------
Net earnings per share 1.33 5.21 3.92
-------------------------------------------------------------------------------------------------------------
Swiss GAAP diluted
Earnings before extraordinary items 1.51 6.70 3.94
Extraordinary items (0.19) (1.51) (0.05)
-------------------------------------------------------------------------------------------------------------
Net earnings per share -- diluted 1.32 5.19 3.89
-------------------------------------------------------------------------------------------------------------
US GAAP basic
Earnings before extraordinary items (0.73) 4.23 2.67
Effect cumulative change in accounting principles 0.11 0.00 0.00
Extraordinary items 0.00 0.04 0.00
-------------------------------------------------------------------------------------------------------------
US GAAP -- basic (0.62) 4.27 2.67
-------------------------------------------------------------------------------------------------------------
US GAAP diluted
Earnings before extraordinary items (0.69) 4.08 2.58
Effect cumulative change in accounting principles 0.10 0.00 0.00
Extraordinary items 0.00 0.04 0.00
-------------------------------------------------------------------------------------------------------------
US GAAP -- diluted (0.59) 4.12 2.58
-------------------------------------------------------------------------------------------------------------
All share-related data have been adjusted for the 4-for-1 share split effective
as of August 15, 2001.
1) Own shares are deducted in the computation of the weighted-average number of
shares outstanding.
F-109
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.2 Consolidated cash flows
See also consolidated statement of source and application of funds. The
following table of consolidated cash flows was prepared based on changes in the
Swiss GAAP balance sheet amounts presented in the categories specified by US
GAAP.
in CHF m 2001 2000 1999
----------------------------------------------------------------------------------------------
Cash flows from operating activities
Net profit 1,587 5,785 4,250
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization 3,893 1,884 1,204
Provision for losses 2,014 1,218 1,496
Provision for deferred taxes 993 (279) 832
Other provisions (398) 632 (301)
Change in reserve for general banking risks 0 182 80
Change in technical provisions for the insurance business 7,543 6,359 6,291
Gain from investing activities, net (1,024) (4,430) (1,952)
Equity in earnings of non-consolidated participations (25) (196) (78)
Gain from disposal of non-consolidated participations, net (2) (2) (708)
Change in minority interests 981 1,372 206
Receivables from the insurance business (3,906) (2,427) 1,219
Payables from the insurance business 2,902 1,305 (1,822)
Securities and precious metals trading positions (9,044) (55,771) (17,971)
Deferred policy acquisition costs (1,156) (150) (461)
(Increase)/decrease in accrued income and other assets (8,196) (1,193) 17,698
Increase/(decrease) in accrued expenses and other
liabilities (4,758) (3,803) (14,705)
Amortization of premiums/accretion of discounts, net (77) (592) (160)
----------------------------------------------------------------------------------------------
Total adjustments (10,260) (55,891) (9,132)
----------------------------------------------------------------------------------------------
Net cash provided by/(used in) operating activities (8,673) (50,106) (4,882)
----------------------------------------------------------------------------------------------
Cash flows from investing activities
(Increase)/decrease in money market papers (1,579) 994 2,038
(Increase)/decrease in due from banks 7,435 (74,286) 11,396
(Increase)/decrease in due from customers/mortgages (14,691) (55,365) 5,411
Investments in subsidiaries and participations (1,546) (14,841) (3,452)
Disposal of subsidiaries and participations 1,548 379 1,674
Purchases of investments (113,431) (62,303) (87,661)
Maturities of investments 10,099 7,812 17,253
Disposal of investments 86,573 47,328 65,826
Capital expenditures on tangible and intangible assets (2,631) (2,383) (1,370)
Disposals of tangible and intangible assets 790 178 304
Other, net 0 0 173
----------------------------------------------------------------------------------------------
Net cash provided by/(used in) investing activities (27,433) (152,487) 11,592
----------------------------------------------------------------------------------------------
F-110
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.2 Consolidated cash flows (continued)
in CHF m 2001 2000 1999
---------------------------------------------------------------------------------------------
Cash flows from financing activities
Increase/(decrease) in money market papers issued (4,123) (2,120) 3,660
Increase /(decrease) in due to banks (27,529) 167,162 1,786
Increase/(decrease) in due to customers 43,110 25,918 (9,052)
Issuance of medium-term notes and bonds 43,441 14,015 9,516
Repayments of medium-term notes and bonds (16,714) (10,198) (12,943)
Deposits to policyowner account balances 2,790 1,966 2,614
Withdrawals from policyowner account balances (1,739) (1,169) (899)
Increase/(decrease) from issuance/retirement of common
shares (394) 8,716 759
Dividends paid (including minority interests) (2,568) (1,986) (1,427)
Other, net (18) 86 2
---------------------------------------------------------------------------------------------
Net cash provided by/(used in) financing activities 36,256 202,391 (5,984)
---------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 14 (11) 87
---------------------------------------------------------------------------------------------
Net increase/(decrease) in cash and cash equivalents 164 (213) 813
---------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of financial year 2,928 3,141 2,328
---------------------------------------------------------------------------------------------
Cash and cash equivalents at end of financial year 3,092 2,928 3,141
---------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information
---------------------------------------------------------------------------------------------
Cash paid during the year for income taxes 1,603 1,542 615
Cash paid during the year for interest 35,767 33,203 17,472
---------------------------------------------------------------------------------------------
Non-cash investing and financing activities
Transfer of loans to real estate held for sale 118 171 131
Securitization of loans 1,783 0 33
---------------------------------------------------------------------------------------------
Assets acquired and liabilities assumed in business
combinations
Fair value of assets acquired 9,109 100,688 3,582
Liabilities assumed (7,861) (86,223) (728)
Cash paid related to business acquisitions 1,248 14,465 2,854
---------------------------------------------------------------------------------------------
Assets and liabilities sold in business divestitures
Fair value of assets sold (10,476) (41) (1,218)
Liabilities sold 9,248 0 52
Cash received related to business divestitures (1,228) (41) (1,166)
---------------------------------------------------------------------------------------------
Certain reclassifications have been made to prior-year amounts to conform to the
current presentation.
F-111
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.3 US GAAP consolidated changes in shareholders' equity
See note 35 for additional information on changes in shareholders' equity. The
following table for the changes in shareholders' equity in accordance with US
GAAP.
Accumulated Common
Additional other shares in
Common shares Common paid in Retained comprehensive treasury
in CHF m (except number of shares) outstanding 1) shares capital 5) earnings income 4) at cost 2) Total
-----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 1,026,195,292 5,382 14,365 15,298 5,003 (2,758) 37,290
-----------------------------------------------------------------------------------------------------------------------------------
Net profit - - - 2,775 - - 2,775
Other comprehensive income, net of
tax - - - - 930 - 930
Issuance of common shares 12,480,476 62 697 - - - 759
Share-based compensation - - 122 - - - 122
Accrual for earned share
compensation 870 870
Release of treasury shares for
share compensation 17,017,520 (897) 897 0
Sale of treasury shares 189,911,688 - (2) - 12,261 12,259
Repurchase of treasury shares (202,380,248) - - - - (13,301) (13,301)
Net premium/discount on treasury
share and own share derivative
activity - - (6) - - - (6)
Cash dividends paid 3)
(CHF 1.25 per share) - - - (1,361) - - (1,361)
Dividend on treasury shares - - - 50 - - 50
-----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 1,043,224,728 5,444 15,149 16,762 5,933 (2,901) 40,387
-----------------------------------------------------------------------------------------------------------------------------------
Net profit - - - 4,487 - - 4,487
Other comprehensive income, net of
tax - - - - 303 - 303
Issuance of common shares 112,926,008 565 8,152 - - - 8,717
Share-based compensation - - 1,298 - - - 1,298
Accrual for earned share
compensation 1,945 1,945
Release of treasury shares for
share compensation 20,355,660 (1,277) 1,277 0
Sale of treasury shares 153,126,600 - 297 - - 12,304 12,601
Repurchase of treasury shares (225,750,840) - - - - (17,955) (17,955)
Net premium/discount on treasury
share and own share derivative
activity - - (67) - - - (67)
Cash dividends paid 3)
(CHF 1.75 per share) - - - (1,917) - - (1,917)
Dividend on treasury shares - - - 107 - - 107
-----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000 1,103,882,156 6,009 25,497 19,439 6,236 (7,275) 49,906
-----------------------------------------------------------------------------------------------------------------------------------
Net profit - - - (687) - - (687)
Other comprehensive income, net of
tax - - - (3,743) - (3,743)
Issuance of common shares 2,457,851 11 164 - - - 175
Cancellation of repurchased shares (7,600,000) (38) (531) - - - (569)
Share-based compensation - - 457 - - - 457
Accrual for earned share
compensation 2,097 2,097
Release of treasury shares for
share compensation 29,913,015 (2,133) 2,133 0
Sale of treasury shares 235,177,204 - (115) - - 15,925 15,810
Repurchase of treasury shares (243,106,991) - - - - (16,385) (16,385)
Net premium/discount on treasury
share and own share derivative
activity - - 54 - - - 54
Repayment out of share capital 3)
(CHF 2.00 per share) - (2,392) - -- - - (2,392)
Dividend on treasury shares - - - 173 - - 173
-----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2001 1,120,723,235 3,590 25,490 18,925 2,493 (5,602) 44,896
-----------------------------------------------------------------------------------------------------------------------------------
All share-related data have been adjusted for the 4-for-1 share split effective
as of August 15, 2001.
1) At par value CHF 3 each, fully paid.
2) Comprising 75,886,576, 97,869,804 and 45,601,224 treasury shares at
December 31, 2001, 2000 and 1999, respectively. In addition to the treasury
shares, a maximum of 191,026,457, 164,279,536 and 126,975,600 unissued
shares (conditional
F-112
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.3 US GAAP consolidated changes in shareholders' equity (continued)
and authorized capital) at December 31, 2001, 2000 and 1999, respectively,
were available for issuance without the approval of the shareholders.
3) Dividends are declared and paid in the year subsequent to the reporting
period. For the financial year 2000, repayment out of share capital as
approved on June 1, 2001 in lieu of a dividend.
4) Unrealized investment gains and losses have been reduced to the extent that
there is a legal or contractual obligation to pass those gains and losses
to policyholders when recognized. As a result, unrealized gains and losses
have been reduced by CHF (47) million, CHF 1,120 million and CHF
1,838 million in 2001, 2000 and 1999, respectively.
5) Balances include the accrued cost for shares to be delivered under the share
award plans. The cost attributable to share award plans at December 31,
2001, 2000, 1999 and 1998 amount to CHF 3,268 m, CHF 3,304 m, CHF 2,636 m
and 2,663 m respectively. The balances include the accrued cost for shares
granted subsequent to the financial year-end as part of the financial year
compensation.
The Group has commenced a share repurchase program of up to CHF 5 billion,
corresponding to approximately 66 million shares, over two years. The Group
began the repurchase over a second trading line at the SWX Swiss Exchange on
March 14, 2001. The amount and timing of the repurchases will depend on market
conditions, earnings and acquisition opportunities. On April 24, 2001, the Group
closed the first phase of the repurchase program having acquired 7.6 million
shares, which were cancelled on 10 August 2001. As approved by the Annual
General Meeting on June 1, 2001, 7.7 million shares were repurchased via second
trading line on the SWX Swiss Exchange between April 25, 2001 and April 24, 2002
for subsequent cancellation.The total purchase price was CHF 541,726,200,
corresponding to an average price per share of CHF 70.08 (adjusted for the 2001
4-for-1 share split and for the par value reduction of CHF 3). The Board is
proposing that the cancellation of the shares repurchased be approved at the
Annual General Meeting on May 31, 2002.
F-113
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.4 US GAAP accumulated other comprehensive income
The following table of accumulated other comprehensive income is in accordance
with US GAAP.
Unrealized
Foreign Unrealized gains/ Minimum Accumulated
currency gains/ (losses) on pension other
translation (losses) on cash flow liability comprehensive Comprehensive
in CHF m adjustments securities hedges adjustment income income
---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 0 5,005 - (2) 5,003 -
---------------------------------------------------------------------------------------------------------------------------------
Net profit - - - - - 2,775
Other comprehensive income, net of tax:
Foreign currency translation adjustments 1,172 - - - 1,172 -
Unrealized gains/(losses) on securities:
Unrealized holding gains/(losses) arising
during period, net of tax of CHF 359 m - 590 - - 590 -
Less: Reclassification adjustment for
gains/ (losses) included in net income,
net of tax of CHF 177 m - (837) - - (837) -
Minimum pension liability adjustment, net
of tax of CHF 0 m - - - 5 5 -
---------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income 1,172 (247) - 5 930 930
---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 1,172 4,758 - 3 5,933 -
---------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income 1999 - - - - - 3,705
---------------------------------------------------------------------------------------------------------------------------------
Net profit - - - - - 4,487
Other comprehensive income, net of tax:
Foreign currency translation adjustments (825) - - - (825) -
Unrealized gains/(losses) on securities:
Unrealized holding gains/(losses) arising
during period, net of tax of CHF 225 m - 3,536 - - 3,536 -
Less: Reclassification adjustment for
gains/ (losses) included in net income,
net of tax of CHF 709 m - (2,404) - - (2,404) -
Minimum pension liability adjustment, net
of tax
of CHF 2 m - - - (4) (4) -
---------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (825) 1,132 (4) 303 303
---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000 347 5,890 (1) 6,236 -
---------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income 2000 - - - - 4,790
---------------------------------------------------------------------------------------------------------------------------------
Net profit -- -- - -- -- (687)
Other comprehensive income, net of tax:
Foreign currency translation adjustments (48) - - - (48) --
Unrealized gains/(losses) on securities:
Unrealized holding gains/(losses) arising
during period, net of tax of CHF 412 m - (3,052) - - (3,052) --
Less reclassification adjustment for
gains/ (losses) included in net income,
net of tax of CHF (190) m - (330) - - (330) --
Unrealized gains/(losses) on cash flow
hedges:
Unrealized holding gains/(losses) arising
during period, net of tax of CHF 1 m - - (81) - (81) --
Less reclassification adjustment for
gains/ (losses) included in net income,
net of tax of CHF 0 m - - 0 - 0 --
Cumulative effect of changes in accounting
principles, net of tax of CHF 7 m - - (17) - (17) --
Minimum pension liability adjustment, net
of tax of CHF 60 m - - - (215) (215) --
---------------------------------------------------------------------------------------------------------------------------------
Changes in other comprehensive income (48) (3,382) (98) (215) (3,743) (3,743)
---------------------------------------------------------------------------------------------------------------------------------
As of December 31, 2001 299 2,508 (98) (216) 2,493
---------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income 2001 -- -- -- -- -- (4,430)
---------------------------------------------------------------------------------------------------------------------------------
F-114
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.5 Recently issued US accounting standards
Accounting for Business combinations and Goodwill
In July 2001, the FASB issued SFAS NO. 141, BUSINESS COMBINATIONS (SFAS
No. 141), and SFAS NO. 142, GOODWILL AND OTHER INTANGIBLE ASSETS (SFAS
No. 142).
SFAS No. 141 requires that the purchase method of accounting be used for all
business combinations and the use of the pooling of interests method will be
prohibited. This statement is effective for business combinations initiated
after June 30, 2001 and for purchase method of accounting business combinations
completed after June 30, 2001. In addition, SFAS 141 requires certain intangible
assets to be recognized apart from goodwill and sets forth specific criteria
relating to the recognition of intangible assets acquired in business
combinations. The adoption of SFAS 141 may result in certain intangible assets
being reclassified to goodwill. Earlier adoption or retroactive application is
not permitted.
SFAS No. 142 changes the accounting for goodwill and intangible assets with
indefinite lives from an amortization method to an impairment-only approach.
Accordingly, amortization of goodwill, including goodwill recorded in prior
business combinations, will cease upon adoption of SFAS No. 142. Other
intangible assets with finite lives will continue to be amortized over their
assigned useful lives. For the Group and other calendar year companies, this
statement is effective for financial years beginning after December 15, 2001,
and earlier adoption or retroactive application is not permitted.
The Group will apply the new accounting guidelines in these statements for
reporting in the first six months of 2002. The non-amortization provisions of
SFAS No. 142 are expected to result in an adjustment to amortization expense,
net of tax, for the year ended December 31, 2002 of CHF 1.6 billion
(approximately CHF 1.33 per share). The actual assessment of the impact on the
Group's earnings and financial position of the impairment provisions of SFAS
No. 142 will be based on goodwill and other intangible assets recorded on
January 1, 2001, in accordance with the standard. The Group will perform the
first of the required impairment tests of goodwill and indefinite life
intangible assets during the first six months of 2002. Due to the extensive
effort involved in adopting SFAS No. 141 and SFAS No. 142, the Group is
currently unable to determine what the effect of these tests will be on the
earnings and financial position of the Group.
Accounting for the impairment or disposal of long-lived assets
In October 2001, the FASB issued SFAS NO. 144, ACCOUNTING FOR THE IMPAIRMENT OR
DISPOSAL OF LONG-LIVED ASSETS (SFAS No. 144).
SFAS 144 supercedes SFAS NO. 121 ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF (SFAS 121), and the accounting
and reporting provisions of APB OPINION NO. 30 REPORTING THE RESULTS OF
OPERATIONS -- REPORTING THE EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS, AND
EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURING EVENTS AND TRANSACTIONS (APB
30). This statement also amends ARB 51 CONSOLIDATED FINANCIAL STATEMENTS (ARB
51), to elimiate the exception to consolidation for a temporarily controlled
subsidiary.
SFAS 144 is effective for financial years beginning after December 15, 2001.
Upon adoption all long-lived assets to be disposed of and discontinued
operations and shall be measure at the lower of the carrying amount of fair
value less costs to sell. It also broadens the definition of discontinued
operations but does not allow for the accrual of future operating losses, as was
previously permitted.
Due to the effort involved in adopting SFAS 144, the Group is currently unable
to determine the effect on earnings and the financial position of the Group.
F-115
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.6 Investments
The following tables are based on the consolidated Swiss GAAP balance sheet as
held-to-maturity or available-for-sale based on US GAAP criteria. Additional
information regarding investments can be found in note 22 for financial
investments from the banking business, note 23 for investments from the
insurance business and note 24 for own shares included in the investments from
the banking and insurance business.
Money market papers
Gross Gross
Amortized unrealized unrealized
December 31, 2001 (in CHF m) Book value cost gains losses Fair value
-------------------------------------------------------------------------------------------------------------------------------
Debt securities issued by foreign governments 3,401 3,401 0 0 3,401
-------------------------------------------------------------------------------------------------------------------------------
Securities held-to-maturity 3,401 3,401 0 0 3,401
-------------------------------------------------------------------------------------------------------------------------------
Debt securities issued by the Swiss Federal Gov-
ernment, cantonal or local governmental entities 1,266 1,266 0 0 1,266
Debt Securities issued by foreign governments 1,594 1,594 0 0 1,594
Corporate debt securities 292 292 0 0 292
Other 0 0 0 0 0
-------------------------------------------------------------------------------------------------------------------------------
Securities available-for-sale 3,152 3,152 0 0 3,152
-------------------------------------------------------------------------------------------------------------------------------
Other money market papers1) 25,474 - - - -
-------------------------------------------------------------------------------------------------------------------------------
Total money market papers 32,027 - - - -
-------------------------------------------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized
December 31, 2000 (in CHF m) Book value cost gains losses Fair value
-------------------------------------------------------------------------------------------------------------------------------
Debt securities issued by foreign governments 1,408 1,408 0 0 1,408
-------------------------------------------------------------------------------------------------------------------------------
Securities held-to-maturity 1,408 1,408 0 0 1,408
-------------------------------------------------------------------------------------------------------------------------------
Debt securities issued by Swiss Federal Government,
cantonal or local governmental entities 1,555 1,564 0 0 1,564
Debt securities issued by foreign governments 3,725 3,725 0 0 3,725
Corporate debt securities 271 271 0 0 271
Other 78 78 0 0 78
-------------------------------------------------------------------------------------------------------------------------------
Securities available-for-sale 5,629 5,638 0 0 5,638
-------------------------------------------------------------------------------------------------------------------------------
Other money market papers 1) 23,090 - - - -
-------------------------------------------------------------------------------------------------------------------------------
Total money market papers 30,127 - - - -
-------------------------------------------------------------------------------------------------------------------------------
1) Not considered debt securities under US GAAP criteria but rather cash and
cash equivalents, interest bearing deposits due from banks and trading
assets.
F-116
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.6 Investments (continued)
Financial investments from the banking business
Gross Gross
Amortized unrealized unrealized
December 31, 2001 (in CHF m) Book value cost gains losses Fair value
-------------------------------------------------------------------------------------------------------------------------------
Debt securities issued by foreign governments 5,691 5,691 5 2 5,694
Corporate debt securities 3 3 0 0 3
Other 0 0 0 0 0
-------------------------------------------------------------------------------------------------------------------------------
Debt securities held-to-maturity 5,694 5,694 5 2 5,697
-------------------------------------------------------------------------------------------------------------------------------
Debt securities issued by the Swiss Federal
Government, cantonal or local governmental
entities 502 502 22 18 506
Debt securities issued by foreign governments 8,441 8,446 80 5 8,521
Corporate debt securities 1,206 1,204 14 1 1,217
Other 422 422 2 1 423
-------------------------------------------------------------------------------------------------------------------------------
Debt securities available-for-sale 10,571 10,574 118 25 10,667
-------------------------------------------------------------------------------------------------------------------------------
Equity securities 3,694 3,731 2,199 38 5,892
-------------------------------------------------------------------------------------------------------------------------------
Securities available-for-sale 14,265 14,305 2,317 63 16,559
-------------------------------------------------------------------------------------------------------------------------------
Own shares 773 -- -- -- --
Own bonds 31 -- -- -- --
Investments in venture capital 14,458 -- -- -- --
Real estate 2,070 -- -- -- --
Other 15 -- -- -- --
-------------------------------------------------------------------------------------------------------------------------------
Total financial investments from the banking
business 37,306
-------------------------------------------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized
December 31, 2000 (in CHF m) Book value cost gains losses Fair value
-------------------------------------------------------------------------------------------------------------------------------
Debt securities issued by foreign governments 4,021 4,021 1 1 4,021
Corporate debt securities 99 99 0 0 99
Other 14 14 0 0 14
-------------------------------------------------------------------------------------------------------------------------------
Debt securities held-to-maturity 4,134 4,134 1 1 4,134
-------------------------------------------------------------------------------------------------------------------------------
Debt securities issued by Swiss Federal Government,
cantonal or local governmental entities 764 764 23 20 767
Debt securities issued by other foreign governments 7,625 7,633 112 9 7,736
Corporate debt securities 974 974 20 2 992
Other 466 466 9 1 474
-------------------------------------------------------------------------------------------------------------------------------
Debt securities available-for-sale 9,829 9,837 164 32 9,969
-------------------------------------------------------------------------------------------------------------------------------
Equity securities 5,144 5,169 3,278 25 8,422
-------------------------------------------------------------------------------------------------------------------------------
Equity securities available-for-sale 14,973 15,006 3,442 57 18,391
-------------------------------------------------------------------------------------------------------------------------------
Own bonds 1 - - - -
Investments in venture capital 3,988 - - - -
Real estate 2,469 - - - -
Other 9 - - - -
-------------------------------------------------------------------------------------------------------------------------------
Total financial investments from the banking
business 25,574 - - - -
-------------------------------------------------------------------------------------------------------------------------------
F-117
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.6 Investments (continued)
The following table presents proceeds from sales of securities and realized
gains and losses, on both Swiss GAAP and US GAAP bases, for the years ended
December 31:
Available-for-sale securities
Debt securities Debt securities Debt securities Equity securities Equity securities Equity securities
in CHF m 2001 2000 1999 2001 2000 1999
--------------------------------------------------------------------------------------------------------------------------------
Proceeds from sales 29,161 13,880 25,579 22,952 15,050 12,731
Realized gains
Swiss GAAP basis 1,280 611 310 4,396 5,335 2,085
US GAAP basis 1,004 409 240 2,610 4,014 1,668
Realized losses
Swiss GAAP basis 303 251 201 2,919 1,055 513
US GAAP basis 303 241 313 2,923 1,069 581
--------------------------------------------------------------------------------------------------------------------------------
Transfers of equity securities and securities classified as available-for-sale
to trading account assets resulted in realized gross gains of CHF 0 million, CHF
25 million and CHF 52 million during 2001, 2000 and 1999, respectively, and
gross losses of CHF 17 million, CHF 0 million and CHF 18 million in 2001, 2000
and 1999, respectively.
The Group recognized other than temporary impairments on investments securities
held as available-for-sale of CHF 1,152 million, CHF 357 million and CHF 0
million in 2001, 2000 and 1999, respectively.
The following table presents the amortized cost and fair value of securities
classified as available-for-sale and held-to-maturity by contractual maturity
dates as of:
Securities Securities Securities Securities
Debt securities held-to-maturity held-to-maturity available-for-sale available-for-sale
December 31, 2001 (in CHF m) amortized cost fair value amortized cost fair value
-------------------------------------------------------------------------------------------------------------------------------
From the banking business
Due in one year or less 1,920 1,919 3,279 3,290
Due from one to five years 3,774 3,778 6,912 6,996
Due from five to ten years 0 0 323 321
Due after ten years 0 0 60 60
-------------------------------------------------------------------------------------------------------------------------------
Total debt securities from the banking business 5,694 5,697 10,574 10,667
-------------------------------------------------------------------------------------------------------------------------------
From the insurance business
Due in one year or less 0 0 2,031 2,059
Due from one to five years 0 0 18,300 18,768
Due from five to ten years 0 0 32,140 32,576
Due after ten years 0 0 12,937 13,157
-------------------------------------------------------------------------------------------------------------------------------
Total debt securities from the insurance business 0 0 65,408 66,560
-------------------------------------------------------------------------------------------------------------------------------
At December 31, 2001, money market papers held by the Group which are classified
as either available-for-sale or held-to-maturity primarily mature within one
year.
F-118
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.6 Investments (continued)
At December 31, 2001, insurance financial investments with the fair value and
book value of CHF 112 million and CHF 107 million, respectively, were on deposit
with regulatory authorities. The Group retains ownership of all securities on
deposit and receives the related investment income.
The net change in unrealized gains and losses for investments from the insurance
business were as follows for the years ended December 31:
in CHF m 2001 2000 1999
--------------------------------------------------------------------------------------------------------------------------------
Debt securities (127) 512 (3,656)
Equity securities (7,240) (2,762) 3,571
Other investments 314 16 (644)
--------------------------------------------------------------------------------------------------------------------------------
Change in unrealized investment gains (losses) (7,053) (2,234) (729)
Adjustments
Deferred policy acquisition costs 543 158 59
Present value of future profits 31 (3) 3
Policyholder liabilities 1,517 418 27
Deferred income taxes 670 1,168 124
--------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized investment gains and losses from the insurance business (4,292) (493) (516)
--------------------------------------------------------------------------------------------------------------------------------
At December 31, 2001, the aggregate investments in debt securities from three
specific individual counterparties were each in excess of 10% of consolidated
shareholders' equity, excluding minority interests. Aggregate investments in
debt securities issued by two European governments and a European financial
institution represented approximately 18.4%, 17.2% and 14.3% respectively, of
the December 31, 2001 balance of consolidated shareholders' equity, excluding
minority interests. The Standard and Poor's ratings for these were AA, AAA and
AAA, respectively.
47.7 Real estate held for investment from the insurance business
The following table shows real estate held for investment from the insurance
business at December 31 for the years presented.
Amounts shown are Swiss GAAP reformatted to US GAAP presentation.
in CHF m 31.12.01 31.12.00
---------------------------------------------------------------------------------------------------------------------------------
Land 1,978 1,887
Buildings and improvements 7,283 6,842
---------------------------------------------------------------------------------------------------------------------------------
Total cost 9,261 8,729
---------------------------------------------------------------------------------------------------------------------------------
Accumulated depreciation 1,718 1,646
---------------------------------------------------------------------------------------------------------------------------------
Net book value 7,543 7,083
---------------------------------------------------------------------------------------------------------------------------------
Estimated fair value 10,367 10,052
---------------------------------------------------------------------------------------------------------------------------------
F-119
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.8 Brokerage receivables and brokerage payables
The Group has receivables and payables from transactions in financial
instruments purchased from and sold to banks, customers, brokers and dealers.
The Group is exposed to risk of loss from the inability of its counterparty to
pay for a purchase or to deliver the financial instruments sold, in which case
the Group would have to sell or purchase the financial instruments at prevailing
market prices. To the extent an exchange or clearing organization acts as a
counterparty to a transaction, credit risk is generally reduced. The Group
requires customers to maintain margin collateral in compliance with applicable
regulatory and internal guidelines. Amounts shown below are Swiss GAAP
reformatted to US GAAP presentation.
Brokerage receivables and brokerage payables, which arise in the normal course
of business, consisted of the following as of:
in CHF m 31.12.01 31.12.00
---------------------------------------------------------------------------------
Receivables due from customers 23,425 25,395
Receivables due from banks, brokers and dealers 12,176 9,131
---------------------------------------------------------------------------------
Total brokerage receivables 35,601 34,526
---------------------------------------------------------------------------------
Payables due to customers 28,860 23,340
Payables due to banks, brokers and dealers 9,213 9,921
---------------------------------------------------------------------------------
Total brokerage payables 38,073 33,261
---------------------------------------------------------------------------------
47.9 Securities borrowed, lent and subject to repurchase agreements
See also note 39 for additional information.
Amounts shown below are Swiss GAAP reformatted to US GAAP presentation.
Securities borrowed or purchased under agreements to resell, at their respective
balance sheet values, consisted of the following as of:
in CHF m 31.12.01 31.12.00
---------------------------------------------------------------------------------
Federal funds sold and securities purchased under resale
agreements 206,964 201,972
Deposits paid for securities borrowed - cash only 23,640 30,484
---------------------------------------------------------------------------------
Total funds and securities 230,604 232,456
---------------------------------------------------------------------------------
Certain restatements have been made to prior-year amounts to conform to the
current presentation.
Securities lent or sold under agreements to repurchase, at their respective
balance sheet values, consisted of the following as of:
in CHF m 31.12.01 31.12.00
---------------------------------------------------------------------------------
Federal funds purchased and securities sold under agreements
to repurchase 185,320 157,974
Deposits received for securities lent - cash only 23,699 19,669
---------------------------------------------------------------------------------
Total funds and securities 209,019 177,643
---------------------------------------------------------------------------------
Certain restatements have been made to prior-year amounts to conform to the
current presentation.
The maximum month end amount of securities purchased under agreements to resell
was CHF 225,482 million, CHF 201,972 million and CHF 111,773 million in 2001,
2000 and 1999,
F-120
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.9 Securities borrowed, lent and subject to repurchase agreements (continued)
respectively. The average amount of securities purchased under agreements to
resell during the year was CHF 209,790 million, CHF 164,632 million and
CHF 94,979 million in 2001, 2000 and 1999, respectively.
The resale and repurchase agreements represent collateralized financing
transactions used to earn net interest income, increase liquidity, or facilitate
trading activity. These instruments are collateralized principally by government
securities and money market instruments and generally have terms ranging from
overnight to a longer or unspecified period of time. It is the Group's policy to
take possession of the underlying collateral, monitor its market value relative
to the amounts due under the agreements, and when necessary, require prompt
transfer of additional collateral or reduction in the loan balance in order to
maintain contractual margin protection. In the event of counterparty default,
the financing agreement provides the Group with the right to liquidate the
collateral held. In the Group's normal course of business, substantially all of
the collateral received that may be sold or repledged, has been sold or
repledged at December 31, 2001.
Deposits paid for securities borrowed and deposits received for securities lent
are recorded at the amount of cash advanced or received and are collateralized
principally by cash or marketable securities. Securities borrowed transactions
require the deposit of cash or securities collateral with the lender. For
securities lent transactions, the Group receives cash or securities collateral
in an amount generally in excess of the market value of securities lent. The
Group monitors the market value of securities borrowed and securities lent on a
daily basis, and additional collateral is obtained as necessary.
Securitization Activity
The Group enters into various transactions whereby commercial and residential
mortgages as well as corporate bonds are sold to qualifying trust or special
purpose trusts and beneficial interest in those trusts are sold to investors.
The investors and the securitization trusts have no recourse to the Group's
other assets for failure of debtors to pay when due.
In 2001, the Group recognized pre-tax gains of CHF 134 million on the
securitization of the commercial mortgages, CHF 99 million pre-tax gain on the
securitzation of residential mortgages and CHF 195 million pre-tax gain on
securitizations of corporate bonds, respectively.
The following table summarizes cash flows received from securitization trusts
for the year ended December 31:
2001 2000
------------------------------------- ---------------------------------
in CHF m Commercial Residential Commercial Residential
Mortgages Mortgages Bonds Mortgages Mortgages Bonds
---------------------------------------------------------------------------------------------------------------------
Proceeds from new securitizations 14,583 28,692 18,815 4,709 1,216 518
Other cash flows received (gains/losses) 163 99 158 16 0 3
---------------------------------------------------------------------------------------------------------------------
F-121
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.9 Securities borrowed, lent and subject to repurchase agreements (continued)
The fair value of retained interest from securitizations, key economic
assumptions used to value, as of December 31, 2001 and the sensitivity of the
current fair value to immediate adverse percent changes in those assumptions are
as follows:
Commercial Residential
Mortgage Mortgage
Loans Loans Bonds
-------------------------------------------------------------------------------------------------------------------
Carrying amount/fair value of retained interests (in CHF m) 1,230 1,690 590
Weighted-average life (in years) 0.3 to 9.3 1.6 to 21.1 0.1 to 11.5
Weighted-average CHF value change for one basis point
movement 0.04 0.05 0.03
Prepayment Speed Assumption 2) N/A 1) 100 PSA to 833 PSA 5) N/A 4)
Impact on fair value of 10% adverse change N/A 9 N/A
Impact on fair value of 20% adverse change N/A 12 N/A
Floating Interest Rate/Cash Flow Discount rate Libor +/- Spread 6.86 8.29
Impact on fair value of 10% adverse change 19 34 10
Impact on fair value of 20% adverse change 37 68 20
Expected credit losses 3)
Impact on fair value of 2% adverse change 0 0 1
Impact on fair value of 5% adverse change 1 0 2
-------------------------------------------------------------------------------------------------------------------
1) These mortgages typically have prepayment fees associated with them and have
balloon payments at the end of the term and as such prepayments are not
considered key assumptions.
2) PSA is an industry standard prepayment speed model used in the calculation
of the fair value of the retained interest. PSA utilizes the Constant
Prepayment Rate (CPR) assumptions. A 100% prepayment assumption assumes a
prepayment rate of 0.2% per annum of the outstanding principal balance of
mortgage loans in the first month of life. This increases by 0.2% thereafter
during the life of the mortgage loan leveling off to a constant prepayment
rate of 6.0% per annum beginning in the thirtieth month and each month
thereafter during the life of the mortgage loan. 100 PSA equals 100 Constant
Prepayment Rate (CPR).
3) Expected credit losses for mortgage loans are assumed to be zero as
generally the underlying mortgages are secured by real property and
substantially all beneficial interest retained represents investment grade
interests.
4) The majority portfolio consists of high-yield and investment grade corporate
bonds. These obligations are not prepayable. The remaining portfolio
consists of commercial and residential loans. Commercial obligations
typically have balloon payments and as such prepayments are not considered
key assumptions.
5) Amid falling rates in 2001, huge prepayment volatility occurred especially
with respect to the initial pricing assumptions.
These sensitivities are hypothetical and should be used with caution. Changes in
fair value based on a 10 percent variation in assumptions generally cannot be
extrapolated because the relationship of the change in assumption to the change
in fair value may not be linear. Also, the effect of a variation in a particular
assumption on the fair value of the retained interests is calculated without
changing any other assumption. Therefore, changes in one assumption may result
in changes in another assumption which might magnify or counteract the
sensitivities.
F-122
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.10 Income taxes
See note 14 for additional information on taxes.
The Group is incorporated in Switzerland and operates in various countries with
differing tax laws and rates. A substantial amount of the Group's income before
taxes and related taxes are generated outside of Switzerland. Consequently, the
effective tax rate may vary from period to period to reflect the generation of
taxable income in tax jurisdictions.
A reconciliation of taxes computed at the statutory rate of 25% to the actual
taxes is shown in the following table.
in % 2001 2000 1999
--------------------------------------------------------------------------------------------
Statutory tax rate 25.0 25.0 25.0
Increases/(decreases) in taxes resulting from:
Effects of different tax rates (29.6) (9.6) (10.7)
Net operating losses (NOL) for which no deferred tax asset
is recognized 36.8 4.4 9.9
Utilization of NOL (7.9) (7.6) (10.0)
Changes in deferred tax valuation allowance 2.8 (2.1) (3.0)
Lower taxed income (21.2) (1.4) (2.5)
Non deductible expenses, allowances and deductions 26.8 3.7 (1.0)
Other (11.6) 5.9 8.8
--------------------------------------------------------------------------------------------
Effective tax rate 21.1 18.3 16.5
--------------------------------------------------------------------------------------------
At December 31, 2001 and 2000, deferred tax assets based on Swiss GAAP totaled
CHF 6,910 million and CHF 6,883 million, respectively, while deferred tax
liabilities based on Swiss GAAP totaled CHF 5,740 million and
CHF 6,659 million at December 31, 2001 and 2000, respectively.
At December 31, 2001 and 2000, the Group had accumulated undistributed earnings
from foreign subsidiaries, which are subject to unrecoverable withholding tax of
CHF 8,754 million and CHF 6,055 million, respectively. No deferred tax has been
recorded as these earnings are considered indefinitely reinvested. If these
earnings were distributed, the Group would be subject to unrecoverable
withholding tax of CHF 539 million and CHF 344 million at December 31, 2001 and
2000, respectively.
Foreign income/(loss) before tax expense was CHF (630) million,
CHF 2,347 million and CHF 2,341 million at December 31, 2001, 2000 and 1999,
respectively. Foreign income is defined as income generated by operations
located outside Switzerland.
F-123
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
47.10 Income taxes (continued)
Presented below in accordance with SFAS NO. 109 ACCOUNTING FOR INCOME TAXES, is
the tax effect of temporary differences that give rise to significant portions
of the US GAAP deferred tax assets and deferred tax liabilities valued in
accordance with US GAAP as of:
in CHF m
31.12.01 31.12.00
---------------------------------------------------------------------------------
Insurance technical provisions 2,092 1,922
Employment benefits 2,254 2,513
Investment Securities 317 149
Provisions 1,908 195
Derivatives 120 892
Real estate 339 238
NOL carry-forwards 1,862 2,266
Other 1,364 1,266
---------------------------------------------------------------------------------
Deferred tax asset before valuation allowance 10,256 9,441
Less valuation allowance (1,400) (1,155)
---------------------------------------------------------------------------------
Deferred tax assets net of valuation allowance 8,856 8,286
---------------------------------------------------------------------------------
Insurance technical provisions (525) (76)
Employee benefits (85) (68)
Investment securities (1,184) (2,234)
Present value of future profits (1,576) (1,953)
Deferred policy acquisition costs (698) (535)
Business combinations (1,863) (1,766)
Derivatives (69) (277)
Software capitalization (211) (124)
Leasing (169) (165)
Real estate (599) (624)
Other (1,126) (1,017)
---------------------------------------------------------------------------------
Deferred tax liabilities (8,105) (8,839)
---------------------------------------------------------------------------------
Net deferred tax assets/(liabilities) 751 (553)
---------------------------------------------------------------------------------
Certain foreign branches and subsidiaries of the Group have deferred tax assets
related to net operating loss carry-forwards and other items. A US GAAP
valuation allowance has been recognized because it is "more likely than not"
that some portion of the deferred tax will not be realized due to limited carry-
forward periods and expected taxable profits. The net change during 2001 in the
total valuation allowance was CHF 245 million. This change was due to
utilization of tax carry-forwards. Based on management's assessment, it is more
likely than not that all the net deferred tax assets will be realised through
future taxable income or implementation of tax planning strategies.
At December 31, 2001, the Group had available net operating loss carry-forwards
totalling CHF 6,692 million, the latest of which expires in 2020.
47.11 Reinsurance
See also note 16 for additional information on reinsurance.
F-124
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
47.11 Reinsurance (continued)
The Group's non-life and life insurance companies cede some of their insurance
risks to third-parties in order to provide greater diversification of their
businesses, provide additional capacity for future growth, effect
business-sharing arrangements, protect against catastrophic events and limit the
potential for losses arising from large risks. The reinsurance arrangements do
not relieve the Group from its direct obligation to its policyholders. Thus, a
credit exposure exists to the extent that any reinsurer is unable to meet the
obligations assumed under the reinsurance arrangements. The Group evaluates the
financial condition of its reinsurers and monitors concentrations of credit risk
to reinsurers to minimize its exposure to significant losses from reinsurers'
insolvencies. The Group's current policy is generally to place its reinsurance
with companies rated either AAA or AA by Standard & Poor's. A balance sheet
provision has been recorded for estimated unrecoverable reinsurance of
CHF 4 million and CHF 7 million for 2001 and 2000, respectively. In addition,
the Group's policy is to generally hold collateral in the form of cash,
securities and letters of credit as security under the related reinsurance
agreements. Concentrations with individual reinsurers are not material to the
Group and the Group is not substantially dependent upon any reinsurance
contract.
Non-life reinsurance
Over the past several years, the Group has gradually been replacing its
proportional reinsurance treaties with non-proportional treaties. Retention
limits are based generally on the line of business and the jurisdiction of
coverage. The Group has a global catastrophic reinsurance protection program
providing coverage for losses arising from any one incident in excess of
CHF 50 million and CHF 50 million per year for all losses (incidents) between
CHF 50 million and CHF 100 million (USD 25 million and 50% of the losses
(incidents) between USD 25 million and USD 50 million in North America).
Reinsurance assumed by the Group from other companies is done on a facultative
basis.
H.S. Weavers was an underwriting agent that wrote business on behalf of
Winterthur Insurance through year-end 1983. The agency accepted commercial
umbrella and excess casualty business from US companies, and, as a result, has
significant exposure to asbestos, pollution and other health hazard claims.
Effective July 1, 2000, Winterthur Insurance purchased retroactive reinsurance
coverage from the National Indemnity Corporation to limit the exposure from this
book of business. The reinsurance provides coverage up to USD 800 million
against an estimated undiscounted exposure of USD 584 million. As a result of
this retroactive reinsurance transaction, Winterthur Insurance recorded a net
deferred gain in 2000 in the amount of USD 233 million CHF 381 million. The net
deferred gain will be amortized to operating income over the estimated
settlement period. At December 31, 2001, the remainder of the deferred gain to
be amortized in future years was USD 203 million (CHF 340 million).
Life reinsurance
The Group limits its exposure to losses on any single life. For ordinary
insurance, Winterthur Life & Pensions retains a maximum coverage of
approximately CHF 3 million per individual life. There are smaller retentions
for certain geographic regions and other products. Life reinsurance is entered
into principally under surplus agreements on yearly renewable term or modified
co-insurance basis. Amounts recoverable from life reinsurers are estimated in a
manner consistent with the assumptions used for the underlying policy benefits.
F-125
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
47.12 Present value of future profits
The following table represents the activity in the present value of future
profits (PVFP) for the years ended December 31:
in CHF m
2001 2000 1999
----------------------------------------------------------------------------------------------
Balance at beginning of financial year 2,522 1,505 754
Additions arising from acquisitions 59 1,150 758
Interest accrued during the year 157 156 50
Eliminated due to impairment or disposals 0 (44) 0
Amortization expense (394) (126) (89)
Foreign currency translation impact (40) (116) 29
----------------------------------------------------------------------------------------------
Carrying value at end of year before adjustments 2,304 2,525 1,502
Adjustment for unrealized gains and losses on
available-for-sale securities 31 (3) 3
----------------------------------------------------------------------------------------------
Carrying value at end of financial year 2,335 2,522 1,505
----------------------------------------------------------------------------------------------
For the year ended December 31, 2001, additions arising from acquisitions of
life insurance portfolios relate to the acquisition of VOPF, one of the largest
Czech pension fund. For the year ended December 31, 2000, the addition was
related to the acquisitions of Colonial UK on July 1, 2000 and Nicos Life on
April 1, 2000. For the year ended December 31, 1999, the addition was related to
the acquisition of an additional 23% interest in DBV Winterthur Holding AG on
July 1, 1999, which increased the Group's interest to 68.6%.
The estimated amount of the December 31, 2001 balance, before the effect of
unrealized gains and losses, to be amortized over each of the next five years is
as follows:
in CHF m
-----------------------------------------------------------------
2002 392
2003 264
2004 248
2005 235
2006 223
-----------------------------------------------------------------
Under US GAAP the acquisition of "Winterthur" Swiss Insurance Company is
required to be accounted for as an acquisition rather than as a pooling of
interests as for Swiss GAAP. As a result any PVFP existing before the date of
acquisition is eliminated and a new PVFP is calculated as of the acquisition
date. The carrying value of PVFP computed in conformity with US GAAP is CHF
4,749 million, CHF 4,937 million and CHF 3,938 million at December 31, 2001,
2000 and 1999, respectively. These amounts are net of the impact of unrealized
(losses)/gains of CHF (144) million, CHF 410 million CHF 599 million at
December 31, 2001, 2000 and 1999, respectively.
F-126
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.13 Deferred policy acquisition costs
Amounts shown are Swiss GAAP reformatted to US GAAP presentation. The following
table summarizes the balances of and changes in deferred policy acquisition
costs for the years ended December 31:
Non-life Non-life Non-life Life Life Life Total Total Total
in CHF m 2001 2000 1999 2001 2000 1999 2001 2000 1999
-------------------------------------------------------------------------------------------------------------------------
At beginning of financial year 1,454 1,191 1,144 2,511 2,369 2,330 3,965 3,560 3,474
-------------------------------------------------------------------------------------------------------------------------
Additions arising from
acquisitions (26) 162 0 265 0 0 239 162 0
Deferred policy acquisition
costs for the year 2,978 1,978 2,609 595 375 738 3,573 2,353 3,347
Amortization expense (2,272) (1,828) (2,536) (307) (452) (751) (2,579) (2,280) (3,287)
Foreign currency translation
impact (25) (49) (26) (52) 61 (7) (77) 12 (33)
-------------------------------------------------------------------------------------------------------------------------
Subtotal 2,109 1,454 1,191 3,012 2,353 2,310 5,121 3,807 3,501
-------------------------------------------------------------------------------------------------------------------------
Adjustment for unrealized
gains/ (losses) on
available-for-sale securities 0 0 0 541 158 59 541 158 59
-------------------------------------------------------------------------------------------------------------------------
At end of financial year 2,109 1,454 1,191 3,553 2,511 2,369 5,662 3,965 3,560
-------------------------------------------------------------------------------------------------------------------------
47.14 Real estate
REAL ESTATE HELD FOR SALE
The following table summarizes the real estate held for sale at December 31 for
the years presented. Amounts shown are Swiss GAAP reformatted to US GAAP
presentation.
31.12.01 31.12.00
---------------------------------------------------------------------------------
Real estate acquired for sale 1,503 1,727
Real estate repossessed and held for sale 572 756
---------------------------------------------------------------------------------
Real estate held for sale 2,075 2,483
---------------------------------------------------------------------------------
The properties are primarily commercial and residential real estate properties
and in most cases are listed for sale, depending on market conditions. These
properties are primarily related to the activities of Credit Suisse First Boston
and Credit Suisse Banking.
Real estate held for sale is presented net of valuation adjustments. Valuation
adjustments for foreclosed real estate represent management's best estimate of
the expected value to be realized in a normal sale transaction.
OWN USE REAL ESTATE
See also note 26 for additional information on tangible fixed assets.
In 2001, the Group recognized an impairment loss for long-lived assets to be
held and used of CHF 20 million. Impairment of long-lived assets losses totaled
CHF 92 million in 2000 and resulted from other than temporary declines in the
market values of certain buildings, which continue to be held and used, in
Switzerland and Brazil. As a result principally of a significant decrease in
market values of certain properties in Switzerland, the Group performed an
impairment evaluation on own use real estate in both 2000 and 2001. Certain
properties were identified as impaired in cases where the properties' carrying
values exceeded the expected future cash flows computed undiscounted and without
interest
F-127
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.14 Real estate (continued)
charges. The carrying values of the impaired properties were written down to
fair value and this established a new cost basis. For these properties, fair
values were measured based on either discounted cash flow analyses or
appraisals. Accordingly, in 2000, an impairment loss of CHF 77 million was
recorded in DEPRECIATION AND WRITE-OFFS ON NON-CURRENT ASSETS, NET.
Additionally, the Group purchased own use real estate in Brazil and translated
the Brazilian currency at the date of purchase into USD, the reporting currency
of the Group's subsidiary holding this property. Due to the significant
devaluation of the Brazilian currency against the USD in 2000, the Group
believed it could no longer realize the dollar value reported for financial
statement purposes. In October 2000, the Group obtained a building appraisal and
converted the estimated value into USD at the October 2000 exchange rate. The
real estate was written-down for the difference between this amount and the
carrying amount. An impairment loss of CHF 15 million was recorded in the line
item DEPRECIATION AND WRITE-OFFS ON NON-CURRENT ASSETS, NET. There were no
impairments identified in 1999.
47.15 Fair value of financial instruments
The table below presents the fair value and the Swiss GAAP carrying values of
financial instruments in accordance with SFAS NO.107, DISCLOSURES ABOUT FAIR
VALUE OF FINANCIAL INSTRUMENTS (SFAS No. 107). This statement requires the
disclosure of fair value information about financial instruments, whether or not
amounts are recognized in the balance sheet.
Quoted market prices, when available, are used as the measure of fair value. In
cases where quoted market prices are not available, fair values are determined
using present value estimates or other valuation techniques. The calculated fair
values are significantly affected by the assumptions used, principally the
timing of future cash flows and the discount rate. Because assumptions are
inherently subjective in nature, the estimated fair values cannot be
substantiated by comparison to independent market quotes and, in many cases, the
estimated fair values would not necessarily be realized in an immediate sale or
settlement of the instrument. The disclosure requirements of this statement
exclude all non-financial instruments such as lease transactions, real estate
and premises, equity method
F-128
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.15 Fair value of financial instruments (continued)
investments and pension and benefit obligations. Accordingly, the fair value
amounts presented do not represent management's estimation of the underlying
value of the Group.
Book Fair Book Fair
value value value value
in CHF m 31.12.01 31.12.01 31.12.00 31.12.00
-------------------------------------------------------------------------------------------------------
On balance sheet financial assets
Cash and other liquid assets 3,092 3,092 2,928 2,928
Money market papers 32,027 32,026 30,127 30,142
Due from banks 203,785 203,801 218,521 218,513
Receivables from the insurance business 11,823 11,823 9,871 9,871
Due from customers 1) 183,685 183,953 168,374 168,665
Mortgages 1) 92,034 92,830 91,879 91,917
Securities and precious metals trading portfolios 208,374 208,374 198,917 198,917
Financial investments from the banking business 2) 19,960 22,289 19,107 22,525
Investments from the insurance business 2) 123,742 123,415 125,534 125,595
Non-consolidated participations at cost 367 482 370 465
Positive replacement values of derivative instruments 155,340 155,340 118,139 118,139
On balance sheet financial liabilities
Money market papers issued 19,252 19,286 23,176 23,218
Due to banks 1) 335,932 335,901 359,441 359,658
Payables from the insurance business 11,864 11,864 8,807 8,807
Due to customers in savings and investment accounts 38,547 38,547 39,233 39,233
Due to customers, other 1) 261,513 261,620 213,385 213,907
Medium-term notes (cash bonds) 3,019 3,115 3,225 3,308
Bonds and mortgage-backed bonds 81,505 82,268 65,524 65,811
Negative replacement values of derivative instruments 157,504 157,504 123,184 123,184
-------------------------------------------------------------------------------------------------------
Certain reclassifications have been made to prior-year amounts to conform to the
current presentation.
1) Lease transactions have been excluded from these carrying and fair values in
accordance with SFAS No. 107.
2) Real estate and premises have been excluded from these carrying and fair
values in accordance with SFAS No. 107.
The following is a description of the significant methods and assumptions used
in calculating the fair values presented above.
For cash and other liquid assets, money market claims maturing within three
months, the fair value is assumed to approximate carrying amount given the
short-term nature of these instruments. This assumption is applied also to
receivables and payables from the insurance business. For those items with a
stated maturity exceeding three months, fair value is calculated using a
discounted cash flow analysis.
The following describes the methods of determining the fair value of loans which
are primarily included in due from banks, due from customers, and mortgages. For
non-impaired loans where no quoted market prices are available, contractual cash
flows are discounted using the market interest rates for loans with similar
characteristics. For impaired loans, the carrying value net of valuation
adjustments approximates fair value.
The securities and precious metals trading portfolio is carried on the balance
sheet at fair value. Fair value is determined using quoted market prices.
The fair values of positive replacement values, negative replacement values,
financial investments from the banking and the insurance business, and
non-consolidated participations are based on quoted
F-129
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.15 Fair value of financial instruments (continued)
market prices. Where these are not available, fair values are based on the
quoted market prices of comparable securities, or are estimated by discounting
anticipated future cash flows or using other valuation techniques.
For deposit instruments, which are included in due to banks, due to customers in
savings and investment accounts and due to customers, other, the fair value is
calculated as follows: for deposit instruments with no stated maturity and those
with original maturities less than three months, the carrying value is assumed
to approximate fair value due to the short-term nature of these liabilities. For
deposit instruments with a stated maturity exceeding three months, fair value is
calculated using a discounted cash flow analysis.
For medium-term notes, bonds and mortgage-backed bonds, fair values are
estimated by using quoted market prices, or discounting the remaining
contractual cash flows using a rate at which the Group could issue debt with a
similar remaining maturity as of the balance sheet date.
47.16 Derivative financial instruments
See also the consolidated off-balance sheet business table and notes 29 and 32
for additional information on derivative financial instruments.
A derivative instrument is a financial instrument or other contract with all
three of the following characteristics:
(1)(a) One or more underlyings and (b) one or more notional amounts or payment
provisions or both,
(2) Requires little or no initial net investment, and
(3) Its terms require or permit net settlement.
Derivatives are generally either privately negotiated over-the-counter (OTC)
contracts or standard contracts transacted through regulated exchanges. The
Group enters into derivative contracts for trading and risk management purposes.
The Group's most frequently used derivative products are interest rate and
currency swaps, foreign exchange forward contracts, interest rate and foreign
currency options, forward rate agreements, and foreign currency and interest
rate futures.
Swaps
Swaps are contractual agreements between two parties to exchange a series of
cash flows on a specified notional amount for a predetermined period.
For interest rate swaps, counterparties generally exchange fixed and floating
rate interest payments based on a notional value in a single currency. The main
risks associated with these instruments are the exposure to movements in
interest rates and the ability of the counterparties to meet the terms of the
contract. Interest rate swaps are used to adjust exposure to interest rate risk
by modifying the repricing or maturity characteristics of assets and
liabilities.
Cross-currency swaps involve the exchange of fixed or floating rate interest
payments in one currency for the receipt of fixed or floating interest payments
in another currency.
For commodity swaps, counterparties generally exchange fixed and floating rate
interest payments based on a notional value in a single commodity.
F-130
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.16 Derivative financial instruments (continued)
Forwards and futures
Forwards and futures are contractual agreements to either buy or sell a
specified currency, commodity or financial instrument at a specific price and
date in the future. Forwards are customized contracts transacted in the OTC
market. Futures are transacted in standardized amounts on regulated exchanges
and are subject to daily margining. Counterparty or credit risk arises from the
possible inability of OTC counterparties to meet the terms of their contracts
and from movements in securities values, interest rates and foreign exchange
rates.
Options
Options are contractual agreements that convey the right but not the obligation
to either buy or sell a specific amount of a currency, commodity or financial
instrument at a fixed price either at a fixed future date or at any time within
a fixed future period.
The writer of the option receives a premium from the purchaser for accepting
market risk. The purchaser of the option pays a premium for the right to
exercise the option, and the purchaser accepts credit risk due to the
uncertainty as to the writer's ability to fulfil the conditions of the contract.
Options also include caps, collars, and floors, which are contractual agreements
where the writer agrees to pay the purchaser, based on a specified notional
amount, the agreed upon difference between the market rate and the prescribed
rate of the cap, collar, or floor. The writer receives a premium for selling
this instrument.
Collateral and netting
To reduce credit risk, specifically related to its derivative transactions, the
Group enters into master netting agreements whenever possible and, when
appropriate, obtains collateral from counterparties. These agreements provide
that, in the event of default, all outstanding transactions with the
counterparty will be terminated and all amounts outstanding will be settled on a
net basis. The Group holds collateral in respect of credit related instruments
where this is considered desirable, given the customer's assets. This provides
the Group with a claim on these assets for both existing and future liabilities.
The Group subjects its derivative-related credit risks to the same credit
approval, limit and monitoring standards that it uses for managing other
transactions that create credit risk. This includes evaluation of counterparties
as to creditworthiness, and managing the size, diversification and maturity
structure of the portfolio. The Group's credit exposure at December 31, 2001
from derivatives held for trading purposes is represented by the positive fair
value of instruments. The risk of counterparty default on derivative contracts
is monitored on an ongoing basis and the level of credit risk is further
minimized by dealing with counterparties of good credit standing.
Adoption of SFAS 133
The Group adopted Statement of Financial Accounting Standards No. 133
(SFAS 133), ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, as
amended by SFAS 138 on January 1, 2001 for US GAAP reporting purposes. In
accordance with the transition provisions of SFAS 133, the Group recorded in its
US GAAP financial statements the following:
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.16 Derivative financial instruments (continued)
- a net-of-tax cumulative-effect-type adjustment of CHF 123 million (loss) in
earnings to recognize the difference (attributable to the hedged risks)
between the carrying values and fair values of related hedged assets and
liabilities; and
- a net-of-tax cumulative-effect-type adjustment of CHF 17 million in
accumulated other comprehensive income to recognize at fair value all
derivatives that are designated as cash flow hedging instruments.
The Group reclassified CHF 14 million from the transition adjustment that was
recorded in accumulated other comprehensive income into US GAAP earnings during
the twelve months following initial application to December 31, 2001.
Accounting for derivative and hedging activities
All derivatives are recognized on the balance sheet at their fair value. The
fair value of a derivative represents the aggregate net present value of the
expected cash inflows and outflows required to extinguish the rights and
obligations arising from the derivative in an orderly market as of the reporting
date. Fair value does not indicate future gains or losses but rather the
unrealized gains and losses from marking to market all derivatives at a
particular point in time. The fair values of derivatives are determined using
various methodologies, including quoted market prices, where, available
prevailing market rates for instruments with similar characteristics and
maturities; net present value analysis; or other pricing models as appropriate.
On the date the derivative contract is entered into, the Group designates the
derivative as one of the following for US GAAP purposes:
(1) a trading instrument,
(2) a risk management transaction not qualifying for US GAAP hedge accounting,
(3) a hedge of the fair value of a recognized asset or liability ("fair value"
hedge),
(4) a hedge of a forecasted transaction or of the variability of cash flows to
be received or paid related to a recognized asset or liability ("cash flow"
hedge), or
(5) a hedge of a net investment in a foreign operation.
Trading derivatives are reported in trading assets or liabilities with changes
in their fair value recognized as they occur in trading revenue. All other
derivatives are reported in other assets or other liabilities.
Changes in the fair value of derivatives, which have been designated and qualify
as a fair value hedge, along with the gain or loss on the hedged asset or
liability that is attributable to the hedged risk are recorded in current-period
earnings in the same line item as the hedged item. The ineffective portion of
changes in the fair value of a fair value hedging derivative is recorded in
other income as they occur.
The effective portion of the change in the fair value of a derivative that is
designated and qualifies as a cash flow hedge are recorded in other
comprehensive income. These amounts are reclassified into earnings when the
variable cash flow from the hedged item impacts earnings (e.g., when periodic
settlements on a variable rate asset or liability are recorded in earnings). The
ineffective portion of changes in the fair value of cash flow hedging derivative
is recorded in other income as they occur.
Derivatives that are designated and qualify as foreign currency hedges, which
are used to hedge the variability functional currency equivalent cash flows, are
accounted for as cash flow hedges as described above. Derivatives that are
designated and qualify as foreign currency hedges of the fair value of a
F-132
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.16 Derivative financial instruments (continued)
foreign currency denominated asset or liability are accounted for as fair value
hedges as described above.
The effective portion of changes in the fair value of a derivative used as a
hedge of a net investment in a foreign operation, is recorded in the cumulative
translation adjustments account within other comprehensive income. The
ineffective portion of changes in the fair value is recorded as other income as
they occur.
The Group purchases and sells financial instruments that contain derivative
instruments "embedded" within them. Where the Group has determined that the
economic characteristics of these embedded derivatives are not clearly and
closely related to the economic characteristics of the host contract, the
embedded derivative is separated from the host contract, and carried at fair
value. The separated derivative is accounted for as a trading derivative
instrument.
The Group formally documents all relationships between hedging instruments and
hedging items, as well as its risk-management objective and strategy for
undertaking hedge transactions. All derivatives that are designated as fair
value, cash flow, or foreign currency hedges are linked to specific assets and
liabilities on the balance sheet or specific forecasted transactions. The Group
also formally assesses, both at the hedge's inception and on an ongoing basis,
whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in fair values or cash flows of hedged items
attributable to the hedged risk. When it is determined that a derivative is not
highly effective as a hedge or that it has ceased to be a highly effective
hedge, the Group discontinues hedge accounting prospectively as discussed below.
The effectiveness of hedging relationships is evaluated using quantitive
measures of correlation.
The Group discontinues hedge accounting prospectively for the following reasons:
(1) it is determined that the derivative is no longer effective in offsetting
changes in the fair value or cash flows of a hedged item (including
forecasted transactions);
(2) the derivative expires or is sold, terminated, or exercised;
(3) the derivative is no longer designated as a hedge instrument, because it is
unlikely that the forecasted transaction will occur;
(4) management determines that designation of the derivative as a hedge
instrument is no longer appropriate.
When hedge accounting is discontinued because it is determined that the
derivative no longer qualifies as an effective fair value hedge, the derivative
will continue to be carried on the balance sheet at its fair value, and the
hedged asset or liability will no longer be adjusted for changes in fair value
due to the risk being hedged. When hedge accounting is discontinued on a cash
flow hedge the net gain or loss shall remain in accumulated other comprehensive
income and be reclassified into earnings in the same period or periods during
which former hedged transaction affects earnings. When hedge accounting is
discontinued because it is probable that a forecasted transaction will not occur
within the original specified time period or with the additional time period as
specified in SFAS 133, the derivative will continue to be carried on the balance
sheet at its fair value, and gains and losses that were accumulated in other
comprehensive income will be recognized immediately in earnings. In all other
situations in which hedge accounting is discontinued, the derivative will be
earned at its fair value on the balance sheet, with changes in its fair value
recognized in current-period earnings, unless redesignated as a hedging
instrument.
F-133
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.16 Derivative financial instruments (continued)
Use of Derivative Instruments
The Group maintains an overall interest rate risk management strategy that
incorporates the use of derivative instruments to minimize significant unplanned
fluctuations in earnings that are caused by interest rate volatility. The
Group's goal is to manage interest rate sensitivity by modifying the repricing
or maturity characteristics of certain assets and liabilities so that the net
interest margin is not, on a material basis, adversely affected by movements in
interest rates. As a result of interest rate fluctuations, hedged assets and
liabilities will appreciate or depreciate in market value. Income or loss on the
derivative instruments that are linked to the hedged assets and liabilities will
generally offset the effect of this unrealized appreciation or depreciation. The
Group views this strategy as a prudent management of interest rate sensitivity,
such that earnings are not exposed to undue risk presented by changes in
interest rates.
By using derivative instruments, the Group is exposed to credit and market risk.
If the counterparty fails to perform, credit risk is equal to the extent of the
positive fair value of a derivative. The Group minimizes the credit (or
repayment) risk arising from derivative transactions through its credit approval
process and the use of limits and monitoring procedures. The Group seeks to
further minimize credit risk through the use of collateral and netting
arrangements (i.e., legal right of a setoff of receivable and payable derivative
contracts) where it is deemed necessary.
The Group uses various hedging strategies that are developed through a review of
potential hedging techniques and using analysis from financial simulation models
and other internal and industry sources to identify the most cost effective
method to hedge the risk exposure.
Trading Activities
The Group is active in most of the principal trading markets of the world, using
the majority of the popular trading and hedging products. This includes the use
of swaps, futures, options, and structured products (custom transactions using
combinations of derivatives) in connection with its sales and trading
activities. As a dealer, the Group's sales activities include acting as
principal in structuring and marketing of derivative products to customers at
competitive prices to enable them to transfer, modify or reduce current or
expected risks. Trading activities include market-making, positioning and
arbitrage activities, including derivative transactions entered into for risk
management purposes that do not otherwise qualify for hedge accounting. These
derivatives are presented in other assets. Market-making involves quoting bid
and offer prices to other market participants to provide liquidity and regular
availability of derivatives with the intention of generating revenues based on
spread and volume. Positioning involves managing market risk positions with the
expectation of profiting from favorable movements in prices, rates or indices.
Arbitrage activities involve identifying and profiting from price differentials
between markets and products. The majority of the Group's derivatives held at
December 31, 2001, were used for trading activities.
Fair Value Hedges
The Group typically enters into interest rate swaps to manage its exposure to
interest rate risk. The Group will generally use these swaps to convert fixed
rate assets or liabilities to variable rates. The Group uses cross currency
swaps to convert foreign currency denominated fixed rate assets or liabilities
to floating rate functional currency assets or liabilities. The Group uses
forward contracts and option
F-134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.16 Derivative financial instruments (continued)
contracts to hedge its exposure to changes in fair value of equity instruments.
The Group uses foreign currency forwards to hedge the foreign currency risk
associated with available-for-sale securities.
For the year ended December 31, 2001, the Group recognized a net loss on
derivative instruments of CHF 14 million (reported as other expense in the
consolidated income statement), which represented the sum of the ineffective
portion of all fair value hedges and the amount excluded from the assessment of
hedge effectiveness.
Cash Flow Hedges
The Group generally uses interest rate swaps to convert floating rate assets or
liabilities to fixed rates. The Group uses cross currency swaps to convert
foreign currency denominated fixed and floating rate assets or liabilities to
fixed rate functional currency assets or liabilities. For the year ended
December 31, 2001, the Company recognized no net loss on derivative instruments
(reported as other expense in the consolidated income statement), which
represented the sum of the total ineffectiveness of cash-flow hedge's and the
amount excluded from the assessment of the hedge effectiveness. This amount
represents the cashflow hedges ineffectiveness arising from differences between
the critical terms of the interest rate swaps and the hedged liability.
Gains and losses on derivative contracts that are reclassified from accumulated
other comprehensive income to current-period earnings are included in the line
item in which the hedged forecasted transactions is recorded. As of
December 31, 2001, there were CHF 9 million deferred net losses on derivative
instruments in accumulated other comprehensive income reclassified to earnings
during the previous twelve months.
Hedges of Net Investments in Foreign Operations
The Group typically uses forward exchange contracts and
foreign-currency-denominated debt to hedge selected net investments in foreign
operations. The purpose of this hedge is to protect against adverse movements in
exchange rates. For the year ended December 31, 2001, there was no net losses
related to these derivatives included in the cumulative translation adjustment
within other comprehensive income.
F-135
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
47.17 Financial instruments with off-balance sheet risk
Description of financial instruments with off-balance sheet risk
See also the consolidated off-balance sheet business table for further
information on financial instruments with off-balance sheet risk.
The Group is a party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of its customers, to
reduce its own exposure to fluctuations in interest rates, and to conduct
lending activities. These financial instruments include commitments to extend
credit, credit and performance-related guarantees, irrevocable commitments in
respect of documentary credits, interest rate caps and floors written, interest
rate swaps, and forward and futures contracts. These instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amount reflected in the consolidated balance sheet. Derivative financial
instruments are described in note 47.16 - Derivative financial instruments.
Risks involved and management of those risks
Exposure to credit loss in the event of non-performance by the other party to
the financial instrument for commitments to extend credit, letters of credit and
financial guarantees, is represented by the notional amount of those
instruments. The Group uses the same credit policies in making commitments and
conditional obligations as it does for on balance sheet items.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since a portion of the commitments is expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Group evaluates each customer's credit
worthiness on a case-by-case basis.
A provision for contingent liabilities is maintained for the banking operations,
which is considered adequate to absorb losses arising from the existing balance
of contingent liabilities. The provision for such losses is in accordance with
the overall supervisory direction of the Swiss Banking laws. Each subsidiary
sets out provisions for contingent obligations and claims, using Group
guidelines. The provisions are reviewed on a quarterly basis by senior
management.
Litigation
World War II Settlement
Swiss banking settlement
In October 1996, several class action lawsuits were brought against the Group
and another Swiss bank in the United States District Court for the Eastern
District of New York. In January 1999, an agreement was signed with various
Jewish groups and the lawyers representing the US class action plaintiffs on a
global settlement that would resolve all claims against all Swiss businesses but
with the exception of certain named life insurance carriers, including
Winterthur Life & Pensions, relating to the World War II era. On July 26, 2000,
the court approved the global settlement, and on November 22, 2000, the court
adopted a plan for distributing the settlement funds.
The full and conclusive settlement committed the defendant Swiss banks to pay
USD 1.25 billion under certain terms and conditions. The Group committed to pay
up to one-third of this sum. On
F-136
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
47.17 Financial instruments with off-balance sheet risk (continued)
November 23, 2000, the Group paid the final installment into an escrow fund.
Contributions from other Swiss companies that did not participate in the
litigation are expected and have partly been committed. If such contributions
materialize, they will help offset the amount the Group paid. A number of
persons have elected to opt out of the settlement and not to participate in the
class action. Such persons' claims will not be released by the settlement.
In addition, a number of appeals challenging the fairness of the settlement, or
the distribution plan, were filed by purported class members but all of those
appeals have been denied. Therefore, the settlement is fully effective.
Accordingly, the settlement money paid into the escrow fund has been transferred
to a settlement fund that is fully under the control of the court and class
plaintiffs' counsel.
The Group and another bank have filed an appeal challenging a ruling by the
court that seeks to narrow in two respects the scope of the releases given to
Swiss companies and their affiliates who are alleged to have used slave labor
during World War II. The court of appeals issued a favorable ruling with respect
to one such issue and an unfavorable one with respect to the other. Further
proceedings are contemplated in the district court to resolve finally the scope
of the release language relating to other companies.
Claims against Life & Pensions
In 1997, a class action lawsuit, referred to as the Cornell case, was filed
against 16 European insurance companies, including Life & Pensions, in the
United States District Court for the Southern District of New York. Life &
Pensions did not receive a release under the Swiss banking settlement described
above. The plaintiffs claimed that these companies failed or refused to pay out
benefits, particularly in connection with life policies, to which victims or
survivors of World War II were entitled. In January 1999, Life & Pensions was
named as a defendant in a second class action, also in the Southern District of
New York, referred to as the Winters/Schenker case, which asserts the same or
similar claims. In January 2000, the Cornell case was dismissed. Plaintiffs in
the Winters/Schenker case were invited by the court to file an amended
complaint.
In addition to the litigation and in response to actions by various American
insurance regulators, in August 1998, an agreement was reached in co-operation
with such regulators and with other European insurers, establishing a common
procedure for the filing and processing of life insurance claims related to the
World War II era. The organization established for this purpose, the
International Commission on Holocaust Era Insurance Claims, or ICHEIC, has
initiated procedures for claims outreach, claims handling, the auditing of the
insurers and similar matters. Life & Pensions is taking an active part in
ICHEIC.
The American Insurance Association, and certain of Life & Pensions US domiciled
insurance subsidiaries along with several other US domiciled insurance companies
affiliated with non-US entities have challenged in court proceedings legislation
in the State of California purporting to suspend the licenses of the California
insurers if the State determines that the insurers (or their non-US affiliates)
have not followed certain procedures for insurance claims relating to the World
War II era, the outcome of which challenge is at the present time uncertain.
F-137
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
47.17 Financial instruments with off-balance sheet risk (continued)
Governmental/Regulatory inquiries relating to IPO allocation practices
Credit Suisse First Boston Corporation, or CSFB Corp., one of the Group's
principal US broker-dealers, was the subject of an investigation in connection
with certain of its alleged practices as to the allocation of shares in initial
public offerings and subsequent securities transactions and commissions by the
NASD Regulation, Inc., or NASDR, the US Attorney's Office for the Southern
District of New York and the SEC. To our knowledge, several other investment
banks have been the subject of investigations regarding similar matters.
The inquiries have principally focused on the allocation practices with respect
to initial public offerings in 1999 and 2000 and in particular, the receipt of
allegedly excessive commissions on secondary trades from certain customers that
received allocations of shares and the relationship between the payment of
commission and the receipt of the initial public offering allocations. On
January 22, 2002, CSFB Corp. fully resolved the investigation by the SEC, which
filed a Complaint, Consent and Final Judgment in the United States District
Court for the District of Columbia. CSFB Corp. also entered into a Letter of
Acceptance, Waiver and Consent with the NASDR, which fully resolves the NASDR
investigation. Both documents charge CSFB Corp. with violations of certain NASD
Conduct Rules and record-keeping regulations and the NASDR document also charges
CSFB Corp. with failure to supervise. Neither document made any allegations or
findings of fraudulent conduct by CSFB Corp. Pursuant to these settlements, CSFB
Corp. agreed to pay a total of USD 100 million (CHF 169 million). This amount
includes a USD 30 million (CHF 50 million) civil penalty to be divided between
the SEC and NASDR, and a USD 70 million (CHF 117 million) payment to be made to
the US Treasury and NASDR, representing disgorgement as a result of the conduct
described by the SEC and NASDR in the Complaint and AWC. As part of these
settlements, CSFB has adopted and agreed to follow new policies and procedures
relating to the allocation of shares in initial public offerings. CSFB Corp. was
also enjoined as part of these settlements from prescribed violations of the
NASD Conduct Rules and record keeping requirements and was censured by the
NASDR. CSFB Corp. settled these investigations without admitting or denying the
allegations in the Complaint and AWC. CSFB Corp. has also been separately
informed that the US Attorney, S.D.N.Y. has closed its investigation of CSFB
Corp. in connection with its practices of allocating shares of IPO securities
during the period from 1998 through 2000, without bringing any action.
Litigation relating to IPO allocation practices
Since January 2001, CSFB Corp., DLJSC and several other investment banks have
been named as defendants in a large number of putative class action complaints
filed in the US District Court for the Southern District of New York, alleging
various violations of the federal securities laws resulting from alleged
material omissions and misstatements in registration statements and prospectuses
for the initial public offerings and with respect to transactions in the
aftermarket. These lawsuits contain allegations that the registration statement
and prospectus either omitted or misrepresented material information about
commissions paid to CSFB Corp., DLJSC or the other investment banks and
aftermarket transactions by certain customers that received allocations of
shares in the initial public offerings. In certain complaints, CSFB Corp., DLJSC
or the other investment banks are also alleged to have issued misleading analyst
research reports that failed to disclose the alleged allocation practices and
that analysts were allegedly subject to a conflict of interest resulting from
the manner in which bonus
F-138
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
47.17 Financial instruments with off-balance sheet risk (continued)
compensation was paid. The Group's entities intend to defend themselves
vigorously against all of the claims asserted in these complaints.
Since March 2001, CSFB Corp. and several other investment banks have been named
as defendants in several putative class actions filed in the US District Court
for the Southern District of New York, alleging violation of the federal and
state antitrust laws in connection with alleged practices in the allocation of
shares in initial public offerings in which such investment banks were a lead or
co-managing underwriter. The amended complaint in these lawsuits, which have now
been consolidated into a single action, alleges that the underwriter defendants
have engaged in an illegal antitrust conspiracy to require customers, in
exchange for initial public offering allocations, to pay non-competitively
determined commissions on transactions in other securities, to purchase an
issuer's shares in follow on offerings, and to commit to purchase other less
desirable securities. The complaint also alleges that the underwriter defendants
conspired to require customers, in exchange for initial public offering
allocations, to agree to make aftermarket purchases of the initial public
offering securities at a price higher than the offering price, as a precondition
to receiving an allocation. These alleged "tie-in" arrangements are further
alleged to have inflated artificially the market price for the securities. The
Group's entities intend to defend themselves vigorously against all of the
claims asserted in these complaints.
On May 25, 2001, CSFB Corp. was sued in the US District Court for the Southern
District of Florida by a putative class of issuers in initial public offerings
in which CSFB Corp. acted as lead manager on the grounds that CSFB Corp.
underpriced initial public offerings, accepted excessive brokerage commissions
in exchange for allocations in initial public offerings, required investors to
give CSFB Corp. a share of initial public offering profits, and used initial
public offering allocations to obtain additional investment banking business,
all in breach of the underwriting agreement. This case was subsequently
transferred to the US District Court for the Southern District of New York. An
amended complaint has now been filed in this matter adding a breach of fiduciary
duty claim and a claim for indemnification in the aforementioned IPO securities
cases pending in the US District Court for the Southern District of New York. On
March 29, 2002 CSFB Corp. moved to dismiss the amended complaint. The Group's
entities intend to defend themselves vigorously against all of the claims
asserted in this matter.
On June 29, 2001, CSFB Corp., together with another investment bank, was also
named as a defendant in an action, the Covad Action, brought by a putative class
consisting of CSFB Corp. retail customers that purchased shares in Covad
Communications. CSFB Corp. was alleged to have violated a fiduciary duty to its
retail customers by issuing favorable analyst reports in an effort to obtain
investment banking business from Covad, including secondary offerings. The
complaint in the Covad Action has been dismissed on consent of all parties. The
plaintiffs in the Covad Action have stated their intention to file a new
complaint. The Group's entities intend to defend themselves vigorously against
all of the claims asserted in this matter.
On August 2, 2001, CSFB Corp. and five other investment banks were named as
defendants in a putative class action filed with the US District Court for the
Southern District of New York, alleging violations of the federal securities
laws resulting from the issuance by defendants' research analysts of research
reports on certain internet and technology company stocks, which reports
included "buy" recommendations that allegedly increased or sustained the trading
price of the stocks, and allegedly were materially misleading because they did
not disclose the alleged financial interests of the analyst or the defendant
investment banks in the subject internet or technology company. On November 9,
2001,
F-139
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
47.17 Financial instruments with off-balance sheet risk (continued)
CSFB Corp. was served with the complaint in this action. In April 2002,
plaintiffs stipulated to dismiss the action without prejudice as to CSFB Corp.
and four of the other investment banks. The parties are currently awaiting court
approval of this stipulation of dismissal.
Investigations of Regulators in Japan and United Kingdom
In 1999, the Financial Supervisory Agency of Japan, or Japan FSA completed a
formal, on-site examination of the businesses of the Credit Suisse First Boston
and certain of its subsidiaries in Japan. During the examination, the Japan FSA
examiners questioned certain derivatives and other transactions entered into by
Credit Suisse First Boston in Japan and inquired into certain supervisory and
other issues. Shortly after the commencement of the Japan FSA examination in
January 1999, our management became aware that several managers and other
members of Credit Suisse First Boston's staff had attempted to intervene with
the Japan FSA examination during its initial stages by canceling and/or
destroying documents.
On July 29, 1999, we were notified of the administrative sanctions imposed by
the Japan FSA and the Financial Reconstruction Commission in Japan, or FRC, as a
result of the examination. The order revoked the license of the Tokyo branch of
Credit Suisse Financial Products (currently known as Credit Suisse First Boston
International, or CSFBi, our derivatives business subsidiary) to do business,
and other sanctions were imposed on the Tokyo branch of Credit Suisse First
Boston and other subsidiaries. On March 7, 2001, CSFBi was found guilty by the
Tokyo District Court of obstructing the 1999 Japan FSA examination and was fined
JPY 40 million (approximately CHF 0.5 million). The liability of CSFBi was based
on an asserted principle of Japanese banking law that a company is vicariously
liable for the conduct of employees during an examination.
In 1999, the Securities and Futures Authority of the United Kingdom, or UK SFA
the principal regulator of our broker-dealer operations in the United Kingdom,
commenced its own inquiry into the activities that were the subject of the Japan
FSA examination as well as other activities associated with our operations in
Tokyo. In July 2001, the UK SFA concluded the factual aspect of the
investigation. On December 1, 2001, the UK SFA ceased to exist, and the
investigation has been continued by the UK SFA's successor regulator, the
Financial Services Authority of the United Kingdom, or UK FSA. On March 8, 2002,
CSFBi received the UK FSA's "Preliminary Findings Letter," which sets forth the
UK FSA's findings of fact upon which a decision to institute disciplinary
proceedings against CSFBi would be based. CSFBi is in the process of preparing a
response.
Securities and Exchange Board of India interim order
On April 18, 2001, the Securities and Exchange Board of India ("SEBI"), issued
an interim order requiring that Credit Suisse First Boston (India) Securities
Private Limited ("CSFB India") not undertake any new stock broking business
until further orders are passed by SEBI. The interim order, which was issued
following a preliminary enquiry by SEBI but prior to any hearing of the matter,
was based on a preliminary determination by SEBI that (i) certain purchase and
sale transactions in certain shares executed by CSFB India for a client in 2001
were financing transactions that were structured to give a misleading appearance
of active trading in such shares leading to the creation of an artificial market
and (ii) CSFB India had entered into unauthorized lending of securities. On
April 30, 2001, CSFB India
F-140
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
47.17 Financial instruments with off-balance sheet risk (continued)
presented a defense in which it refuted the allegations contained in the interim
order at an initial hearing before the Chairman of SEBI.
CSFB India received an order from SEBI on June 5, 2001. In summary the order
(i) is a continuation of the April 18, 2001 order (and accordingly the
suspension from carrying on stock broking business continues), (ii) did not
introduce any new evidence or widen the scope or time period of this inquiry,
(iii) continues to make broadly similar allegations to those set out in the
earlier order, although SEBI has concluded that CSFB India did not engage in
unauthorized stock lending and (iv) appoints an enquiry officer to investigate
the matter.
CSFB India attended a hearing in front of the enquiry officer on August 10,
2001. The enquiry officer issued a second show cause notice in February 2002 (to
which CSFB India has already responded) that expanded the scope of the enquiry
to cover transactions entered into from April 1, 2000 to March 31, 2001. The
next step in the procedure is for the enquiry officer to make a recommendation
to the SEBI chairman who will then make a final decision. The enquiry officer
has not yet made her recommendation.
Enron-related Litigation and Inquiries
NEWPOWER HOLDINGS, INC.
Since February 27, 2002, Credit Suisse First Boston, Inc. or, CSFBI, DLJSC,
CSFBDIRECT and certain other investment banks, along with NewPower
Holdings, Inc. or NewPower and certain of NewPower's directors, have been named
as defendants in eight putative class actions filed with the US District Court
for the Southern District of New York. One of our former employees was a
director of NewPower and is named in seven of the eight complaints. These
complaints allege violations of federal securities law due to alleged material
misrepresentations in, and omissions of material fact from, the registration
statement and prospectus issued in connection with NewPower's October 5, 2000
IPO, and for alleged misrepresentations and omissions regarding NewPower after
the IPO. According to the complaints, NewPower was formed by Enron Corp., or
Enron, in 1999, and Enron remains NewPower's controlling shareholder. On
April 24, 2002, the Court ordered that a consolidated complaint be filed 45 days
after a lead plaintiff has been selected. The Group's entities intend to defend
themselves vigorously against all of the claims asserted in these complaints.
CALLIHAN V. SKILLING, ET AL.
On March 15, 2002, certain executives and directors of Enron, Arthur Andersen
and CSFBI were named in a putative class action filed in the US District Court
for the Southern District of Mississippi by purchasers of publicly traded Enron
securities who purchased between October 19, 1998 and November 27, 2001. This
complaint alleges violations of federal securities laws due to alleged
misstatements and omissions of material fact contained in certain registration
statements and prospectuses issued in connection with the sale of certain Enron
debt securities and common stock, and for alleged misstatements and omissions of
material fact regarding the financial condition of Enron. The Group's entities
intend to defend themselves vigorously against all of the claims asserted in
this matter.
F-141
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
47.17 Financial instruments with off-balance sheet risk (continued)
TITTLE V. ENRON CORP., ET AL.
On April 8, 2002, Enron and certain executives and directors of Enron, Arthur
Andersen and certain partners, executives and employees of Arthur Andersen, the
law firm of Vinson & Elkins, L.L.P. and certain partners of Vinson & Elkins, and
CSFBI and certain other investment banks, were named in a putative class action
filed in the US District Court for the Southern District of Texas by Enron
employees who participated in various Enron employee savings plans. The
complaint alleges violations of the Employment Retirement Income Security Act of
1974, or ERISA for various breaches of fiduciary duty, violations of the
Racketeer Influenced and Corrupt Organizations Act, or RICO, state law
negligence, and civil conspiracy for alleged misconduct in connection with the
administration of Enron's employee savings plans. CSFBI and the other investment
banking defendants have been named only in connection with the RICO and civil
conspiracy claims. The Group's entities intend to defend themselves vigorously
against those claims.
NEWBY V. ENRON CORP., ET AL.
On April 8, 2002, Enron and certain executives and directors of Enron, Arthur
Andersen and certain partners, executives and employees of Arthur Andersen, the
law firms of Vinson & Elkins, L.L.P. and Kirkland & Ellis, and CSFBI and certain
other investment banks, were named in a consolidated putative class action filed
in the US District Court for the Southern District of Texas by purchasers of
Enron publicly traded equity and debt securities between October 19, 1998 and
November 27, 2001. The complaint alleges violations of the federal securities
laws for alleged misstatements and omissions of material fact regarding the
financial condition of Enron, alleged misstatements and omissions of material
fact in connection with various registration statements and prospectuses issued
in connection with the sale of certain Enron securities and alleged controlling
person liability, and violations of the Texas Securities Act for alleged
material misstatements and omissions of material fact in connection with
registration statements and prospectuses issued in connection with the sale of
certain Enron debt securities. CSFBI has been named only in connection with the
claims under the federal securities laws for alleged misstatements and omissions
of material fact regarding the financial condition of Enron and for controlling
person liability. The Group's entities intend to defend themselves vigorously
against those claims.
THE RETIREMENT SYSTEMS OF ALABAMA V. MERRILL LYNCH & CO., ET AL.
On March 15, 2002, certain executives and directors of Enron, Arthur Andersen,
and CSFBI and certain other investment banks were named in an action filed in
the Circuit Court of Montgomery County, Alabama. A first amended complaint was
filed on April 3, 2002. The first amended complaint alleges violations of the
Securities Act of Alabama, the federal securities laws, as well as violations of
Alabama statutory and common law due to alleged misstatements and omissions of
material fact from certain registration statements and prospectuses issued in
connection with the sales of certain Enron debt securities and common stock and
for alleged material misstatements and omissions regarding Enron. CSFBI has been
named only in connection with the claims under Alabama law. The Group's entities
intend to defend themselves vigorously against those claims.
F-142
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
47.17 Financial instruments with off-balance sheet risk (continued)
GOVERNMENT INQUIRIES
CSFB Corp., as well as, we understand, other investment banks, has received
inquiries and requests for information from certain US Congressional committees,
the SEC and the NYSE regarding certain transactions and business relationships
with Enron and its affiliates, including certain Enron-related special purpose
entities. The Group is cooperating fully with such inquiries and requests.
RESEARCH MATTERS
The New York State Attorney General, Secretary of the Commonwealth of
Massachusetts, Securities Division, SEC, National Association of Securities
Dealers and NYSE are reviewing the independence of research departments. CSFB
Corp., as well as, we understand, other financial services firms, has been asked
to provide information and documents. CSFB Corp. is fully cooperating with these
inquiries.
Other
The Group and its subsidiaries are involved in a number of judicial, regulatory
and arbitration proceedings, including those described above, concerning matters
arising in connection with the conduct of the businesses of the Group and its
subsidiaries. Some of these actions have been brought on behalf of various
classes of claimants and seek damages of material and indeterminate amounts.
Management believes, based on currently available information, that the results
of such proceedings, in the aggregate, will not have a material adverse effect
on the financial condition of the Group as a whole, but could be material to the
Group's operating results for any particular period.
47.18 Concentrations of credit risk
Credit risk concentrations arise and exist when any particular exposure type
becomes material relative to the size and capital of the Group. Within the
Group, monitoring by counterparties, country, industry, product and business
division is carried out in an effort to ensure that such concentrations are
identified. Possible material exposures of any counterparty or counterparties
are regularly identified as part of regulatory reporting of large exposures. The
approval of country and regional limits aims to avoid any undue country risk
concentration. From an industry exposure point of view, the combined credit
exposure of the Group is quite diversified. Within Credit Suisse Banking a large
portion of exposure is from individual clients, particularly in residential
mortgages in Switzerland. At Credit Suisse First Boston, a large portion of the
exposure relates to transactions with financial institutions. However, in both
cases, the customer base is extensive and the number and variety of transactions
are broad. For Credit Suisse First Boston the business is also geographically
diverse with operations focused in the Americas, Europe and, to a lesser extent,
Asia.
F-143
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.19 Deposits
The following table presents information concerning domestic and foreign
deposits as of December 31. Designation of Switzerland versus foreign is based
upon the location of the office receiving and recording the deposit. Amounts
shown are Swiss GAAP reformatted to US GAAP presentation.
Total Total
in CHF m Switzerland Foreign 31.12.01 Switzerland Foreign 31.12.00
--------------------------------------------------------------------------------------------------------------------------
Non-interest bearing demand 9,570 2,467 12,037 10,095 4,170 14,265
Interest bearing demand 30,926 3,227 34,153 29,651 4,859 34,510
Savings deposits 38,536 11 38,547 39,219 14 39,233
Time deposits 47,974 136,365 184,339 41,943 138,014 179,957
--------------------------------------------------------------------------------------------------------------------------
Total deposits 127,006 142,070 269,076 120,908 147,057 267,965
--------------------------------------------------------------------------------------------------------------------------
At December 31, 2001, the remaining maturities of time deposits are as follows:
in CHF m
------------------------------------------------------------------------
2002 169,432
2003 491
2004 7,248
2005 3,398
2006 3,476
Thereafter 294
------------------------------------------------------------------------
Total time deposits 184,339
------------------------------------------------------------------------
The aggregate amount of deposits that have been reclassified as loan balances at
December 31, 2001 and 2000 were CHF 657 million and CHF 463 million,
respectively.
47.20 Liabilities for loss and loss adjustment expenses for the non-life
insurance business
The following table reconciles the gross non-life reserves in the reconciliation
of loss and loss adjustment expenses (LAE) presented below to that presented in
footnote 34 within the provision for unpaid claims and claim adjustment expenses
and provisions for annuities at:
in CHF m 31.12.01 31.12.00 31.12.99
-------------------------------------------------------------------------------------------------------
Gross loss and LAE reserves presented below 19,588 20,604 19,072
Winterthur Reinsurance business 1) 377 493 863
Republic Insurance Company 2) 0 0 604
German Health 3) 198 195 217
-------------------------------------------------------------------------------------------------------
Loss and LAE reserves 20,163 21,292 20,756
-------------------------------------------------------------------------------------------------------
1) The Winterthur Reinsurance business was divested in 1998. A 100% reinsurance
contract was entered into for those contracts that were not novated.
2) Republic Insurance Company is a divested business, which was sold during
2000.
3) German health business, which is included in the non-life business segment,
has been excluded from the table below as it is not a property-casualty
business.
F-144
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.20 Liabilities for loss and loss adjustment expenses for the non-life
insurance business (continued)
The following table is a summary reconciliation of the beginning and ending loss
and LAE reserves, including the effect of reinsurance ceded, for the non-life
insurance business for each of the years ended December 31:
in CHF m 2001 2000 1999
-------------------------------------------------------------------------------------------------------
Loss and LAE reserves at beginning of financial year 20,604 19,072 17,559
Less reinsurance recoverables on unpaid losses at beginning
of financial year (3,914) (2,650) (1,976)
-------------------------------------------------------------------------------------------------------
Net loss and LAE reserves at beginning of financial year 16,690 16,422 15,583
-------------------------------------------------------------------------------------------------------
Current accident year 10,707 9,608 8,641
Prior accident years 1) 79 100 (248)
-------------------------------------------------------------------------------------------------------
Provision for losses and LAE for claims incurred 10,786 9,708 8,393
-------------------------------------------------------------------------------------------------------
Current accident year (4,796) (4,550) (4,082)
Prior accident years (4,750) (4,835) (3,993)
-------------------------------------------------------------------------------------------------------
Loss and LAE payments for claims incurred (9,546) (9,385) (8,075)
-------------------------------------------------------------------------------------------------------
Unrealized foreign exchange loss/(gain) (234) (317) 521
Other 2) (1,000) 262 0
-------------------------------------------------------------------------------------------------------
Net loss and LAE reserves at end of financial year 16,696 16,690 16,422
-------------------------------------------------------------------------------------------------------
Reinsurance recoverables on unpaid losses at end of
financial year 2,892 3,914 2,650
-------------------------------------------------------------------------------------------------------
Loss and LAE reserves at end of financial year 3) 19,588 20,604 19,072
-------------------------------------------------------------------------------------------------------
1) The loss on prior accident years in 2001 is primarily due to subsidiaries in
USA and Spain. In 2000, this was primarily due to subsidiaries in Spain and
Portugal and adverse development related to the December 1999 winter storms
in Europe.
2) In 2001, included in the line Other are loss and loss expense reserves of
CGU Belgium of CHF 513 million and Prudential Plc portfolio of CHF
417 million, which Winterthur Insurance acquired in 2001, and of Winterthur
International. Winterthur Swiss Insurance (Asia), Hong Kong and the Czech
non-life portfolio of CHF 1,944 million, which Winterthur diverted in 2001.
In 2000, this included loss and expense reserves of NIG of CHF 633 million,
which Winterthur Insurance acquired in 2000, and the deferred gain of CHF
381 million on the H.S. Weavers retroactive reinsurance contract.
3) Reserves for businesses disposed of have been excluded from the above table.
F-145
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.20 Liabilities for loss and loss adjustment expenses for the non-life
insurance business (continued)
Gross losses and LAE for asbestos and environmental claims, excluding
reinsurance for environmental and asbestos claims, were CHF 936 million and CHF
968 million at December 31, 2001 and 2000, respectively. Of this amount, CHF
799 million in 2001 and CHF 856 million in 2000 were from claims in North
America. Net losses and LAE for asbestos and environmental claims, including
reinsurance assumed and ceded for environmental and asbestos claims were CHF
268 million and CHF 288 million at December 31, 2001 and 2000, respectively. Of
this amount, CHF 157 million in 2001 and CHF 178 million in 2000 were related to
claims in North America. H.S. Weavers was an underwriting agent that wrote
business on behalf of Winterthur Insurance through year-end 1983. The agency
accepted commercial umbrella and excess casualty business from US companies, and
as a result, has significant exposure to asbestos, pollution and other health
hazard claims. Effective July 1, 2000, Winterthur Insurance purchased
reinsurance coverage up to USD 800 million to limit exposure from this book of
business. In addition, during 2000, Winterthur Insurance also sold Republic
Insurance Company, which eliminated a significant amount of the Group's exposure
to asbestos, pollution and other health hazard risks related to this book of
business. Due to uncertainties such as changes in legislation, additional
liabilities may arise for amounts in excess of the current reserves, which
cannot be reasonably estimated. However, the Group believes it is not likely
that the additional claims will have a material adverse effect on the Group's
financial position and results of operations.
At December 31, 2001 and 2000 the carrying values of certain annuity type
non-life reserves that are discounted, on a gross basis, were CHF 3,472 million
and CHF 3,219 million, respectively. The discount amounts were CHF
1,708 million and CHF 1,553 million for 2001 and 2000, respectively. The
discount rates used were between 3% and 5% in both years.
47.21 Participating policies of insurance business
Participating policies are policies where policyholders participate in the
profits and the policies are expected to pay dividends based on the experience
of the insurer.
Participating business for non-life insurance represents approximately 8% and 9%
of the total non-life insurance premium income for the years ended December 31,
2001 and 2000, respectively.
Participating business for life insurance represents approximately 67% and 69%
of the total life insurance premiums in force at December 31, 2001 and 2000,
respectively, and approximately 69% and 70% of life insurance premium income for
the years ended December 31, 2001 and 2000, respectively.
The amount of dividends to be paid is determined annually by the board of
directors of the respective companies where the dividends are paid. Amounts
allocable to participating policyholders are based on company practice, legal
requirements and/or market conditions depending on the jurisdiction. At
December 31, 2001 and 2000, the amount of policyholder dividends for non-life
was CHF 193 million and CHF 246 million, respectively. The amount of
policyholder dividends for life insurance was CHF 1,558 million and CHF
1,500 million at December 31, 2001 and 2000, respectively.
F-146
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.22 Business combinations
Vojensky Otevreny Penzijni Fond (VOPF)
On April 4, 2001, Winterthur Life & Pensions acquired the largest Czech pension
fund, Vojensky Otevreny Penzijni Fond (VOPF) for a purchase price of
CHF 125 million. The Group acquired 93.28% of total capital on January 18, 2001
and 6.66% of total capital on May 9, 2001. This acquisition has been accounted
for under the purchase method of accounting, and accordingly, the results of
operations of WPF beginning April 1, 2001 have been included in the accompanying
consolidated financial statements. Total goodwill was approximately
CHF 104 million will be amortized over 20 years under Swiss GAAP.
JO Hambro Investment Management Limited
On February 7, 2001, Credit Suisse Group acquired JO Hambro Investment
Management Ltd., an investment company targeting high-net-worth individuals, for
GBP 94.5 million (CHF 229 million) payable in a combination of cash and
securities. This acquisition has been accounted for under the purchase method of
accounting, and accordingly, the results of operations of JO Hambro Investment
Management Limited beginning February 7, 2001 have been included in the
accompanying consolidated financial statements. Under Swiss GAAP, the goodwill
amount of GBP 86 million (CHF 208 million) will be amortized over 20 years. JO
Hambro will for the time being retain its name and operate as a separately
branded entity.
Commercial General Union
On September 30, 2001, Winterthur acquired the non-life insurance activities of
Commercial General Union in Belgium. The purchase price was BEF 4,764 million
(CHF 175 million) and the goodwill amount of BEF 6,424 million
(CHF 236 million) will be amortized over 20 years under Swiss GAAP. This
acquisition has been accounted for under the purchase method of accounting, and
accordingly, the results of operations of Commercial General Union in Belgium
beginning September 30, 2001 have been included in the accompanying consolidated
financial statements.
SLC Asset Management
On December 7, 2001, the Group acquired SLC Asset Management Limited, SLC Pooled
Pensions Limited and Sun Life of Canada Unit Managers Limited, the principal UK
asset management subsidiaries of global insurer Sun Life Financial Services of
Canada Inc., for the purchase price of GBP 122 million (CHF 287 million). The
companies are asset management companies with contracts for management of the
insurance assets (including property) of their former affiliate Sun Life
Assurance Company of Canada (UK) Limited and third-party institutional and
retail funds. This acquisition has been accounted for under the purchase method
of accounting, and accordingly, the results of operations beginning December 7,
2001 have been included in the accompanying consolidated financial statements.
Under Swiss GAAP, the goodwill of GBP 106 million (CHF 250 million) will be
amortized over 20 years.
Donaldson, Lufkin & Jenrette, Inc.
On November 3, 2000, the Group completed the acquisition of Donaldson, Lufkin &
Jenrette, Inc. (DLJ). The Group acquired all of the outstanding shares of common
stock of the series designated Donaldson, Lufkin & Jenrette, Inc.- DLJ Common
Stock, for USD 90 per share in cash pursuant to a tender offer for
F-147
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.22 Business combinations (continued)
consideration of USD 5,026 million (CHF 8,930 million). The Group also acquired
from AXA, SA and certain of its affiliates, their combined interest in DLJ for a
combination of USD 2,377 million (CHF 4,223 million) in cash and 102,908,668
newly issued common shares. Total consideration for the acquisition of DLJ,
including costs associated with the transaction amounted to USD 12,361 million
(CHF 21,962 million).
In accordance with a Merger Agreement dated August 30, 2000, DLJ, now named
Credit Suisse First Boston (USA), Inc., became an indirect wholly owned
subsidiary of the Group. This acquisition has been accounted for under the
purchase method of accounting, and accordingly the results of operations of DLJ
beginning from November 3, 2000 have been included in the accompanying
consolidated financial statements. The purchase price has been allocated to
assets acquired and liabilities assumed based on their estimated fair value at
the acquisition date. Goodwill is being amortized on a straight-line basis over
20 years.
The following unaudited pro forma consolidated results of operations are
presented in accordance with US GAAP as if the acquisition of DLJ had occurred
at the beginning of the years presented.
2000
Pro forma information (unaudited) in CHF m 1999
in CHF m
---------------------------------------------------------------------------------
Revenue, net of interest expense 73,922 60,717
Profit before extraordinary items 2,328 1,524
Net profit 2,345 1,524
Basic earnings per share (in CHF) 8.24 5.33
---------------------------------------------------------------------------------
The pro forma consolidated results of operations include adjustments to give
effect to amortization of goodwill, interest expense on acquisition debt,
retention benefits and certain other adjustments, together with related income
tax effects. The unaudited pro forma information is not necessarily indicative
of the results of operations that would have occurred had the purchase been made
at the beginning of the periods presented or the future results of the combined
operations.
Colonial UK, Nicos Life, and National Insurance and Guarantee Corporation Plc
In 2000, "Winterthur" acquired the following entities in cash transactions:
Colonial UK; Nicos Life; and National Insurance and Guarantee Corporation Plc
(NIG). Colonial UK was purchased for GBP 290 million (CHF 731 million), Nicos
Life was purchased for JPY 17,400 million (CHF 285 million) and NIG was
purchased for GBP 130 million (CHF 347 million). All three acquisitions were
accounted for as purchases and the resulting goodwill for each acquisition will
be amortized over 20 years. The results of operations for each entity have been
included in the accompanying consolidated financial statements beginning from
the respective acquisition dates.
Warburg Pincus Asset Management
On July 6, 1999, Credit Suisse Asset Management (CSAM) completed its acquisition
of Warburg Pincus Asset Management (Warburg Pincus), a US asset manager. CSAM
paid an initial USD 450 million (CHF 689 million); consisting of USD 75 million
(CHF 115 million) in cash and 8,276,596 common shares. Additional unconditional
payments of USD 50 million (CHF 76 million) in common shares was paid out
F-148
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.22 Business combinations (continued)
within two years of the purchase date. These unconditional payments have been
accrued and capitalized as part of the purchase price. Additional USD
150 million payments are conditional upon meeting employee retention and revenue
targets as well as reaching specific levels of assets under management, and are
to be paid out within three years of acquisition. Conditional payments are
recorded as adjustments to goodwill when paid. The conditional payments are also
made as a combination of cash and shares. Of these conditional payments, USD
70 million (CHF 114 million) has been paid out as certain targets for employee
retention and assets under management were met for 2000 and 2001. This
transaction has been accounted for as a purchase, and accordingly the results of
operations beginning July 6, 1999 are included in the accompanying consolidated
financial statements. Assets acquired and liabilities assumed have been recorded
at their estimated fair values at the date of acquisition. Goodwill is being
amortized on a straight-line basis over 20 years.
In connection with CSAM's acquisition of Warburg Pincus, the Group purchased a
19.9% interest in the private equity activities of Warburg Pincus & Co.,
effective July 6, 1999 for USD 425 million (CHF 650 million). The Group
delivered 1,379,436 common shares with an aggregate value of approximately USD
62.5 million (CHF 96 million) and paid the remainder in cash. Additional USD
100 million payments, payable in cash and common shares, are subject to certain
conditions and were paid out within two years of the acquisition.
DBV Winterthur Holding, AG
Effective July 1, 1999, Winterthur Group acquired an additional 23% stake in its
fully consolidated subsidiary, DBV Winterthur Holding AG, Wiesbaden, from
Commerzbank for DEM 977 million (CHF 759 million) in cash. The transaction was
accounted for as a purchase, and goodwill is being amortized over 20 years.
Winterthur Group's stake in DBV-Winterthur Holding AG increased to 68.6%. The
change in minority interests as a result of this acquisition is reflected in the
consolidated financial statements effective July 1, 1999.
Credit Suisse Financial Products/Credit Suisse First Boston International
In April 1999 Credit Suisse Group acquired Swiss Re's 20% minority interest in
Credit Suisse Financial Products for CHF 1,104 million in cash. Credit Suisse
Financial Products became a wholly owned subsidiary of Credit Suisse Group on
the day of the acquisition. The transaction was accounted for as a purchase and
resulting goodwill is being amortized using the straight-line method over
20 years. The transaction is reflected in the consolidated Swiss GAAP financial
statements with effect from January 1, 1999. In March 2000, Credit Suisse
Financial Products was renamed Credit Suisse First Boston International.
F-149
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.22a Restructuring Costs, Merger-related costs and Other Exceptional Charges
For related information related to restructuring charges, please refer to
note 13.
The following is an analysis of the change in the restructuring provision of the
Group for the year ended December 31, 2001:
in CHFm Balance at Amounts paid Foreign Balance at
31.12.00 in 2001 exchange 31.12.01
-----------------------------------------------------------------------------------------------------------------
Personnel expenses 333 (233) 10 110
Premises and equipment 294 (245) 9 58
Other 406 (303) 18 121
-----------------------------------------------------------------------------------------------------------------
Total 1,033 (781) 37 289
-----------------------------------------------------------------------------------------------------------------
Merger related costs represent retention awards related to the acquisition of
DLJ, which are being expensed over the vesting period. The vesting period is
generally three years. Retention awards of CHF 799 million are included in the
consolidated income statement for the year ended December 31, 2001. The
remaining retention awards of CHF 901 million as of December 31, 2001, are
expected to be charged against earnings in the following periods:
in CHFm Amounts to be
Charged
---------------------------------------------------------------------------
2002 565
2003 303
2004 33
---------------------------------------------------------------------------
Total 901
---------------------------------------------------------------------------
In addition during the fourth quarter of 2001, the Group incurred exceptional
items of CHF 1,259 million due to staff reductions of approximately 1,500
employees, as part of an extensive cost-reduction program, which was initiated.
Of this amount, CHF 985 million relates to severance and is included in
PERSONNEL EXPENSES, CHF 274 million relates facilities charges and exit charges
for non-core business, of which CHF 228 million is included in VALUATION
ADJUSTMENTS, PROVISIONS AND LOSSES.
Included in other income for the year ended December 31, 2001 is a gain of
approximately CHF 314 million on the assignment of the lease and related sale of
the lease hold improvements on the former headquarters of DLJ.
47.23 Related party transactions
See also note 37 for information on loans to members of the Group's governing
bodies.
All loans are either mortgages or loans against securities. Mortgage loans are
granted either with variable interest rates that can be adjusted at any time to
reflect changed market conditions for such loans or with fixed interest rates
over a certain period. Typically, fixed mortgages are granted for periods of up
to 5 years. Interest rates applied are based on the refinancing cost of the bank
plus a reduced margin and are consistent with those applicable to other
employees. Loans against securities are granted at interest rates that can be
adjusted to changed market conditions at any time and are consistent with
interest rates applicable to similar loans granted to other employees.
F-150
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.23 Related party transactions (continued)
In addition, the Group has entered into financing and other banking agreements
with major shareholders and with companies in which members of the Board of
Directors or the Group Executive Board have a significant influence. All such
transactions were entered into in the ordinary course of business and at terms
and conditions in line with comparable transactions with other similarly rated
third-parties. The interest rates and/or fees applied are dependent on the
Group's refinancing cost, the type of transaction as well as the terms of the
transaction. At December 31, 2001, total exposures with such related parties
amounted to CHF 82 million, including advances, derivative contracts and
contingent liabilities. The highest exposure for the three years ended
December 31, 2001, did not exceed CHF 1,070 million, including all contingent
liabilities.
From time to time, the Group may engage through one of its subsidiaries in
different types of investment banking transactions with related parties. As part
of such contracts the Group may underwrite a substantial loan with the intention
to immediately sell it again in the market. Any residual loans stemming from
such transactions are included in the above amounts. Furthermore, the Group may
enter through one of its subsidiaries into securities transactions with related
parties involving a purchase of securities with the agreement to resell the
securities back at an agreed price at a later date. Such borrowings are
collateralized by a pledge of securities. The maximum potential exposure of such
borrowings for the three years ended December 31, 2000 did not exceed CHF
450 million.
47.24 Pension and post-retirement benefits
See also note 36 for information on pension and post retirement benefits. The
provisions of SFAS NO. 87, EMPLOYERS ACCOUNTING FOR PENSIONS (SFAS No. 87) have
been applied only to the Group's main plans. Both the assets and covered
employees within these main plans comprise in excess of 95% of the respective
assets and covered employees in all of the Group's defined benefit plans. The
measurement date for the Group's main plans is September 30, 2001. Amounts shown
below are in accordance with US GAAP.
Swiss pension plans
The pension funds of the Group in Switzerland are defined benefit plans, and are
set up as trusts, domiciled in Zurich and Winterthur. All employees in
Switzerland are covered by these plans. The pension plan benefits exceed the
minimum benefits required under Swiss law.
Contributions are paid for by the Group and the employees. The employee
contributions are calculated as a percentage of the annual salary and are
deducted monthly. The percentages deducted from the salary depend upon the
employee's age and salary and vary between 7.5% and 12%. The employer's matching
contributions are 167% of the employees' contributions.
Foreign pension plans
Various pension schemes exist in foreign locations of Credit Suisse Group,
including both defined benefit and defined contribution plans. The plans'
retirement benefits depend on age, contributions and salary. The funding policy
for these plans is consistent with local government and tax requirements. The
assumptions used are derived using local economic conditions. Material defined
benefit plans exist in
F-151
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.24 Pension and post-retirement benefits (continued)
Germany, the US and the UK. These retirement plans provide benefits in the event
of retirement, death, disability, or employment termination.
Post-retirement benefits other than pensions
In the United States and Canada, the Group sponsors post-retirement life
insurance plans and provides health care benefits for certain retirees and
employees when they retire.
The following table shows the components of net periodic pension expense for the
Swiss and foreign defined benefit plans for the years ended December 31:
Total pension expense
Pension Pension Pension
benefits benefits benefits
in CHF m 2001 2000 1999
----------------------------------------------------------------------------------------------
Net benefits earned during the year 423 406 311
Interest costs on benefit obligation 634 591 561
Expected return on plan assets (861) (824) (751)
Amortization of
Unrecognized transition obligation/(asset) 67 68 66
Prior service cost 3 2 1
Unrecognized (gains)/losses (28) (1) 3
----------------------------------------------------------------------------------------------
Net periodic pension cost 238 242 191
Settlement loss 59 18 28
----------------------------------------------------------------------------------------------
Total US GAAP pension expense 297 260 219
----------------------------------------------------------------------------------------------
F-152
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.24 Pension and post-retirement benefits (continued)
The following table shows the changes in the benefit obligation and the fair
value of plan assets during 2001 and 2000 and the amounts included in the
Group's condensed consolidated US GAAP balance sheet for the Group's defined
benefit pension and other post-retirement benefit plans at:
Post Post
Pension Pension retirement retirement
benefits benefits benefits benefits
in CHF m 31.12.01 31.12.00 31.12.01 31.12.00
-------------------------------------------------------------------------------------------------------------------
Benefit obligation at beginning of financial year 13,857 13,824 69 64
Benefit obligation of countries added in current
year 314 31 0 1
Plan participants' contributions 254 192 0 0
Service cost 423 406 2 2
Interest cost 634 591 5 5
Plan amendments 233 15 (4) 0
Settlement loss 59 18 0 0
Actuarial (gains)/losses 953 (296) 1 0
Business Combinations (7) 0 0 0
Benefits payments (632) (855) (5) (4)
Exchange rate (gains)/losses (18) (69) 2 1
-------------------------------------------------------------------------------------------------------------------
Benefit obligation at end of financial year 16,070 13,857 70 69
-------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at beginning of financial
year 14,984 13,577 0 0
Assets of countries added in current year 262 28 0 0
Actual return on plan assets (989) 1,498 0 0
Group contributions 782 564 5 4
Plan participants' contributions 254 192 0 0
Settlements 29 18 0 0
Benefits payments (632) (855) (5) (4)
Exchange rate (gains)/losses 12 (38) 0 0
-------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of financial
year 1) 14,702 14,984 0 0
-------------------------------------------------------------------------------------------------------------------
Total amount recognized at end of financial year
Funded status of the plan (1,368) 1,127 (70) (69)
Unrecognized:
Net transition obligation/(asset) 123 190 0 17
Prior service cost 255 25 (4) 1
Net actuarial (gains)/losses 962 (1,865) (7) (8)
4th quarter employer contributions 146 145 1 1
-------------------------------------------------------------------------------------------------------------------
Net amount recognized 118 (378) (80) (58)
-------------------------------------------------------------------------------------------------------------------
Amounts recognized in the US GAAP balance sheet
consist of
Prepaid benefit cost 428 533 0 0
Accrued benefit liability (665) (910) (80) (58)
Intangible asset 79 (1) 0 0
Accumulated other comprehensive income 276 0 0 0
-------------------------------------------------------------------------------------------------------------------
Net amount recognized 118 (378) (80) (58)
-------------------------------------------------------------------------------------------------------------------
1) At December 31, 2001 and 2000, the total value of Group securities included
in plan assets was CHF 697 million and CHF 675 million, respectively. The
majority of these assets are invested in Credit Suisse Group shares. In
addition, the majority of the plan assets of the Winterthur Pension Plan of
Switzerland is fully insured with Winterthur Life Switzerland. The plan
assets covered by this agreement amount to CHF 3,476 million and CHF
3,281 million at December 31, 2001 and 2000, respectively.
2) For those plans whose accumulated benefit obligation exceeds plan assets,
the aggregate accumulated benefit obligation for the year 2001 was
CHF 1,884 million and the aggregate fair value of plan assets for the year
2001 for those plans was CHF 1,723 million.
F-153
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.24 Pension and post-retirement benefits (continued)
The weighted-average assumptions used in calculating the above amounts were:
Post
Pension Post retirement
Pension benefits retirement benefits
in % benefits 2000 benefits 2000
2001 in % 2001 in %
-------------------------------------------------------------------------------------------------------------
Discount rate 4.4 4.7 7.0 7.5
Expected rate of salary increases 3.5 3.5 - -
Expected long-term rate of return on assets 6.0 6.2 - -
Assumed health care cost increase - - 4.8 5.3
-------------------------------------------------------------------------------------------------------------
The discount rates used reflect the rates at which the pension benefits could be
effectively settled. The assumed discount rates have been primarily based on the
rates of return of high-quality fixed-income investments available in each
market at the measurement date.
A 1% increase or decrease in the health care cost trend rate assumption would
not have had a material impact on the accumulated post-retirement benefit
obligation or expense for 2001 and 2000.
Defined Contribution Plans
The Credit Suisse Group also contributes to various defined contribution plans
primarily in the US and the UK but also in other countries throughout the world.
The contribution to these plans during 2001, 2000 and 1999 were CHF 109 million,
CHF 102 million and CHF 84 million, respectively.
47.25 Capital requirements
Banking operations
The Group, on a consolidated basis, is subject to risk-based capital and
leverage guidelines, under the Swiss Federal Banking Commission (FBC) and the
Bank for International Settlements (BIS) guidelines. These guidelines are used
to evaluate risk-based capital adequacy. For purposes of complying with FBC and
BIS capital requirements, total capital is divided into three categories:
- Tier 1 capital (core capital)
- Tier 2 capital (supplementary capital)
- Tier 3 capital (additional capital)
Tier 1 capital primarily includes paid-in share capital, reserves (defined to
include retained earnings), capital participations of minority shareholders in
fully consolidated subsidiaries, and the reserve for general banking risks and
audited current-year profits, less anticipated dividends. Among other items,
this is reduced by the Group's holdings of its own shares outside the trading
book and goodwill. Tier 1 capital is supplemented for capital adequacy purposes
by Tier 2 capital, which consists primarily of hybrid capital and subordinated
debt instruments. A further supplement is Tier 3 capital, which consists of
certain unsecured subordinated debt obligations with repayment restrictions. The
sum of all three capital tiers, less non-consolidated participations in the
industries of banking, finance and insurance,
F-154
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.25 Capital requirements (continued)
equals total capital. Under both FBC law and BIS guidelines, a bank must have a
ratio of total eligible capital to aggregate risk-weighted assets of at least
8%, of which the Tier 1 capital element must be at least 4%.
The following table sets forth key capital figures and ratios under the BIS
guidelines as of:
31.12.01 31.12.00
---------------------------------------------------------------------------------
Tier 1 capital in CHF m 1) 21,155 27,111
Total capital in CHF m 34,888 43,565
BIS Tier 1 capital ratio (in %) 1) 9.5% 11.3%
BIS Total capital ratio (in %) 15.7% 18.2%
---------------------------------------------------------------------------------
1) Tier 1 capital includes non-cumulative perpetual preferred securities of CHF
2.1 bn in 2001 and CHF 1.1 bn in 2000.
The ratios measure capital adequacy by comparing eligible capital with
risk-weighted assets positions, which include balance sheet assets, net
positions in securities not held in the trading portfolio, off-balance sheet
transactions converted into credit equivalents and market positions in the
trading portfolio.
The volatility of the components within shareholders' equity may have an impact
on the capital adequacy of the Group. In 2001, total capital was impacted by a
decrease in the amount of net unrealized gains on available-for-sale investment
securities from the insurance business, as well as decreases in share capital
and capital reserves.
At December 31, 2001, the Group was adequately capitalized under the regulatory
provisions outlined under both FBC and BIS guidelines.
Broker-dealer operations
The Group's wholly owned subsidiaries, Donaldson, Lufkin & Jenrette Securities
Corporation (DLJSC) and Credit Suisse First Boston Corporation (CSFB Corp.), are
registered broker-dealers, registered futures commission merchants and member
firms of the New York Stock Exchange, Inc. (the NYSE). As such, they are subject
to the NYSE's net capital rule, which conforms to the Uniform Net Capital Rule
pursuant to rule 15c3-1 of the Securities Exchange Act of 1934, as amended (the
Exchange Act). Under the alternative method permitted by this rule, the required
net capital may not be less than two percent of aggregate debit balances arising
from customer transactions or four percent of segregated funds whichever is
greater. If a member firm's capital is less than four percent of aggregate debit
balances, the NYSE may require the firm to reduce its business. If a member
firm's net capital is less than five percent of aggregate debit balances, the
NYSE may prevent the firm from expanding its business and declaring cash
dividends. At December 31, 2001, DLJSC and CSFB Corp.'s net capital of
approximately USD 1.2 billion and USD 2.4 billion, respectively, were 19.7% and
43.9%, respectively, of aggregate debit balances and in excess of the minimum
requirement by approximately USD 1.1 billion and USD 2.3 billion, respectively.
The Group's London-based broker-dealer subsidiaries are subject to the
requirements of the Securities and Futures Authority, a self-regulatory
organization established pursuant to the United Kingdom Financial Services Act
of 1986. Other US and foreign broker-dealer subsidiaries of the Group are
subject to the net capital requirements of their respective regulatory agencies.
F-155
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.25 Capital requirements (continued)
At 31 December 2001, the Group's broker-dealer subsidiaries were in compliance
with all applicable regulatory capital adequacy requirements.
Insurance operations
The Group is required to maintain minimum solvency margins for its insurance
business under the Swiss Code of Obligations. All insurance companies granted an
insurance license in Switzerland are required to adhere to the following capital
requirements:
in CHF m Non-life Life
---------------------------------------------------------------------------------------------
Capital 0.6-10.0 5.0-10.0
Organization fund 1) up to 50% of capital 3.0-5.0
---------------------------------------------------------------------------------------------
1) The use of the organization fund is restricted. It can be used to cover
incorporation and start-up extraordinary growth, and any losses.
The solvency margin for non-life is the greater of two calculations: (1) the
premium margin based on the net premium income for the latest financial year;
and (2) the claims margin, based on the net average claims expense for the last
three financial years. The premium margin is calculated by taking 16-18% of the
appropriate premium income less a deduction of up to 50% for the gross claims
incurred in the previous financial year that were reinsured. The claims margin
is calculated by multiplying 23-26% by the appropriate claims expense of up to
50% for the gross claims incurred in the previous financial year that were
reinsured. The required solvency margin is the higher of the above two margins.
Life insurance companies are required to maintain a margin of approximately 4%
of insurance reserves (1% of separate account reserves) plus 0.03% of the amount
at risk under insurance policies. Required safety margin is calculated as:
(1) the total of commitments for policies issued, provisions for claims
outstanding and policyholders surplus; plus (2) 1% of the total of clause (1),
but at least CHF 100,000.
The minimum solvency margin requirements in Switzerland are similar to the
requirements for European Union member countries in accordance with European
Union directives. Regulators outside the EU can and do impose various capital
and solvency requirements on insurers operating within their jurisdiction.
Additionally, some local regulators can and do require companies to maintain
solvency margins which are higher than the solvency margins provided for by the
regulations.
Based on a review of the Group's principal insurance subsidiaries, at
December 31, 2001, these subsidiaries were in compliance with all applicable
solvency and capital adequacy margin requirements. The Group's principal
insurance subsidiaries in aggregate represent approximately CHF 165 billion or
approximately 97% of the total insurance assets of the Group.
Dividend restrictions
Certain of the Group's subsidiaries are subject to legal restrictions on the
amount of dividends they can pay. For example, article 675 in conjunction with
article 671 of the Swiss Code of Obligations restricts the amount of dividends
that "Winterthur" Swiss Insurance Company, Credit Suisse First Boston and Credit
Suisse legal entities can pay.
At December 31, 2001, the Group was not subject to significant restrictions on
its ability to pay dividends.
F-156
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.26 Credit Suisse Group (parent company only)
Condensed statement of income
in CHF m 2001 2000 1999
--------------------------------------------------------------------------------------------------
Interest income and income from securities 1,343 1,620 190
Income from investments in Group companies 1) 3,141 4,091 1,885
Other income 555 270 271
--------------------------------------------------------------------------------------------------
Income 5,039 5,981 2,346
--------------------------------------------------------------------------------------------------
Interest expenses 423 376 263
Personnel expenses and directors' fees 115 112 116
Other expenses 182 154 143
Depreciation, write-offs and provisions 655 0 2
Extraordinary expenses 0 0 2
Taxes 66 92 27
--------------------------------------------------------------------------------------------------
Expenses 1,441 734 553
--------------------------------------------------------------------------------------------------
Net profit for the year 3,598 5,247 1,793
--------------------------------------------------------------------------------------------------
1) Recognized on a cost basis, pursuant to Swiss Company law.
F-157
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.26 Credit Suisse Group (parent company only) (continued)
Condensed balance sheet
in CHF m 31.12.01 31.12.00
-----------------------------------------------------------------------------------------
Assets
Liquid assets held at Group companies 1,497 772
Securities 1,438 3,701
Other receivables from third-parties 39 87
Receivables from Group companies 490 0
Accrued income and prepaid expenses 1,272 1,842
-----------------------------------------------------------------------------------------
Total current assets 4,736 6,402
-----------------------------------------------------------------------------------------
Investments in Group companies 1) 32,204 32,065
Long-term loans to Group companies 3,024 2,063
Securities 3,039 2,420
-----------------------------------------------------------------------------------------
Total long-term assets 38,267 36,548
-----------------------------------------------------------------------------------------
Total assets 43,003 42,950
-----------------------------------------------------------------------------------------
Liabilities and shareholders' equity
Payable to third-parties 9 984
Payable to Group companies 1,161 1,168
Accrued expenses and deferred income 1,119 1,576
-----------------------------------------------------------------------------------------
Total current liabilities 2,289 3,728
-----------------------------------------------------------------------------------------
Bonds 3,650 4,150
Long-term loans from Group companies 3,827 2,972
Provisions 817 492
-----------------------------------------------------------------------------------------
Total long-term liabilities 8,294 7,614
-----------------------------------------------------------------------------------------
Share capital 3,590 6,009
Legal reserve 11,817 19,653
Reserve for own shares 2,469 600
Free reserves 14,100 0
Retained earnings:
Retained earnings brought forward (3,154) 99
Net profit for the year 3,598 5,247
-----------------------------------------------------------------------------------------
Total shareholders' equity 32,420 31,608
-----------------------------------------------------------------------------------------
Total liabilities and shareholders' equity 43,003 42,950
-----------------------------------------------------------------------------------------
1) Recognized on a cost basis, pursuant to Swiss Company law
F-158
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47.26 Credit Suisse Group (parent company only) (continued)
Condensed cash flow statement
in CHF m 2001 2000 1999
--------------------------------------------------------------------------------------------------
Cash flows from operating activities
Net profit 3,598 5,247 1,793
Net adjustments to reconcile net profit to net cash provided
by operating activities (531) (444) (322)
--------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,067 4,803 1,471
--------------------------------------------------------------------------------------------------
Cash flows from investing activities
Purchases of securities (3,799) (4,158) (3,332)
Sales of securities 4,469 2,648 2,441
Investments in and advances to subsidiaries (1,282) (11,407) (2,214)
Repayment of advances to subsidiaries 139 0 200
--------------------------------------------------------------------------------------------------
Net cash used in investing activities (473) (12,917) (2,905)
--------------------------------------------------------------------------------------------------
Cash flows from financing activities
Advances from subsidiaries 848 1,455 2,008
Issuance of bonds 0 600 500
Repayments of bonds (500) (600) 0
Proceeds from issuance of common shares 175 8,717 758
Dividends paid/repayment out of share capital (2,392) (1,917) (1,360)
--------------------------------------------------------------------------------------------------
Net cash provided by/(used in) financing activities (1,869) 8,255 1,906
--------------------------------------------------------------------------------------------------
Net increase/(decrease) in liquid assets 725 141 472
Liquid assets at beginning of financial year 772 631 159
--------------------------------------------------------------------------------------------------
Liquid assets at end of financial year 1,497 772 631
--------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information
Cash paid during the year for income taxes 31 78 17
Cash paid during the year for interest 429 364 256
Cash dividends received from subsidiaries 3,141 4,091 1,885
--------------------------------------------------------------------------------------------------
F-159
[KPMG LOGO]
Assurance
KPMG Klynveld Peat Marwick Goerdeler SA Telephone +41 1 249 31 31
Badenerstrasse 172 P.O. Box Fax +41 1 249 30 41
CH-8004 Zurich CH-8026 Zurich www.kpmg.ch
Report of the Independent Auditors
THE BOARD OF DIRECTORS OF CREDIT SUISSE GROUP
Under the date of March 1, 2002, we reported on the consolidated balance sheets
of Credit Suisse Group and subsidiaries as of December 31, 2001 and 2000 and the
related consolidated statements of income and source and application of funds
for each of the years in the three-year period ended December 31, 2001, which
are included in the Form 20-F. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedules I, III and IV in the Form 20-F. These
financial statement schedules are the responsibility of Credit Suisse Group
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
Zurich, March 1, 2002
KPMG Klynveld Peat Marwick Goerdeler SA
/s/ Brendan R. Nelson /s/ Peter Hanimann
Brendan R. Nelson Peter Hanimann
Chartered accountant Certified accountant
Member Firm of Member the Swiss Institute of Certified
KPMG International Accountants and Tax Consultants
F-160
Schedule I
Summary of investments -- other than investments in related parties from the
insurance business
Amount
December 31, 2001 shown in the
in CHF m Cost 1) Fair value balance sheet
------------------------------------------------------------------------------------------------------------------
Debt securities
United States Government and government agencies and authorities 1,502 1,531 1,531
Swiss Federal Government, cantonal or local governmental entities 8,205 8,287 8,287
Foreign governments 19,336 19,558 19,558
Public utilities 1,214 1,270 1,270
Convertibles and bonds with warrants attached 15 15 15
All other corporate bonds 36,993 37,755 37,755
Time deposits 2 2 2
------------------------------------------------------------------------------------------------------------------
Fixed maturities 2) 67,267 68,418 68,418
------------------------------------------------------------------------------------------------------------------
Public utilities 496 501 501
Banks, trust and insurance companies 5,153 5,618 5,618
Industrial, miscellaneous and all other 16,533 16,250 16,250
------------------------------------------------------------------------------------------------------------------
Equity securities 3) 22,182 22,369 22,369
------------------------------------------------------------------------------------------------------------------
Other investments
Mortgage loans on real estate 9,811 9,468 9,811
Real estate 7,549 10,376 7,549
Policy loans 814 814 814
Separate account investments 14,519 14,519 14,519
Other long-term investments 4,576 4,846 4,648
Short-term investments 3,805 3,802 3,802
------------------------------------------------------------------------------------------------------------------
Other investments 41,074 43,825 41,143
------------------------------------------------------------------------------------------------------------------
Total investments 130,168 134,268 131,930
------------------------------------------------------------------------------------------------------------------
Own shares 184
Policy loans (excluded from investments from the insurance business) (813)
Derivatives (included in investments from the insurance business) (10)
------------------------------------------------------------------------------------------------------------------
Total investments from the insurance business 131,291
------------------------------------------------------------------------------------------------------------------
1) Original cost of equity securities and, as to fixed maturities, original
cost reduced by repayments and adjustment for amortization of premiums and
discounts.
2) Excludes bonds issued by Group entities with cost value of CHF 914 million
and fair value of CHF 929 million.
3) Excludes shares issued by Group with cost value of CHF 181 million and fair
value of CHF 184 million.
F-161
Schedule III
Supplementary insurance information
Other
Future policy policy Benefits, Amortisation
Deferred benefits, and claims, of deferred
policy losses, claims Net losses and policy Other
Segment acquisition claims, and Unearned benefits Premium investment settlement acquisition operating Premiums
in CHF m costs loss expenses premiums payable revenue income expenses costs expenses written
--------------------------------------------------------------------------------------------------------------------------------
2001
Non-life 2,109 20,308 5,987 1,443 15,007 2,217 (11,509)1) (2,272) (873) 16,840
Life 3,553 102,818 13 7,785 17,188 3,651 (12,167) (307) (673) 17,203
--------------------------------------------------------------------------------------------------------------------------------
Total 5,662 123,126 6,000 9,228 32,195 5,868 (23,676) (2,579) (1,546) 34,043
--------------------------------------------------------------------------------------------------------------------------------
2000
Non-life 1,454 19,955 4,996 1,702 13,519 2,385 (10,432)1) (1,828) (822) 14,632
Life 2,511 95,198 21 10,303 15,171 6,051 (9,734) (452) (544) 15,172
--------------------------------------------------------------------------------------------------------------------------------
Total 3,965 115,153 5,017 12,005 28,690 8,436 (20,166) (2,280) (1,366) 29,804
--------------------------------------------------------------------------------------------------------------------------------
1999
Non-life 1,191 19,662 4,055 1,705 12,056 1,691 (6,145)1) (2,536) (787) 12,604
Life 2,369 79,922 9 8,628 14,090 5,048 (8,033) (751) (414) 14,088
--------------------------------------------------------------------------------------------------------------------------------
Total 3,560 99,584 4,064 10,333 26,146 6,739 (14,178) (3,287) (1,201) 26,692
--------------------------------------------------------------------------------------------------------------------------------
1) Includes benefit claims, losses and settlement expenses from health business
and divested businesses.
F-162
Schedule IV
Reinsurance
Amount
assumed
Gross Ceded to Assumed from to net
in CHF m amount other companies other companies Net amount in %
-------------------------------------------------------------------------------------------------------
2001
Life insurance in force 351,726 -- -- -- --
Premiums
Non-life 16,162 (1,679) 524 15,007 3.5%
Life 17,190 (210) 208 17,188 1.2%
-------------------------------------------------------------------------------------------------------
Total premiums 33,352 (1,889) 732 32,195 2.3%
-------------------------------------------------------------------------------------------------------
2000
Life insurance in force 333,859 - - - -
Premiums
Non-life 14,711 (1,532) 340 13,519 2.5%
Life 15,438 (281) 14 15,171 0.1%
-------------------------------------------------------------------------------------------------------
Total premiums 30,149 (1,813) 354 28,690 1.2%
-------------------------------------------------------------------------------------------------------
1999
Life insurance in force 282,599 - - - -
Premiums
Non-life 13,084 (1,244) 216 12,056 1.8%
Life 14,178 (108) 20 14,090 0.1%
-------------------------------------------------------------------------------------------------------
Total premiums 27,262 (1,352) 236 26,146 0.9%
-------------------------------------------------------------------------------------------------------
F-163