credit sussi Annual Report Part 1 Share performance Market capitalisation Financial calendar

ANNUAL REPORT 1998/1999

CHF SHARE PERFORMANCE 350 300 250 200 150 100 Credit Suisse Group Swiss Market Index 1996 1997 1998 3/1999 MARKET CAPITALISATION as at 31 December 60 50 40 30 20 10 0 90 91 92 93 94 95 96 97 98 CHF bn Financial Calendar 1999 Annual General Meeting Friday 28 May 1999 First-half results for 1999 Wednesday 8 September 1999 Media conference for 1999 results Tuesday 14 March 2000 2000 Annual General Meeting Friday 26 May 2000

FINANCIAL HIGHLIGHTS 1998 1998 1997 Change REVENUE COMPOSITION 1998 Consolidated income statement in CHF m in CHF m +/-% Revenue 21,700 21,010 3 Gross operating profit 6,641 7,100 –6 25% 25% Net profit 3,068 397 – Cash flow 6,066 6,026 1 11% ROE in % in % Credit Suisse Group 11.7 1.7 – 39% Banking business 10.0 0.5 – Balance sheet business Insurance business 10.3 10.1 2 Commission and service fees Trading Insurance Change Consolidated balance sheet 31 Dec. 1998 31 Dec. 1997 +/-% Total assets (CHF m) 652,437 689,568 –5 Total shareholders’ equity (CHF m) 28,162 25,651 10 – of which minority interests (CHF m) 2,325 2,005 16 Total assets under management (CHF bn) 934 863 8 – of which advisory (CHF bn) 523 496 5 – of which discretionary (CHF bn) 411 367 12 Change BIS ratios in % in % +/-% BIS tier 1 ratio Credit Suisse 7.1 6.6 7 Credit Suisse First Boston 8.4 8.5 –1 Credit Suisse Group 12.0 10.9 10 BIS total capital ratio Credit Suisse Group 17.8 16.8 6 Change Human resources at year-end 1998 1997 +/-% Total staff 62,296 62,242 0 – of which in Switzerland banking business 20,795 21,442 –3 insurance business 7,146 7,108 1 – of which outside Switzerland banking business 15,980 13,235 21 insurance business 18,375 20,457 –10 Change Share data 1998 1997 +/-% Number of shares issued at year-end 269,086,369 266,128,097 1 Shares ranking for dividend at year-end 269,086,369 265,750,460 1 Average 267,542,466 262,952,238 2 Market capitalisation (CHF m) at year-end 57,854 60,060 –4 Earnings per share (CHF) 11.5 1.5 – Share price (CHF) at year-end 215 226 –5 for inclusion in Swiss tax returns 214 224 –4 year high 382 238 61 year low 149.5 133.75 12 Dividend (CHF) 5* 5 0 * proposal of the Board of Directors to AGM on 28 May 1999 1

TO OUR SHAREHOLDERS RAINER E. GUT, CHAIRMAN OF THE BOARD OF DIRECTORS (RIGHT), AND LUKAS MÜHLEMANN, CHIEF EXECUTIVE OFFICER Dear shareholder The international financial markets were distinguished by two main trends in 1998. On the one hand the year saw considerable market volatility: massive price rises, especially on the European and North American stock markets, in the first half were followed by a sharp global financial crisis triggered by the collapse of the Russian market in August. At the same time, the ongoing consolidation process in the financial services industry gathered pace, with a move towards ever larger financial services companies as well as combined banking and insurance providers. Against this eventful background, Credit Suisse Group achieved a satisfactory result. The foundation of the Group on four banking businesses and a strong insurance business, Winterthur, has proved its worth. Our Group not only has the required strength to expand its market position against ever larger competitors, but also the necessary breadth to successfully hold its ground in difficult markets. Four of our five business units – Credit Suisse, Credit Suisse Private Banking, Credit Suisse Asset Management and Winterthur – posted very good results in 1998. Credit Suisse First Boston’s performance was impacted by the collapse of the Russian market, although in most other areas the business unit achieved good results. Net operating income of Credit Suisse Group increased slightly to CHF 21.7 bn. Net profit rose substantially to CHF 3.1 bn. Consolidated ROE amounted to 11.7%, while earnings per share were CHF 11.50. The Board of Directors of Credit Suisse Group proposes to the Annual General Meeting an unchanged dividend of CHF 5. With respect to the results of the individual business units: in 1998 Credit Suisse successfully completed the restructuring process launched almost three years ago and also achieved an impressive improvement in results. Revenue increased by 18% or CHF 479 m, with net profit at CHF 205 m. Credit Suisse Private Banking achieved another substantial improvement in its results in 1998, with revenue increasing by 18% to CHF 4.3 bn and net profit by 27% to CHF 1.7 bn. Assets under management rose by CHF 27 bn to CHF 403 bn. Credit Suisse Asset Management also performed well, with revenue up 21% at CHF 852 m and net profit up 58% to CHF 223 m. Total assets under management increased by 13% to CHF 297 bn. 2

Premium volume in non-life business at Winterthur increased by 6% to CHF 13.8 bn and in life business by 23% to CHF 14.8 bn. Net profit was up by more than 31% at CHF 884 m. For Credit Suisse First Boston 1998 was a year of sharp contrasts. After the excellent performance in the first half, pre-tax profit fell to an unsatisfactory CHF 116 m, owing primarily to the virtual total collapse of the Russian market. The unprecedented severity of Russia’s collapse resulted in net provisions and depreciation at Credit Suisse First Boston of a total of CHF 1.86 bn. Despite achieving satisfactory results and strengthening its position in most other markets, Credit Suisse First Boston posted a loss after tax of CHF 221 m. The projects which were initiated in 1997 as part of the merger of Credit Suisse Group and Winterthur with a view to generating cost savings and enhancing revenues were successfully concluded in 1998. By the end of the year 2000, synergies of CHF 280 m per year will be captured; a further CHF 60-70 m are expected over the next few years. Strategies are currently being implemented for Europe with the aim of strengthening collaboration between Winterthur, Credit Suisse Private Banking and Credit Suisse Asset Management. In Switzerland the Group will continue to pursue the mutual sale of banking and insurance products through the banking and insurance distribution channels, which will collaborate closely to serve their clients. An important project for the Group is the preparation for the new millennium. By the end of June 1999, all IT systems are to be year-2000 compliant; at the end of February 1999, 93% of all business-critical systems had already been remediated. All business units have had a very good start to the current business year. Given the situation on the international financial markets, the Group anticipates a generally volatile and challenging operating environment in which it plans to achieve further substantial progress in reaching its performance targets. We would like to thank our staff for their hard work, professionalism and commitment in what was once again a demanding year. We also thank our customers and shareholders for the trust they have placed in us and for their valuable support. Rainer E. Gut Lukas Mühlemann Chairman of the Board of Directors Chief Executive Officer 3

THE STRUCTURE OF CREDIT SUISSE GROUP Credit Suisse Group is a global financial services company, providing a comprehensive range of banking and insurance products. Active on every continent and in all major financial centres, Credit Suisse Group comprises five business units, each geared to the requirements of specific customer groups and markets: Credit Suisse: corporate and individual customers in Switzerland Credit Suisse Private Banking: services for private investors in Switzerland and abroad Credit Suisse First Boston: global investment banking Credit Suisse Asset Management: services for institutional and mutual fund investors worldwide Winterthur: insurance for private and corporate customers worldwide CREDIT SUISSE CREDIT SUISSE FIRST BOSTON WINTERTHUR 241 locations in Switzerland 50 locations in Switzerland 3 locations in Switzerland 7 locations in Switzerland about 700 locations in 35 locations internationally 58 locations internationally 23 locations internationally Switzerland present in over 30 countries Subsidiaries Subsidiaries Subsidiaries Subsidiaries Subsidiaries Neue Aargauer Bank Bank Leu* Credit Suisse Credit Suisse Trust Winterthur Life (98.6%)* Financial Products and Banking Credit Suisse Fides* Winterthur International Credit Suisse Immobilien Clariden Bank* DBV-Winterthur Holding Leasing Bank Hofmann* Winterthur Holding Italia Bank für Handel & Hispanowin S.A. Effekten Winterthur-Europe Credit Suisse Trust* Assurances Winterthur (UK) Holdings Winterthur U.S. Holdings * direct holding of Credit Suisse Group 4

THE FIVE BUSINESS UNITS OF CREDIT SUISSE GROUP CREDIT SUISSE Credit Suisse serves corporate and Thanks to an innovative range of products individual customers in Switzerland through and services, especially in direct and a multichannel strategy and an efficient internet banking, it ranks among the branch network covering all major locations. market leaders in its segment. CREDIT SUISSE PRIVATE BANKING Credit Suisse Private Banking is one of providing personal investment counselling the world’s largest private banks and has and professional asset management for a a strong presence in both the Swiss and sophisticated international clientele. international markets. It specialises in CREDIT SUISSE FIRST BOSTON Credit Suisse First Boston is a leading financial products for users and suppliers global investment banking firm, providing of capital around the world. financial advisory, capital raising and CREDIT SUISSE ASSET MANAGEMENT Credit Suisse Asset Management is a providing first-class international leading global asset manager focusing on management through domestic operations. institutional and mutual fund investors, WINTERTHUR Winterthur Group is one of the leading and corporate customers tailor-made insurance companies in Europe and one of insurance and pension solutions at the the largest internationally active insurance local and international level. companies in the world. It offers private 5

CREDIT SUISSE GROUP BUSINESS REVIEW AND CONSOLIDATED RESULTS In 1998 Credit Suisse Group posted a net profit of CHF 3.1 bn. Four of the Group’s five business units – Credit Suisse, Credit Suisse Private Banking, Credit Suisse Asset Management and Winterthur – recorded very good results. Credit Suisse improved its result by almost CHF 500 m, returning to a net profit of CHF 205 m. Credit Suisse First Boston announced a disappointing result, owing primarily to the collapse of the Russian market. In view of the turbulence on the international financial markets, the Group’s result is satisfactory. Credit Suisse Group’s net operating income rose by 3% compared with 1997 to CHF 21.7 bn. Net interest income, which rose by 13%, contributed CHF 5.2 bn to this amount, with commission and service fee activities contributing CHF 8.3 bn (up 26%), trading CHF 2.4 bn (down 55%) and insurance operations CHF 5.4 bn (up 12%). Total operating expenses increased by 8% to CHF 15.1 bn, with personnel expenses increasing by 7% to CHF 10.6 bn owing largely to business expansion and acquisitions by Credit Suisse First Boston. By contrast, bonus payments were slightly lower than in the previous year, despite higher performance-based incentive payments at all business units except Credit Suisse First Boston. Overall, Credit Suisse Group showed a gross operating profit of CHF 6.6 bn, 6% lower than in the previous year. Depreciation, valuation adjustments and losses increased from CHF 3.2 bn to CHF 3.8 bn, including credit provisions of CHF 2.6 bn. Extraordinary income of CHF 1.6 bn includes CHF 101 m from the sale of Winterthur’s participation in HIH (Australia) and CHF 442 m from the sale of Winterthur’s active reinsurance business to PartnerRe. It also includes a release from the reserves for general banking risks of CHF 933 m. Of this sum, CHF 381 m were applied for the settlement of the Holocaust class actions in respect of World War II, and CHF 552 m to create provisions for credit risks. At CHF 573 m, 1998 extraordinary expenses were substantially lower than 1997 extraordinary charges. After deducting tax of CHF 575 m and minority interests of CHF 147 m, Credit Suisse Group posted a net profit of CHF 3.1 bn. Consolidated return on equity amounted to 11.7%. Total assets under management rose by CHF 71 bn to CHF 934 bn. Earnings per share were CHF 11.50 and year-end book value rose 8% to CHF 96 per share. At the Annual General Meeting on 28 May 1999 the Board of Directors proposes an unchanged dividend of CHF 5 per Credit Suisse Group registered share. 6

Four out of five business units announce very good results In 1998 Credit Suisse achieved a net profit of CHF 205 m. Revenue rose by 18% compared with 1997, an increase of CHF 479 m to CHF 3.2 bn. Personnel and other operating expenses remained stable as planned, despite substantially higher incentive payments in line with improved performance. The cost/income ratio improved significantly once again, decreas- ing from 85% to 71%. The risk structure of the credit portfolio also developed favourably. As well as producing an improved financial result, Credit Suisse also brought its restructuring process to a close. Despite financial market turbulence, Credit Suisse Private Banking repeated the first half’s very good results in the second half of the year. Revenues rose by 18% and net profit increased by 27% to CHF 1,671 m. Assets under management increased by CHF 27 bn to CHF 403 bn (adjusted for divestments and intra-Group transfer of clients). CHF 17 bn of the increase is attributable to a net inflow of new assets. The cost/income ratio declined from 50.6% to 46.8%, despite substantially higher incentive payments reflecting improved performance. For Credit Suisse First Boston 1998 was a year of marked contrasts. Pre-tax profit declined to USD 82 m (CHF 116 m) after record results in the first half of the year. This disappointing result was due primarily to the collapse of the Russian market. Credit Suisse First Boston had, in line with its business strategy, built a leading market position in Russia, the world’s 12th largest economy in 1997 and a country granted full G7 membership status as of May 1998. The crisis which erupted in August 1998 was characterised by a massive devalua- tion, a moratorium on all local currency public debt with unconscionable discrimination against foreign creditors, a breakdown of the banking system and a political leadership vacuum. Such a combination of factors is unprecedented in the world financial markets. Consequently, value declines of some 95% in Russian government bonds (GKOs) and 85% in equities, as well as heavy provisioning against counterparty default on loans and forward foreign exchange contracts, resulted in provisions and net write-offs of USD 1.3 bn (CHF 1.86 bn). As a result, in 1998 Credit Suisse First Boston reported a net loss of USD 154 m (CHF 221 m) after tax. In other emerging markets as well as in most other business areas Credit Suisse First Boston posted good results. The revenue split between Americas (44%), Europe (47%) and Asia Pacific (9%) highlights Credit Suisse First Boston’s global balance. Credit Suisse First Boston’s financial results contrast sharply with gains in market share and major advances in terms of strategic positioning. As a result of substantial investments to achieve organic growth, the seamless and successful integration of the businesses acquired from BZW and of Garantia, a reduced risk profile and improved risk management, Credit Suisse First Boston is well positioned to confirm its place among the leading global investment banks. It is expected to again make a substantial contribution to the Group’s results in 1999. 7

Credit Suisse Asset Management can look back on a successful business year in 1998. Restated for a change in the revenue sharing agreement with the other business units, revenue grew by 21% to CHF 852 m and net profit rose by 58% to CHF 223 m. Discretionary assets under management increased by 20% to CHF 212 bn; total assets under management increased by 13.4% to 297 bn. The growth of equity funds under management and the growth in retail distribution led to improved pre-tax margins consistent with the strategic business plan. The acquisition of Warburg Pincus Asset Management announced in February 1999 will considerably strengthen Credit Suisse Asset Management’s position in the US market. In 1998 Winterthur recorded strong growth in its life business, where premium volume increased 23% to CHF 14.8 bn. Non-life business increased by 6% to CHF 13.8 bn, adjusted for the divestment of the Australian HIH and the reinsurance business. Net profit increased by 31% from CHF 674 m to CHF 884 m. Equity after minority interests grew by 18% to CHF 9.4 bn. In Switzerland, Winterthur further consolidated its position as market leader. Outside Switzerland, Winterthur is focusing on further expanding its position in the European Union, eastern Europe and Asia. Bancassurance strategy: focus on Europe The projects which were initiated in 1997 as part of the merger of Credit Suisse Group and Winterthur with a view to generating cost savings and enhancing revenues were successfully concluded in mid-1998. As a result, synergies of CHF 280 m per annum were identified and will be fully captured by 2000; a further CHF 60–70 m are expected over the next few years. Strategies are currently being implemented for Europe with the aim of strengthening collaboration between Winterthur, Credit Suisse Private Banking and Credit Suisse Asset Management. Over the course of the next few months all retail-oriented European activities outside Switzerland of Credit Suisse Private Banking and Credit Suisse Asset Management will be combined in a new “Personal Financial Services Europe” unit reporting to Thomas Wellauer, Chief Executive Officer of Winterthur. It will work closely with existing European insurance operations. The new unit will be fully operational in Italy in April 1999 with other countries to follow. In Switzerland the Group will continue to pursue the mutual sale of banking and insurance products through the banking and insurance distribution channels, which will collaborate closely to serve their clients. 8

Repurchase of Swiss Re’s 20% stake in Credit Suisse Financial Products Consistent with the organisational changes at Credit Suisse First Boston combining the Fixed Income division and Credit Suisse Financial Products into a new entity, Credit Suisse Group repurchased Swiss Re’s 20% minority position in Credit Suisse Financial Products. The organisational change allows for the reduction of overlapping risk categories, offers potential synergies in the support area and optimises the deployment of capital at Credit Suisse First Boston. As a result of the transaction, Swiss Re increased its holding in Credit Suisse Group and holds just below 5% of Credit Suisse Group shares. Credit Suisse Group’s holding in Swiss Re amounts to approximately 9%. Business unit financial statements The business unit financial statements reflect the organisational structure during 1998 and show the results of all business units as if they were legal entities operating independently. Financial information for the Corporate Centre includes income and expenses for the Corporate Centre as well as all consolidation adjustments. Corporate Centre costs attributable to operating business have been allocated to the respective business units. The business unit financial results include operating financial information only. For further explanation refer to the relevant sections. Changes compared to previous year 1997 accounting figures have not been restated for the transfer of Bank Leu’s retail operations from the Credit Suisse Private Banking business unit to Credit Suisse effective 1 January 1998 as the impact on the business units’ results is immaterial. Trade finance business was transferred from Credit Suisse First Boston to Credit Suisse effective 1 July 1998. The 1997 figures were not restated. Credit Suisse Asset Management’s 1997 income statement and key performance indicators have been adjusted to reflect the revised mutual funds commissions revenue sharing agreements between Credit Suisse Asset Management and the other business units. The 1997 accounting figures of other business units affected by this change have not been adjusted. 9

OVERVIEW OF BUSINESS UNIT RESULTS Credit Credit Credit Adjustments Suisse Suisse Suisse including Credit 1998 Credit Private First Asset Winterthur Winterthur Corporate Suisse in CHF m Suisse Banking Boston Management Non-life Life Centre Group REVENUE 3,209 4,275 9,600 852 3,113 2) 1,364 2) – 713 21,700 Personnel expenses 1,412 1,250 5,332 329 1,321 560 382 10,586 Other operating expenses 842 712 2,307 257 802 374 – 821 4,473 TOTAL OPERATING EXPENSES 2,254 1,962 7,639 586 2,123 934 – 439 15,059 GROSS OPERATING PROFIT 955 2,313 1,961 266 990 430 – 274 6,641 Depreciation and write-offs on non-current assets 30 39 279 12 90 0 207 657 Valuation adjustments, provisions and losses1) 666 177 1,566 0 0 0 766 3,175 PROFIT BEFORE EXTRAORDINARY ITEMS/TAXES 259 2,097 116 254 900 430 –1,247 2,809 1) Extraordinary income 36 60 15 0 0 1,443 1 554 5) Extraordinary expenses 51 35 81 1 28 3) 377 573 Taxes 43 435 221 30 307 – 461 575 5) NET PROFIT BEFORE MINORITY INTERESTS 201 1,687 –171 223 995 280 3,215 – of which minority interests –4 16 50 0 111 – 26 147 NET PROFIT (after minority interests) 205 1,671 – 221 223 884 4) 306 3,068 Average allocated equity capital 4,230 2,596 10,176 180 8,641 Return on average equity capital 4.8% n/a –1.7% n/a 10.3% Equity capital allocation as of 1 January 1999 4,450 2,200 9,340 170 9,358 1) net of release of reserves for general banking risks 11 25 306 2) defined as premiums earned (net), less claims incurred and expenses for processing claims as well as actuarial provisions, less commissions (net), plus investment income from insurance business; expenses due to the handling of both claims and investments are allocated to revenue: personnel expenses non-life: CHF 334 m, life: CHF 176 m, other operating expenses non-life: CHF 206 m, life: CHF 115 m 3) mainly interest expenses not allocated to one of the two insurance divisions 4) excludes after-tax profit of CHF 479 m from the sale of HIH (Australia) and the reinsurance business 5) details from gain in 4) above (gross: CHF 543 m, tax: CHF 64 m, net of tax: CHF 479 m) BUSINESS UNIT ACCOUNTING PRINCIPLES Unless stated below, Group accounting and valuation principles apply. INCOME STATEMENT General To reconcile business unit accounts with legal entity accounts certain adjustments were made in the Corporate Centre (included in the column “Adjustments including Corporate Centre”). Extraordinary items such as the settlement of the US class action lawsuits related to World War II or restructuring costs are reflected in the Corporate Centre only. Extra- ordinary income and valuation adjustments, provisions and losses are shown net of release of reserves for general banking risks. 10

Inter-business unit revenue splits Responsibility for all products is allocated to one business unit. When business units contribute to the success of another, revenue allocations have been established to compensate such efforts. Revenue allocations are shown in the relevant income statement line. Inter-business unit cost allocations Certain administration and IT tasks (“services”) are concentrated in one business unit, which acts as a provider for the other business units. Such services are compensated on the basis of service level agreements and transfer payments (which include personnel and other operating expenses). These are reflected in the income statement line “Other operating expenses”. Real estate used by the bank All real estate in Switzerland, mainly bank premises, is managed centrally. The costs reflect market rent and an additional charge if actual cost exceeds market rent. They are included in “Other operating expenses”. Provisions for credit risk Actual credit provisions exceeding the anticipated credit provisions have been reversed against the reserves for general banking risks held on Group level and netted in the business unit income statement line “Valuation adjustments, provisions and losses”. Taxes Taxes are calculated for individual business units based on average tax rates reflecting their geographical diversity. The difference between these and actual tax expenses has been adjusted in the Corporate Centre. BALANCE SHEET General The balance sheets of the banking business units include the appropriate proportion of bank premises occupied in Switzerland and abroad. Equity allocation The available equity is allocated to the business units based on average regulatory capital required during the period. KEY PERFORMANCE INDICATORS Ratios per head have not been calculated as some Group-wide services are provided centrally by one of the business units and required staffing for services received is not reflected in the recipient business unit’s headcount. 11

ASSETS UNDER MANAGEMENT Assets under management include client-related on and off-balance sheet assets. Where two business units share responsibility for managing funds (such as investment funds), the assets under management are included in both business units. 12

REPORT OF THE GROUP’S AUDITORS ON THE BUSINESS UNIT FINANCIAL STATEMENTS We have performed certain procedures enumerated below in relation to the 1998 business unit financial statements of Credit Suisse Group and its subsidiary under- takings (“the business unit financial statements”) for which the Directors of Credit Suisse Group are solely responsible. The business unit financial statements, which have been prepared for illustrative purposes only, are set out on pages 14 – 29 of the annual report. We have performed limited review procedures with regard to the business unit financial statements as follows: – Reviewed the methodology for preparation of the business unit financial statements as described therein and their proper application; – Given the methodology for preparation, reviewed the consistent application of the accounting policies; and – Reviewed the reconciliation between the business unit financial statements and the consolidated Group results presented in the audited financial statements for the year. Nothing has come to our attention as a result of the foregoing limited review procedures that would lead us to believe that the business unit financial statements have not been properly compiled on the basis of the preparation set out therein or are materially mis- stated. KPMG Klynveld Peat Marwick Goerdeler SA Brendan R. Nelson Peter Hanimann Chartered Accountant Certified Accountant Auditors in Charge Zurich, 15 March 1999 13

CORPORATE AND INDIVIDUAL CUSTOMERS IN SWITZERLAND Credit Suisse performed very well in 1998. At CHF 3.2 bn, revenue was up CHF 479 m or 18% on the previous year. Staff costs and other operating expenses were maintained at a stable level as planned. The cost/income ratio was further improved, falling from 85% to 71%. With net profit of CHF 205 m, the business unit posted positive results for the first time since the restructuring of 1996. Credit Suisse completed its final restructuring projects in 1998. Fifteen service and production centres were concentrated into four service centres in Zurich, Berne, Geneva and Mendrisio. The integration of both Bank Leu’s corporate and individual customer business and Credit Suisse First Boston’s Swiss trade finance business was implemented smoothly. The business unit progressed further down the path to profitable expansion. The Mix mortgage, launched mid-year, was very well received. Over 2,000 transactions, with a volume of just under CHF 1 bn, were effected. The joint venture with American Express is a central element in the business unit’s growth strategy. Credit Suisse is the only Swiss bank to offer all three major credit cards – American Express, Visa and Eurocard. Credit Suisse is continuing to implement the bancassurance strategy in the individual customer segment. Winterthur and Credit Suisse operations have been combined under one roof in 80 locations. The increased sale of investment and insurance products continued in 1998. KEY PERFORMANCE INDICATORS 1998 1997 Average allocated equity capital CHF m 4,230 4,175 Allocated equity capital CHF m at 1 January 1999/98 4,450 4,150 Cost/income ratio 71.2% 84.9% Return on average equity capital 4.8% – 6.6% Number of employees at 31 December 11,729 12,540 Pre-tax margin 7.6% –11.9% Staff expenses/total operating expenses 62.6% 69.3% Staff expenses/total income 44% 56.6% Number of branches at 31 December 241 244 Net interest margin 2.21% 1.95% Loan growth 10.4% – 0.18% Deposit/loan ratio 71.8% 77.8% Assets under management CHF bn at 31 December 120 111 14

In particular, sales of single premium annuity policies via the Credit Suisse banking channel performed very well. Fund holdings increased by 25%, significantly ahead of market development. The volume of funds held in the Credit Suisse safekeeping accounts for vested pension benefits Mixta BVG and Mixta BVG Defensiv has more than doubled since the end of 1997. Corporate banking earnings improved for both on and off-balance sheet business. New customer acquisitions contributed significantly to this performance. The new risk-adjusted pricing structure introduced last year was applied extensively. In this context, the credit evaluation procedure was made transparent for clients. The introduction of the euro was accompanied by an active customer information campaign and the launch of an attractive product range. Direct banking channels (telephone and internet) continued to perform very well. In October 1998 the independent Lafferty Information and Research Group named Credit Suisse the best internet bank in Europe. Over 90,000 customers have signed online contracts with Credit Suisse thus far. In 1998, 1.74 m logins resulted in 6.52 m transactions. Credit Suisse now receives around 15% of all its securities orders via the internet. INCOME STATEMENT 1998 in CHF m 1997 in CHF m Change in % Net interest income 2,096 1,875 12 Net commission and service fee income 845 609 39 Net trading income 220 188 17 Other ordinary income 48 58 –17 REVENUE 3,209 2,730 18 Personnel expenses 1,412 1,544 –9 Other operating expenses 842 685 23 TOTAL OPERATING EXPENSES 2,254 2,229 1 GROSS OPERATING PROFIT 955 501 91 Depreciation and write-offs on non-current assets 30 90 – 67 Valuation adjustments, provisions and losses* 666 707 –6 PROFIT BEFORE EXTRAORDINARY ITEMS AND TAXES 259 – 296 188 Extraordinary income* 36 17 112 Extraordinary expenses 51 46 11 Taxes 43 –48 190 NET PROFIT 201 – 277 173 – of which minority interests –4 1 – 500 NET PROFIT (after minority interests) 205 – 278 174 * net of release of reserves for general banking risks 11 1,108 15

1998 results The corporate and individual customer operations of Bank Leu were incorporated into Credit Suisse effective 1 January 1998. The business unit also acquired the trade finance activities of Credit Suisse First Boston effective 1 July 1998. As a result of these two transactions, Credit Suisse has CHF 6.1 bn higher lendings, CHF 2 bn higher customer deposits and CHF 1.2 bn higher safekeeping assets. Neither the balance sheet nor the income statement was restated. At CHF 93 bn, total assets were down 3% on the previous year due to the planned reduction in interbank and money market activities. Lendings to customers increased by approximately 9.5% to CHF 84.8 bn. Customer deposits increased by 1% to CHF 60.9 bn. Assets under management rose 8% to CHF 120 bn. The positive earnings trend witnessed in the first six months of 1998 continued in the second half. This can be largely attributed to improved interest margins, positive developments in the recovery of past due interest, sales of single premium annuity policies prior to the introduction of stamp duty on new life insurance policies, and increased investment fund sales. Costs developed as planned and gross operating profit rose a significant 91% to CHF 955 m. The cost/income ratio improved substantially, falling from 85% to 71%. Valuation adjustments, provisions and losses amounted to CHF 666 m. This figure comprises CHF 650 m in respect of the statistically calculated credit risk costs and CHF 16 m in respect of other provisions. Actual valuation adjustments were CHF 11 m above the statistically projected level. The overall risk structure of the lending portfolio continued to improve. With a net profit of CHF 205 m in 1998, Credit Suisse posted positive results for the first time since the restructuring. Credit Suisse will continue to make steady progress in reaching its growth and profitability targets. 16

BALANCE SHEET 31 Dec. 1998 in CHF m 31 Dec. 1997 in CHF m Change in % Cash and other liquid assets 869 993 –12 Money market claims 563 7,116 – 92 Due from banks 633 309 105 Due from other business units 1,187 3,139 – 62 Due from customers 26,245 22,855 15 Mortgages 58,596 54,631 7 Securities and precious metals trading portfolio 54 100 – 46 Financial investments 1,873 2,364 – 21 Participations 49 51 –4 Tangible fixed assets 2,278 2,377 –4 Accrued income and prepaid expenses 194 476 – 59 Other assets 894 1,986 – 55 TOTAL ASSETS 93,435 96,397 –3 Due to banks 1,888 586 222 Due to other business units 13,101 16,971 – 23 Due to customers in savings and investment accounts 37,429 37,149 1 Due to customers, other 23,517 23,117 2 Medium-term notes 5,841 6,708 –13 Bonds and mortgage-backed bonds 5,399 5,595 –4 Accrued expenses and deferred income 548 820 – 33 Other liabilities 903 1,046 –14 Valuation adjustments and provisions 169 354 – 52 Capital 4,640 4,051 15 – of which minority interests 10 10 0 TOTAL LIABILITIES 93,435 96,397 –3 17

SERVICES FOR PRIVATE INVESTORS IN SWITZERLAND AND ABROAD 1998 was a very successful business year for Credit Suisse Private Banking. Net profit before minority interests grew 28% to CHF 1,687 m and assets under management increased by 6% to CHF 403 bn due to a substantial net inflow of new business. Credit Suisse Private Banking was able to further consolidate its strong position as one of the world’s leading private banking operations. A new market-oriented management structure, together with the expansion of comprehensive financial advisory services and the creation of the Special Services support unit to develop tailor-made product solutions, enabled Credit Suisse Private Banking to meet the differing needs of its clients even more effectively. In a concurrent move, relationship managers were equipped with state-of-the-art advisory and communication tools. Further- more, the internet will be increasingly used in future as a distribution channel to make products and services available to private banking clients. Credit Suisse Private Banking has repositioned its international operations. Private banking operations in North America were sold as the units were not of sufficient size to achieve adequate levels of profitability. In contrast, European operations were actively expanded. The creation of Credit Suisse (Italy) SpA enabled the business unit to tap new distribution channels and increase its share of the Italian market. New representa- tive offices in Athens and Istanbul enhanced the bank’s presence in Greece and Turkey. Post-restructuring, Credit Suisse Private Banking is now represented in 50 locations in Switzerland and 35 locations worldwide. The private banks within Credit Suisse Private Banking were regrouped. In the second half of the year Affida Bank was integrated into Bank Leu and Bank Heusser into Clariden Bank. These various restructuring and expansion moves implemented during 1998 are an integral part of Credit Suisse Private Banking’s medium-term plan. KEY PERFORMANCE INDICATORS 1998 1997 Average allocated equity capital CHF m 2,596 n/a Allocated equity capital CHF m at 1 January 1999/98 2,200 1,900 Cost/income ratio 46.8% 50.6% Number of employees at 31 December 8,635 8,464 Pre-tax margin 49.6% 46.0% Fee income/total income 63.5% 64.5% Fee income/total operating expenses 138.3% 131.5% Assets under management CHF bn at 31 December 403 381 After-tax profit/average AUM 42 bp 37 bp 18

1998 results Despite widespread market turbulence, the very good performance of the first six months was repeated in the second half of the year. Credit Suisse Private Banking posted excellent results for 1998, with net profit before minority interests of CHF 1,687 m (up 28%). After allowing for the transfer of assets to other Credit Suisse Group business units and the sale of North American operations, adjusted assets under management increased by a total of CHF 27 bn to CHF 403 bn. CHF 17 bn was net new business. At CHF 4,275 m, total revenue grew at a higher rate (18%) than total operating expenses (11%). This resulted in a marked improvement in the cost/income ratio from 50.6% to 46.8%. Staff costs rose due to the expansion of investment advisory services in Switzerland and internationally, the creation of the business unit’s own service centre and performance-related remuneration. At CHF 712 m, other operating expenses were 11% lower than in 1997. Valuation adjustments, provisions and losses of CHF 177 m reflect the revaluation of credit positions and increased provisions for operational risks. The substantial fall in mortgage holdings resulted from the transfer of Bank Leu’s retail operations to BALANCE SHEET INFORMATION Credit Suisse. 31 Dec. 1998 31 Dec. 1997 in CHF m in CHF m Total assets 83,913 81,349 Due from customers 22,544 25,406 – of which secured by mortgages 6,505 9,815 – of which secured by other collateral 14,042 12,187 INCOME STATEMENT 1998 1997 Change in CHF m in CHF m in % Net interest income 852 792 8 Net commission and service fee income 2,713 2,328 17 Net trading income 551 389 42 Other ordinary income 159 101 57 REVENUE 4,275 3,610 18 Personnel expenses 1,250 970 29 Other operating expenses 712 800 –11 TOTAL OPERATING EXPENSES 1,962 1,770 11 GROSS OPERATING PROFIT 2,313 1,840 26 Depreciation and write-offs on non-current assets 39 55 – 29 Valuation adjustments, provisions and losses* 177 113 57 PROFIT BEFORE EXTRAORDINARY ITEMS AND TAXES 2,097 1,672 25 Extraordinary income* 60 36 67 Extraordinary expenses 35 46 – 24 Taxes 435 341 28 NET PROFIT 1,687 1,321 28 – of which minority interests 16 7 129 NET PROFIT (after minority interests) 1,671 1,314 27 * net of release of reserves for general banking risks 25 56 19

GLOBAL INVESTMENT BANKING 1998 was a year of sharp contrasts for Credit Suisse First Boston. As a result of the Russian collapse, the firm reported pre-tax profit of just USD 82 m (CHF 116 m). However, contrasting these disappointing financial results were important advances in market share and strategic positioning. The substantial investments made in 1997 and 1998, together with successful organic development, position Credit Suisse First Boston well for 1999 and beyond. Excluding Russia, Credit Suisse First Boston’s pre-tax profits in 1998 were USD 1,384 m (CHF 1,979 m). In response to market turbulence, risk mitigation efforts reduced the balance sheet by 19% or USD 68 bn since June to USD 291 bn (CHF 400 bn). Capital ratios for the bank Credit Suisse First Boston actually strengthened during the year, with a BIS ratio of 15.4% overall (tier 1: 8.4%) at year-end, among the strongest of any international peer. Russia The global financial crisis, triggered by the unprecedented severity of Russia’s collapse, had a major negative effect on Credit Suisse First Boston’s 1998 profit. Since the fall of communism, Credit Suisse First Boston had profitably built leading market shares in the Russian financial markets. Value declines of some 95% in GKOs, 85% in equities and heavy provisioning against counterparty default on loans and forward foreign exchange contracts, resulted in very large losses from Russia overall. Simply put, an important market for Credit Suisse First Boston suffered from unprecedented economic collapse. Further improvements are being implemented with respect to the firm’s risk management and risk diversification. In addition to specific risk reduction, Credit Suisse First Boston has combined its Fixed Income and Derivatives businesses. This will simplify risk aggregation across related areas, produce cost and revenue synergies and more focused management. In this context Swiss Re’s 20% minority interest in Credit Suisse Financial Products has been repurchased by Credit Suisse Group. The firm’s independent risk functions have been strengthened with the creation of a new Strategic Risk Man- agement Group. KEY PERFORMANCE INDICATORS 1998 1997 Average allocated equity capital CHF m 10,176 9,661 Allocated equity capital CHF m at 1 January 1999/98 9,340 9,900 BIS tier 1 ratio* 8.4% 8.5% Cost/income ratio 82.5% 69.1% Return on average equity capital – 2% 18% Number of employees at 31 December 14,126 11,863 Pre-tax margin 0.5% 24.9% Staff expenses/total operating expenses 69.8% 73.2% Staff expenses/total income 55.5% 49.1% * applies to the bank Credit Suisse First Boston 20

Strategic developments 1998 was also a year of substantial achievement for Credit Suisse First Boston. The firm took a major step forward in implementing its strategy of investing to expand its customer businesses and global reach. The acquisition of BZW’s business in Europe was successfully completed and integrated, giving Credit Suisse First Boston a significant boost to its leadership in Europe and underlining its unique transatlantic positioning. An important new “home market” position in the UK was also gained. The combined businesses are already operating better than originally planned, with results ahead of schedule and strong gains in market share. Credit Suisse First Boston’s growing business in Asia was substantially strengthened by the acquisitions of BZW’s Asian businesses and the 100% control of Credit Suisse First Boston’s affiliates in Australasia: First Pacific Group and First NZ Capital. The acquisition of Garantia in Brazil for USD 675 m (CHF 965 m), completed in August, fills an important strategic gap and results in a unique leadership position in Latin America. Despite hostile market conditions and a sharp reduction in risk positions, Credit Suisse First Boston Garantia has operated ahead of plan with good profitability since the acquisition – both in 1998 and 1999 to date. Credit Suisse First Boston also expanded organically, adding some 935 people in 1998 (8% of total employment) including over 150 technology bankers and research analysts. This latter move underpins the firm’s commitment to strengthen its business and is already providing impressive results. INCOME STATEMENT 1998 in CHF m 1997 in CHF m Change in % 1998 in USD m 1997 in USD m Change in % Fixed Income 2,489 4,866 – 49 1,740 3,379 – 49 Equities 2,038 1,745 17 1,425 1,212 18 Credit Suisse Financial Products 1,538 1,742 –12 1,075 1,210 –11 Corporate and Investment Banking 2,560 2,130 20 1,790 1,479 21 Private Equity and other 975 –157 721 683 – 109 727 REVENUE 9,600 10,326 –7 6,713 7,171 –6 Personnel expenses 5,332 5,074 5 3,728 3,523 6 Other operating expenses 2,307 1,853 25 1,613 1,287 25 TOTAL OPERATING EXPENSES 7,639 6,927 10 5,341 4,810 11 GROSS OPERATING PROFIT 1,961 3,399 – 42 1,372 2,361 – 42 Depreciation and write-offs on non-current assets 279 213 31 195 148 32 Valuation adjustments, provisions and losses* 1,566 555 182 1,095 385 184 PROFIT BEFORE EXTRAORDINARY ITEMS AND TAXES 116 2,631 – 96 82 1,828 – 96 Extraordinary income* 15 51 – 71 11 35 – 69 Extraordinary expenses 81 114 – 29 57 79 – 28 Taxes 221 872 – 75 155 606 – 74 NET LOSS/PROFIT –171 1,696 –110 – 119 1,178 –110 – of which minority interests 50 123 – 59 35 85 – 59 NET LOSS/PROFIT (AFTER MINORITY INTERESTS) – 221 1,573 –114 – 154 1,093 –114 * net of release of reserves for general banking risks 306 22 214 15 The business unit income statement differs from the Group’s legal accounts in presenting brokerage, execution and clearing expenses as part of operating expenses in common with US competitors, rather than netted against revenues. 21

We estimate that without the investment components of these acquisitions and strategic personnel additions, Credit Suisse First Boston would have reported additional pre-tax profits of at least USD 200 m (CHF 286 m) in 1998 and 3% higher operating margins. However, we are confident that they will produce attractive benefits over the next three years both financially and strategically, accelerating the firm’s rebalancing towards customer business and closing selected market share gaps where important. One of the best indications of shared confidence in Credit Suisse First Boston’s business health is the significantly lower staff turnover, despite the tensions of 1998. 1998 results 1998 was a successful year financially for many of Credit Suisse First Boston’s businesses. Total revenue, excluding Russia, increased 11% compared with 1997 (percentages refer to the dollar-based figures). On the same basis, the revenue split was 44% Americas, 47% Europe and 9% Asia Pacific, highlighting the firm’s unique global balance. Equities Excluding Russia, revenue increased 52% and ROE was around 15%. US and European cash businesses and equity derivatives showed particularly strong advances. Good market share gains were achieved across the board in capital markets, secondary sales, trading and research. Excluding Russia, gross equities revenues, including those booked in Corporate and Investment Banking and CSFP, were USD 2,055 m (CHF 2,939 m). Corporate and Investment Banking Revenue increased 21%. This reflects market share advances in all products offset by lower net interest income (7% of the total) as the developed markets loan book continued to shrink and with equity capital supporting it reduced to USD 700 m (CHF 1 bn). Revenue from M&A and equity capital markets increased 45% compared with 1997. Profitability, though still modest, is improving, impacted by the heavy investments in progress. Fixed Income Excluding Russia, revenues declined 28% with profitability little better than breakeven due to second half losses in distressed debt/high yield and other credit-sensitive areas. However, money markets, foreign exchange and government bond trading increased profits. Emerging markets business was profitable outside eastern Europe. Debt capital markets global underwriting share increased substantially on volume, which doubled compared with 1997. Credit Suisse Financial Products Excluding Russia, revenue declined 4%. Customer business in derivatives was up on 1997 and despite trading losses (including Russia and Long Term Capital Management), CSFP maintained an ROE of 14% overall and over 25% excluding Russia. 22

Private Equity The firm now manages over USD 2.9 bn (CHF 4 bn) in several funds globally and is well positioned to grow further. Significant gains from the partial sale of past strategic and merchant banking investments of Credit Suisse Group and the former CS First Boston were taken in 1998. Credit Suisse Group has approximately USD 1.2 bn (CHF 1.7 bn) invested at cost in private investments with an equal amount of unfunded commitments to this asset class. BALANCE SHEET 31 Dec. 1998 in CHF m 31 Dec. 1997 in CHF m Change in % Cash 1,175 2,021 – 42 Money market claims 18,860 16,119 17 Due from banks 138,726 138,351 0 – of which securities lending and reverse repurchase agreements 78,303 103,288 – 24 Due from other business units 1,894 5,933 – 68 Due from customers 61,522 103,993 – 41 – of which securities lending and reverse repurchase agreements 28,634 62,030 – 54 Mortgages 7,178 7,157 0 Securities and precious metals trading portfolio 100,963 102,385 –1 Financial investments 10,072 9,343 8 Participations 436 262 66 Tangible fixed assets 1,947 1,837 6 Goodwill 535 0 – Accrued income and prepaid expenses 6,845 5,817 18 Other assets 49,555 53,690 –8 – of which replacement value of derivatives 46,347 50,934 –9 TOTAL ASSETS 399,708 446,908 –11 Liabilities in respect of money market paper 19,923 17,719 12 Due to banks 185,335 183,043 1 – of which securities borrowing and repurchase agreements 74,915 84,817 –12 Due to other business units 16,350 39,677 – 59 Due to customers, in savings and investment deposits 180 463 – 61 Due to customers, other 71,157 97,374 – 27 – of which securities borrowing and repurchase agreements 22,714 56,797 – 60 Bonds and mortgage-backed bonds 33,464 33,551 0 Accrued expenses and deferred income 8,844 8,025 10 Other liabilities 53,007 53,875 –2 – of which replacement value of derivatives 49,481 50,635 –2 Valuation adjustments and provisions 1,638 2,706 – 39 Capital 9,810 10,475 –6 – of which minority interests 1,743 1,201 45 TOTAL LIABILITIES 399,708 446,908 – 11 23

SERVICES FOR INSTITUTIONAL AND MUTUAL FUND INVESTORS WORLDWIDE Credit Suisse Asset Management enjoyed another strong year of revenue growth (up 21%) and growth in discretionary assets under management (up 20%). With the organisation now in place, Credit Suisse Asset Management is focusing on expanding the business through organic growth and acquisitions. During 1998 a number of actions were taken to improve third-party distribution and to strengthen core domestic businesses and broaden global capabilities. In Europe a new platform was developed for selling offshore funds, and in Australia a retail effort was initiated. The retail distribution efforts in Japan have made Credit Suisse Asset Management a leader in distributing products through the new bank channels which opened in December of 1998. Acquisition initiatives in 1998 include the purchase of Groupe Cristal in France and the business of RMB in Australia. In February 1999, Credit Suisse Asset Management announced the purchase of Warburg Pincus Asset Management in the USA, thereby considerably strengthening its position in the US market. KEY PERFORMANCE INDICATORS 1998 1997 Average allocated equity capital CHF m 180 n/a Allocated equity capital CHF m at 1 January 1999/98 170 130 Cost/income ratio 70.2% 72.9% After-tax profit/average AUM 7.9 bp 5.8 bp Number of employees at 31 December 1,577 1,393 Pre-tax margin 29.7% 25.1% Staff expenses/total operating expenses 56.1% 57.2% Staff expenses/total income 38.6% 40.5% Total assets under management CHF bn 297 262 Total discretionary funds CHF bn 212 177 Total mutual funds distributed CHF bn 74 63 Total advisory assets CHF bn 85 85 Growth in assets under management 13.4% 18.6% Growth in discretionary assets under management 20% 17.5% – of which volume 14% 6% – of which performance 6% 11.5% 24

1998 results Discretionary assets under management grew by 19.7% compared with 1997; 12.4% from net new business, 1.1% from assets through acquisitions and 6.2% from market movements. Most of the asset growth was achieved in the targeted areas of equity and balanced products (60% of total net new business). The success in asset growth and the improved asset mix are reflected in the revenue growth of 21%, which, together with a controlled expense increase of 17%, has improved further the ratio of after-tax profit to average assets under management. The business unit’s results for 1997 have been restated to reflect changes in the revenue sharing for mutual fund products between the business units. INCOME STATEMENT 1998 in CHF m 1997* in CHF m Change in % Management and advisory fees 595 479 24 Net mutual fund fees 206 185 11 Other revenues 51 42 21 REVENUE 852 706 21 Personnel expenses 329 286 15 Other operating expenses 257 214 20 TOTAL OPERATING EXPENSES 586 500 17 GROSS OPERATING PROFIT 266 206 29 Depreciation and write-offs on non-current assets 12 15 – 20 Valuation adjustments, provisions and losses 0 0 0 PROFIT BEFORE EXTRAORDINARY ITEMS AND TAXES 254 191 33 Extraordinary income 0 9 –100 Extraordinary expenses 1 23 – 96 Taxes 30 36 –17 NET PROFIT 223 141 58 – of which minority interests 0 0 0 NET PROFIT (after minority interests) 223 141 58 * adjusted to reflect revised revenue sharing between business units in respect of mutual fund commissions implemented at 1 January 1998 25

INSURANCE FOR PRIVATE AND CORPORATE CUSTOMERS WORLDWIDE Winterthur Group posted very good results in 1998. It also focused on its new business strategy: the concentration of efforts on increasing value over the long-term, sharper focus on core business and core markets and the exploitation of potential in the field of bancassurance. Winterthur finished the 1998 business year on a high note. Net operating profit rose by 31% (1997: 31%) to CHF 884 m. An additional gain of CHF 479 m was made on the sale of reinsurance operations and the holding in HIH (Australia). Annual profit of CHF 1,363 m was recorded. Shareholders’ equity grew 18% to CHF 9.4 bn. New strategy In 1998 Winterthur reviewed and reformulated its business strategy. The company’s primary goal is to be a leading retail insurer and bancassurance provider in Europe, focusing particularly on the Swiss, German, Italian, Spanish and Belgian markets. In addition, Winterthur intends to further reinforce its good foundation in Europe by strengthening its position in the other European markets and by implementing cross- border product initiatives. Second, it aims to become the market leader in selected markets in eastern Europe and Asia. The largest opportunities for growth are to be found in asset gathering business. Winterthur’s pension funds in the growth markets of eastern Europe and its units in Asia mean it is particularly well placed to achieve this goal. Third, Winterthur wants to be a leading provider of global insurance and group life solutions. Fourth, an attractive return on shareholders’ equity is to be achieved in all other markets and areas of business, e.g. in North America. Expansion at Winterthur is to be carefully targeted, encompassing both organic growth and acquisitions and partner- ships. Systematic implementation Winterthur Group implemented two key strategic deci- sions in 1998 – the sale of its 51% holding in the Australian HIH and of its active reinsurance operations. The resources freed up through the sales will be used to further strengthen Winterthur’s positions in Europe and for targeted expansion in eastern Europe and Asia. The creation of the Individual and Group Life product centre is a further step in the implementation of the bancassurance strategy within Credit Suisse Group. This division, the leading bancassurance provider in Switzerland when it was formed in the first half of 1998, has already seen its share of the Swiss life insurance market increase considerably. The expansion of individual and group life activities into Europe is planned. Finally, the partnership between Winterthur International and the US-based Travelers Property Casualty has opened up new opportunities for global insurance activities with corporates. 26

Very good year for operational business Despite a further intensification of com- petition in the global insurance markets and turbulence on the financial markets, most of Winterthur’s divisions were able to improve both their results and their competitive positions. In Switzerland, Winterthur further strengthened its position as the market leader. The integration of the legal costs insurer ARAG Schweiz into Winterthur-ARAG is now complete. Life operations experienced a boom. DBV Winterthur again saw a sharp rise in profits for 1998. The stock exchange between Commerzbank and the Generali Group resulted in the termination of the ten- year partnership between Commerzbank and Winterthur (effective at the beginning of the year 2000) and opens up new bancassurance options for Credit Suisse Group. Winterthur underpinned its position as one of the leading insurers in Italy. Spanish auto operations posted a loss for 1998 after many years of good results due to the adverse development of claims. First successes were registered in the implementation of the bancassurance strategy in a number of European countries, Spain included. Of particular note is Winterthur’s strong position in the growth markets of central Europe: Hungary, Poland and the Czech Republic. In south-east Asia and the Pacific Rim, Winterthur’s activities focused on life business and joint activities with Credit Suisse Group banking units. 1998 results Net operating profit after tax and minority interests was 31.2% higher at CHF 884 m. An additional CHF 479 m (after tax) in extraordinary profit was made on the sale of reinsurance operations and HIH (Australia). Annual profit (after tax and minoritiy interests) was CHF 1,363 m. Gross premiums for Winterthur Group rose by 13.9% to CHF 28.6 bn. These figures have been restated for the sale of HIH (Australia) and reinsurance operations. Recording 22.7% growth, life business showed substantially greater expansion than non-life business, which grew 5.8%. Investments, which make up around 91% of total assets, increased by 11.1% to CHF 111.5 bn. Shareholders’ equity rose by CHF 1.5 bn (18.1%) from CHF 7.9 bn to CHF 9.4 bn. This increase reflects the excellent operational results, favourable stock market developments and an appropriate investment strategy. Technical provisions rose by 9.9% to CHF 96.7 bn. FINANCIAL HIGHLIGHTS 1998 1997 * Change in CHF m in CHF m in % Gross premiums 28,620 25,123 14 Net investment income 8,019 7,138 12 Net operating profit (after minority interests) 884 674 31 Annual profit 1,363 318 329 1998 1997 Change in CHF m in CHF m in % Investments 111,505 100,387 11 Technical provisions 96,652 87,938 10 Debentures outstanding 465 807 – 42 Shareholders’ equity (excl. minority interests) 9,358 7,924 18 31 Dec. 1998 31 Dec. 1997 Employees 25,521 25,062 2 * restated for the sale of HIH (Australia) and the reinsurance business 27

1998 results for non-life business Despite the adverse development of claims in the Spanish motor business and the introduction of new accounting practices in Italy and Spain, resulting in an increase in technical provisions, the key performance bench- mark in insurance business, the combined ratio (sum total of claims ratio, expense ratio and dividends to policyholders incurred) improved from 110.1% to 109.2%. The technical provisions ratio (ratio of technical provisions to premiums) remained virtually unchanged compared with 1997 at 182%. Net investment income increased by 6.5% compared with the previous year. Overall, the result in non-life business (before extraordinary items, tax and minority interests) amounted to CHF 900 m. 1998 results for life business Gross premiums rose by 22.7% to CHF 14.8 bn. The expense ratio fell further to 9.3% compared with 10.5% in 1997. Claims incurred, which rose 13.4%, grew at a lower rate. The change in the actuarial provision, up by 31 Dec. 1998 31 Dec. 1997 Change BALANCE SHEET in CHF m in CHF m in % Investments 111,505 102,119 9 – non-life 27,327 28,122 –3 – life 79,587 71,242 12 – life business where the investment risk is borne by policyholders 4,591 2,755 67 Policy loans 878 902 –3 Deposits with reinsured companies 697 337 107 Cash at banks and in hand 258 770 – 66 Receivables from insurance companies 1,181 833 42 Receivables from agents and policyholders 2,811 2,775 1 Sundry debtors 1,915 1,514 26 Accrued income and prepaid expenses 2,287 2,314 –1 Office and EDP equipment 243 345 – 30 Other assets 680 1,178 – 42 TOTAL ASSETS 122,455 113,087 8 Technical provisions 96,652 91,228 6 – non-life 21,463 24,205 –11 – life 70,535 64,177 10 – life business where the investment risk is borne by policyholders 4,654 2,846 64 Deposits received from reinsurance ceded 1,253 750 67 Convertible bond and warrant issues 465 922 – 50 Payables to insurance companies 1,271 707 80 Payables to agents and policyholders 3,468 2,280 52 Sundry creditors 2,420 2,319 4 Accrued expenses and deferred income 1,497 1,771 –15 Other liabilities 4,104 3,623 13 Shareholders’ equity 11,325 9,487 19 Minority interests 1,967 1,563 26 Shareholders’ equity after minority interests 9,358 7,924 18 TOTAL LIABILITIES 122,455 113,087 8 28

27.2%, rose more sharply than premiums because Winterthur used the positive financial results to reserve for increased life expectancy. The financial results were also excellent. Net investment income rose 14.8%. Net profit (before extraordinary items, tax and minority interests) in life business increased to CHF 430 m from CHF 362 m in 1997. NON-LIFE OPERATIONS 1998 in CHF m 1997* in CHF m Change in % Gross premiums 13,793 13,038 6 Net premiums 12,257 11,773 4 Premiums earned, net 11,803 11,288 5 Claims incurred, net – 8,920 – 8,705 2 Dividends to policyholders incurred, net – 335 – 294 14 Operating expenses, net (including commissions paid) – 3,771 – 3,571 6 UNDERWRITING RESULT, NET –1,223 –1,282 –5 Net investment income 2,261 2,124 6 Interest on deposits and bank accounts 140 128 9 Other interest paid – 98 – 71 38 Other income and expenses (including exchange rate differences) –180 –138 30 PROFIT (before extraordinary items, tax, minority interests) 900 761 18 Investments 27,327 26,390 4 Technical provisions 21,463 20,975 2 Combined ratio 109% 110% Claims ratio 76% 77% Expense ratio 31% 30% Technical provisions ratio 182% 186% LIFE OPERATIONS 1998 in CHF m 1997* in CHF m Change in % Gross premiums 14,827 12,085 23 Net premiums 14,673 12,026 22 Premiums earned, net 14,674 11,915 23 Claims incurred, net – 6,959 – 6,138 13 Change in actuarial provision, net – 9,263 – 7,285 27 Allocation to participation, net –1,918 –1,652 16 Operating expenses, net (including commissions paid) –1,360 –1,259 8 Net investment income 5,758 5,014 15 Interest on deposits and bank accounts 207 120 73 Interest on bonuses credited to policyholders –117 –100 17 Other interest paid – 302 –189 60 Other income and expenses (including exchange rate differences) – 290 – 64 353 PROFIT (before extraordinary items, tax, minority interests) 430 362 19 Investments 84,178 73,997 14 Technical provisions 75,189 66,963 12 Expense ratio 9.3% 10.5% Claims incurred and change in actuarial provision 111% 112% * restated for the sale of HIH (Australia) and the reinsurance business 29

THE ROLE OF THE SWISS FINANCIAL SERVICES INDUSTRY IN THE SECOND WORLD WAR The breakthrough in negotiations with class action plaintiffs was reached on 12 August 1998 with the agreement on a global settlement. The full and conclusive settlement commits the major Swiss banks to pay USD 1.25 bn. Even after the settlement, the Volcker Committee continued its investigation into dormant assets under the terms of the 1996 Memorandum of Understanding with Jewish organisations. A number of European insurance companies (including Winterthur Life) are also facing class actions. These companies have reached agreement on a procedure for the settlement of claims from the Holocaust period. Conclusion of settlement negotiations The terms of the settlement reached under the aegis of Judge Korman commit the major Swiss banks to pay USD 1.25 bn. UBS AG undertakes to pay two-thirds and Credit Suisse Group one-third of this sum, whereby further contributions from companies which did not participate in the settlement are expected. In return, all claims made against Swiss commercial banks, the Swiss National Bank and Swiss firms (excluding insurance companies) will be withdrawn. Following the announcement of the settlement, all threats of sanctions and calls for a boycott were dropped. In November 1998, in accordance with the terms of the agreement, UBS and Credit Suisse Group paid the first instalment of USD 250 m into a blocked account in the USA. The remaining amount will be transferred in three further annual instalments. On 10 February 1999 the World Jewish Restitution Organisation endorsed the settlement agreement which had been worked out with plaintiffs and Jewish organisations. Once Judge Korman has approved the proposed method for distribution of the funds – to be devised by the claimants – and once notification of the settlement has been effected worldwide, the first payments can be made to those with legitimate claims. Dormant accounts On behalf of the Volcker Committee, a number of international audit firms searched the archives of most Swiss banks in an effort to uncover any as yet unidentified dormant accounts dating from the Second World War period. A particularly lengthy task was the compilation in electronic form of lists of names to be matched against external lists of Holocaust victims. In this phase alone, up to 250 members of staff of the various Credit Suisse Group banks and some 65 external auditors were involved in preparing and compiling the relevant documents. Regardless of the time and expense involved, Credit Suisse Group fully supports the historical investigation. Claims against insurance companies In mid-1997 a class action lawsuit was filed against 16 European insurance companies, including Winterthur Life. The plaintiffs claim that these companies failed or refused to pay out benefits, particularly in connection with life policies, to which victims or survivors of the Holocaust were entitled. A considerable search effort is currently under way in Winterthur’s archives. 30

In August 1998 – in close co-operation with American insurance regulators - an agreement was reached with individual European insurers, setting out a procedure for the settlement of claims arising from the Holocaust era. The body set up to oversee these provisions - the International Commission on Holocaust Era Insurance Claims (ICHEIC), chaired by former US secretary of state Lawrence Eagleburger - has already started work. Winterthur Life is taking active part. Humanitarian fund payments The humanitarian fund for needy victims of the Holo- caust was set up with CHF 275 m donated by the major Swiss banks, other Swiss companies and private individuals to provide rapid assistance to Holocaust survivors suffering hardship. Having made its first payments in eastern Europe at the end of 1997, the management of the fund, installed by the federal government, extended eligibility to non-Jewish Holocaust survivors in need and also widened its scope in geographical terms. Since mid-August 1998 it has also been possible for US residents to submit applications for assistance, for which USD 32 m has been set aside. By the end of 1998 a total of CHF 83 m had been paid out by the humanitarian fund. Important events and measures March/April 1998 US states and cities suspend their threat of boycott. The major Swiss banks enter into talks with class action plaintiffs and the World Jewish Congress. June 1998 A USD 600 m settlement proposed by the major Swiss banks is rejected. In the USA, a class action lawsuit is brought against the Swiss National Bank. July 1998 US finance chiefs lift the boycott moratorium. Subsequently, various US states and cities announce sanctions against Swiss banks. August 1998 The major Swiss banks reach a USD 1.25 bn settlement with class action plaintiffs and Jewish organisations. August 1998 Memorandum of Understanding signed by US insurance regulators, Jewish organisations and European insurers. December 1998 In New York a new class action lawsuit is brought against European insurers. January 1999 The Volcker Committee announces that its investigation will be completed by the end of May 1999. February 1999 Signing of the settlement agreement by the major Swiss banks, class action plaintiffs and Jewish organisations. April 1999 Judge Korman gives his preliminary approval to the bank settlement. 31

CREDIT SUISSE GROUP AND THE COMMUNITY Credit Suisse Group’s global presence encompasses a wide variety of cultures, countries and markets. Its activities are based on high ethical standards which apply throughout the Group. In Switzerland, where Credit Suisse Group employs 27,941 people, it plays an active part in shaping social and economic conditions through its membership of banking associations and other economic bodies. An attractive employer Credit Suisse Group offers interesting and challenging positions and career opportunities to its 62,296 employees worldwide. Targeted training programmes promote the personal development of members of staff. In 1998 Credit Suisse Group hired around 400 banking apprentices and 200 graduates in Switzerland. The Group encourages women with children to continue their careers, promoting equal opportunities at the workplace through, for instance, the provision of childcare and new and more flexible work patterns. An attractive investment for the ecologically minded Credit Suisse Group is committed to all areas of environmental protection. Its independently validated environmental report describes the measures the Group has taken, especially with regard to product ecology. The continued ISO 14001 certification of all offices in Switzerland, combined with the Group’s commitment to product ecology, has prompted many ecologically oriented investors to include Credit Suisse Group in their portfolios as a “best-in-class” stock. Social commitment: financial support/Anniversary Foundation In 1998 Credit Suisse Group provided support to various organisations and institutions dedicated to social, charitable, humanitarian and cultural causes. More than 1,000 beneficiaries received around CHF 15 m. The Anniversary Foundation promoted numerous social and cultural projects, such as the refurbishment of the ICRC museum in Geneva and the world skiing championships for disabled persons to be held in the Canton of Valais in the year 2000. The CSFB Foundation Trust primarily supported educational and personal development programmes for young people in US inner city areas. In addition, Credit Suisse First Boston made financial contributions to more than 400 charitable institutions. Sponsorship Credit Suisse sponsored a large number of cultural and sporting events in 1998, welcoming around 26,000 guests to more than 200 events in Switzerland. Credit Suisse and Winterthur – both committed to promoting sport for young people – acted as joint sponsors of the Tour de Suisse and the Swiss national football teams. Credit Suisse Private Banking provided support in the fields of golf, equestrianism, classical music and the visual arts. In addition to Winterthur’s involvement in gymnastics, handball and music, the company’s “Foundation for the Prevention of Accidents” launched a campaign to improve road safety to mark its 25th anniversary. 32

CREDIT SUISSE GROUP PROJECTS In addition to the IT remediation work in connection with the switch to the year 2000, the focus at Credit Suisse Group in 1998 was on four key projects: the conclusion of the strategic refocusing of banking operations, exploiting synergies in bancassurance, and the preparations related to the introduction of the euro and to the reconciliation of the Group’s financial statements to US GAAP (generally accepted accounting principles). Refocusing of banking operations The refocusing of the banking operations of Credit Suisse Group into four business units geared to specific customer segments and markets was implemented quickly and successfully. A large part of the project had already been completed at the end of 1997. Related processing and IT projects were concluded on schedule in 1998. The job reduction programme in Switzerland, developed in collaboration with employee organisations, was realised in 1998 and proved to be successful in practice. The planned reduction of around 3,500 jobs in Switzerland and approximately 1,500 abroad was offset by the creation of virtually the same number of new posts, connected primarily with new acquisitions and an expansion in business volume. Exploiting synergies in bancassurance A number of major targets were reached in 1998 with respect to the merger with Winterthur. As well as establishing the Individual and Group Life division at Winterthur and bringing together around 80 Credit Suisse branches and Winterthur agencies into shared premises, 1998 in particular saw further developments in the range of products and services as well as the expansion of joint activities in selected European markets. The more intensive sale of insurance products via banking channels and the range of combined product packages are showing especially good results. Euro The euro project groups worked intensively for more than three years on the necessary preparations in connection with the introduction of the new European currency. In 1998 the focus was on sensitising customers to the euro, developing new euro products, as well as carrying out technical and operational adjustments. At the end of the year, tens of thousands of accounts and securities were switched to the new currency, and foreign exchange trading and payment transactions systems were adjusted. Reconciling the Group’s financial statements to US GAAP In spring 1998 Credit Suisse Group embarked on a project to reconcile its financial statements to US GAAP (generally accepted accounting principles) in a phased process lasting until 2001. Reconciliation to US GAAP will bring the Group a number of benefits, including easier access to the international capital markets, better benchmarking with competitors and an improved ability to make acquisitions. 33

CREDIT SUISSE GROUP AND THE YEAR 2000 The challenge faced by financial institutions worldwide as the year 2000 approaches is substantial. Credit Suisse Group is addressing the year 2000 issue utilising a priority-driven methodology, encompassing inventory and assessment, remediation or replacement, testing, third-party risk analysis and contingency planning. The Credit Suisse Group Board of Directors and Executive Board have given the highest priority to the year 2000 project, and intend to discharge this responsibility fully and to work diligently to provide this assurance to the company’s customers, shareholders and markets. State of preparations By the end of February 1999, Credit Suisse Group had remediated 93% of its business-critical systems. These systems are in daily use and are being made ready for the extensive programme of industry testing in 1999. Credit Suisse Group also relies on its customers, business partners and suppliers for their year 2000 compliance. Risk assessment processes have been put in place, and over 7,000 customers and business partners were contacted during 1998. Warranties are being sought for vendor-supplied IT components. These components are also being tested within the Group’s technology environment. Focus for 1999 During 1999, Credit Suisse Group will remain focused on achieving, maintaining and demonstrating year 2000 compliance. The Group’s target for achieving compliance of all systems is the end of June 1999 and procedures have been put in place to ensure that remediated systems continue to be compliant throughout 1999. The Group has demonstrated its year 2000 readiness through participation in 30 industry tests during 1998 and is committed to participate in 59 industry tests in 1999. The year 2000 issue is widespread and, in many cases, it is not possible to guarantee that problems will not occur. Credit Suisse Group has started a contingency planning process which is targeted for completion by the end of June 1999. This process includes risk identification, business continuity planning and monitoring, as well as the formation of management teams to respond quickly to unexpected events. Project governance Credit Suisse Group has organised its governance structure for the year 2000 issue to reflect the normal organisation of its business. The Board of Directors and the Executive Board of Credit Suisse Group are provided with status reports on a regular basis and are satisfied that appropriate steps are being taken to mitigate the risks to the Group. Costs Credit Suisse Group took an exceptional charge in its 1997 accounts for IT restructuring in preparation for the introduction of the euro and for the year 2000 of CHF 401 m after tax (CHF 488 m pre-tax). Of this amount, CHF 276 m was used in 1998. 34

CREDIT SUISSE GROUP RISK MANAGEMENT Credit Suisse Group pursues an effective risk management policy throughout its business units, with clear goals of capital preservation and capital optimisation. The Group’s risk management approach is aimed at meeting the challenges of a rapidly changing market environment and maximising the potential for the most efficient allocation and management of economic capital throughout the entire Group to the benefit of shareholders and other stakeholders. Overview of risk management Intermediating financial risks and proactively managing these risks is one of the Group’s prime businesses. Credit Suisse Group perceives risk management as an ongoing process. It starts with the definition of business objectives, policies and strategies. It proceeds with the identification, assessment, management and control of all risks associated with the Group’s activities. The cycle closes with the reaffirmation and validation of objectives and strategies. Success factors for risk management include a strong commitment from senior management to independent risk management and controls, as well as clear policies, procedures, risk acceptance criteria and risk measurement across all products and business activities. Economic capital The primary objectives of Credit Suisse Group’s proactive approach to risk manage- Economic capital at Credit Suisse ment are to preserve the Group’s capital base and to optimise the allocation of regulatory Group is defined as an equity reserve or cushion for unexpected and economic capital to the individual business units. Strategic plans have been adopted losses. It ensures that Credit to enhance risk management capabilities to a “best practice” level throughout the Group Suisse Group – even under extreme conditions – remains solvent with the goal of staying at the forefront of the industry. and stays in business. It is impor- The Board of Directors is responsible for the determination of the general risk tant to recognise that economic capital is distinct from regulatory policy, the strategic risk management organisation and for defining the overall risk capital, which focuses on market appetite. The Board of Directors meets at least five times a year. The Chairman’s Com- and credit risk. Conceptually, economic capital is comprehensive mittee of the Board of Directors is responsible for reviewing the Group’s risk exposure and covers all significant risks. on a quarterly basis. The Board of Directors has delegated certain risk management and control responsibilities to the Group Chief Risk Officer (GCRO) and the Group Risk Coordination Committee (GRCC). The GRCC, which meets at least on a quarterly basis, defines overall Group risk policies and approves general instructions, processes and standards concerning risk management at the business unit level. It also reviews Credit Suisse Group’s capital management process. In continuous efforts to enhance the integrated risk management process, the GRCC meetings held in 1999 will normally be followed by a meeting of the Group Executive Board’s Risk Management Committee, which focuses on issues and new projects and products from a risk perspective and deals with risk-relevant compliance issues. This Risk Management Committee and the GRCC are led by the GCRO. Various risk committees at the business unit level are established by the respective Chief Executive Officers. Integrated Group-wide risk management is based on a partnership between all the entities involved in risk management, at both the Group and the business unit level. It is 35

the task of Group Risk Management (GRM) to foster this partnership and to harmonise the risk management approach towards the different risk types across the various business units. GRM’s mandate – as independent “risk conscience” without any risk positions of its own – is to ensure an effective and coherent implementation of the Group’s risk management strategy. As the main operating units, the five business units of Credit Suisse Group are responsible for the implementation of their own risk management strategy within the Group’s overall framework. Each business unit has a specialised risk management structure in place – including risk committees, the appropriate tools, systems, procedures and controls – that is foremost suited to managing the risks taken in that particular business unit. The risk management structure is independent of front-office divisions. The key to successful risk management at the business unit level has been the design of a comple- mentary “top-down strategic” and “bottom-up tactical” risk management approach with formal policies and procedures addressing all areas of significant risk. This, in turn, has fostered a risk management culture, which is an important factor for success at Credit Suisse Group. The structure is robust and flexible enough to cope with changes in the business environment and allows for the global integration of the various risks that can affect the Group’s portfolio. The Group also leverages the extensive experience and know-how of its specialised entities, particularly Credit Suisse Financial Products, a subsidiary of Credit Suisse First Boston, which is an acknowledged market leader in risk management. In the normal course of its financial services activities, Credit Suisse Group engages in transactions that give rise to various types of risks. The following overview shows Credit Suisse Group’s seven major risk classes. One of the important aims of the Credit Suisse Group restructuring in 1996 and 1997 was the allocation of risk types to specialised business units. While most business units are exposed to all risk types, these risks vary as to relevance to the individual business unit. Market risks are concentrated at Credit Suisse First Boston, while credit risks are most important at Credit Suisse and Credit Suisse First Boston. Winterthur is primarily exposed to insurance risks, compared with business volume risks at Credit Suisse Private Banking and Credit Suisse Asset Management. All business units are exposed to operational, reputational and strategy risks. Market Risk Credit Risk Strategy Risk Insurance Risk Reputational Risk Business Volume Risk Operational Risk Risk culture with modern risk management and established control measures as part of corporate culture 36

Market risk Market risk is the risk of loss arising from changes in the values of financial Variance-covariance instruments resulting from the movement of market rates, prices and volatilities. The versus historical simulation majority of Credit Suisse Group’s market risk is concentrated in the Credit Suisse First Variance-covariance Boston business unit, the Group’s global provider of wholesale financial services. Credit methods are based on calculating volatilities of Suisse First Boston devotes considerable resources to ensure that market risk is com- the variables under con- prehensively captured and understood, accurately measured and effectively managed. sideration (e.g. equity indices, FX rates), and Credit Suisse First Boston’s independent Risk Measurement and Management correlation matrices for (RMM) department is now responsible for the measurement and reporting of all credit risk changes in these variables. They assume that and market risk data for Credit Suisse First Boston. RMM was formed by integrating the changes (or loga- the existing credit risk reporting and systems functions of the Credit Risk Management rithmic changes) in these variables are normally department with the market risk functions in the former Market Risk Management distributed. department. Establishing RMM was one of the organisational changes that was prompt- Historical simulation uses actual historical ed by the market turmoil of 1998. changes in these vari- RMM uses the following two core techniques to measure and manage market risk ables over the observation period, and so avoids exposures: assumptions about their – The Value at Risk method (VaR method) estimates the potential loss arising from distribution. Historical simulation implicitly allows a given portfolio for a predetermined probability and holding period, using market for correlations without movements determined from historical data. having to rely on a correlation matrix. In addition, – The Scenario Analysis method estimates the potential loss after stressing market historical simulation allows parameters. These market parameter movements are derived from past extreme for easy implementation of full or partial revaluation of events and hypothetical scenarios. option portfolios. RMM consolidates market risk exposures arising from all trading portfolios and geographical centres, and evaluates Credit Suisse First Boston’s aggregate VaR on a daily basis. Stress testing of all major portfolios is undertaken regularly using scenario analysis. Value at Risk Credit Suisse First Boston has used a VaR methodology to model market risk since 1995, Credit Suisse Financial Products since the business was established in 1990. The methodology is subject to continuous review to ensure that it remains relevant to the business being conducted, captures all significant risks, is consistent across risk types, and meets or exceeds regulatory and industry standards. Credit Suisse First Boston’s VaR is defined as the 99th percentile greatest loss that may be incurred on the portfolio over a ten-day holding period. In general, two years of underlying data are used to derive the market movements used for this calculation. These movements are recalculated on a quarterly basis and after periods of market turbulence. The parameters and procedures meet the quantitative requirements prescribed by the Basle Committee on Banking Supervision and the Swiss Federal Banking Commission. 37

1998 The Basle Committee on Banking Supervision published its “Amendment to the Capital AVERAGE MARKET RISKS OF CSFB 1 Accord to Incorporate Market Risks” in January 1996. These recommendations were 1% 1% implemented in the most recent revision of Swiss Banking Law and allow banks to calcu- 18% late regulatory capital required to support market risk based on the results of their internal VaR models scaled up by a multiplication factor of three or more. The capital cushion created by this multiplication factor is intended to compensate for the regulators’ 23% general concerns about uncertainties or weaknesses in any bank’s risk model. 57% Following a detailed review of the VaR model and the related processes and controls, Total interest rates Total foreign exchange the Swiss Federal Banking Commission approved Credit Suisse First Boston’s internal Total equity Total commodities VaR models for use in the calculation of market risk capital effective 30 June 1998. Total cross risk Positions are aggregated by type of risk rather than by product. For example, 1 excluding correlation effects between the risk factors interest rate risk includes risk arising from money market and swap transactions, bonds, interest rate options, foreign exchange, equity and commodity options. The average market risks of Credit Suisse First Boston are shown on the left. 1997 The VaR risk measurement methodology that Credit Suisse First Boston uses is a AVERAGE MARKET RISKS OF CSFB 1 combination of variance-covariance and historical simulation. Under historical simulation 1% 2% used by Credit Suisse Financial Products, exposures are determined by taking current 18% positions (sensitivities) and calculating a series of ten-day profit and loss movements using two years of historical data. Risk is calculated as the 1st percentile of the observed profit and loss distribution. Where historical simulation is not used, the VaR is 20% calculated by multiplying the risk sensitivity by a market shock based on the 99th percen- 59% tile confidence interval over a ten-day period (“extreme move”). It is planned to migrate Total interest rates Total foreign exchange completely to the historical simulation method for all divisions within Credit Suisse First Total equity Total commodities Boston. During the transition phase, there will be no offsets between the two methods. Total cross risk In arriving at aggregate VaR, it is necessary to consider offsets between different 1 excluding correlation effects between the risk factors markets, currencies and risk types to reflect the observed relationships between these markets and the impact of diversification. In the historical simulation method, the offset between different currencies or risk types can be taken into account by summing the ten-day profits and losses for each of the underlying components and calculating the 1st percentile of the profit and loss distribution based on the aggregated profit and loss time series. This is a more robust approach because offset benefits are based on actual relationships between underlying components. Where historical simulation is not used, the aggregate VaR may be calculated using the variance-covariance method to offset risk. Market risk limits are structured at multiple levels – from trading desks up to the business unit level. Limits at lower levels can be regarded as internal risk flags which are used to identify potential risk concentrations. Limits also assist in allocating risk to clusters, e.g. individual business clusters or regions and trading desks. The chart on the next page illustrates the relationship between daily trading profit and loss and one-day VaR over the course of 1998. This type of backtesting is the method proposed by the Basle Committee on Banking Supervision for the assessment 38

of the accuracy of the VaR model. The VaR measure is intended to be larger than all 1998 DISTRIBUTION OF CSFB’S DAILY TRADING REVENUE but a certain fraction – determined by the confidence level – of trading outcomes. No. of days Backtesting is performed at two levels: the overall level (Credit Suisse First Boston) 45 and the individual trading book level. The one-day VaR is compared to the actual daily 40 trading revenue. Results of the process at the aggregate level (see below) show no 35 30 exceptions even during the period of high market volatility between August and Novem- 25 ber 1998 and therefore confirm that Credit Suisse First Boston’s VaR model is sound 20 and meets regulatory standards. Comparison at an individual book level permits the 15 review of risk modelling techniques at the level of a specific trading unit or risk model 10 and enables any problems that surface at the aggregate level to be traced back to their 5 source. Results for the major trading portfolios also provide useful insights into the 0 –100 –50 0 50 100 CHF m profit and loss and VaR reporting process. Frequency of trading revenue Increased volatilities contributed to the increase in VaR in 1998, even though risk positions were reduced considerably during the second half of 1998. The average one- day VaR estimate in 1998 was CHF 307.6 m (CHF 201.9 m in 1997), and the minimum 1997 DISTRIBUTION OF CSFB’S DAILY TRADING REVENUE and maximum levels were CHF 206.3 m (CHF 139.2 m in 1997) and CHF 382.2 m No. of days (CHF 257.7 m in 1997), respectively. In contrast, the average daily trading revenue 45 was CHF 14.3 m (CHF 25.1 m in 1997), and the minimum and maximum levels were 40 CHF –173.6 m (CHF –102.6 m in 1997) and CHF 137.4 m (CHF 120.0 m in 1997), 35 30 respectively. Credit Suisse First Boston’s frequency distribution of daily trading revenue 25 for 1998 and for 1997 is illustrated on the right. 20 15 Scenario analysis Scenario analysis is an essential component of Credit Suisse 10 First Boston’s market risk measurement framework. Using this technique, market risk 5 of all major portfolios is measured by stressing the market data parameters (prices, 0 –100 –50 0 50 100 CHF m interest rates and volatilities). The market data is changed according to a predefined set Frequency of trading revenue of scenarios. Scenario analysis supplements the VaR approach as it allows risk to be viewed in cases where, for example, market conditions are disrupted. It is also particularly useful in calculating more accurately the impact of larger market movements, whereas 1998 VaR VERSUS RELATIONSHIP BETWEEN DAILY REVENUE AND VaR ESTIMATE FOR CSFB TRADING LOSSES CHF m CHF m 150 Daily trading loss 100 300 50 200 0 -50 100 -100 -150 0 0 100 200 300 CHF m -200 One-day VaR -250 -300 -350 -400 1st quarter 1998 2nd quarter 1998 3rd quarter 1998 4th quarter 1998 Daily revenue One-day VaR (99%) 39

analytical risk measures are only accurate for smaller movements. Reports are produced for senior management and traders for a range of scenarios on a monthly basis. Market data scenarios include yield curve and credit spread movements, changes in recovery rates on emerging market bonds, exchange rate movements, equity index and stock price movements, gold and oil price movements and changes in volatilities and correlations. Many of the scenarios are based on extreme macroeconomic events from the past, e.g. the 1987 stock market crash and the 1991 Gulf War. There are also some scenarios that assess the impact of events that could occur in the future, e.g. an anticipated fall in equity prices. In the market disruptions that occurred in 1998, scenario results for emerging market difficulties proved particularly useful in assessing Credit Suisse First Boston’s maximum potential downside. In addition, scenario analysis is also performed to quantify the impact on projected losses if portfolios can be partially re-hedged as markets fall. Asset and liability management The balance sheet interest rate risk is monitored and managed by the individual business units within specifically designated centres of competence; responsibility lies with the respective Asset and Liability Management Committees. The management of interest rate risk is primarily based on mark-to-market methods. Swaps, forward rate agreements and options are used as hedging instruments. With regard to structural balance sheet risk, Credit Suisse and Credit Suisse Private Banking use market risk measurement methodologies. For asset and liability management purposes, VaR is calculated based on the 95% confidence level and a twenty-day holding period. Two years of underlying data are used to derive the market movements used for this calculation. Large portions of the retail portfolios of Credit Suisse and Credit Suisse Private Banking consist of non-maturing accounts (e.g. variable-rate mortgages and savings products). Their factor sensitivities are modelled with replicating portfolios based on the effective repricing behaviour of non-maturing accounts. Credit Suisse First Boston refinances assets that are marked to market daily with floating rate liabilities. Credit risk Credit risk is the risk that a borrower (or counterparty) is unable to meet its financial obligations. In the event of a default, a bank generally incurs a loss equal to the amount owed by the borrower less a recovery amount resulting from foreclosure, liquidation or restructuring of the company. The majority of Credit Suisse Group’s credit risk is concentrated in the Credit Suisse and Credit Suisse First Boston business units. Credit Suisse Group implemented a new Credit Risk Management Framework for MIS purposes in December 1996. As this framework is used for management information purposes only, it is not reflected in the legal financial statements. This new approach to assessing and managing credit risk is at the cutting edge of current thinking in risk management. The framework is continually being refined, and coverage of credit-related exposures is gradually being extended. CREDITRISK+ – a state-of-the-art credit risk measurement and management tool developed by Credit Suisse Financial Products – 40

is a core component of this new framework. CREDITRISK+ was made available to the 1998 PERFORMING PORTFOLIO: ACP VS CREDIT public in 1997. Credit Suisse Group’s Credit Risk Management Framework comprises PROVISIONS four core components: (i) an individual credit limit system, (ii) country and regional CHF m concentration limits, (iii) a credit risk provisioning methodology and (iv) a portfolio opti- 1,200 misation and pricing methodology. 1,000 A system of individual credit limits is the traditional means of managing credit risk. 800 Credit Suisse Group’s limit system also aims at optimising portfolio diversification. A set 600 of country and regional limits is in place to address concentration issues in the portfolio 400 (see country risk). The third aspect of the Credit Risk Management Framework is an 200 appropriate credit risk provisioning methodology. Annual credit provisions (ACP) equal 0 expected credit losses (derived from actual historical average losses). The annual CS CSPB CSFB CSG 1998 ACP expected loss of a performing portfolio is a predictable risk, which is essentially a cost 1998 credit provisions of doing credit-related business. Actual losses which occur in any one year may be higher or lower than this amount, depending on the economic environment, interest rates, etc. In addition to the expected loss, an indicative worst case loss over a one- 99 TH PERCENTILE WORST CASE DEFAULT LOSS year time horizon, the so-called 99th percentile worst case default loss, is also calcu- CHF m 2,500 lated. The 99th percentile worst case default loss is based on the 99th percentile of the 2,250 full credit default loss distribution, which is in turn based on historical default probabilities 2,000 and historical recovery rates. The difference between the 99th percentile worst case 1,750 1,500 default loss and the ACP reflects the unexpected loss level. The fourth aspect of the 1,250 Credit Risk Management Framework is the pricing and optimisation of the portfolio and 1,000 750 the consideration of risk and reward. 500 Credit Suisse Group’s Credit Risk Management Framework is a vital tool for 250 managing the Group’s credit risk on an ongoing basis. The framework allows transactions 0 CS CSPB* CSFB CSG involving credit risk to be more correctly priced by performing the risk/return calculation 1996 1997 to ensure that an adequate return is being achieved for the level of risk taken. 1998 * The worst case default loss was calculated The current implementation of the Credit Risk Management Framework covers jointly for CS and CSPB in 1996. virtually all of Credit Suisse’s and substantial parts of Credit Suisse Private Banking’s Most of the increases are due to improved coverage of the Credit Risk Management Framework. credit exposure. More than half of the counterparty exposure risks of Credit Suisse First Boston are covered. Credit Suisse Financial Products has fully implemented the Credit Risk Management Framework. It is planned to increase the coverage of Credit Suisse Group’s Credit Risk Management Framework considerably by the end of 1999. The two charts to the right show the relationship between the 1998 ACP, credit provisions from transactions covered by the framework in 1998 as well as the development of the 99th percentile worst case default loss. Country risk Country risk is the risk that a sovereign is unable or unwilling to meet its contractual obligations and/or imposes controls on capital flows. In such an event, both credit and market risk can increase significantly for an extended period of time. While country risk primarily affects market risk and credit risk, it is a risk-driver for other risks as well. Given the international character of their activities, all business units of Credit 41

CSFB EXPOSURE TO SELECTED EMERGING Suisse Group are exposed to country risk. Its impact, however, is most pronounced at MARKETS as at 31 December 1998 Credit Suisse First Boston. CHF m The events of this and last year have prompted important initiatives in the organisa- 6,000 tion of Credit Suisse Group’s risk management with respect to country risk. Credit Suisse 5,000 First Boston has set up a new group “Strategic Risk Management” responsible for 4,000 assessing its overall risk portfolio at a global level. The Credit Suisse and Credit Suisse Private Banking business units have established new directives for country risk. These 3,000 and other organisational changes have enhanced the capability of Credit Suisse Group 2,000 to manage country risk impacts more proactively with commensurate risk discipline 1,000 throughout the Group. 0 Although key instruments for country risk management, country ratings and country Asia Latin Russia/ America eastern Europe limits have been in place for many years, they are subject to an ongoing refinement Provisions Net exposure process. Country ratings provide a model-based and qualitative assessment of the risk of sovereign default. They – together with major country limits – are periodically reviewed by an independent team within Credit Suisse First Boston and require approval by the COUNTRY EXPOSURE BY CSFB RATING (EXCLUSIVE OF Chairman’s Committee for their enforcement as a component of the business risk strategy. PROVISIONS) as at 31 December 1998 Country limits cap Credit Suisse Group’s exposure to any individual country. They are CHF m supplemented by regional limits, further capping the maximum exposure to a specific 120,000 region. Regional limits mitigate the impact of contagion effects. Both country and regional 100,000 limits are periodically reviewed by the Credit Policy Committee and Capital Allocation 80,000 and Risk Management Committee (CPC/CARMC) of Credit Suisse First Boston. The adoption of new rules, aiming at an automatic and simple response process 60,000 in the event of a country rating downgrade, introduces an additional element of discipline 40,000 to our risk culture. The systematic use and refinement of scenario analysis and stress 20,000 testing for countries have enhanced the methods for determining the appropriate size of 0 country limits given a certain risk appetite. N1 N2 N3 N4 N5 N6 N7 AAA AA A BBB BB B/ <CC CCC CSFB: funded loans and related exposures (incl. exposures to trading counterparties) Internal ratings N1–N7 are approximately equivalent to the respective external ratings. 42

Operational risk Operational risk is the risk of loss arising from inadequacies of business processes, procedures, security, as well as the risk of losses due to changes in the legal, political and business environment. Operational risk is mitigated through effective and comprehensive policies, procedures and a system of internal controls, including risk management information systems, computer systems, communication networks, fraud detection and, most important, segregation of duties. Trading units, for example, are kept strictly separate from back-office operations, with each area reporting to a different line of management. Independent pricing controls are in place and technical and organisational control mechanisms ensure that transactions carried out by traders are processed promptly and correctly. In the case of Winterthur, professional underwriting, efficient and reliable administration, fair and cost efficient claims handling and tight controlling processes are an integral part of the operational risk management culture. Settlement risk All business units engaging in trading activities monitor settlement risk for its credit as well as its operational risk components. Late receipts of funds are monitored with the aim of detecting possible default patterns in the making. Netting, where legally enforceable, is a priority for all business units. Credit Suisse Group’s structure of specialised entities further reduces settlement risk. Credit Suisse First Boston is also a prominent member and promoter of CLS (continuous linked settlement system), a market initiative that aims at eliminating this risk type by settling payments against receipt of countervalues only. Participation in regulated clearing and depository organisations further reduces settlement risk. The number of bank group limits of Credit Suisse Group was reduced once more from 1,800 in 1997 to approximately 1,500 by the end of 1998. Legal risk Credit Suisse Group’s business units are mitigating legal risk by using appropriate documentation – standard master agreements and individual trade confirma- tions – and by continuous consultation with internal and external counsel to analyse legal risk, improve documentation and strengthen transaction structures. Credit Suisse Group is in the forefront of financial institutions working with the regulators on establishing the validity of netting in various jurisdictions. 43

1998 Risk management framework of Winterthur Winterthur follows Credit Suisse Group’s ECONOMIC CAPITAL OF INSURANCE RISK overall risk management framework and devotes substantial resources to strengthening its risk management activities. Winterthur is a business unit with many years of experience 35% and success in the insurance markets and has developed an outstanding expertise in managing all the risks associated with selling insurance policies. Protecting Winterthur from undue risk accumulations (e.g. natural catastrophe exposure) is a core risk management activity. 65% The overall responsibility for risk identification, risk measurement and control is Non-life Life assumed by a central risk management unit. Groups of specialists focus on the various risk components and implement concepts and tools such as economic capital. The latter is a key tool for risk management, as well as for performance measurement. Substantial resources are invested to further the development and refinement of economic capital analysis on an ongoing basis. Risk universe and risk management activities In order to understand the risk universe of an insurance company, the flow of business and the accompanying flow of risks have to be analysed. By selling insurance policies to customers as protection against specific perils, the company becomes exposed to risk dimensions which need attention and management activity. The policy (i.e. the protection) is sold against a premium, which is in turn stored in assets to cover claims occurring at a future date, sometimes many years later. This means that the company has to deal with managing and limiting insurance risk by a set of reinsurance contracts, managing the financial market risk in liabilities and assets, as well as managing and controlling credit risks of assets and reinsurance contracts. Because its business is primarily medium to longer term in nature, the overall risk profile of Winterthur is stable and evolves moderately along the growth path of the business. Whereas reinsurance programmes follow a yearly renewal process, assets are mainly managed strategically, with a medium to long-term horizon. Within centrally set boundaries, such as underwriting guidelines, reinsurance protection, reinsurance security guidelines (credit risk), asset allocation strategy and allocated risk capital, the business assumes the day-to-day risk management responsibilities. Several layers in the organisation control compliance. Underwriting Premium Insurance Risk (gross) Assets Liabilities Reinsurance Retention Market Risk Credit Risk Insurance Risk 44

Insurance risk Winterthur follows stringent guidelines, especially with regard to the 1998 ECONOMIC CAPITAL OF businesses written, the selection of risks and the sums insured. Winterthur is faced with NON-LIFE BUSINESS several risks stemming from its underwriting activity. The premium charged to the 18% policyholder covers, among other elements, the expected costs of future claims. This latter element is uncertain (stochastic) in its very nature and is the economic rationale for customers to buy insurance. The stochastic nature is manifested in deviations of actual claims from the expected value. This is called insurance or underwriting risk. 40% 42% Winterthur operates two main insurance businesses: non-life and life. Small claims Non-life In non-life business, insurance risk is manifested by claims that might be Claims reserve Catastrophe scenarios more frequent, larger and/or might have to be paid earlier than expected (expected pay-outs are priced in the tariff). Continuous monitoring, adjustment of tariffs, broad diversification, adequate reinsurance protection and the expertise of underwriting staff protect profits and keep insurance risk on predetermined, moderate levels. 1998 ECONOMIC CAPITAL OF Underwriters of Winterthur are specialist insurance experts. Established procedures LIFE BUSINESS in loss control and premium audit form the basis for monitoring the risks on higher 22% aggregation levels. Exposures are ultimately aggregated at the business unit level and reviewed on a net basis (after reinsurance). Economic capital is used to assess the overall risk situation. A well diversified insurance portfolio with many business lines spread over many 78% policyholders might nevertheless be vulnerable to natural hazards. In such circumstances Group life the policies do not diversify, but rather accumulate to large exposures. Substantial losses Individual life insurance could be triggered by a single event if adequate reinsurance protection were lacking. Together with periodic portfolio reviews, Winterthur analyses the natural hazard risk (flood, earthquake, windstorm) with scenario techniques, which leads to estimates of probable maximum losses incurred by natural disaster. This information is used to guide the risk selection in underwriting and to buy catastrophe protection in the reinsurance market, which in turn creates counterparty risks. The loss to Winterthur of a single event (e.g. winter storm in Europe) is confined to a worst case amount of well below CHF 100 m. Life In life insurance Winterthur is faced with similar basic underwriting risk characteristics as in non-life. Deviations of actual death rates, disability rates, longevity and surrender from expected values form the underwriting risk universe of this business. As a leading life insurer, Winterthur benefits from a broad diversification in its portfolio. The pure life insurance risks (after reinsurance of peak exposures) are small. This favourable position is substantially driven by careful product design and portfolio selection, as well as by the high stability and reliability of the statistical basis, such as death tables. Savings elements are quite often embedded in life insurance products. These financial risks can be substantial and must be managed accordingly. It is asset management’s task to take care of these risk elements and to produce the kind of cash flows the policyholders will claim. 45

The product centre for life business closely monitors and manages the life insurance risks. Reinsurance protection is designed and managed at the business unit level. Economic capital is used to assess and steer the risk profile of the life business. Reinsurance Winterthur runs a well designed reinsurance structure to protect its local businesses, its divisions and its capital at large. The architecture of the reinsurance protection in place is such that, on all levels of the organisation (i.e. local business, division and group), a set of internal and external reinsurance treaties absorbs all risks which exceed a prudent retention level. Internal reinsurance treaties (e.g. Winterthur reinsures a local unit) do not change Winterthur’s overall risk profile, but they can significantly reduce a particular entity’s risk levels. A division benefits from the diversification effect among its local businesses, which allows a higher retention level to be run (i.e. a lower reinsurance protection). The same effects are exploited at the business unit level. In economic capital terms, reinsurance eliminates 22% of insurance risks. Reinsurance protection follows the development of Winterthur and the developments in reinsurance and capital markets. The current reinsurance structure of Winterthur relies predominantly on traditional reinsurance products. Today’s soft reinsurance markets, with relatively cheap tariffs for reinsurance, allow tight protection programmes to be run at attractive prices. The reinsurance protection follows a three-layered organisational structure based on the uniform principle that each organisational entity runs insurance risk in accordance with its portfolio and its capital base only. Therefore, Winterthur’s reinsurance protection is not a simple aggregate of individual programmes, but rather a coherent risk-return optimal structure. Financial market risk of Winterthur’s assets Winterthur’s investment function bundles market risks in liabilities as well as structural currency risks and passes these risks to financial markets by investing capital and reserves in financial assets. Winterthur invests in the main asset classes, such as money market instruments, bonds, loans, mortgages, stocks and real estate. The asset allocation strategy for Winterthur is revised on a yearly basis, always taking regulatory, local and product-related restrictions into consideration. The portfolios in asset management are defined in line with the legal business and product structure. Operational currency risk management, cash management and liquidity management are additional tasks of Winterthur’s investment function. While market risk management is also performed within asset management, the monitoring and control functions are independent of the asset managers. For performance and risk control purposes, securities positions are marked to market. 46

The quality of assets is generally excellent (primarily bonds with AA and higher ratings; 1998 RELATIVE IMPORTANCE OF rating of “A” as a minimum requirement). In order to promote diversification, asset ASSET CLASSES management controls are in place which prevent counterparty-specific accumulations in 8% 3% assets of different classes. A similar observation holds for currency risk, which is miti- 12% gated by currency-congruent investment. Derivatives are used as risk management instruments and not as an asset class in their own right. Overall position monitoring also includes derivatives according to their 22% 55% underlying risk content. Bonds Asset and liability management The financial market risks of Winterthur’s assets are Equity Real estate not assessed in isolation. Assets of insurance companies are a result of the fact that Mortgages Money market premiums are paid earlier than claims are settled. The resulting time difference of up to 50 years has its implications. Firstly, funds have to be invested in assets in such a way that they generate cash flows in line with the cash outflows embedded in the liability structure. Secondly, product-specific characteristics, such as maturity or profit-participating bonuses, have to be treated appropriately. Keeping pace with business developments, product innovations and the evolution of financial markets as well as permanent monitoring of balance sheet strength are necessary for the asset and liability management task at Winterthur to be fulfilled. Credit risk The exposure of Winterthur to credit risk stems from holding debt instruments and from the use of reinsurance. Assets subject to default or defaulting reinsurance companies are the concrete manifestation of this risk. Winterthur has defined high quality standards for investments. In addition, the Group monitors counterparty-specific accumulations across asset management and reinsurance credit risk exposures. The international diversification of the businesses is also reflected in the international diversification of assets and therefore in credit exposures. This in itself mitigates credit risk substantially. Outlook It is part of Credit Suisse Group’s strategy to be a leader in risk management. Significant personnel and technological resources are focused on ensuring that Credit Suisse Group continues to enhance its risk management capabilities and thereby remains at the forefront of the industry. To achieve this goal, Credit Suisse Group has developed an integrated framework of best practice risk management, risk policies, methodologies and infrastructure. Credit Suisse Group is also in the process of linking risk management, performance measurement and capital allocation using a risk and economic capital management framework, with economic capital usage as a common denominator for all risks. Together with a proactive risk management culture and the appropriate quantitative tools, the economic capital management framework will support the decision-making process of senior management at Credit Suisse Group, thus linking risk management to the Group’s shareholder value strategy. 47

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