**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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**FORM 10-Q**

**xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934**

**Forthe quarterly period ended March 31, 2006**

**OR**

**oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934**

**Forthe transition period from           to           **

**CommissionFile Number: 1-6862**

**Credit Suisse (USA), Inc.**

(Exact name of registrantas specified in its charter)

| **Delaware**                                                     | **13-1898818**                         |
|------------------------------------------------------------------|----------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) | (I.R.S. Employer   Identification No.) |
| **Eleven Madison Avenue  New York, New York**                    | **10010**                              |
| (Address of  principal executive offices)                        | (Zip Code)                             |

 

**(212) 325-2000**

(Registrant’s telephonenumber, including area code)

**The Registrant meets the conditions set forth inGeneral Instruction H (1) (a) and (b) of Form 10-Qand is therefore filing this Form 10-Q with the reduced disclosureformat.**

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirementsfor the past 90 days: Yes x  No o

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act.(Check one):

Large accelerated filer o  Accelerated filer o  Non-accelerated filer x

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act). Yes o  No x

Becausethe registrant is an indirect wholly owned subsidiary of Credit Suisse Group,none of the registrant’s outstanding voting stock is held by nonaffiliates ofthe registrant. As of the date hereof, 1,100.103543 shares of the registrant’sCommon Stock, $.10 par value, were issued and outstanding and held by CreditSuisse Holdings (USA), Inc.

 

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**CREDITSUISSE (USA), INC.Quarterly Report on Form 10-Q for the Quarter Ended March 31,2006**
| **PART I**  | ** ** | **FINANCIAL INFORMATION**                                                                                      |   |                                                                                                                                             |
|------------------|------------|----------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|
|             |       | ITEM  1: Financial Statements                                                                             |   |                                                                                                                                             |
|             |       |                                                                                                           |   | Condensed  Consolidated Statements of Financial Condition   (Unaudited) as of March 31, 2006 and December 31, 2005                |   | 2 |
|             |       |                                                                                                           |   | Condensed  Consolidated Statements of Income   (Unaudited) for the three months ended March 31, 2006 and 2005                               |   | 4 |
|             |       |                                                                                                           |   | Condensed  Consolidated Statements of Changes in Stockholder’s Equity   (Unaudited) for the three months ended March 31, 2006 and 2005 |   | 5 |
|             |       |                                                                                                           |   | Condensed  Consolidated Statements of Cash Flows   (Unaudited) for the three months ended March 31, 2006 and 2005                      |   | 6 |
|             |       |                                                                                                           |   | Notes  to Condensed Consolidated Financial Statements (Unaudited)                                                                                |   |   |
|             |       |                                                                                                           |   | 1.                                                                                                                                               |   | Summary  of Significant Accounting Policies |   | 7 |
|             |       |                                                                                                           |   | 2.                                                                                                                                               |   | Related  Party Transactions |   | 11 |
|             |       |                                                                                                           |   | 3.                                                                                                                                               |   | Transfers  and Servicing of Financial Assets |   | 14 |
|             |       |                                                                                                           |   | 4.                                                                                                                                               |   | Private  Equity and Other Long-Term Investments |   | 18 |
|             |       |                                                                                                           |   | 5.                                                                                                                                               |   | Derivatives  Contracts |   | 19 |
|             |       |                                                                                                           |   | 6.                                                                                                                                               |   | Borrowings |   | 20 |
|             |       |                                                                                                           |   | 7.                                                                                                                                               |   | Leases and  Commitments |   | 22 |
|             |       |                                                                                                           |   | 8.                                                                                                                                               |   | Guarantees |   | 23 |
|             |       |                                                                                                           |   | 9.                                                                                                                                               |   | Net  Capital Requirements |   | 24 |
|             |       |                                                                                                           |   | 10.                                                                                                                                              |   | Cash  and Securities Segregated Under Federal and Other Regulations |   | 25 |
|             |       |                                                                                                           |   | 11.                                                                                                                                              |   | Employee  Benefit Plans |   | 25 |
|             |       |                                                                                                           |   | 12.                                                                                                                                              |   | Legal  Proceedings |   | 26 |
|             |       |                                                                                                           |   | 13.                                                                                                                                              |   | Industry  Segment and Geographic Data |   | 27 |
|             |       |                                                                                                           |   | 14.                                                                                                                                              |   | Subsequent  Event |   | 29 |
|             |       |                                                                                                           |   | Report  of Independent Registered Public Accounting Firm                                                                                         |   | 30 |
|             |       | ITEM  2: Management’s Discussion and Analysis of Financial Condition and  Results of Operations |   | 31                                                                                                                                               |
|             |       | ITEM  3: Quantitative and Qualitative Disclosures About Market Risk                                       |   | 58                                                                                                                                               |
|             |       | ITEM  4: Controls and Procedures                                                                          |   | 61                                                                                                                                               |
| **PART II** | ** ** | **OTHER INFORMATION**                                                                                          |   |                                                                                                                                             |
|             |       | ITEM  1: Legal Proceedings                                                                                |   | 62                                                                                                                                               |
|             |       | ITEM 1A: Risk  Factors                                                                                         |   | 63                                                                                                                                               |
|             |       | ITEM  6: Exhibits                                                                                         |   | 63                                                                                                                                               |
|             |       | Signature                                                                                                      |   | 64                                                                                                                                               |
|                  |            |                                                                                                                |        |                                                                                                                                                  |  |  |  |  |  |

 

**AVAILABLEINFORMATION**

*We fileannual, quarterly and current reports and other information with the Securitiesand Exchange Commission, or SEC. Our SEC filings are available to the publicover the internet on the SEC’s website at*www.sec.gov. You may also view our annual, quarterly and current reports on ourwebsite at www.csfb.com/about_csfb/company_information/sec/index.shtml as soon as is reasonably practicable after thereport is electronically filed with, or furnished to, the SEC. The informationon our website is not incorporated by reference into this Quarterly Report.

1

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**PART IFINANCIAL INFORMATION**

***Item 1:Financial Statements***

**CREDIT SUISSE(USA), INC. AND SUBSIDIARIESCondensed ConsolidatedStatements of Financial Condition(Unaudited)(In millions)**

| ** **                                                                                                      | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|-----------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| **ASSETS**                                                                                                      |       |                     |       |                        |       |   |   |
| Cash and cash  equivalents                                                                                      |       | $                        | 955        |                        |       | $ | 884 |   |   |
| Collateralized  short-term financings:                                                                          |       |                     |       |                        |       |   |   |
| Securities purchased under agreements to resell                                                                 |       | 49,507                   |       |                        | 54,454     |   |   |
| Securities borrowed                                                                                             |       | 93,889                   |       |                        | 82,802     |   |   |
| Receivables:                                                                                                    |       |                     |       |                        |       |   |   |
| Customers                                                                                                       |       | 3,384                    |       |                        | 3,299      |   |   |
| Brokers, dealers and other                                                                                      |       | 10,113                   |       |                        | 8,128      |   |   |
| Financial  instruments owned (includes securities pledged as collateral of $73,573 and  $73,043, respectively): |       |                     |       |                        |       |   |   |
| U.S. government and agencies                                                                                    |       | 28,435                   |       |                        | 31,366     |   |   |
| Corporate debt                                                                                                  |       | 19,600                   |       |                        | 20,561     |   |   |
| Mortgage whole loans                                                                                            |       | 19,516                   |       |                        | 17,817     |   |   |
| Equities                                                                                                        |       | 37,520                   |       |                        | 35,244     |   |   |
| Commercial paper                                                                                                |       | 3,333                    |       |                        | 1,523      |   |   |
| Private equity and other long-term investments                                                                  |       | 10,252                   |       |                        | 3,641      |   |   |
| Derivatives contracts                                                                                           |       | 7,052                    |       |                        | 5,085      |   |   |
| Other                                                                                                           |       | 4,221                    |       |                        | 3,929      |   |   |
| Net deferred tax  asset                                                                                         |       | 961                      |       |                        | 1,202      |   |   |
| Office facilities  at cost (net of accumulated depreciation and amortization of $893 and $852,  respectively)   |       | 471                      |       |                        | 453        |   |   |
| Goodwill                                                                                                        |       | 585                      |       |                        | 562        |   |   |
| Loans receivable  from parent and affiliates                                                                    |       | 27,644                   |       |                        | 25,225     |   |   |
| Other assets and  deferred amounts (includes encumbered loans of $8,083 as of March 31,  2006)             |       | 9,923                    |       |                        | 1,579      |   |   |
| Total assets                                                                                                    |       | $                        | 327,361    |                        |       | $ | 297,754 |   |   |

** **

See accompanying notes to condensed consolidated financial statements (unaudited).

2

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**CREDIT SUISSE(USA), INC. AND SUBSIDIARIESCondensed Consolidated Statements of Financial Condition (Continued)(Unaudited)(In millions**, except share data)

| ** **                                                                                      | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| **LIABILITIES AND STOCKHOLDER’S  EQUITY**                                                  |       |                     |       |                        |       |   |   |
| Commercial paper and  short-term borrowings                                                     |       | $                        | 17,080     |                        |       | $ | 13,654 |   |   |
| Collateralized  short-term financings:                                                          |       |                     |       |                        |       |   |   |
| Securities sold under  agreements to repurchase                                                 |       | 124,153                  |       |                        | 126,323    |   |   |
| Securities loaned                                                                               |       | 51,951                   |       |                        | 45,956     |   |   |
| Payables:                                                                                       |       |                     |       |                        |       |   |   |
| Customers                                                                                       |       | 11,456                   |       |                        | 10,129     |   |   |
| Brokers, dealers and  other                                                                     |       | 4,453                    |       |                        | 3,884      |   |   |
| Financial instruments  sold not yet purchased:                                                  |       |                     |       |                        |       |   |   |
| U.S. government and  agencies                                                                   |       | 22,621                   |       |                        | 20,078     |   |   |
| Corporate debt                                                                                  |       | 3,755                    |       |                        | 3,696      |   |   |
| Equities                                                                                        |       | 9,506                    |       |                        | 12,402     |   |   |
| Derivatives contracts                                                                           |       | 4,771                    |       |                        | 2,262      |   |   |
| Other                                                                                           |       | 444                      |       |                        | 155        |   |   |
| Obligation to return  securities received as collateral                                         |       | 4,876                    |       |                        | 3,077      |   |   |
| Accounts payable and  accrued expenses                                                          |       | 2,142                    |       |                        | 3,152      |   |   |
| Other liabilities                                                                               |       | 20,962                   |       |                        | 7,049      |   |   |
| Long-term borrowings                                                                            |       | 36,549                   |       |                        | 33,926     |   |   |
| Total liabilities                                                                               |       | 314,719                  |       |                        | 285,743    |   |   |
| Stockholder’s Equity:                                                                      |       |                     |       |                        |       |   |   |
| Common stock  ($0.10 par value; 50,000 shares authorized; 1,100 shares issued and  outstanding) |       | —                   |       |                        | —     |   |   |
| Paid-in capital                                                                                 |       | 9,844                    |       |                        | 9,530      |   |   |
| Retained earnings                                                                               |       | 2,978                    |       |                        | 2,661      |   |   |
| Accumulated other  comprehensive loss                                                           |       | (180                     | )          |                        | (180       | ) |   |
| Total stockholder’s equity                                                                 |       | 12,642                   |       |                        | 12,011     |   |   |
| Total liabilities  and stockholder’s equity                                                |       | $                        | 327,361    |                        |       | $ | 297,754 |   |   |

 

See accompanying notes to condensed consolidated financial statements (unaudited).

3

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIESCondensed Consolidated Statements of Income(Unaudited)(In millions)**

| ** **                                                                                                               | ** ** | **For the Three Months  Ended  March 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                                                                                                               | ** ** | **    2006    **       | ** ** | **    2005    ** | ** ** |
| Revenues:                                                                                                                |       |                                                           |       |   |   |   |   |   |   |
| Principal transactions-net                                                                                               |       |                                                           | $          | 1,655 |   |   |   | $ | 367 |   |   |
| Investment banking and advisory                                                                                          |       |                                                           | 583        |   |   |   | 321 |   |   |
| Commissions and fees                                                                                                     |       |                                                           | 351        |   |   |   | 351 |   |   |
| Other                                                                                                                    |       |                                                           | 47         |   |   |   | 17 |   |   |
|                                                                                                                     |       |                                                           | 2,636      |   |   |   | 1,056 |   |   |
| Interest and dividends                                                                                                   |       |                                                           | 4,082      |   |   |   | 2,724 |   |   |
| Interest expense                                                                                                         |       |                                                           | 3,788      |   |   |   | 2,147 |   |   |
| Net interest and dividends                                                                                               |       |                                                           | 294        |   |   |   | 577 |   |   |
| Total net revenues                                                                                                       |       |                                                           | 2,930      |   |   |   | 1,633 |   |   |
| Expenses:                                                                                                                |       |                                                           |       |   |   |   |   |   |   |
| Employee compensation and benefits                                                                                       |       |                                                           | 1,164      |   |   |   | 947 |   |   |
| Occupancy and equipment rental                                                                                           |       |                                                           | 121        |   |   |   | 120 |   |   |
| Brokerage, clearing and exchange fees                                                                                    |       |                                                           | 85         |   |   |   | 77 |   |   |
| Communications                                                                                                           |       |                                                           | 41         |   |   |   | 36 |   |   |
| Professional fees                                                                                                        |       |                                                           | 82         |   |   |   | 67 |   |   |
| Other operating expenses                                                                                                 |       |                                                           | 40         |   |   |   | (5 | ) |   |
| Total expenses                                                                                                           |       |                                                           | 1,533      |   |   |   | 1,242 |   |   |
| Income before  provision for income taxes, minority interests and cumulative effect of a  change in accounting principle |       |                                                           | 1,397      |   |   |   | 391 |   |   |
| Provision for  income taxes                                                                                              |       |                                                           | 137        |   |   |   | 66 |   |   |
| Minority  interests                                                                                                      |       |                                                           | 943        |   |   |   | 155 |   |   |
| Income before cumulative effect of a change in  accounting principle                                                     |       |                                                           | 317        |   |   |   | 170 |   |   |
| Cumulative effect  of a change in accounting principle, net of  income tax expense of $3 in 2005                         |       |                                                           | —     |   |   |   | 6 |   |   |
| Net income                                                                                                               |       |                                                           | $          | 317 |   |   |   | $ | 176 |   |   |

 

See accompanying notes to condensed consolidated financial statements (unaudited).

4

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIESCondensed Consolidated Statements of Changes in Stockholder’s EquityFor the Three Months Ended March 31, 2006 and 2005(Unaudited)(In millions)**

| ** **                                                       | ** ** | **Common  Stock** | ** ** | **Paid-in  Capital** | ** ** | **Retained  Earnings** | ** ** | **Accumulated  Other  Comprehensive  Income (Loss)** | ** ** | **Total** | ** ** |
|------------------------------------------------------------------|------------|-------------------|------------|----------------------|------------|------------------------|------------|-----------------------------------------------------------|------------|-----------|------------|
| Balances as of  December 31, 2004                           |       |              | $          | —               |       |                   | $          | 8,538                                                     |       |      | $          | 2,534 |   |   |   | $ | (8 | ) |   | $ | 11,064 |   |
| Net income                                                       |       |              | —     |                 |       | —                 |       |                                                      | 176        |      |       |   | — |   |   | 176 |   |
| Net change in  cash flow hedge, including tax benefit of $2 |       |              | —     |                 |       | —                 |       |                                                      | —     |      |       |   | (3 | ) |   | (3 | ) |
| Total comprehensive income                                       |       |              |       |                 |       |                   |       |                                                      |       |      |       |   |   |   |   | 173 |   |
| CSG share plan activity, including tax charge  of $11            |       |              | —     |                 |       | 118                    |       |                                                      | —     |      |       |   | — |   |   | 118 |   |
| Balances as of  March 31, 2005                              |       |              | $          | —               |       |                   | $          | 8,656                                                     |       |      | $          | 2,710 |   |   |   | $ | (11 | ) |   | $ | 11,355 |   |
| Balances as of December 31, 2005                            |       |              | $          | —               |       |                   | $          | 9,530                                                     |       |      | $          | 2,661 |   |   |   | $ | (180 | ) |   | $ | 12,011 |   |
| Net income                                                       |       |              | —     |                 |       | —                 |       |                                                      | 317        |      |       |   | — |   |   | 317 |   |
| Total comprehensive income                                       |       |              |       |                 |       |                   |       |                                                      |       |      |       |   |   |   |   | 317 |   |
| CSG share plan activity, including tax benefit  of $19           |       |              | —     |                 |       | 314                    |       |                                                      | —     |      |       |   | — |   |   | 314 |   |
| Balances as of  March 31, 2006                              |       |              | $          | —               |       |                   | $          | 9,844                                                     |       |      | $          | 2,978 |   |   |   | $ | (180 | ) |   | $ | 12,642 |   |

 

See accompanying notes to condensed consolidated financial statements (unaudited).

5

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIESCondensed Consolidated Statements of Cash FlowsFor the Three Months Ended March 31, 2006 and 2005(Unaudited)(In millions)**

| ** **                                                                                               | ** ** | **2006** | ** ** | **2005** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Cash flows from operating activities:                                                                    |       |     |       |     |       |
| Net income                                                                                               |       | $        | 317        |     | $          | 176 |   |
| Adjustments to reconcile net income to net cash used  in operating activities:                           |       |     |       |     |       |
| Depreciation and  amortization                                                                           |       | 51       |       | 33       |       |
| Non-cash CSG share plan  activity                                                                        |       | 295      |       | 129      |       |
| Tax benefit on CSG share  plan activity                                                                  |       | 19       |       | —   |       |
| Deferred taxes                                                                                           |       | 239      |       | 85       |       |
| Other, net                                                                                               |       | —   |       | (14      | )          |
| Change in operating assets and operating  liabilities:                                                   |       |     |       |     |       |
| Securities borrowed                                                                                      |       | (11,087  | )          | 3,529    |       |
| Receivables from  customers                                                                              |       | (85      | )          | 282      |       |
| Receivables from  brokers, dealers and other                                                             |       | (1,985   | )          | (10,771  | )          |
| Financial instruments  owned                                                                             |       | (2,010   | )          | (5,403   | )          |
| Other assets and  deferred amounts and Other liabilities, net                                            |       | (3,524   | )          | (2,177   | )          |
| Securities loaned                                                                                        |       | 5,995    |       | 3,974    |       |
| Payables to customers                                                                                    |       | 1,327    |       | 1,269    |       |
| Payables to brokers,  dealers and other                                                                  |       | 569      |       | (1,508   | )          |
| Financial instruments  sold not yet purchased                                                            |       | 2,504    |       | 11,952   |       |
| Obligation to return  securities received as collateral                                                  |       | 1,799    |       | (953     | )          |
| Accounts payable and  accrued expenses                                                                   |       | (1,010   | )          | (1,458   | )          |
| Net cash used in  operating activities                                                                   |       | (6,586   | )          | (855     | )          |
| Cash flows from investing activities:                                                                    |       |     |       |     |       |
| Net (payments for) proceeds from:                                                                        |       |     |       |     |       |
| Loans receivable from  parent and affiliates                                                             |       | (2,419   | )          | 1,943    |       |
| Office facilities, net                                                                                   |       | (64      | )          | (30      | )          |
| Net cash (used in)  provided by investing activities                                                     |       | (2,483   | )          | 1,913    |       |
| Cash flows from financing activities:                                                                    |       |     |       |     |       |
| Net proceeds from (payments for):                                                                        |       |     |       |     |       |
| Commercial paper and  short-term borrowings                                                              |       | 3,426    |       | (5,942   | )          |
| Securities sold under  agreements to repurchase, net of securities purchased under agreements to  resell |       | 2,777    |       | 6,240    |       |
| Issuances of long-term  borrowings                                                                       |       | 3,040    |       | 3        |       |
| Redemptions and  maturities of long-term borrowings                                                      |       | (103     | )          | (1,621   | )          |
| Net cash provided by  (used in) financing activities                                                     |       | 9,140    |       | (1,320   | )          |
| Increase (decrease) in  cash and cash equivalents                                                        |       | 71       |       | (262     | )          |
| Cash and cash  equivalents as of the beginning of period                                                 |       | 884      |       | 727      |       |
| Cash and cash  equivalents as of the end of period                                                       |       | $        | 955        |     | $          | 465 |   |
| SUPPLEMENTAL DISCLOSURES                                                                                 |       |     |       |     |       |
| Cash payments for  interest                                                                              |       | $        | 3,749      |     | $          | 2,001 |   |
| Cash payments for income taxes, net of refunds                                                           |       | $        | 19         |     | $          | 6 |   |

 

See accompanying notes to condensed consolidated financial statements (unaudited).

6

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) March 31, 2006**

**1.**   Summaryof Significant Accounting Policies

**The Company**

The condensed consolidatedfinancial statements include Credit Suisse (USA), Inc., and itssubsidiaries (the “Company”). The Company is an integrated investment bankserving institutional, corporate, government and high-net-worth individualclients. The Company’s products and services include securities underwriting,sales and trading, financial advisory services, private equity investments,full service brokerage services, derivatives and risk management products,asset management and investment research. The Company is an indirect whollyowned subsidiary of Credit Suisse, a Swiss bank, and Credit Suisse Group (“CSG”).Effective January 16, 2006, the Company changed its name from CreditSuisse First Boston (USA), Inc. to Credit Suisse (USA), Inc.

**Basis ofPresentation**

All significant intercompany balances and transactionshave been eliminated. The Company is a wholly owned subsidiary of Credit SuisseHoldings (USA), Inc. (“CS Holdings”).

Certain financial information that is normallyincluded in annual financial statements prepared in accordance with accountingprinciples generally accepted in the United States but not required for interimreporting purposes has been condensed or omitted. These condensed consolidatedfinancial statements reflect, in the opinion of management, all adjustments(consisting of normal, recurring accruals) that are necessary for a fairpresentation of the condensed consolidated statements of financial conditionand income for the interim periods presented.

The results of operations for interim periods are notnecessarily indicative of results for the entire year. These condensedconsolidated financial statements should be read in conjunction with theconsolidated financial statements and notes thereto included in the Company’sAnnual Report on Form 10-K for the year ended December 31,2005.

To prepare condensed consolidated financial statementsin accordance with accounting principles generally accepted in the UnitedStates, management must make estimates and assumptions. The reported amounts ofassets and liabilities and revenues and expenses are affected by theseestimates and assumptions, the most significant of which are discussed in thenotes to the condensed consolidated financial statements. Estimates, by theirnature, are based on judgment and available information. Therefore, actualresults could differ materially from these estimates. For a description of theCompany’s significant accounting policies, see Note 1 of the consolidatedfinancial statements in Part II, Item 8 in the Company’s Annual Report on Form 10-Kfor the year ended December 31, 2005.

Effective January 1, 2006, CSG realigned itsorganizational structure to its new strategic orientation, which is to focus onbanking and hold its insurance business as a financial investment. As a resultof this realignment, CSG’s banking business consists of three reportingsegments:  Investment Banking, PrivateBanking and Asset Management. The Company is managed as a subsidiary of CreditSuisse and CSG, and its businesses are a part of each of these banking segments.Therefore, effective January 1, 2006 the Company began operating andmanaging its businesses along these same three banking segments.

The Company’s Investment Banking segment consistsprincipally of the businesses that comprised its former InstitutionalSecurities segment, with the addition of the private funds group that wasformerly part 

7

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) March 31, 2006**

**1.**   Summary of Significant Accounting Policies (Continued)

of its Wealth &Asset Management segment. The Company’s Private Banking segment consists of theprivate client services business in the U.S. (other than Volaris) that wasformerly part of the Company’s Wealth & Asset Management segment. TheCompany’s Asset Management segment consists of the private equity business andthe Volaris business that were formerly part of its Wealth & AssetManagement segment.

The Company manages and reports its segments on apre-tax basis and excludes revenues and expenses primarily from theconsolidation of certain private equity funds which are reported in Elimination &Other. Net income is unaffected by the consolidation of these private equityfunds because offsetting minority interests are also recorded in Elimination &Other.

Certain reclassificationshave been made to prior year condensed consolidated financial statements inthis Quarterly Report to reflect the operational and management structure inplace during 2006.

**RECENTLY ADOPTEDACCOUNTING STANDARDS**

**Consolidation**

In June 2005, the Financial Accounting StandardsBoard (“FASB”) ratified Emerging Issues Task Force (“EITF”) Issue No. 04-5,“Determining Whether a General Partner, or the General Partners as a Group,Controls a Limited Partnership or Similar Entity When the Limited Partners HaveCertain Rights” (“EITF 04-5”). EITF 04-5 provides a framework forevaluating whether a general partner or a group of general partners controls alimited partnership and therefore should consolidate it. EITF 04-5 statesthat the presumption of general partner control is overcome only when thelimited partners have substantive “kick-out rights” or “participating rights.”These rights would allow a simple majority of the limited partners to dissolveor liquidate the partnership or otherwise remove the general partner “withoutcause” or effectively participate in significant decisions made in the ordinarycourse of the partnership business. EITF 04-5 was effective uponratification for all newly formed limited partnerships and for existing limitedpartnership agreements that have been modified. The guidance was effective forthe Company with respect to existing unmodified partnerships as of January 1,2006.

As a result of the ratification of EITF 04-5,EITF Issue No. 96-16, “Investor’s Accounting for an Investee Whenthe Investor Has a Majority of the Voting Interest but the Minority Shareholderor Shareholders Have Certain Approval or Veto Rights” (“EITF 96-16”) wasupdated and FASB Staff Position (“FSP”) No. SOP 78-9-1, “Interactionof AICPA Statement of Position 78-9 and EITF Issue No. 04-5” (“FSPSOP 78-9-1”) was issued. The amendments to EITF 96-16 wereeffective on a prospective basis upon issuance, whereas, similar to EITF 04-5,FSP SOP 78-9-1 was effective upon issuance for all new partnershipsformed and for existing partnership agreements modified after June 29,2005, and was effective for the Company with respect to existing unmodifiedpartnerships as of January 1, 2006.

The changes to EITF 96-16and the provisions of EITF 04-5 and FSP SOP 78-9-1 in effectduring 2005 did not have a material impact on the Company’s financialcondition, results of operations or cash flows. As of January 1, 2006, theCompany increased its assets and liabilities by $6.7 billion, due to theconsolidation of certain unmodified private equity partnerships which existedprior to June 2005.

8

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) March 31, 2006**

**1.**   Summary of Significant Accounting Policies (Continued)

**Share-basedCompensation**

In December 2004, the FASB issued Statement ofFinancial Accounting Standards (“SFAS”) No. 123 (Revised 2004), “Share-BasedPayment” (“SFAS 123R”). SFAS 123R was effective for annual reporting periodsbeginning after June 15, 2005. The Company early adopted SFAS 123R as of January 1,2005, applying the modified prospective method. The Company’s policy is toexpense all share-based awards over the requisite service period.

The most significant accounting implications of theadoption of SFAS 123R for the Company were as follows: (i) inclusion offorfeitures in the estimate of compensation expense determined at the grantdate rather than as they occur. The Company recorded a cumulative adjustment ofapproximately $6 million, net of tax, during the first quarter of 2005 toreverse the expense previously recognized on all outstanding unvested awardsexpected to be forfeited. For new grants after January 1, 2005, forfeitureshave been included in the initial estimation of the compensation expense at thegrant date; (ii) recognition of compensation cost for all outstandingunvested awards as of January 1, 2005, that were previously accounted forunder Accounting Principles Board (“APB”) Opinion No. 25 and for which noexpense was previously recognized, based on the original grant-date fair valueof each award over the remaining requisite service period of the respectiveaward (the recognition of this expense was not material); and (iii) adoptionof changes to the presentation of the statement of cash flows in accordancewith the revised standard.

In a December 2005 speech, the Securities andExchange Commission (“SEC”) staff provided further guidance on SFAS 123R,relating to accounting for share-based compensation awards subject to anon-competition provision that have scheduled vesting beyond an employee’seligibility for early retirement. The SEC staff noted that such share-basedawards should generally be expensed over the period from the grant date to thedate an employee becomes eligible for early retirement, rather than over theentire vesting, or stated service, period, unless the non-competition provisionand other factors establish an in-substance requisite service period thatextends beyond the early retirement date. As a result of the December 2005guidance, and based on subsequent discussions with the SEC staff, the Companyrecorded in the fourth quarter of 2005 an incremental expense to reflect thefull-year cost of its 2005 share-based awards. This incremental expensereflected the attribution of the total cost of these awards over the periodfrom the grant date to the date the employee becomes eligible for earlyretirement rather than over the vesting period that ranged from three to fiveyears.

The impact of the Company’s change in accounting wasto increase fourth quarter and full year 2005 compensation and benefits by $296million ($12 million of which was charged to CSG affiliates outside of theCompany and reflected as a reduction in other operating expenses), and todecrease fourth quarter and full year 2005 net income by $185 million. Thisnon-cash charge, recorded in Elimination & Other for segment reportingpurposes, represents the recognition of compensation expense for share-basedawards granted in 2005 that otherwise would have been recorded in the Company’ssegments, principally Investment Banking, generally over vesting periods ofthree to five years.

The share-based awardsgranted in March 2006 provide for early retirement eligibility no earlierthan two years after the award grant date. These awards will be recorded ascompensation expense in the 

9

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) March 31, 2006**

**1.**   Summary of Significant Accounting Policies (Continued)

Company’soperating segments over the period from the grant date of March 2006 tothe date an employee becomes eligible for early retirement if earlier than thethree to five year vesting period.

**Accounting Changes**

In May 2005, the FASBissued SFAS No. 154, “Accounting Changes and Error Corrections, areplacement of APB Opinion No. 20, ‘Accounting Changes’ (“APB 20”) andFASB Statement No. 3, ‘Reporting Accounting Changes in Interim FinancialStatements (an Amendment of APB Opinion No. 28, ‘Interim FinancialReporting’)” (“SFAS 154”). SFAS 154 requires retrospective application, unlessimpracticable, to prior periods’ financial statements for voluntary changes inaccounting principles and changes required by an accounting pronouncement inthe unusual circumstances in which the pronouncement does not include specifictransition provisions. The statement also requires that a change in depreciation,amortization, or depletion method for long-lived, non-financial assets shouldbe accounted for as a change in accounting estimate effected by a change inaccounting principle (i.e., as a retrospective application). The guidance forreporting the correction of an error in previously issued financial statementsand the change of an accounting estimate does not change from APB 20. SFAS 154was effective for the Company as of January 1, 2006. The adoption of SFAS154 did not have a material impact on the Company’s financial condition,results of operations or cash flows.

**Hybrids**

In February 2006, theFASB issued SFAS No. 155, “Accounting for Certain Hybrid FinancialInstruments” (“SFAS 155”), which amended SFASNo. 133, “Accounting for Derivative Instruments and Hedging Activities” asamended (“SFAS 133”) and SFAS No. 140, “Accounting forTransfers and Servicing of Financial Assets and Extinguishments of Liabilities”(“SFAS 140”). Under SFAS 155, hybrid financial instruments that containembedded derivatives that would otherwise require bifurcation may be accountedfor at fair value, with changes in fair value recognized in the condensedconsolidated statement of income. The fair value designation may be applied onan instrument-by-instrument basis; however, the election to apply fair valueaccounting is irrevocable. SFAS 155 will be effective for those instrumentsacquired or issued on or after an entity’s fiscal year beginning after September 15,2006, but early adoption is permitted as of the beginning of a fiscal year forwhich an entity has not previously issued interim financial statements. SFAS155 allows limited retrospective application for existing bifurcated hybridfinancial instruments. The Company elected to early adopt SFAS 155 as of January 1,2006. The adoption of SFAS 155 did not have a material impact on theCompany’s financial condition, results of operations or cash flows.

**Servicing**

In March 2006, theFASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets” (“SFAS156”), which amended SFAS 140. SFAS 156 requires that all separately recognizedservicing rights after the effective date be initially measured at fair value,and permits separately recognized servicing rights to be accounted for at fairvalue in subsequent periods, with changes in fair value recognized in theincome statement. SFAS 156 permits an irrevocable election to apply fair valueaccounting for classes of servicing rights based on the different valuation andrisk characteristics of the underlying assets and the 

10

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) March 31, 2006**

**1.**   Summary of Significant AccountingPolicies (Continued)

way theeconomic risks are managed. SFAS 156 will be effective on a prospective basisfor fiscal years beginning after September 15, 2006; however earlyadoption is permitted as of the beginning of a fiscal year for which an entityhas not previously issued interim financial statements. SFAS 156 also allowslimited retrospective application for existing separately recognized servicingrights. The Company elected to early adopt SFAS 156 as of January 1, 2006.The adoption of SFAS 156 did not have an impact on the Company’s financialcondition, results of operations or cash flows.

**Insurance**

In March 2006, theFASB issued FASB Staff Position (“FSP”) No. FTB 85-4-1, “Accountingfor Life Settlement Contracts by Third Party Investors” (“FSP FTB 85-4-1”).FSP FTB 85-4-1 provides a contract-by-contract election to accountfor life settlement contracts on either a fair value basis, with changes infair value recognized in the income statement, or through use of the investmentmethod. Under the investment method, the initial investment and continuingcosts are capitalized; however, no income is recognized until death of theinsured party. The guidance of FSP FTB 85-4-1 will be effective forfiscal years beginning after June 15, 2006 and will permit early adoption;however, upon adoption, limited retrospective application of the measurementguidance is required. The Company elected to early adopt FSP FTB 85-4-1as of January 1, 2006. The adoption of FSP FTB 85-4-1 did nothave an impact on the Company’s financial condition, results of operations orcash flows.

**STANDARDS TO BEADOPTED IN FUTURE PERIODS**

**FSP FIN 46(R)-6**

In April 2006, theFASB issued FSP No. FIN 46(R)-6, “Determining the Variability to BeConsidered in Applying FASB Interpretation No. 46(R)” (“FSP FIN 46(R)-6”).FSP FIN 46(R)-6 provides guidance regarding how contracts or arrangementsthat create or reduce variability should be considered when determining whetherentities qualify as variable interest entities (“VIEs”) and when assessing theneed for consolidation of VIEs. FSP FIN 46(R)-6 requires that evaluationsof the variability created or absorbed in an entity from its contracts orarrangements be based on an analysis of the entity’s design. In evaluating thedesign of an entity, an analysis must be performed as to the potential risks towhich the entity is exposed as well as the risks that the entity was designedto create and pass along to its interest holders based on the purpose for whichthe entity was formed. The guidance of FSP FIN 46(R)-6 must be applied ona prospective basis in reporting periods beginning after June 15, 2006,but need not be applied to existing entities unless a reconsideration eventoccurs. The Company is currently evaluating the impact of adopting FSP FIN46(R)-6.

**2.**   RelatedParty Transactions

CSG, through CS Holdings, owns all of the Company’soutstanding voting common stock. The Company is involved in significant financingand other transactions, and has significant related party balances, with CSGaffiliates, primarily Credit Suisse, and certain of its subsidiaries andaffiliates. The Company generally enters into these transactions in theordinary course of business and believes that these transactions are generallyon market terms that could be obtained from unrelated third parties.

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) March 31, 2006**

**2.**   Related Party Transactions (Continued)

The following table setsforth the Company’s related party assets and liabilities as of March 31,2006 and December 31, 2005:

| ** **                                              | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|---------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                              | ** ** | **(In millions)**   | ** ** |
| **ASSETS**                                              |       |                     |       |                        |       |   |   |   |   |
| Securities  purchased under agreements to resell        |       |                     | $          | 6,644                       |       |   |   | $ | 5,163 |   |   |
| Securities  borrowed                                    |       |                     | 6,158      |                        |       |   | 4,323 |   |   |
| Receivables from  customers                             |       |                     | 25         |                        |       |   | — |   |   |
| Receivables from  brokers, dealers and other            |       |                     | 3,915      |                        |       |   | 2,247 |   |   |
| Derivatives  contracts                                  |       |                     | 1,665      |                        |       |   | 842 |   |   |
| Net deferred tax  asset                                 |       |                     | 961        |                        |       |   | 1,202 |   |   |
| Loans receivable  from parent and affiliates            |       |                     | 27,644     |                        |       |   | 25,225 |   |   |
| Total assets                                            |       |                     | $          | 47,012                      |       |   |   | $ | 39,002 |   |   |
| **LIABILITIES**                                         |       |                     |       |                        |       |   |   |   |   |
| Short-term  borrowings                                  |       |                     | $          | 15,212                      |       |   |   | $ | 12,093 |   |   |
| Securities sold  under agreements to repurchase         |       |                     | 25,391     |                        |       |   | 25,634 |   |   |
| Securities loaned                                       |       |                     | 39,857     |                        |       |   | 33,976 |   |   |
| Payables to  customers                                  |       |                     | 2,589      |                        |       |   | 2,853 |   |   |
| Payables to  brokers, dealers and other                 |       |                     | 3,813      |                        |       |   | 2,036 |   |   |
| Derivatives  contracts                                  |       |                     | 1,510      |                        |       |   | 489 |   |   |
| Obligation to  return securities received as collateral |       |                     | 2,339      |                        |       |   | 1,242 |   |   |
| Taxes payable  (included in Other liabilities)          |       |                     | 204        |                        |       |   | 350 |   |   |
| Intercompany  payables (included in Other liabilities)  |       |                     | 173        |                        |       |   | 626 |   |   |
| Total liabilities                                       |       |                     | $          | 91,088                      |       |   |   | $ | 79,299 |   |   |

 

Included in the condensed consolidated statements ofincome are revenues and expenses resulting from various securities trading andfinancing activities with certain affiliates, as well as fees foradministrative services performed by the Company under the terms of various agreements.The Company earns commission revenues and incurs commission expenses during thenormal course of business for securities transactions conducted withaffiliates. Other operating expenses include affiliate service fees that aretreated as a reduction in other operating expenses in the condensedconsolidated statements of income. These fees include compensation and benefitsexpense relating to business activities conducted by Company employees onbehalf of CSG affiliates outside the Company.

12

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) March 31, 2006**

**2.**   Related Party Transactions (Continued)

The following table setsforth the Company’s related party revenues and expenses for the three monthsended March 31, 2006 and 2005:

| ** **                                          | ** ** | **For the Three Months  Ended March 31,** | ** ** |
|-----------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                          | ** ** | **    2006    **           | ** ** | **    2005    ** | ** ** |
| Principal  transactions-net (derivatives contracts) |       |                                                               | $          | 252 |   |   |   | $ | 310 |   |   |
| Commissions and  fees, net                          |       |                                                               | (22        | ) |   |   | (7 | ) |   |
| Interest and  dividend revenues                     |       |                                                               | 458        |   |   |   | 238 |   |   |
| Interest expense                                    |       |                                                               | (753       | ) |   |   | (434 | ) |   |
| Total net revenues                                  |       |                                                               | $          | (65 | ) |   |   | $ | 107 |   |   |
| Other operating expenses                            |       |                                                               | $          | (51 | ) |   |   | $ | (84 | ) |   |
| Total expenses                                      |       |                                                               | $          | (51 | ) |   |   | $ | (84 | ) |   |

 

From time to time, the Company sells at cost to CSHoldings the right, title and interest in certain assets. Once the assets aresold, the Company continues to service these assets on behalf of CS Holdings.For the three months ended March 31, 2006, the value of the assets sold,net of collections applied, was not material.

As of March 31, 2006, certain private equityfunds of funds, hedge funds of funds and VIEs that issue collateralized debtobligations (“CDOs”), with aggregate assets under management of approximately$21.1 billion, of CS Alternative Capital, Inc., an indirect wholly ownedsubsidiary of CS Holdings, are managed by the Company’s Alternative Investmentsdivision. CS Alternative Capital, Inc. reimburses the Company for allexpenses incurred by the Company in connection with managing these assets. TheCompany treats these reimbursements as a reduction in other operating expensesin the condensed consolidated statements of income.

The Credit Suisse Group International Share Planprovides for the grant of equity-based awards to Company employees based on CSGshares pursuant to which employees of the Company may be granted, ascompensation, shares or other equity-based awards as compensation for servicesperformed. CS Holdings purchases shares from CSG to satisfy these awards, butCS Holdings does not require reimbursement from the Company; therefore, amountsassociated with these awards are considered a capital contribution to theCompany and credited to paid-in-capital. Amounts contributed by CS Holdingsrelating to compensation expense for the three months ended March 31, 2006and 2005 were $314 million and $118 million, respectively, including taxeffects. See Note 1 for further information on the Company’s share-basedcompensation.

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) March 31, 2006**

**2.**   RelatedParty Transactions(Continued)

Certain of the Company’s directors, officers andemployees and those of its affiliates and their subsidiaries maintain marginaccounts with the Company’s principal broker-dealer subsidiary, CS Securities(USA) LLC (“CS Securities”) and other affiliated broker-dealers in theordinary course of business. In addition, certain of such directors, officersand employees have investments or commitments to invest in various privateequity funds. The Company makes loans to directors and executive officers onthe same terms as are generally available to third parties or otherwisepursuant to widely available employee benefit plans. CS Securities and otheraffiliated broker-dealers, from time to time and in the ordinary course ofbusiness, enter into, as principal, transactions involving the purchase or saleof securities from or to such directors, officers and employees and members oftheir immediate families.

The Company issues guarantees to customers withrespect to certain obligations of its affiliates in the ordinary course ofbusiness, including, but not limited to, certain derivatives transactions.Failure to perform by an affiliate would require the Company to perform underthe guarantee. See Note 8 for more information.

The Company is included inthe consolidated federal income tax return and certain state and local incometax returns filed by CS Holdings.

**3.**   Transfersand Servicing of Financial Assets

As part of the Company’s financing and securitiessettlement activities, the Company uses securities as collateral to supportvarious secured financing sources. If the counterparty does not meet itscontractual obligation to return securities used as collateral, the Company maybe exposed to the risk of reacquiring the securities at prevailing marketprices to satisfy its obligations. The Company controls this risk by monitoringthe market value of financial instruments pledged each day and by requiringcollateral levels to be adjusted in the event of excess market exposure.

As of March 31, 2006 and December 31, 2005,the fair value of assets that the Company pledged to counterparties was$228.0 billion and $212.5 billion, respectively, of which$73.6 billion and $73.0 billion, respectively, was included infinancial instruments owned in the condensed consolidated statements offinancial condition.

The Company has alsoreceived similar assets as collateral that the Company has the right to re-pledgeor sell. The Company routinely re-pledges or sells these assets to third parties.As of March 31, 2006 and December 31, 2005, the fair value of theassets pledged to the Company was $205.1 billion and $184.6 billion,respectively, of which $205.0 billion and $178.1 billion,respectively, was re-pledged or sold.

**SecuritizationActivities**

The Company originates and purchases residentialmortgages and originates commercial loans for the purpose of securitization.The Company sells these mortgage loans to qualified special purpose entities (“QSPEs”).The QSPEs issue securities that are backed by the assets transferred to theQSPEs and pay a return based on the returns on those assets. Investors in thesemortgage-backed securities typically have recourse to the assets in the QSPE.The investors and the QSPEs have no recourse to the Company’s assets. CSSecurities is an underwriter of, and makes a market in, these securities.

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) March 31, 2006**

**3.**   Transfers and Servicing of Financial Assets(Continued)

As of March 31, 2006, the Company held encumberedmortgage loans totaling $8.1 billion related to securitization transactionsthat did not qualify for sale accounting treatment under paragraph 40b of SFAS 140.Prior to securitization, such encumbered loans were accounted for in financialinstruments owned, however due to the transfer of legal title in the form of apledge in the securitization, these loans have been reclassified to Otherassets and deferred amounts in the condensed consolidated statements offinancial condition. Cash amounts received in payment upon transfer for suchloans are accounted for as secured borrowings and are recorded in Otherliabilities in the condensed consolidated statements of financial condition.

The following tablepresents the proceeds and gains related to the securitization of commercialmortgage loans, residential mortgage loans and other asset-backed loans for thethree months ended March 31, 2006 and 2005. The gain on securitizationsincludes underwriting revenues, deferred origination fees and expenses, gainsor losses on the sale of the collateral to the QSPE or VIE and gains or losseson the sale of the newly issued securities to third parties but excludes netinterest revenues earned on assets prior to securitization.

| ** **                                             | ** ** | **Commercial  mortgage  loans**(1) | ** ** | **Residential  mortgage  loans**(2) | ** ** | **Other  asset-backed  loans**(2)(3) | ** ** |
|--------------------------------------------------------|------------|------------------------------------|------------|-------------------------------------|------------|--------------------------------------|------------|
| ** **                                             | ** ** | **(In millions)**             | ** ** |
| **For the Three Months Ended****March 31,  2006** |       |                               |       |                                |       |                                 |       |   |   |   |   |   |   |
| Proceeds from  securitizations                         |       |                               | $          | 2,267                               |       |                                 |       | $ | 6,494 |   |   |   | $ | 1,220 |   |   |
| Gain on  securitizations                               |       |                               | $          | 63                                  |       |                                 |       | $ | 10 |   |   |   | $ | 9 |   |   |
| **For the  Three Months Ended****March, 2005**         |       |                               |       |                                |       |                                 |       |   |   |   |   |   |   |
| Proceeds from  securitizations                         |       |                               | $          | 1,357                               |       |                                 |       | $ | 11,755 |   |   |   | $ | 1,908 |   |   |
| Gain on securitizations                                |       |                               | $          | 42                                  |       |                                 |       | $ | 11 |   |   |   | $ | 15 |   |   |

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(1)                The gains orlosses on the sale of the collateral to the QSPE is the difference between thecarrying value on the day prior to the securitization date (the lower of costor fair value) and the selling price of the mortgage whole loans to the QSPE onthe securitization pricing date.

(2)                The gains orlosses on the sale of the collateral to the QSPE is the difference between thefair value on the day prior to securitization pricing date and the sellingprice of the mortgage whole loans to the QSPE on the securitization pricingdate.

(3)                Includes home equity loans and other securitiescollateralized by residential mortgage loans.

The Company may retain interests in these securitizedassets in connection with its underwriting and market-making activities. TheCompany’s primary exposure in its securitization activities is limited to itsretained interests. Retained interests in securitized financial assets areincluded at fair value in corporate debt in financial instruments owned in thecondensed consolidated statements of financial condition. Any changes in thefair value of these retained interests are recognized in the condensedconsolidated statements of income. The fair values of retained interests aredetermined using market quotes where available or present value of estimatedfuture cash flows valuation techniques that incorporate assumptions thatmarketplace participants customarily use in their estimates of values. As of March 31,2006 and 

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) March 31, 2006**

**3.**   Transfers and Servicing of Financial Assets (Continued)

December 31, 2005,the fair value of the interests retained by the Company was $2.7 billionand $5.1 billion, respectively.

Key economic assumptionsused in measuring at the date of securitization the fair value of the retainedinterests resulting from securitizations completed during the three monthsended March 31, 2006 were as follows:

| ** **                                      | ** ** | **For the Three Months Ended March 31, 2006** | ** ** |
|-------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **                                      | ** ** | **Commercial  mortgage  loans**(1)                                               | ** ** | **Residential  mortgage  loans** | ** ** | **Other  asset-backed  loans** | ** ** |
| Weighted-average  life (in years)               |       |                                                                             | N/A        |   |   | 6.2 |   |   | 8.9 |   |   |
| Prepayment rate  (in rate per annum)(2)         |       |                                                                             | N/A        |   |   | 10.0%-41.5 | % |   | 25 | % |   |
| Cash flow  discount rate (in rate per annum)(3) |       |                                                                             | N/A        |   |   | 3.5%-36.6 | % |   | N/A |   |   |
| Expected credit losses  (in rate per annum)     |       |                                                                             | N/A        |   |   | 0.0%-29.7 | % |   | N/A |   |   |

 

Thefollowing table sets forth the fair value of retained interests from securitizationsas of March 31, 2006, key economic assumptions used to determine the fairvalue and the sensitivity of the fair value to immediate adverse changes inthose assumptions:

| ** **                                      | ** ** | **As of March 31, 2006** | ** ** |
|-------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                      | ** ** | **Commercial  mortgage  loans**(1)           | ** ** | **Residential  mortgage  loans** | ** ** | **Other  asset-backed** | ** ** |
| ** **                                      | ** ** | **(Dollars in millions)**          | ** ** |
| Fair value of  retained interests               |       |                                         | $          | 39 |   |   | $ | 2,635 |   | $ | 59 |   |
| Weighted-average  life (in years)               |       |                                         | 1.9        |   |   | 4.2 |   | 5.4 |   |
| Prepayment rate  (in rate per annum)(2)         |       |                                         | N/A        |   |   | 0.5%-70.9 | % | 15.2%-46.3 | % |
| Impact on fair value of 10% adverse change      |       |                                         | —     |   |   | $ | (21 | ) | — |   |
| Impact on fair value of 20% adverse change      |       |                                         | —     |   |   | $ | (37 | ) | — |   |
| Cash flow  discount rate (in rate per annum)(3) |       |                                         | 10.2       | % |   | 7.8 | % | N/A |   |
| Impact on fair value of 10% adverse change      |       |                                         | $          | (1 | ) |   | $ | (51 | ) | — |   |
| Impact on fair value of 20% adverse change      |       |                                         | $          | (1 | ) |   | $ | (103 | ) | — |   |
| Expected credit  losses (in rate per annum)     |       |                                         | 5.3        | % |   | 1.2 | % | N/A |   |
| Impact on fair value of 10% adverse change      |       |                                         | $          | — |   |   | $ | (8 | ) | — |   |
| Impact on fair  value of 20% adverse change     |       |                                         | $          | (1 | ) |   | $ | (16 | ) | — |   |
|                                                 |            |                                              |            |  |  |  |  |  |  |  |  |  |

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(1)                To deterprepayment, commercial mortgage loans typically have prepayment protection inthe form of prepayment lockouts and yield maintenances.

(2)                The Companyutilizes the constant prepayment rate assumptions.

(3)                The rate is basedon the weighted average yield on the retained interest.

These sensitivities arehypothetical and do not reflect the benefits of hedging activities. Changes infair value based on a 10% or 20% variation in assumptions generally cannot beextrapolated because the relationship of the change in assumption to the changein fair value may not be linear. Also, the effect of a variation in aparticular assumption on the fair value of the retained interests is calculatedwithout 

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) March 31, 2006**

**3.**   Transfers and Servicing of Financial Assets (Continued)

changingany other assumption. In practice, changes in one assumption may result inchanges in other assumptions (for example, increases in market interest ratesmay result in lower prepayments and increased credit losses), which may magnifyor counteract the sensitivities.

**Variable InterestEntities**

The Company has variable interests in several CDO VIEs.As described under “—Securitization Activities,” in the normal course of itsbusiness, the Company purchases loans and other debt obligations from and onbehalf of clients primarily for the purpose of securitization. These assets aresold to and warehoused by affiliates and, at the end of a warehousing period,the assets are sold to CDO VIEs or QSPEs for securitization. The Companyengages in these transactions to meet the needs of clients, to earn fees and tosell financial assets. The purpose of these CDO VIEs and QSPEs is to provideinvestors a return based on the underlying debt instruments of the CDO VIEs andQSPEs. In connection with its underwriting and market-making activities, theCompany may retain interests in the CDO VIEs and QSPEs. The CDO entities mayhave actively managed (“open”) portfolios or static or unmanaged (“closed”)portfolios. The closed CDO transactions are typically structured to use QSPEs,which are not consolidated in the Company’s financial statements.

The Company has consolidated all CDO VIEs and otherVIEs for which it is the primary beneficiary. As of March 31, 2006 and December 31,2005, the Company recorded $959 million and $673 million, respectively,representing the carrying amount of the consolidated assets of these CDO VIEsand other VIEs that are collateral for the VIE obligations. The beneficialinterests of these consolidated CDO VIEs and other VIEs are payable solely fromthe cash flows of the related collateral, and the creditors of these CDO VIEsdo not have recourse to the Company in the event of default.

The Company holds significant debt and equityinterests in CDO VIEs that are not consolidated because the Company is not theprimary beneficiary. The total assets in these CDO VIEs as of March 31,2006 and December 31, 2005 were $6.2 billion and $5.4 billion,respectively. The Company’s maximum exposure to loss on significant debt andequity interests in CDO VIEs as of March 31, 2006 and December 31,2005 was $103 million and $127 million, respectively, which was theamount carried at fair value in financial instruments owned.

17

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) March 31, 2006**

**3.**   Transfers and Servicing of Financial Assets (Continued)

In the normal course ofits private equity activities, the Company is typically the general partner andinvestment adviser to private equity funds. Limited partners of these fundstypically have recourse to the fund’s assets but have no recourse to theCompany’s assets. The Company consolidates certain private equity funds thatare managed by the Company. A portion of these private equity funds are notVIEs but are consolidated based on the Company’s control of the voting interestof the fund. See Note 1 for more information. The following table presents theimpact on the condensed consolidated statements of financial condition of theCompany as a result of consolidating certain private equity funds as of March 31,2006 and December 31, 2005:

| ** **                                                 | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                                 | ** ** | **(In millions)**   | ** ** |
| Private equity  and other long-term investments            |       |                     | $          | 9,072                       |       |   |   | $ | 2,562 |   |   |
| All other assets,  net                                     |       |                     | 507        |                        |       |   | 177 |   |   |
| Total assets                                               |       |                     | $          | 9,579                       |       |   |   | $ | 2,739 |   |   |
| Minority interests (included in other liabilities)         |       |                     | $          | 8,995                       |       |   |   | $ | 2,549 |   |   |
| All other  liabilities, net (excluding minority interests) |       |                     | 584        |                        |       |   | 190 |   |   |
| Total liabilities                                          |       |                     | $          | 9,579                       |       |   |   | $ | 2,739 |   |   |

 

Thefollowing table presents the impact on the condensed consolidated statements ofincome of the Company as a result of consolidating certain private equityfunds, for the three months ended March 31, 2006 and 2005:

| ** **         | ** ** | **For the Three Months  Ended March 31,** | ** ** |
|--------------------|------------|--------------------------------------------------------------------|------------|
| ** **         | ** ** | **    2006    **           | ** ** | **    2005    ** | ** ** |
| ** **         | ** ** | **(In millions)**                                             | ** ** |
| Net revenues       |       |                                                               | $          | 948 |   |   |   | $ | 157 |   |   |
| Expenses           |       |                                                               | 5          |   |   |   | 2 |   |   |
| Minority interests |       |                                                               | $          | 943 |   |   |   | $ | 155 |   |   |

 

**4.**   PrivateEquity and Other Long-Term Investments

Private equity and other long-term investments includedirect investments and investments in partnerships that make private equity andrelated investments in various portfolio companies and funds. The Companycategorizes its private equity and other long-term investments into threecategories: Credit Suisse-managed funds, which include consolidated funds,funds managed by third parties and direct investments. These investmentsgenerally have no readily available market or may be otherwise restricted as toresale under the Securities Act of 1933 (“Securities Act”); therefore, theseinvestments are carried at management’s best estimate of fair value.

As of March 31, 2006 and December 31, 2005,the Company had investments in private equity and other long-term investmentsof $10.3 billion and $3.6 billion, respectively, including$9.1 billion and $2.6 billion, respectively, in private equityinvestments the Company is required to consolidate. Changes in net unrealizedappreciation/depreciation arising from changes in fair value and the gain orloss realized 

18

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) March 31, 2006**

**4.**   Private Equity and Other Long-Term Investments(Continued)

upon sale are reflected inprincipal transactions-net in the condensed consolidated statements of income.See Notes 1 and 3 for more information. The original cost of these investments,excluding the consolidated private equity investments, was $1.5 billion as of March 31,2006 and $1.4 billion as of December 31, 2005. As of March 31, 2006the Company had commitments to invest up to an additional $391 million innon-consolidated private equity funds and $1.1 billion in consolidatedprivate equity funds.

The Company’s subsidiaries managemany private equity partnerships (the “Funds”). When the investment performanceon Credit Suisse-managed Funds exceeds specific thresholds, the Company andcertain other partners, most of which are current and former employeesof the Company (collectively the “GPs”), may beentitled to receive a carried interest distribution under the governingdocuments of the Funds. Carried interest distributions are based on the cumulativeinvestment performance of each Fund at the time the distribution is made. As aresult, the Company may be obligated to return to investors in the Funds all ora portion of the carried interest distributed to the GPs. The amount of suchcontingent obligations is based upon the performance of the Funds but cannotexceed the amount of carried interest received by the GPs. As of March 31,2006 and December 31, 2005, the maximum amount of such contingentobligations was $616 million and $620 million, respectively, assumingthe Funds’ remaining investments were worthless. Assuming the Funds’ remaininginvestments were sold at their current carrying values as of March 31,2006 and December 31, 2005, the contingent obligations would have been$12 million and $18 million, respectively. As of March 31, 2006and December 31, 2005, the Company withheld cash from distributions onprior realizations to the partners, and recorded corresponding liabilities of$129 million and $126 million, respectively, in connection with theCompany’s guarantee to return prior carried interest distributions to thirdparty investors in the Funds.

In addition, pursuant tocertain contractual arrangements, the Company is obligated to make cashpayments to certain investors in certain Funds if specified performancethresholds are not met. As of March 31, 2006 and December 31, 2005,the maximum amount of such contingent obligations was $45 million assumingthe Funds’ remaining investments were worthless. Assuming the Funds’ remaininginvestments were sold at their current carrying values as of March 31,2006 and December 31, 2005, there would have been no contingentobligation.

**5.**   DerivativesContracts

The Company usesderivatives contracts for trading and hedging purposes and to provide productsfor clients. These derivatives include options, forwards, futures and swaps.For more information on the Company’s derivatives, see Note 6 of theconsolidated financial statements in Part II, Item 8 in the Annual Reporton Form 10-K for the year ended December 31, 2005.

19

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) March 31, 2006**

**5.**   Derivatives Contracts (Continued)

**QuantitativeDisclosures for All Derivatives**

Thefair values of all derivatives contracts outstanding as of March 31, 2006and December 31, 2005 were as follows:

| ** **        | ** ** | **March 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|-------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **        | ** ** | **Assets**                   | ** ** | **Liabilities**                 | ** ** | **Assets** | ** ** | **Liabilities** | ** ** |
| ** **        | ** ** | **(In millions)**       | ** ** |
| Options           |       | $                            | 1,258      |                            |       | $ | 1,007 |   |   | $ | 1,167 |   |   | $ | 728 |   |   |
| Forward contracts |       | 3,803                        |       |                            | 1,828      |   |   | 3,049 |   |   | 1,076 |   |   |
| Swaps             |       | 1,991                        |       |                            | 1,936      |   |   | 869 |   |   | 458 |   |   |
| Total             |       | $                            | 7,052      |                            |       | $ | 4,771 |   |   | $ | 5,085 |   |   | $ | 2,262 |   |   |

 

These assets andliabilities are included as derivatives contracts in financial instrumentsowned/sold not yet purchased, respectively, in the condensed consolidatedstatements of financial condition.

**6.**   Borrowings

Short-term borrowings are generally demand obligationswith interest approximating the federal funds rate, the London InterbankOffered Rate (“LIBOR”) or other money market indices. Such borrowings aregenerally used to facilitate the securities settlement process, financefinancial instruments owned and finance securities purchased by customers onmargin. As of March 31, 2006 and December 31, 2005, there were noshort-term borrowings secured by Company-owned securities.

Thefollowing table sets forth the Company’s short-term borrowings and theirweighted average interest rates:

| ** **                                      | ** ** | **Short-term borrowings**       | ** ** | **Weighted average interest rates** | ** ** |
|-------------------------------------------------|------------|--------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                      | ** ** | **As of  March 31,  2006** | ** ** | **As of  December 31,  2005**            | ** ** | **As of    March 31,    2006** | ** ** | **As of    December 31,    2005** | ** ** |
| ** **                                      | ** ** | **(In millions)**               | ** ** | ** **                                         | ** ** | ** ** | ** ** |
| Bank loans,  including loans from affiliates(1) |       |                                 | $          | 15,930                                             |       |   |   | $ | 12,356 |   |   |   | 4.92 | % |   |   | 4.32 | % |   |
| Commercial paper                                |       |                                 | 1,150      |                                               |       |   | 1,298 |   |   |   | 4.59 | % |   |   | 4.19 | % |   |
| Total short-term  borrowings                    |       |                                 | $          | 17,080                                             |       |   |   | $ | 13,654 |   |   |   |   |   |   |   |   |   |   |

----

(1)                Includes$15.2 billion and $12.1 billion in loans from affiliates as of March 31,2006 and December 31, 2005, respectively.

The Company has a commercial paper program exempt fromregistration under the Securities Act that allows the Company to issue up to$5.0 billion in commercial paper. As of March 31, 2006 and December 31,2005, $1.2 billion and $1.3 billion, respectively, of commercialpaper was outstanding under this program.

20

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) March 31, 2006**

**6.**   Borrowings (Continued)

In February 2006, the Company filed with the SECan automatic shelf registration statement that allows the Company to issue fromtime to time senior and subordinated debt securities, and warrants to purchasesuch securities.

In July 2001, the Company established a Euromedium-term note program, that allows the Company to issue up to$5.0 billion of notes. Under this program, the Company had, as of May 10,2006 approximately $1.2 billion available for issuance.

Thefollowing table sets forth the Company’s long-term borrowings as of March 31,2006 and December 31, 2005:

| ** **                                                              | ** ** | **March 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|-------------------------------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                                                              | ** ** | **(In millions)**       | ** ** |
| Senior notes 3.9%-7.1%,  due various dates through 2032            |       |                         | $          | 31,788                          |       |   |   | $ | 29,214 |   |   |
| Medium-term notes  3.1%-7.4%, due various dates through 2032  |       |                         | 4,139      |                            |       |   | 4,223 |   |   |
| Structured  borrowings 4.5% -16.1%, due various dates through 2015 |       |                         | 622        |                            |       |   | 489 |   |   |
| Total long-term borrowings                                              |       |                         | $          | 36,549                          |       |   |   | $ | 33,926 |   |   |
| Current maturities of  long-term borrowings                             |       |                         | $          | 3,971                           |       |   |   | $ | 3,692 |   |   |

 

As of March 31, 2006 and December 31, 2005,long-term borrowings included downward fair value adjustments of approximately$278 million and upward fair value adjustments of $52 million,respectively, associated with fair value hedges under SFAS 133. As of March 31,2006 and December 31, 2005, the Company had entered into interest rateswaps, with a notional amount of $25.4 billion and $23.6 billion,respectively, on the Company’s long-term borrowings for hedging purposes.Substantially all of these swaps qualified as fair value hedges underSFAS 133. See Note 5 for more information.

Thefollowing table sets forth scheduled maturities of all long-term borrowings asof March 31, 2006:

| ** ** | ** ** | **Twelve Months  Ended March 31,** | ** ** |
|------------|------------|---------------------------------------------------|------------|
| ** ** | ** ** | **(In millions)**                            | ** ** |
| 2007       |       |                                              | 3,971      |   |   |
| 2008       |       |                                              | 4,955      |   |   |
| 2009       |       |                                              | 6,775      |   |   |
| 2010       |       |                                              | 2,795      |   |   |
| 2011       |       |                                              | 4,232      |   |   |
| 2012-2032  |       |                                              | 13,821     |   |   |
| Total      |       |                                              | $          | 36,549 |   |   |
|            |            |                                                   |            |  |  |  |

 

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) March 31, 2006**

**6.**   Borrowings (Continued)

The following table setsforth scheduled maturities of the current portion of long-term borrowings as ofMarch 31, 2006:

| ** **              | ** ** | **Three Months Ended** | ** ** |
|-------------------------|------------|----------------------------------|------------|
| ** **              | ** ** | **(In millions)**           | ** ** |
| June 30, 2006      |       |                             | $          | 1,363 |   |   |
| September 30, 2006 |       |                             | 2,238      |   |   |
| December 31, 2006  |       |                             | —     |   |   |
| March 31, 2007     |       |                             | 370        |   |   |
| Total                   |       |                             | $          | 3,971 |   |   |

 

As of March 31, 2006,CS Securities maintained with third parties five 364-day committedsecured revolving credit facilities totaling $2.2 billion, with onefacility for $500 million maturing in July 2006, one facility for $200million maturing in August 2006, one facility for $500 million maturing inNovember 2006, one facility for $500 million maturing in February 2007and one facility for $500 million maturing in March 2007. The Companyexpects to renew these facilities as they mature. These facilities require CSSecurities to pledge unencumbered marketable securities to secure anyborrowings. Borrowings under each facility would bear interest at short-termrates related to either the Federal Funds rate or LIBOR and can be used forgeneral corporate purposes. The facilities contain customary covenants that theCompany believes will not impair its ability to obtain funding. As of March 31,2006, no borrowings were outstanding under any of the facilities.

**2006 Financings**

During the three monthsended March 31, 2006, the Company issued $3.0 billion of senior notesand $40 million in structured notes and repaid approximately$90 million of medium-term notes and $13 million of structured notes.

**7.   Leasesand Commitments**

Thefollowing table sets forth the Company’s minimum operating lease commitments asof March 31, 2006:

| ** ** | ** ** | **Twelve Months  Ending March 31,** | ** ** |
|------------|------------|----------------------------------------------------|------------|
| ** ** | ** ** | **(In millions)**                             | ** ** |
| 2007       |       |                                               | $          | 155 |   |   |
| 2008       |       |                                               | 147        |   |   |
| 2009       |       |                                               | 142        |   |   |
| 2010       |       |                                               | 139        |   |   |
| 2011       |       |                                               | 134        |   |   |
| 2012-2025  |       |                                               | 950        |   |   |
| Total(1)   |       |                                               | $          | 1,667 |   |   |

----

(1)                Excludessublease revenue of $298 million and executory costs such as insurance,maintenance and taxes of $545 million.

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIESNotes to Condensed Consolidated Financial Statements (Unaudited) (Continued)**March 31, 2006

**7.**   Leasesand Commitments (Continued)

Thefollowing table sets forth the Company’s commitments, including the currentportion as of March 31, 2006:

| ** **                           | ** ** | **Commitment Expiration Per Period** | ** ** |
|--------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                           | ** ** | **Less than  1 year**                     | ** ** | **1-3  years** | ** ** | **4-5  years** | ** ** | **Over  5 years** | ** ** | **Total  commitments** | ** ** |
| ** **                           | ** ** | **(In millions)**                              | ** ** |
| Standby resale  agreements(1)        |       |                                                | $          | 25 |   |   | $ | 125 |   | $ | — |   |   | $ | — |   |   |   | $ | 150 |   |   |
| Private equity(2)                    |       |                                                | 88         |   |   | 22 |   | 13 |   |   | 268 |   |   |   | 391 |   |   |
| Forward  agreements(3)               |       |                                                | 9,274      |   |   | — |   | — |   |   | — |   |   |   | 9,274 |   |   |
| Unfunded lending  commitments(4)     |       |                                                | 590        |   |   | 227 |   | 114 |   |   | 276 |   |   |   | 1,207 |   |   |
| Unfunded  warehousing commitments(5) |       |                                                | 1,991      |   |   | — |   | — |   |   | — |   |   |   | 1,991 |   |   |
| Total commitments                    |       |                                                | $          | 11,968 |   |   | $ | 374 |   | $ | 127 |   |   | $ | 544 |   |   |   | $ | 13,013 |   |   |

----

(1)                In the ordinarycourse of business, the Company maintains certain standby resale agreementfacilities that commit the Company to enter into securities purchased underagreements to resell with customers at current market rates.

(2)                As of March 31,2006, the Company had commitments to invest up to an additional $391 million innon-consolidated private equity funds and $1.1 billion in consolidated privateequity funds.

(3)                Representscommitments to enter into securities purchased under agreements to resell andagreements to borrow securities.

(4)                The Company entersinto commitments to extend credit in connection with certain premium finance,leveraged finance and other activities.

(5)                The Company entersinto commitments to warehouse commercial mortgage whole loans.

Excluded from the table above are certain commitmentsto originate and purchase mortgage whole loans that qualify as derivatives.These commitments are reflected in derivatives contracts in the condensedconsolidated statements of financial condition. For more information on theCompany’s derivatives contracts see Note 5.

As of March 31, 2006, the Company used$400 million in outstanding standby letters of credit to satisfycounterparty collateral requirements.

The Company had nomaterial capital lease obligations as of March 31, 2006. For informationabout certain of the Company’s additional commitments, see Notes 4 and 8.

**8.   Guarantees**

In the ordinary course of business, the Company entersinto guarantee contracts as guarantor. FIN No. 45, “Guarantor’sAccounting and Disclosure Requirements for Guarantees, Including IndirectGuarantees of Indebtedness of Others” (“FIN 45”), requires disclosure by aguarantor of its maximum potential payment obligations under certain of itsguarantees to the extent that it is possible to estimate them. FIN 45 alsorequires a guarantor to recognize, at the inception of a guarantee, a liabilityfor the fair value of the obligations undertaken in issuing such guarantee,including its ongoing obligation to stand 

23

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIESNotes to Condensed Consolidated Financial Statements (Unaudited) (Continued)**March 31, 2006

**8.**   Guarantees (Continued)

ready to perform over theterm of the guarantee in the event that certain events or conditions occur.With certain exceptions, these liability recognition requirements apply to anyguarantees entered into or modified after December 31, 2002.

The guarantees covered by FIN 45 may require theCompany to make payments to the guaranteed party based on changes related to anasset, a liability or an equity security of the guaranteed party. The Companymay also be contingently required to make payments to the guaranteed partybased on another entity’s failure to perform under an agreement, or the Companymay have an indirect guarantee of the indebtedness of others, even though thepayment to the guaranteed party may not be based on changes related to anasset, liability or equity security of the guaranteed party.

In addition, FIN 45 covers certain indemnificationagreements that contingently require the Company to make payments to theindemnified party based on changes related to an asset, liability or equitysecurity of the indemnified party, such as an adverse judgment in a lawsuit orthe imposition of additional taxes due to either a change in the tax law or anadverse interpretation of the tax law.

Thefollowing table sets forth the maximum quantifiable contingent liabilities andcarrying amounts associated with guarantees covered by FIN 45 as of March 31,2006 by maturity.

| ** **                | ** ** | **Amount of Guarantee  Expiration Per Period** | ** ** |
|---------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                | ** ** | **Less than  1 year**                                    | ** ** | **1-3  years** | ** ** | **4-5  years** | ** ** | **Over  5 years** | ** ** | **Total  guarantees** | ** ** | **Carrying  amounts** | ** ** |
| ** **                | ** ** | **(In millions)**                                             | ** ** |
| Credit guarantees         |       |                                                               | $          | — |   |   | $ | 31 |   | $ | 16 |   | $ | 427 |   |   | $ | 474 |   |   |   | $ | 10 |   |   |
| Performance  guarantees   |       |                                                               | 53         |   |   | 552 |   | — |   | — |   |   | 605 |   |   |   | 8 |   |   |
| Derivatives               |       |                                                               | 937        |   |   | 2,080 |   | 284 |   | 1,018 |   |   | 4,319 |   |   |   | 6 |   |   |
| Related party  guarantees |       |                                                               | —     |   |   | — |   | — |   | 1 |   |   | 1 |   |   |   | — |   |   |
| Total guarantees          |       |                                                               | $          | 990 |   |   | $ | 2,663 |   | $ | 300 |   | $ | 1,446 |   |   | $ | 5,399 |   |   |   | $ | 24 |   |   |

 

For more information onthe Company’s guarantees, including guarantees for which the maximum contingentliability cannot be quantified, see Note 10 of the consolidated financialstatements in Part II, Item 8 in the Annual Report on Form 10-Kfor the year ended December 31, 2005.

**9.   NetCapital Requirements**

The Company’s principalwholly owned subsidiary, CS Securities, is a registered broker-dealer,registered futures commission merchant and member firm of the New York StockExchange, Inc. Accordingly, the Company is subject to the minimum netcapital requirements of the SEC and the Commodities Futures Trading Commission(“CFTC”). Under the alternative method permitted by Rule 15c3-1under the Securities Exchange Act of 1934 (the “Exchange Act”), the requirednet capital may not be less than the greater of 2% of aggregate debit balancesarising from customer transactions or 4% of the funds required to be segregatedpursuant to the Commodity Exchange Act less the market value of certaincommodity options, all as defined. Under CFTC Regulation 1.17, the requiredminimum net capital requirement is 8% of the total risk margin requirement (asdefined) for all positions carried in customer accounts plus 4% of the totalrisk margin requirement (as defined) for all positions carried in 

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIESNotes to Condensed Consolidated Financial Statements (Unaudited) (Continued)**March 31, 2006

**9.**   Net Capital Requirements (Continued)

non-customer accounts. Asof March 31, 2006, CS Securities’ net capital of approximately$5.2 billion was 64.3% of aggregate debit balances and in excess of theCFTC’s minimum requirement by approximately $5.0 billion.

The Company’s over-the-counter (“OTC”) derivativesdealer subsidiary, Credit Suisse Capital LLC (“CS Capital”) is also subject tothe uniform net capital rule, but computes its net capital based on value atrisk under Appendix F of Rule 15c3-1 under the Exchange Act. Asof March 31, 2006, CS Capital’s net capital of $623 million, after allowingfor market and credit risk exposure of $43 million and $110 million,respectively, was in excess of the minimum net capital requirement by$603 million. CS Capital is in compliance with the exemptive provisions ofRule 15c3-3 under the Exchange Act because the Company does notcarry securities accounts for customers or perform custodial functions relatingto customer securities.

As of March 31, 2006,the Company and its subsidiaries complied with all applicable regulatorycapital adequacy requirements.

**10.   Cashand Securities Segregated Under Federal and Other Regulations**

In compliance with the Commodity Exchange Act, CSSecurities segregates funds deposited by customers and funds accruing tocustomers as a result of trades or contracts. As of March 31, 2006 and December 31,2005, cash and securities aggregating $2.8 billion and $2.7 billion,respectively, were segregated or secured by CS Securities in separate accountsexclusively for the benefit of customers.

In accordance with the SEC’s no-action letter dated November 3,1998, CS Securities computed a reserve requirement for the proprietary accountsof introducing broker-dealers. As of March 31, 2006 and December 31,2005, CS Securities segregated securities aggregating $4.3 billion and$1.9 billion, respectively, on behalf of introducing broker-dealers.

In addition, CS Securitiessegregated U.S. Treasury securities with a market value of $4.8 billionand $3.3 billion as of March 31, 2006 and December 31, 2005,respectively, in a special reserve bank account exclusively for the benefit ofcustomers as required by Rule 15c3-3 of the Exchange Act.

**11.   EmployeeBenefit Plans**

The Company provides retirement and postretirementbenefits to its U.S. and certain non-U.S. employees through participation indefined benefit pension plans, a defined contribution savings and retirementplan and other post-retirement plans. The Company’s measurement date is September 30for its pension and other plans. For more information on the Company’s employeebenefit plans, see Note 16 of the consolidated financial statements in Part II,Item 8 in the Annual Report on Form 10-K for the year ended December 31,2005.

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIESNotes to Condensed Consolidated Financial Statements (Unaudited) (Continued)**March 31, 2006

**11.**   Employee Benefit Plans (Continued)

The following tablepresents the pension expense by component for the Company’s defined benefit pensionplans and other post-retirement plans for the three months ended March 31,2006 and 2005:

| ** **                                    | ** ** | **For the Three Months  Ended March 31,** | ** ** |
|-----------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                    | ** ** | **    2006    **           | ** ** | **    2005    ** | ** ** |
| ** **                                    | ** ** | **(In millions)**                                             | ** ** |
| **Components  of Net Periodic Benefit Cost:** | ** ** |                                                               | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Service cost                                  |       |                                                               | $          | 7 |   |   |   | $ | 6 |   |   |
| Interest cost                                 |       |                                                               | 12         |   |   |   | 11 |   |   |
| Expected return  on plan assets               |       |                                                               | (13        | ) |   |   | (14 | ) |   |
| Amortization of  loss                         |       |                                                               | 10         |   |   |   | 5 |   |   |
| Net periodic  benefit cost                    |       |                                                               | $          | 16 |   |   |   | $ | 8 |   |   |

 

The Company did not makepayments to the qualified pension plan during the three months ended March 31,2006 and does not expect to make any payments during the remainder of the yearending December 31, 2006. The Company made payments of less than $1million to participants in the supplemental plan and the other post-retirementplans during the three months ended March 31, 2006 and expects to pay atotal of $1 million during the remainder of the year ending December 31,2006.

**12.   LegalProceedings**

The Company has provided reserves for litigation,claims and proceedings involving the Company in accordance with SFAS No. 5,“Accounting for Contingencies.” The Company recorded in the second quarter of2005 a $750 million litigation charge to increase the reserve for privatelitigation involving Enron, certain initial public offering allocationpractices, research analyst independence and other related litigation. Thischarge, coupled with the charge recorded in 2002, brings the Company’s reservesfor these private litigation matters to $1.1 billion after the application ofsettlements entered into through March 31, 2006.

The Company is involved in a number of judicial,regulatory and arbitration proceedings concerning matters arising in connectionwith the conduct of its businesses. The Company believes, based on currentlyavailable information and advice of counsel, that the results of suchproceedings, in the aggregate, will not have a material adverse effect on itsfinancial condition but might be material to operating results for anyparticular period, depending, in part, upon the operating results for suchperiod. The Company intends to defend itself vigorously in these matters,litigating or settling when determined by management to be in the bestinterests of the Company.

It is inherently difficultto predict the outcome of many of these matters. In presenting the condensedconsolidated financial statements, management makes estimates regarding theoutcome of these matters and records a reserve and takes a charge to incomewhen losses with respect to such matters are probable and can be reasonablyestimated. Estimates, by their nature, are based on judgment and currentlyavailable information and involve a variety of factors, including, but notlimited to, the type and nature of the litigation, claim or proceeding, theprogress of the matter, the advice of legal counsel, the Company’s defenses andits experience in similar cases or proceedings as well as its assessment ofmatters, including 

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIESNotes to Condensed Consolidated Financial Statements (Unaudited) (Continued)**March 31, 2006

**12.**   Legal Proceedings (Continued)

settlements,involving other defendants in similar or related cases or proceedings. Furtherlitigation charges or releases of litigation reserves may be necessary in thefuture as developments in such cases or proceedings warrant.

**13.   IndustrySegment and Geographic Data**

The Company operates and manages its businessesthrough three operating segments: the Investment Banking segment, consistingprimarily of investment banking, trading and certain separately managed privateequity and distressed assets; the Asset Management segment, consistingprimarily of the private equity business; and Private Banking, consisting ofthe private client services business in the U.S. For additional information,see Note 1.

The Company’s segments are managed based on types ofproducts and services offered and their related client bases. The Companyevaluates the performance of its segments based primarily on income (loss)before provision (benefit) for income taxes and cumulative effect of a changein accounting principle but excluding minority interests. Minority interest-related revenues andexpenses resulting from the consolidation of certain private equity funds arereported in Elimination & Other. Net income is unaffected by theconsolidation of these private equity funds because offsetting minorityinterests are also recorded in Elimination & Other.

The InvestmentBanking segment consists of:

·       investmentbanking, which serves a broad range of users and suppliers of capital andprovides financial advisory and securities underwriting and placement services;and

·       trading,which trades and distributes equity and equity-related products, includinglisted and OTC derivatives, fixed income financial instruments and derivativesand risk management products, and engages in securities lending and borrowing.

The Investment Banking segment also includes theresults from certain separately managed private equity and distressed assets.

The Asset Management segment consists primarily of theprivate equity business. The private equity business makes privately negotiatedinvestments and acts as an investment advisor for private equity funds.

The Private Banking segment consists of the privateclient services business in the U.S. Private client services is a financialadvisory business serving high-net-worth individuals and corporate investorswith a wide range of Credit Suisse and third-party investment managementproducts and services.

The Company allocates to its segments a *pro rata* share of certain centrallymanaged costs. Leased facilities and equipment costs, employee benefits andcertain general overhead expenses are allocated based upon specified amounts,usage criteria or agreed rates. Interest expense is allocated based upon theparticular type of asset. The allocation of some costs, such as incentivebonuses, has been estimated. The timing and magnitude of changes in ourincentive bonus accrual can have a significant effect on our operating resultsfor a given period. Any revenues and expenses not allocated to the Company’ssegments appear in Elimination & Other in the table below. Foradditional information, see Note 1.

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIESNotes to Condensed Consolidated Financial Statements (Unaudited) (Continued)**March 31, 2006

**13.**   Industry Segment and Geographic Data (Continued)

The following table setsforth selected financial information for the Company’s segments.

| ** **                                                 | ** ** | **Investment  Banking** | ** ** | **Asset  Management** | ** ** | **Private  Banking** | ** ** | **Elimination  & Other**(3) | ** ** | **Total** | ** ** |
|------------------------------------------------------------|------------|-------------------------|------------|-----------------------|------------|----------------------|------------|--------------------------------------|------------|-----------|------------|
| ** **                                                 | ** ** | **(In millions)**  | ** ** |
| **For the three months ended March 31,  2006:**       |       |                    |       |                  |       |                 |       |                                 |       |      |       |   |   |   |   |   |   |   |   |
| Net revenues excluding  net interest                       |       |                    | $          | 1,555                 |       |                 |       | $                                    | 91         |      |       |   | $ | 64 |   |   |   | $ | 926 |   |   | $ | 2,636 |   |
| Net interest and  dividends revenue                        |       |                    | 286        |                  |       |                 | —     |                                 |       |      | 2          |   |   |   | 6 |   |   | 294 |   |
| Total net revenues(1)                                      |       |                    | 1,841      |                  |       |                 | 91         |                                 |       |      | 66         |   |   |   | 932 |   |   | 2,930 |   |
| Total expenses                                             |       |                    | 1,390      |                  |       |                 | 62         |                                 |       |      | 75         |   |   |   | 6 |   |   | 1,533 |   |
| Income (loss)(2)                                           |       |                    | 451        |                  |       |                 | 29         |                                 |       |      | (9         | ) |   |   | 926 |   |   | 1,397 |   |
| Minority interests                                         | ** ** | ** **              | —     |                  |       |                 | —     |                                 |       |      | —     |   |   |   | 943 |   |   | 943 |   |
| Income (loss) after  minority interests(4)                 | ** ** | ** **              | $          | 451                   |       |                 |       | $                                    | 29         |      |       |   | $ | (9 | ) |   |   | $ | (17 | ) |   | $ | 454 |   |
| **For the  three months ended March 31,  2005:** |       |                    |       |                  |       |                 |       |                                 |       |      |       |   |   |   |   |   |   |   |   |
| Net revenues excluding  net interest                       |       |                    | $          | 727                   |       |                 |       | $                                    | 120        |      |       |   | $ | 57 |   |   |   | $ | 152 |   |   | $ | 1,056 |   |
| Net interest and  dividends revenue                        |       |                    | 570        |                  |       |                 | —     |                                 |       |      | 1          |   |   |   | 6 |   |   | 577 |   |
| Total net revenues(1)                                      |       |                    | 1,297      |                  |       |                 | 120        |                                 |       |      | 58         |   |   |   | 158 |   |   | 1,633 |   |
| Total expenses                                             |       |                    | 1,127      |                  |       |                 | 51         |                                 |       |      | 62         |   |   |   | 2 |   |   | 1,242 |   |
| Income (loss)(2)                                           |       |                    | 170        |                  |       |                 | 69         |                                 |       |      | (4         | ) |   |   | 156 |   |   | 391 |   |
| Minority interests                                         | ** ** | ** **              | —     |                  |       |                 | —     |                                 |       |      | —     |   |   |   | 155 |   |   | 155 |   |
| Income (loss) after  minority interests(4)                 | ** ** | ** **              | $          | 170                   |       |                 |       | $                                    | 69         |      |       |   | $ | (4 | ) |   |   | $ | 1 |   |   | $ | 236 |   |
| **Segment  assets as of March 31,  2006**             | ** ** | ** **              | $          | 315,748               |       |                 |       | $                                    | 1,762      |      |       |   | $ | 272 |   |   |   | $ | 9,579 |   |   | $ | 327,361 |   |
| **Segment assets as of December 31,  2005**           | ** ** | ** **              | $          | 293,278               |       |                 |       | $                                    | 1,512      |      |       |   | $ | 225 |   |   |   | $ | 2,739 |   |   | $ | 297,754 |   |

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(1)                Interest incomeand expense is accrued at the stated coupon rate for coupon-bearing financialinstruments, and for non-coupon-bearing financial instruments, interest incomeis recognized by accreting the discount over the life of the instrument. Forcoupon-bearing financial instruments purchased at a discount or premium, thedifference between interest income and expense accrued at the stated couponrate and interest income and expense determined on an effective yield basis,which could be significant, is included in principal transactions-net insteadof interest and dividends, net, in the Company’s condensed consolidatedstatements of income and in net revenues excluding net interest.

(2)                Income (loss)before provision (benefit) for income taxes, minority interests and cumulativeeffect of a change in accounting principle.

(3)                Relatedprimarily to the Company’s consolidation of certain private equity funds. SeeNote 1 and 3 for more information. Also includes a limited amount of treasurycosts associated with the Company’s capitalization not allocated to the Company’ssegments.

(4)                Income(loss) before provision (benefit) for income taxes and cumulative effect of achange in accounting principle.

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**CREDIT SUISSE (USA), INC. AND SUBSIDIARIESNotes to Condensed Consolidated Financial Statements (Unaudited) (Continued)**March 31, 2006

**14.   SubsequentEvent**

In April 2006, the Company reached an agreementwith a number of professional liability insurers to resolve insuranceobligations relating to certain litigation and related costs involving theInvestment Banking segment. Under this agreement, the Company has received $300million. The Company expects to reflect the payments received in the secondquarter of 2006 as a reduction in Investment Banking’s operating expenses.

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**Report ofIndependent Registered Public Accounting Firm**

The Board of Directors and StockholderCredit Suisse (USA), Inc.

We have reviewed the condensed consolidated statementof financial condition of Credit Suisse (USA), Inc. and subsidiaries (the “Company”)as of March 31, 2006, the related condensed consolidated statements ofincome for the three-month periods ended March 31, 2006 and 2005, and therelated condensed consolidated statements of changes in stockholder’s equityand cash flows for the three-month periods ended March 31, 2006 and2005. These condensed consolidated financial statements are the responsibilityof the Company’s management.

We conducted our reviews in accordance with thestandards of the Public Company Accounting Oversight Board (United States). Areview of interim financial information consists principally of applyinganalytical procedures and making inquiries of persons responsible for financialand accounting matters. It is substantially less in scope than an audit conductedin accordance with the standards of the Public Company Accounting OversightBoard (United States), the objective of which is the expression of an opinionregarding the financial statements taken as a whole. Accordingly, we do notexpress such an opinion.

Based on our reviews, we are not aware of any materialmodifications that should be made to the condensed consolidated financialstatements referred to above for them to be in conformity with U.S. generallyaccepted accounting principles.

Wehave previously audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States), the consolidated statement offinancial condition of Credit Suisse (USA), Inc. and subsidiaries as of December 31,2005, and the related consolidated statements of income, changes in stockholder’sequity, and cash flows for the year then ended (not presented herein); and inour report dated March 20, 2006, we expressed an unqualified opinion onthose consolidated financial statements. In our opinion, the information setforth in the accompanying condensed consolidated statement of financialcondition as of December 31, 2005 is fairly stated, in all materialrespects, in relation to the consolidated statement of financial condition fromwhich it has been derived.
| /s/ KPMG LLP       |
|--------------------|
| New York, New York |
| May 11, 2006  |

 

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***Item 2:***          Management’sDiscussion and Analysis of Financial Condition and Results of Operations

We serve institutional, corporate, government andhigh-net-worth individual clients. Our businesses include securitiesunderwriting, sales and trading, financial advisory services, private equityinvestments, full-service brokerage services, derivatives and risk managementproducts, asset management and investment research. We are part of threesegments, Investment Banking, Asset Management and Private Banking, of CreditSuisse Group, or CSG, and our results do not reflect the overall performance ofthese segments or CSG.

When we use the terms “we,” “our,” “us” and the “Company,”we mean Credit Suisse (USA), Inc., a Delaware corporation, and itsconsolidated subsidiaries.

The Company’s principaloperations are located in the United States. The Company’s foreign revenues arenot significant.

**BUSINESSENVIRONMENT**

Our principal business activities, investment banking,securities underwriting and sales, trading and asset management are, by theirnature, highly competitive and subject to general market conditions thatinclude volatile trading markets, fluctuations in the volume of new issues,mergers and acquisitions activities and the value of securities. Consequently, ourresults have been, and are likely to continue to be, subject to widefluctuations reflecting the impact of many factors beyond our control,including securities market conditions, the level and volatility of interestrates, competitive conditions, the size and timing of transactions and thegeopolitical environment.

The U.S. economy experienced solid growth during thethree months ended March 31, 2006 as gross domestic product growth andconsumer spending were strong and unemployment rates declined. The FederalReserve Board continued to raise short-term interest rates at a measured paceand hinted that the end of the tightening process may be nearing.

The major U.S. stock market indices were up for thethree months ended March 31, 2006 despite rising interest rates and highenergy prices. For the three months ended March 31, 2006, the Dow JonesIndustrial Average, the Standard & Poor’s 500 stock index and theNASDAQ composite index increased 4%, 4% and 6%, respectively.

During the three months ended March 31, 2006,short-term interest rates continued to rise. The federal funds rate was 4.75%as of March 31, 2006 compared to 4.25% as of December 31, 2005 as theFederal Reserve Board increased the federal funds rate twice during the threemonths ended March 31, 2006. The yield on 10-year U.S. Treasurynotes increased from 4.39% as of December 31, 2005 to 4.86% as of March 31,2006.

The dollar value of U.S.equity and equity-related underwriting increased slightly for the three monthsended March 31, 2006 compared to the three months ended March 31,2005, reflecting increases in secondary common stock issuances and convertiblesecurities issuances offset in part by a decrease in initial public offerings. Thedollar value of U.S. debt underwriting increased for the three months ended March 31,2006 compared to the three months ended March 31, 2005, primarily as aresult of an increase in investment grade and mortgage-backed securitiesunderwritings. Mergers and acquisitions activity was robust as the dollar valueof both announced and completed U.S. mergers and acquisitions for the three monthsended March 31, 2006 increased compared to the three months ended March 31,2005.

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**MANAGEMENT OVERVIEW**

In a climate of solid economic growth and strongequity markets in the U.S., the Company recorded net income of $317 million inthe first quarter of 2006 compared to $176 million in the first quarter of 2005.Our results reflected an increase in revenues partially offset by higherexpenses.

Our total net revenues increased by $1.3 billion, or79%, compared to the first quarter of 2005. Net revenues for the first quarterof 2006 include $948 million from the consolidation of certain private equityfunds, compared to $157 million in the first quarter of 2005. Net income wasunaffected by this consolidation as we recorded offsetting minority interestsand related operating expenses. The increase in net revenues also reflectshigher revenues across all of our Investment Banking businesses, includingequity and fixed income trading and underwriting and advisory and other fees. Inparticular, our equity proprietary trading, equity customer flow business andmergers and acquisitions advisory businesses performed well in the firstquarter of 2006. These increases were offset in part by lower revenues fromstructured products, particularly asset-backed and commercial mortgage-backedsecurities, and lower private equity investment-related gains. Our totalexpenses for the first quarter of 2006 increased $291 million, or 23%, comparedto the first quarter of 2005, primarily reflecting higher employee compensationand benefits expenses.

The newly integratedCredit Suisse global bank was launched on January 1, 2006. We continue tobe managed as a subsidiary of Credit Suisse and CSG and our businesses are partof their banking segments: Investment Banking, Private Banking and AssetManagement. Going forward, we expect to benefit from being part of theintegrated bank by improving our client service, strengthening our competitiveposition and improving our cost discipline.

**CRITICAL ACCOUNTINGPOLICIES AND ESTIMATES**

In order to prepare the condensed consolidatedfinancial statements in accordance with accounting principles generallyaccepted in the United States of America, we must make estimates andassumptions based on judgment and available information. The reported amountsof assets and liabilities and revenues and expenses are affected by theseestimates and assumptions. Actual results could differ from these estimates, andthe differences could be material.

Our significant accountingpolicies and a discussion of new accounting pronouncements are disclosed inNote 1 of the consolidated financial statements in Part II, Item 8 ofour Annual Report on Form 10-K for the year ended December 31,2005. We believe that the critical accounting policies discussed below involvethe most complex judgments. We believe that the estimates and assumptions usedin the preparation of the condensed consolidated financial statements arereasonable and consistently applied.

**Fair Value**

The fair value of the majority of our financialinstruments is based on quoted market prices in active markets or observablemarket parameters, or is derived from such prices or parameters. Theseinstruments include government and agency securities, commercial paper, mostinvestment-grade corporate debt securities, most high-yield debt securities,exchange traded and certain over-the-counter, or OTC, derivative instruments,most collateralized debt obligations, or CDOs, most mortgage-backed andasset-backed securities, certain residential mortgage whole loans and listedequities.

In addition, we holdfinancial instruments that are thinly traded or for which no market prices areavailable, and which have reduced or no price transparency. For theseinstruments the determination of fair value requires subjective assessment andvarying degrees of judgment depending on liquidity, concentration, pricingassumptions and the risks affecting the specific instrument. In such circumstances,valuation is determined based on management’s best estimate of fair value.These instruments include 

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certaininvestment-grade corporate debt securities, high-yield debt securities,distressed debt securities, certain mortgage-backed and asset-backedsecurities, certain CDOs, certain residential mortgage whole loans, certain OTCderivatives, non-traded equity securities and private equity and otherlong-term investments. Valuation techniques for certain of these instrumentsare described more fully below.

***Controls over the fair valuation process***

Control processes are applied to ensure that the fairvalue of the financial instruments reported in our condensed consolidatedfinancial statements, including those derived from pricing models, are appropriateand determined on a reliable basis. The Company determines fair value usingobservable market prices or market-based parameters whenever possible. In theabsence of observable market prices or market-based parameters in an activemarket, observable prices or market-based parameters of comparable markettransactions, or other observable data supporting an estimation of fair valueusing a valuation model at the inception of a contract, fair value is based onthe transaction price. Control processes are designed to assure that thevaluation approach utilized is appropriate and the assumptions are reasonable.

These control processes include the review andapproval of new instruments, review of profit and loss at regular intervals,risk monitoring and review, price verification procedures and reviews of modelsused to estimate the fair value of financial instruments by senior managementand personnel with relevant expertise who are independent of the trading andinvestment functions.

The Company also has agreements with certaincounterparties to exchange collateral based on the fair value of derivativescontracts. Through this process, one or both parties provide the other partywith the fair value of these derivatives contracts in order to determine theamount of collateral required. This exchange of information provides additionalsupport for valuation of certain derivatives contracts. As a participant in theOTC derivatives market, the Company and other participants provide pricinginformation to aggregation services that compile this data and provide thisinformation to subscribers. This information is considered in the determinationof fair value for certain OTC derivatives.

For further discussion ofthe Company’s risk management policies and procedures, refer to “Quantitativeand Qualitative Disclosures About Market Risk” in Part I, Item 3.

***Price transparency of financial instruments recordedat fair value***

Financial instruments which are recorded on theCompany’s condensed consolidated statement of financial condition at fair valuehave been categorized based upon the transparency of the pricing informationavailable.

The categories ofpricing transparency have been broadly segregated as follows:

·       *Quoted market prices or observable market parameters.  *Thesefinancial instruments are valued based upon directly observable market pricesor through the use of valuation models and techniques for which the requiredparameters are directly observable.

·       *Reduced or no observable market parameters.  *Thesefinancial instruments are priced by using management’s best estimate of fairvalue using valuation techniques that are based on significant judgment sinceobservable, market-based data is generally not available.

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Thefollowing table sets forth a summary of the price transparency of the Company’sfinancial instruments that are carried at fair value as of March 31, 2006and December 31, 2005:

| ** **                                       | ** ** | **As of March 31, 2006**                           | ** ** | **As of December 31, 2005**             | ** ** |
|--------------------------------------------------|------------|------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                       | ** ** | **Quoted market  prices or  observable  market  parameters** | ** ** | **Reduced or no  observable  market  parameters** | ** ** | **Quoted market  prices or  observable**

**market  parameters** | ** ** | **Reduced or no  observable  market  parameters** | ** ** |
| ** **                                       | ** ** | **(In millions)**                                                 | ** ** | **(In millions)**                                      | ** ** |
| **Financial  instruments owned**                 |       |                                                                   |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash products(1)                                 |       |                                                                   | $          | 101,663                                                     |       |   |   | $ | 3,349 |   |   |   | $ | 101,211 |   |   |   | $ | 3,394 |   |   |
| Derivatives(2)                                   |       |                                                                   | 11,176     |                                                        |       |   | 2,140 |   |   |   | 7,658 |   |   |   | 1,841 |   |   |
| Private equity  and other long-term investments  |       |                                                                   | 1,693      |                                                        |       |   | 8,559 |   |   |   | 315 |   |   |   | 3,326 |   |   |
| Total                                            |       |                                                                   | $          | 114,532                                                     |       |   |   | $ | 14,048 |   |   |   | $ | 109,184 |   |   |   | $ | 8,561 |   |   |
| **Financial instruments sold not yet purchased** |       |                                                                   |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash products                                    |       |                                                                   | $          | 36,310                                                      |       |   |   | $ | 16 |   |   |   | $ | 36,304 |   |   |   | $ | 27 |   |   |
| Derivatives(2)                                   |       |                                                                   | 10,416     |                                                        |       |   | 619 |   |   |   | 6,155 |   |   |   | 521 |   |   |
| Total                                            |       |                                                                   | $          | 46,726                                                      |       |   |   | $ | 635 |   |   |   | $ | 42,459 |   |   |   | $ | 548 |   |   |

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(1)                Excluded from thetable above are $7,613 million and $5,835 million as of March 31, 2006 andDecember 31, 2005, respectively, in cash products which are carried at thelower of cost or fair value primarily consisting of commercial mortgage wholeloans and originated residential mortgage whole loans.

(2)                Basedon gross mark-to-market valuations of the Company’s derivatives prior tonetting of $6,264 million and $4,414 million as of March 31, 2006 andDecember 31, 2005, respectively, under Financial Accounting StandardsBoard, or FASB, Interpretation No. 39, “Offsetting of Amounts Related toCertain Contracts (An Interpretation of Accounting Principles Board Opinion No. 10and FASB Statement No. 105).”

***Financial Instruments***

*Cash products*

The Company’s cash products consist ofinterest-bearing securities, purchased residential mortgage whole loans, equitysecurities and certain variable prepaid forwards. Interest-bearing securitiesinclude debt securities, residential and commercial mortgage-backed and otherasset-backed securities and CDOs. Equity securities include common equity shares,preferred stock and convertible bonds.

For debt securities for which market prices are notavailable, valuations are based on yields reflecting the perceived risk of theissuer and the maturity of the security, recent disposals in the market orother modeling techniques, which involve judgment.

Values of residential and commercial mortgage-backedsecurities and other asset-backed securities are generally available throughquoted market prices, which are often based on market information of the pricesat which similarly structured and collateralized securities trade betweendealers and to and from customers. Values of residential and commercialmortgage-backed securities and other asset-backed securities for which thereare no significant observable market parameters are valued using valuationmodels incorporating prepayment scenarios and Monte Carlo simulations.

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Collateralized debt, bondand loan obligations are split into various structured tranches, and eachtranche is valued based upon its individual rating and the underlyingcollateral supporting the structure. Values aredetermined using present value of estimated future cash flows valuationtechniques that incorporate assumptions that market participants customarilyuse in their estimates of values including payment speeds, credit losses anddiscount rates.

Purchased residentialmortgage whole loans are valued using pricing factors specific to loan levelattributes, such as loan-to-value ratios, current balances and liens.

The majority of ourpositions in equities are traded on public stock exchanges, for which dailyquoted market prices are available. Fair values of preferred shares aredetermined by their yield and the subordination relative to the issuer’s othercredit obligations. Convertible bonds are generally valued using direct pricingsources; for a small number of convertible bonds no direct prices are availableand valuation is determined using internal and external models, for which thekey input parameters include stock price, dividend rates, credit spreads,prepayment rates and equity market volatility.

*Derivatives*

Positions in derivativesheld for trading purposes include both OTC and exchange-traded derivatives. Thefair values of exchange-traded derivatives are typically derived from observableexchange prices and/or observable market parameters. Fair values for OTCderivatives are determined on the basis of internally developed proprietarymodels using various input parameters. The input parameters include thosecharacteristics of the derivative that have a bearing on the economics of theinstrument and market parameters.

The determination of thefair value of many derivatives involves only a limited degree of subjectivitybecause the required input parameters are observable in the marketplace. Thepricing of these instruments is referred to as “direct.” For other more complexderivatives, subjectivity relating to the determination of input parametersreduces price transparency. The pricing of these instruments is referred to as “indirect.”Specific areas of subjectivity include estimating long-dated volatilityassumptions on OTC option transactions and recovery rate assumptions for creditderivative transactions. Uncertainty of pricing assumptions and liquidity arealso considered as part of the valuation process. In accordance with EmergingIssues Task Force Issue No. 02-3, “Issues Involved in Accounting forDerivatives Contracts Held for Trading Purposes and Contracts Involved inEnergy Trading and Risk Management Activities,” we do not recognize a dealerprofit or loss, (unrealized gain or loss at inception of a derivativetransaction), or day one profit/loss, unless the valuation underlying theunrealized gain or loss is evidenced by (a) quoted market prices in anactive market, (b) observable prices of other current market transactionsor (c) other observable data supporting a valuation technique. Thedeferred profit or loss is amortized over either the life of the derivative orthe period until which observable data is available.

For further information onthe fair value of derivatives as of March 31, 2006 and December 31,2005, see Note 5 of the condensed consolidated financial statements in Part I,Item 1.

*Private equity and other long-term investments*

Private equity and otherlong-term investments include direct investments and investments inpartnerships that make private equity and related investments in variousportfolio companies and funds. Private equity investments and other long-terminvestments consist of both publicly traded securities and private securities.Publicly traded investments are valued based upon readily available marketquotes with appropriate adjustments for liquidity as a result of holding largeblocks and/or having trading restrictions. Private securities, which generallyhave no readily available market or may be otherwise restricted as to resale,are valued taking into account a number of factors, such as the most recentround of financing involving unrelated new investors, earnings multipleanalyses using comparable companies or discounted cash flow analysis.

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Thefollowing table sets forth the fair value of our private equity and otherlong-term investments by category as of March 31, 2006 and December 31,2005:

| ** **                                                                                                                                                     | ** ** | **As of  March 31, 2006** | ** ** | **As of  December 31, 2005** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                                                                                                     | ** ** | **Fair value**                      | ** ** | **Percent  of total**                  | ** ** | **Fair value** | ** ** | **Percent  of total** | ** ** |
| ** **                                                                                                                                                     | ** ** | **(In millions)**                   | ** ** | ** **                                  | ** ** | **(In millions)** | ** ** | ** ** | ** ** |
| CS-managed funds  (which includes $9,072 and $2,562 related to funds consolidated(1) as of March 31,  2006 and December 31, 2005, respectively) |       |                                     | $          | 9,777                                       |       |   |   | 94 | % |   |   | $ | 3,256 |   |   |   | 89 | % |   |
| Funds managed by  third parties                                                                                                                                |       |                                     | 438        |                                        |       |   | 4 |   |   |   | 359 |   |   |   | 10 |   |   |
| Direct  investments                                                                                                                                            |       |                                     | 35         |                                        |       |   | 1 |   |   |   | 26 |   |   |   | 1 |   |   |
| Other investments                                                                                                                                              |       |                                     | 2          |                                        |       |   | 1 |   |   |   | — |   |   |   | — |   |   |
| Total                                                                                                                                                          |       |                                     | $          | 10,252                                      |       |   |   | 100 | % |   |   | $ | 3,641 |   |   |   | 100 | % |   |

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(1)                For moreinformation on the consolidated funds as of March 31, 2006 and December 31,2005, see Notes 3 and 4 of the condensed consolidated financial statements in Part I,Item 1.

CS-managed funds includepartnerships and related direct investments for which the Company acts as thefund’s advisor and makes investment decisions. CS-managed funds principallyinvest in private securities and, to a lesser extent, publicly tradedsecurities and fund of fund partnerships. The fair value of investments inCS-managed fund of funds partnerships is based on the valuation received fromthe underlying fund manager, is reviewed by us and reflected in “Reduced or noobservable market parameters” in the table above. The fair value of investmentsin other CS-managed funds is based on the Company’s valuation. Balancesreported in CS-managed funds also include amounts relating primarily to theconsolidation of private equity funds, which are described in further detail inNotes 3 and 4 of the condensed consolidated financial statements in Part I,Item 1. A substantial portion of the private equity funds consolidated are alsoreflected in “Reduced or no observable market parameters” in the table above.Funds managed by third parties include investments in funds managed by anexternal fund manager. The fair value of these funds is based on the valuationreceived from the general partner of the fund, is reviewed by us and reflectedin “Reduced or no observable market parameters” in the table above.

**Income Taxes**

***Deferred Tax Assets***

We recognize deferred tax assets and liabilities forthe estimated future tax effects of operating loss carry-forwards andtemporary differences between the carrying amounts of existing assets andliabilities and their respective tax basis as of the date of the statement offinancial condition.

The realization of deferred tax assets on temporarydifferences is dependent upon the generation of taxable income during theperiods in which those temporary differences become deductible. The realizationof deferred tax assets on net operating losses is dependent upon the generationof taxable income during the periods prior to their expiration. Periodically,management evaluates whether deferred tax assets can be realized. If managementconsiders it more likely than not that all or a portion of a deferred tax assetwill not be realized, a corresponding valuation allowance is established. Inevaluating whether deferred tax assets can be realized, management considers:projected future taxable income, the scheduled reversal of deferred taxliabilities and tax planning strategies.

This evaluation requires significant managementjudgment, primarily with respect to projected taxable income. The estimate offuture taxable income can never be predicted with certainty. It is derived frombudgets and strategic business plans but is dependent on numerous factors, someof which are beyond our 

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control. Substantialvariance of actual results from estimated future taxable profits, or changes inour estimate of future taxable profits, could lead to changes in deferred taxassets being realizable or considered realizable, and would require acorresponding adjustment to the valuation allowance.

As of March 31, 2006and December 31, 2005, we had deferred tax assets resulting from temporarydifferences that could reduce taxable income in future periods. The condensedconsolidated statements of financial condition as of March 31, 2006 and December 31,2005 include deferred tax assets of $1.6 billion and $1.8 billion,respectively, and deferred tax liabilities of $615 million and$602 million, respectively. Due to uncertainty concerning our ability togenerate the necessary amount and mix of state and local taxable income infuture periods, we maintained a valuation allowance against our deferred stateand local tax assets in the amount of $28 million and$35 million as of March 31, 2006 and December 31, 2005,respectively.

***Tax Contingencies***

Significant judgment isrequired in determining the effective tax rate and in evaluating certain of ourtax positions. We accrue for tax contingencies when, despite our belief thatour tax return positions are fully supportable, certain positions could bechallenged and our positions may not be fully sustained. Once established, taxcontingency accruals are adjusted due to changing facts and circumstances, suchas case law, progress of audits or when an event occurs requiring a change tothe tax contingency accruals. We regularly assess the likelihood of adverseoutcomes to determine the appropriateness of our provision (benefit) for incometaxes. Although the outcome of any dispute is uncertain, management believesthat it has appropriately accrued for any unfavorable outcome.

**LitigationContingencies**

We are involved in avariety of legal, regulatory and arbitration matters in connection with theconduct of our business. It is inherently difficult to predict the outcome ofmany of these matters, particularly those cases in which the matters arebrought on behalf of various classes of claimants, seek damages of unspecifiedor indeterminate amounts or involve novel legal claims. In presenting ourcondensed consolidated financial statements, management makes estimatesregarding the outcome of these matters and records a reserve and takes a chargeto income when losses with respect to such matters are probable and can bereasonably estimated. Charges, other than those taken periodically for cost ofdefense, are not established for matters when losses cannot be reasonablyestimated. Estimates, by their nature, are based on judgment and currentlyavailable information and involve a variety of factors, including, but notlimited to, the type and nature of the litigation, claim or proceeding, theprogress of the matter, the advice of legal counsel and other advisors, ourdefenses and our experience in similar cases or proceedings as well as our assessmentof matters, including settlements, involving other defendants in similar orrelated cases or proceedings. For a discussion of legal proceedings, see “LegalProceedings” in Part II, Item 1.

**RECENT DEVELOPMENTS**

Effective January 1, 2006, CSG realigned itsorganizational structure to its new strategic orientation, which is to focus onbanking and hold its insurance business as a financial investment. As a resultof this realignment, CSG’s banking business consists of three reportingsegments: Investment Banking, Private Banking and Asset Management. We aremanaged as a subsidiary of Credit Suisse and CSG, and our businesses are a partof each of these banking segments. Therefore, effective January 1, 2006 webegan operating and managing our businesses along these same three bankingsegments.

Our Investment Banking segment consists principally ofthe businesses that comprised our former Institutional Securities segment, withthe addition of the private funds group that was formerly part of our 

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Wealth & AssetManagement segment. Our Private Banking segment consists of the private clientservices business in the U.S. (other than Volaris) that was formerly part ofour Wealth & Asset Management segment. Our Asset Management segmentconsists of the private equity business and the Volaris business that wereformerly part of our Wealth & Asset Management segment.

We manage and report our segments on a pre-tax basisand exclude revenues and expenses primarily related to the consolidation ofcertain private equity funds which are reported in Elimination & Other.Net income is unaffected by the consolidation of these private equity fundsbecause offsetting minority interests are also recorded in Elimination &Other.

Certain reclassifications have been made to our prioryear condensed consolidated financial statements in this Quarterly Report toreflect the operational and management structure in place during 2006.

Consistent with thestrategy to grow the commodities business, Credit Suisse announced during thefirst quarter of 2006 a strategic alliance with Glencore International to builda derivatives and structured products trading business in the oil and petroleumproducts market.

**RESULTS OFOPERATIONS**

Thefollowing table sets forth a summary of our financial results:

| ** **                                                                                                                         | ** ** | **For the Three Months  Ended March 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                                                                                         | ** ** | **   2006   **                       | ** ** | **   2005   ** | ** ** |
| ** **                                                                                                                         | ** ** | **(In millions)**                                             | ** ** |
| Total net  revenues                                                                                                                |       |                                                               | $          | 2,930 |   |   |   | $ | 1,633 |   |   |
| Total expenses                                                                                                                     | ** ** |                                                               | 1,533      |   |   |   | 1,242 |   |   |
| Income before  provision for income taxes, minority interests and cumulative effect of  a change in accounting principle | ** ** |                                                               | 1,397      |   |   |   | 391 |   |   |
| Provision for  income taxes                                                                                                        | ** ** |                                                               | 137        |   |   |   | 66 |   |   |
| Minority  interests                                                                                                                | ** ** |                                                               | 943        |   |   |   | 155 |   |   |
| Income before  cumulative effect of a change in accounting principle                                                          | ** ** |                                                               | 317        |   |   |   | 170 |   |   |
| Cumulative effect  of a change in accounting principle, net of income tax expense of $3 in  2005                              | ** ** |                                                               | —     |   |   |   | 6 |   |   |
| Net income                                                                                                                         |       |                                                               | $          | 317 |   |   |   | $ | 176 |   |   |

 

Substantially all of our financial instruments aremarked to market daily and, therefore, the value of such financial instrumentsand our net revenues are subject to fluctuations based on market movements. Inaddition, net revenues derived from our less liquid assets may fluctuatesignificantly depending on the revaluation or sale of these investments in anygiven period. We also regularly enter into large transactions as part of ourproprietary and other trading businesses, and the number and size of suchtransactions may subject our net revenues to volatility from period to period.

Interest income and expense is accrued at the statedcoupon rate for coupon-bearing financial instruments, and for non-coupon-bearingfinancial instruments, interest income is recognized by accreting the discountover the life of the instrument. For coupon-bearing financial instrumentspurchased at a discount or premium, the net difference between interest incomeand expense accrued at the stated coupon rate and interest income and expensedetermined on an effective yield basis, which could be significant, is includedin principal transactions-net instead of net interest and dividends in thecondensed consolidated statements of income.

We use derivatives and cash instruments to mitigatethe interest rate exposure associated with commercial mortgage whole loans,originated residential mortgage whole loans, resale and repurchase 

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agreements and long-termborrowings. These derivatives and cash instruments are carried at fair value,while the commercial mortgage whole loans and originated residential mortgagewhole loans are carried at the lower of cost or fair value and the resale andrepurchase agreements are carried at contract amounts. In addition, we havecertain derivatives that economically hedge our long-term borrowings which donot qualify for hedge accounting treatment under SFAS 133 “Accounting forDerivatives Interest and Hedging Activities,” or SFAS 133. As a result,decreases in the value of the derivatives and cash instruments, if any, are notoffset by increases in the value of the commercial mortgage whole loans andoriginated residential whole loans until the loans are sold and increases anddecreases in the value of the derivatives and cash instruments, if any, are notoffset by decreases and increases in the value of the resale and repurchaseagreements until the securities are sold or repurchased. Increases anddecreases in the value of the derivatives that economically hedge our long-termborrowings are not offset by decreases and increases in our long-termborrowings. Commercial mortgage whole loans, originated residential mortgagewhole loans, resale and repurchase agreements and economically hedged long-termborrowings can be a significant part of our statement of financial condition.Therefore, our net revenues are subject to volatility from period to period.

Our businesses arematerially affected by conditions in the financial markets and economicconditions generally, including geopolitical events. Unpredictable or adversemarket and economic conditions have adversely affected our past results and mayin the future adversely affect our results of operations. See “Risk Factors” inPart I, Item 1A of our Annual Report on Form 10-K for the yearended December 31, 2005.

**Three Months Ended March 31,2006 Compared to Three Months Ended March 31,2005**

The Company recorded net income of $317 millionfor the three months ended March 31, 2006 compared to net income of $176million for the three months ended March 31, 2005, reflecting asignificant increase in net revenues partially offset by higher expenses.

Total net revenues increased $1.3 billion, or 79%, to$2.9 billion for the three monthsended March 31, 2006, comparedto the three months ended March 31, 2005, resulting from a significantincrease in principal transactions-net and higher investment banking andadvisory revenues and other revenues partially offset by a decrease in netinterest and dividend revenues. Commissions were flat compared to the firstquarter of 2005. The increase in principal transactions-net was primarily dueto higher revenues from the consolidation of certain private equity funds andimproved results in trading. Investment banking and advisory fees increased dueto higher debt and equity underwriting and advisory fees. Net interest anddividend revenues decreased primarily due to increases in long-term borrowingsand higher short-term borrowing costs associated with our trading business.

The Company allocates revenues and expenses to itssegments. Any revenues and expenses not allocated appear in Elimination &Other in the notes to its condensed consolidated financial statements. For thethree months ended March 31, 2006 and 2005, Elimination & Otherprimarily included revenues and expenses that result from the consolidation ofcertain private equity funds. Elimination & Other also included alimited amount of treasury costs associated with the Company’s capitalizationnot allocated to the Company’s segments. The Company’s consolidation of certainprivate equity funds resulted in an increase in net revenues of $948 millionand $157 million, respectively, and an increase in expenses of $5 million and$2 million, respectively, for the three months ended March 31, 2006and 2005. Excluding the increases attributable to the consolidation of certainprivate equity funds, total net revenues increased 34%. As of March 31,2006, the Company’s condensed consolidated statements of financial conditionreflected assets and liabilities of $9.6 billion due to the consolidation ofcertain private equity funds, including $6.7 billion as required by a recentaccounting pronouncement as fully described in Notes 1, 3 and 13 of thecondensed consolidated financial statements in Part I, Item 1.

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Total expenses increased$291 million, or 23%, to $1.5 billion forthe three months ended March 31, 2006 compared to the three months ended March 31, 2005primarily due to higher employee compensation and benefits expenses. Includedin employee compensation expense is $26 million and $60 million for the threemonths ended March 31, 2006 and 2005, respectively, related to businessactivities conducted by Company employees on behalf of CSG affiliates outsideof the Company. These expenses were chargedto these affiliates and are reflected as a reduction in our other operatingexpenses. See “—Expenses.”

**Results by Segment**

The operations of the Investment Banking segmentconsist of investment banking, which includes debt and equity underwriting andfinancial advisory services; and trading, which includes our debt and equitysales and trading and other related activities. The Investment Banking segmentalso includes the results from certain separately managed private equity anddistressed assets. The operations of the Asset Management segment primarilyconsist of the private equity business. The operations of Private Bankingsegment consist of private client services business in the U.S.

Our segments are managed based on types of productsand services offered and their related client bases. We evaluate theperformance of our segments based primarily on income (loss) before theprovision (benefit) for income taxes, minority interests and cumulative effectof a change in accounting principle.

Revenues are evaluated in the aggregate, including anassessment of trading gains and losses and the related interest income andexpense attributable to financing and hedging positions. Therefore, individualrevenue categories may not be indicative of the performance of the segmentresults.

The cost structure of each of our segments is similarand, consequently, the discussion of expenses is presented on an aggregatedbasis for our segments. The Company allocates to its segments a *pro rata* share of certain centrallymanaged costs. Leased facilities and equipment costs, employee benefits andcertain general overhead expenses are allocated based upon specified amounts,usage criteria or agreed rates. Interest expense is allocated based upon theparticular type of asset. The allocation of some costs, such as incentivebonuses, has been estimated. The timing and magnitude of changes in ourincentive bonus accrual can have a significant effect on our operating resultsfor a given period.

The Global Treasurydepartment allocated to the Company’s segments gains and losses related tocertain corporate treasury funding transactions, which allocation is based uponthe estimated funding requirements of the segments.

***Investment Banking***

The Investment Banking segment includes the tradingand investment banking businesses and the results from certain separatelymanaged private equity and distressed assets. Trading consists of sales andtrading in equity securities, equity-related derivatives, fixed incomefinancial instruments, fixed income-related derivatives and other relatedactivities. Investment banking raises capital and provides financial advice tocompanies throughout the United States and abroad. Through investment banking,we manage and underwrite offerings of securities, arrange private placementsand provide financial advisory and other services.

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Thefollowing table sets forth certain financial information of the Company’sInvestment Banking segment:

| ** **                                       | ** ** | **For the Three Months  Ended March 31,** | ** ** |
|--------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                       | ** ** | **   2006   **                       | ** ** | **   2005   ** | ** ** |
| ** **                                       | ** ** | **(In millions)**                                             | ** ** |
| Revenues:                                        |       |                                                               |       |   |   |   |   |   |   |
| Principal  transactions-net                      |       |                                                               | $          | 663 |   |   |   | $ | 132 |   |   |
| Investment banking and  advisory                 |       |                                                               | 579        |   |   |   | 318 |   |   |
| Commissions                                      |       |                                                               | 281        |   |   |   | 265 |   |   |
| Interest and dividends,  net of interest expense |       |                                                               | 286        |   |   |   | 570 |   |   |
| Other                                            |       |                                                               | 32         |   |   |   | 12 |   |   |
| Total net revenues                               |       |                                                               | 1,841      |   |   |   | 1,297 |   |   |
| Total expenses                                   |       |                                                               | 1,390      |   |   |   | 1,127 |   |   |
| Income(1)                                        |       |                                                               | $          | 451 |   |   |   | $ | 170 |   |   |

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(1)                Incomebefore provision for income taxes, minority interests and cumulative effect ofa change in accounting principle.

*Three Months Ended March 31, 2006 Compared toThree Months Ended March 31, 2005*

The Investment Bankingsegment recorded income before provision for income taxes, minority interestsand the cumulative effect of a change in accounting principle of $451 million for the three months ended March 31,2006 compared to $170 million for thethree months ended March 31, 2005. Total net revenues increased$544 million, or 42%, to $1.8 billion for the three months ended March 31, 2006, reflecting higherrevenues from investment banking and trading partially offset by lower otherinvestment banking revenues.

*Trading*

In evaluating theperformance of its trading activities, the Company aggregates principaltransactions-net, commissions and net interest and dividends revenue asnet trading revenues. Changes in the composition of trading inventories andhedge positions can cause principal transactions and net interest income tovary from period to period.

Thefollowing table sets forth net trading revenues of the Investment Bankingsegment:

| ** **       | ** ** | **For the Three Months  Ended March 31,** | ** ** |
|------------------|------------|--------------------------------------------------------------------|------------|
| ** **       | ** ** | **   2006   **                       | ** ** | **   2005   ** | ** ** |
| ** **       | ** ** | **(In millions)**                                             | ** ** |
| Equity           |       |                                                               | $          | 560 |   |   |   | $ | 263 |   |   |
| Fixed Income     |       |                                                               | 802        |   |   |   | 731 |   |   |
| Total Trading(1) |       |                                                               | $          | 1,362 |   |   |   | $ | 994 |   |   |

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(1)                Revenuesreflect the allocation of certain net revenues and interest expense from theGlobal Treasury department to trading. For the three months endedMarch 31, 2006 and 2005, the amount was $139 million of income and $4million of expenses, respectively. See “—Results by Segment” above.

*Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005*

Total net trading revenuesfor the Investment Banking segment increased $368 million, or 37%, to$1.4 billion for the three months ended March 31, 2006compared to thethree months ended March 31, 2005, due to a significant increase inequity net trading revenues and an increase in fixed income net tradingrevenues.

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Equity net trading revenues increased$297 million to $560 million reflecting higher revenues from proprietarytrading and convertibles as a result of rising equity markets and highervolumes. Prime services also continued to perform well with higher revenues. Includedin equity net trading revenues for the three months ended March 31, 2006was a gain of $42 million on the exchange of our New York Stock Exchange seatsfor restricted shares and cash.

Fixed income net tradingrevenues increased 10% to $802 million, reflecting increases in revenues fromproprietary trading, interest rate products and commodities partially offset bylower revenues from structured products. The increase in revenues from interestrate products reflected higher revenues from both exotic and listed derivatives.Commodities contributed to the growth in revenues as we continue to expand thisbusiness. The decrease in structured products net trading revenues was due tolower revenues primarily from commercial mortgage-backed and asset-backedproducts partially offset by higher revenues from residential mortgage-backedproducts. Included in fixed income trading revenues are commercial andresidential mortgage-backed underwriting revenues.

*Investment Banking*

Thefollowing table sets forth the investment banking revenues for the InvestmentBanking segment:

| ** **                | ** ** | **For the Three Months  Ended March 31,** | ** ** |
|---------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                | ** ** | **    2006    **           | ** ** | **    2005    ** | ** ** |
| ** **                | ** ** | **(In millions)**                                             | ** ** |
| Debt underwriting         |       |                                                               | $          | 259 |   |   |   | $ | 95 |   |   |
| Equity  underwriting      |       |                                                               | 88         |   |   |   | 77 |   |   |
| Total underwriting        |       |                                                               | 347        |   |   |   | 172 |   |   |
| Advisory and  other fees  |       |                                                               | 174        |   |   |   | 109 |   |   |
| Total investment  banking |       |                                                               | $          | 521 |   |   |   | $ | 281 |   |   |

 

*Three Months Ended March 31,2006 Compared to Three Months Ended March 31,2005*

Investmentbanking revenues increased 85% to $521 million, reflecting increases in debtand equity underwriting and advisory and other fees. For the three months endedMarch 31, 2006, debt underwriting revenues increased $164 millioncompared to the three months ended March 31, 2005 to $259 million,primarily due to an increase in underwriting revenues from syndicated loansreflecting the fact that on January 1, 2006, we began to conduct certainsyndicated loan activities that were previously conducted by a branch of CreditSuisse outside of our consolidated group. Debt underwriting revenues were alsohigher reflecting industry-wide increases in asset-backed and investment-gradeunderwritings. Equity underwriting revenues increased 14% to $88 millionreflecting an increase in common stock new issuance volumes. Advisory and otherfees increased 60% to $174 million reflecting higher fees from mergers andacquisitions. Advisory and other fees include results from our private fundsgroup, which were flat compared to the three months ended March 31, 2005.

*Other InvestmentBanking*

Other investment banking revenuesprimarily consist of the results for certain separately managed privateequity and distressed assets and gains and losses on swaps that economicallyhedge our long-term borrowings that do not qualify for hedge accountingtreatment under SFAS 133 “Accounting for Derivatives Interest and HedgingActivities,” or SFAS 133.

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Thefollowing table sets forth other investment banking**revenues:

| ** **                                               | ** ** | **For the Three Months  Ended March 31,** | ** ** |
|----------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                               | ** ** | **    2006    **           | ** ** | **     2005     ** | ** ** |
| ** **                                               | ** ** | **(In millions)**                                             | ** ** |
| Separately managed  private equity and distressed assets |       |                                                               | $          | (7 | ) |   |   | $ | 18 |   |   |   |
| Other                                                    |       |                                                               | (35        | ) |   |   | 4 |   |   |   |
| Total other investment banking                           |       |                                                               | $          | (42 | ) |   |   | $ | 22 |   |   |   |

 

*Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005*

Other investment banking had negative net revenues of $42 millionfor the three months ended March 31, 2006 compared to net revenues of $22million for the three months ended March 31, 2005, reflecting losses fromdistressed assets and losses on swaps that economically hedge our long-termborrowings that do not qualify for hedge accounting treatment under SFAS 133.

***Asset Management***

The Asset Managementsegment primarily consists of the private equity business. The private equitybusiness makes privately negotiated investments and acts as an investmentmanager for private equity funds.

Thefollowing table sets forth certain financial information of the Company’s AssetManagement segment:

| ** **                       | ** ** | **For the Three Months  Ended March 31,** | ** ** |
|----------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                       | ** ** | **    2006    **           | ** ** | **    2005    ** | ** ** |
| ** **                       | ** ** | **(In millions)**                                             | ** ** |
| Revenues:                        |       |                                                               |       |   |   |   |   |   |   |
| Principal  transactions-net      |       |                                                               | $          | 49 |   |   |   | $ | 73 |   |   |
| Asset management and  other fees |       |                                                               | 40         |   |   |   | 45 |   |   |
| Other                            |       |                                                               | 2          |   |   |   | 2 |   |   |
| Total net revenues               |       |                                                               | 91         |   |   |   | 120 |   |   |
| Total expenses                   |       |                                                               | 62         |   |   |   | 51 |   |   |
| Income(1)                        |       |                                                               | $          | 29 |   |   |   | $ | 69 |   |   |

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(1)                Incomebefore provision for income taxes, minority interests and cumulative effect ofa change in accounting principle.

*Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005*

Revenue for AssetManagement primarily consists of management fees, net investment gains and losses,which include realized and unrealized gains and losses, including carriedinterest, net interest and other revenues from the private equity business. TheAsset Management segment recorded income before provision for income taxes,minority interests and cumulative effect of a change in accounting principle of$29 million for the three months ended March 31, 2006 compared to $69million for the three months ended March 31, 2005. Total net revenuesdecreased $29 million, or 24%, to $91 million, primarily due to lower principaltransactions-net and asset management fees from the private equity business.

***PrivateBanking***

The Private Banking segment consists of the privateclient services business in the U.S. Private client services is a financialadvisory business serving high-net-worth individuals and corporate investorswith a wide range of Credit Suisse and third-party investment managementproducts and services.

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Thefollowing table sets forth certain financial information of the Company’sPrivate Banking segment:

| ** **                                       | ** ** | **For the Three Months  Ended March 31,** | ** ** |
|--------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                       | ** ** | **    2006    **           | ** ** | **    2005    ** | ** ** |
| ** **                                       | ** ** | **(In millions)**                                             | ** ** |
| Revenues:                                        |       |                                                               |       |   |   |   |   |   |   |
| Principal  transactions-net                      |       |                                                               | $          | 12 |   |   |   | $ | 11 |   |   |
| Investment banking and  advisory                 |       |                                                               | 4          |   |   |   | 3 |   |   |
| Asset management and  other fees                 |       |                                                               | 48         |   |   |   | 43 |   |   |
| Interest and dividends,  net of interest expense |       |                                                               | 2          |   |   |   | 1 |   |   |
| Total net revenues                               |       |                                                               | 66         |   |   |   | 58 |   |   |
| Total expenses                                   |       |                                                               | 75         |   |   |   | 62 |   |   |
| Loss(1)                                          |       |                                                               | $          | (9 | ) |   |   | $ | (4 | ) |   |

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(1)                Lossbefore provision (benefit) for income taxes, minority interests and cumulativeeffect of a change in accounting principle.

*Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005*

The Private Bankingsegment reported a loss before provision for income taxes, minority interestsand cumulative effect of a change in accounting principle of $9 million for thethree months ended March 31, 2006 compared to a loss of $4 million for thethree months ended March 31, 2005, reflecting a modest increase inrevenues more than offset by higher expenses. Revenues for Private Banking increased14% to $66 million, primarily due to higher asset management fees.

**Segment Expenses**

The normal operating coststructure of each of our segments is similar and, consequently, the discussionof expenses is presented on an aggregate basis for our segments. Forinformation on expenses that are not allocated to the Company’s segments, see “Resultsof Operations” and Note 13 of the condensed consolidated financial statementsin Part I, Item 1.

Thefollowing table sets forth employee compensation and benefits expenses, otherexpenses and total expenses of the Company’s segments and does not includeexpenses from Elimination & Other:

| ** **                          | ** ** | **For the Three Months  Ended March 31,**   | ** ** |
|-------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                          | ** ** | **     2006     ** | ** ** | **     2005     ** | ** ** |
| ** **                          | ** ** | **(In millions)**                                               | ** ** |
| Employee compensation  and benefits |       |                                                                 | $          | 1,164 |   |   |   | $ | 947 |   |   |
| Other expenses                      |       |                                                                 | 363        |   |   |   | 293 |   |   |
| Total expenses                      |       |                                                                 | $          | 1,527 |   |   |   | $ | 1,240 |   |   |

 

*Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005*

Total expenses increased $287 million, or 23%, to $1.5billion for the three months ended March 31, 2006 compared to the threemonths ended March 31, 2005. The increase was principally due to higheremployee compensation and benefits expenses, which increased $217 million, or23%, reflecting the higher incentive compensation, base salaries and head countpartially offset by lower severance expenses. For more information onshare-based compensation expense, see Note 1 to the condensed consolidatedfinancial statements in Part I, Item 1. Included in compensation andbenefits expense is $26 million and $60 million for the three months ended March 31,2006 and 2005, respectively, related to business activities conducted byCompany employees on behalf of CSG affiliates outside of the Company. Theseexpenses were charged to these affiliates and are reflected as a reduction ofour other operating expenses.

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Other expenses consistprincipally of occupancy and equipment rental; brokerage, clearing and exchangefees; communications; professional fees; and all other operating expenses.Other expenses increased $70 million or 24%, for the three months ended March 31,2006 compared to the three months ended March 31, 2005, primarily as aresult of increases in other operating expenses and professional fees. Theincrease in other operating expenses reflects a reduction in the expensescharged to affiliates that are reflected as a reduction of our other operatingexpenses. The decrease in expenses charged to affiliates reflected ourcommencement of certain syndicated loan activities that were previouslyconducted by a branch of Credit Suisse outside of our consolidated group. Theincrease in professional fees reflects higher contractor costs. Excluding thecharge to affiliates for compensation expense, other operating expensesincreased 10%.

**Provision for Taxes**

*Three Months Ended March 31,2006 Compared to Three Months Ended March 31,2005*

The provision for income taxes for the three monthsended March 31, 2006 and 2005 was $137 million and $66 million,respectively. Excluded from the provision for income taxes for the three monthsended March 31, 2005 was an income tax expense of $3 million related toour adoption of Statement of Financial Accounting Standards, or SFAS, No. 123,“Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accountingfor Stock-Based Compensation—Transition and Disclosure,” and SFAS No. 123(Revised 2004), “Share-Based Payment,” or SFAS 123R.

The effective tax ratechanged from a provision of 16.9% for the three months ended March 31,2005 to a provision of 9.8% in for the three months ended March 31, 2006.The change in the effective tax rate was due primarily to an increase innon-taxable revenues from certain private equity funds we consolidate.

**Share-basedCompensation**

We adopted SFAS 123R as of January 1, 2005, usingthe modified prospective method. We had previously adopted the recognitionprovisions of SFAS 123 effective January 1, 2003. See Note 1 of thecondensed consolidated financial statements in Part I, Item 1 for moreinformation.

In connection with ouradoption of SFAS 123R, we recorded an after-tax gain of $6 million in thecondensed consolidated statement of income as a cumulative effect of a changein accounting principle to reverse the expense for awards previously recognizedon all outstanding unvested awards that are expected to be forfeited. For newgrants after January 1, 2005, forfeitures are included in the initialestimate of compensation expense at the grant date.

**LIQUIDITY ANDCAPITAL RESOURCES**

**LiquidityManagement Oversight**

We believe that maintaining access to liquidity isfundamental for firms operating in the financial services industry. We havetherefore established a comprehensive process for the management and oversightof our capital, liquidity and funding strategies. Credit Suisse’s Asset andRisk Management Committee, or CARMC**,**has primary oversight responsibility for these functional disciplines. Thiscommittee, which meets on a quarterly basis, includes the CEOs of CSG and ofits divisions, the Chief Financial Officer, the Chief Risk Officer and theTreasurer. CARMC reviews capital and balance sheet development, current andprospective funding, and adherence to internal Treasury risk limits and capitaland liquidity targets. The tactical implementation of this strategy is subsequentlyrefined and updated through regular monthly sessions with the Chief RiskOfficer, the Chief Financial Officer and the Treasurer and other seniormanagement.

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The Global Treasurydepartment is responsible for the day-to-day management of capital, liquidityand funding, as well as relationships with creditor banks and fixed incomeinvestors. It also maintains regular contact with rating agencies andregulators on these and other issues. See “Liquidity Risk” in “Risk Factors” inPart I, Item 1A of our Annual Report on Form 10-K for the yearended December 31, 2005 for more information.

**LiquidityManagement Organization**

We are an indirect subsidiary of Credit Suisse, aSwiss bank. Consequently, our liquidity management structure operates at twolevels, the “Non-Bank Franchise” and the “Bank Franchise.” See “—Balance Sheet and Funding.”

First, at the holding company level, the “Non-BankFranchise,” where access to parent bank funding is limited, we aim to maintainsufficient liquidity so that in the event that we are unable to access theunsecured capital markets, we have cash and liquid assets sufficient to repaymaturing liabilities for a minimum period of one year. When assessing theamount of cash and liquid assets, we take account of the regulatoryrestrictions that limit the amount of cash that could be distributed upstreamby our principal broker-dealer subsidiaries, Credit Suisse Securities (USA)LLC, or CS Securities, and Credit Suisse Capital LLC, or CS Capital, which holdover 81% of our consolidated assets.

Second, our regulatedsubsidiaries have access to unsecured funding from Credit Suisse, the “BankFranchise,” as well as secured funding via the repurchase and securitieslending markets. Historically, Credit Suisse’s bank deposit base has provenextremely stable and is comprised of a diversified customer base, includingretail deposits, as well as wholesale and institutional deposits. In a stressedliquidity environment, our broker-dealers would directly access the securedfunding markets to replace unsecured borrowings from Credit Suisse.

**Balance Sheet andFunding**

The majority of our assets are held in ourbroker-dealer subsidiaries and comprise a substantial portion of the BankFranchise. These assets—principally trading inventories in our InvestmentBanking business—are funded by a combination of collateralized short-termborrowings, which include securities sold under agreements to repurchase andsecurities loaned, as well as unsecured loans from Credit Suisse, the centralfunding entity of the Bank Franchise. Significant portions of our assets heldin the Bank Franchise are highly liquid, with the majority consisting ofsecurities inventories and collateralized receivables, which fluctuatedepending on the levels of proprietary trading and customer business.Collateralized receivables consist primarily of securities purchased underagreements to resell and securities borrowed, both of which are primarily securedby U.S. government and agency securities and marketable corporate debt andequity securities. In addition, we have significant receivables from customers,brokers, dealers and others, which turn over frequently. To meet client needsas a securities dealer, we carry significant levels of trading inventories.

Unsecured funding for the Bank Franchise originateslargely from Credit Suisse’s borrowings in the wholesale and institutionaldeposit markets as well as access to retail deposits. The retail and privatebank funding base is primarily comprised of time deposits and deposits callableon demand. While the contractual maturity of these deposits is typically underthree months, they have historically shown remarkable stability even underextreme market conditions. Additional funding is also sourced via short-terminter-company borrowings from other CSG entities on both a secured andunsecured basis.

Assets not funded by the Bank Franchise include lessliquid assets such as certain mortgage whole loans, distressed securities,high-yield debt securities, asset-backed securities and private equityand other long-term investments. These less liquid assets are principally heldin the Non-Bank Franchise. These assets may be relatively illiquid at times,especially during periods of market stress. Mortgage whole loans, 

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distressed securities,high-yield debt and asset-backed securities are generally financed with acombination of short-term unsecured financing or repurchase agreements,long-term borrowings and stockholder’s equity. We typically fund a significantportion of less liquid assets, such as private equity investments, withlong-term borrowings that we issue directly to the market, and stockholder’sequity.

Short-term funding is generally obtained at ratesrelated to the Federal Funds rate, the London Interbank Offered rate, or LIBOR,or other money market indices, while long-term funding is generally obtained atfixed and floating rates related to U.S. Treasury securities or LIBOR,depending upon prevailing market conditions. We continually aim to broaden ourfunding base by geography, investor and funding instrument.

We lend funds as needed to our operating subsidiariesand affiliates on both a senior and subordinated basis, the latter typically tomeet capital requirements of regulated subsidiaries. We generally try to ensurethat loans to our operating subsidiaries and affiliates have maturities equalto or shorter than the maturities of our market borrowings. As such, seniorfunding to operating subsidiaries and affiliates is typically extended on ademand basis. Alternatively, subordinated financing to regulated subsidiariesis extended on a term basis and we structure our long-term market borrowingswith maturities that extend beyond those of our subordinated advances tosubsidiaries and affiliates.

Because of changes relating to customer needs,economic and market conditions and proprietary trading and other strategies,our total assets, or the individual components of total assets, may varysignificantly from period to period. As of March 31, 2006 and December 31,2005, our total assets were $327.4 billion and $297.8 billion,respectively.

Included below is adiscussion of our long-term contractual obligations, off-balance sheetarrangements and less liquid assets.

**LiquidityMeasurement and Planning**

The principal measure we use to monitor our liquidityposition at each funding franchise is the “liquidity barometer,” whichestimates the time period over which the adjusted market value of unencumberedassets (including cash) exceeds the aggregate value of our maturing unsecuredliabilities plus a conservative forecast of anticipated contingent commitments.Our objective, as mandated by CARMC, is to ensure that the liquidity barometerfor each of the funding franchises is maintained at a sufficient level so as toensure that, in the event we are unable to access unsecured funding, we willhave sufficient liquidity for an extended period. We believe this will enableus to carry out our business plans during extended periods of market stress,while minimizing, to the extent possible, disruptions to our business.

For the Non-Bank Franchise, our objective is to ensurethat the liquidity barometer equals or exceeds a time horizon of one year. Forthe Bank Franchise, our objective is to ensure the liquidity barometer equalsor exceeds 120 days. The different time horizons reflect the relative stabilityof the unsecured funding base of each franchise. In the Non-Bank Franchise,liabilities are measured at their contractual maturities because historically,investors in publicly issued debt securities and commercial paper are highlysensitive to liquidity events such that we believe access to these marketscould be quickly diminished. Conversely, the Bank Franchise’s retail andinstitutional deposit base is measured using contractual maturities that havebeen adjusted to reflect behavioral stability. Historically, this core depositbase has proven extremely stable, even in stressed markets. The conservativeparameters we use in establishing the time horizons in the funding franchisesassume that assets will not be sold to generate cash, no new unsecured debt canbe issued, and funds that are assumed to be trapped because of regulatoryrestrictions are not available to be distributed upstream in a stressedliquidity environment. For liquidity purposes, the adjusted market value ofunencumbered assets includes a conservative reduction from market value, or 

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“haircut,” reflecting theamount that could be realized by pledging an asset as collateral to a third-partylender in a secured funding transaction.

In the case of theNon-Bank Franchise, contingent commitments include such items as commitments toinvest in private equity funds. Certain contingent obligations do not materiallyimpact the liquidity planning at the Company or Non-Bank Franchise, as theseare incurred by other affiliated operating entities that are not consolidatedby the Company. These items, which are taken into account in our liquidityplanning for the Bank Franchise, include:

·       creditrating-related collateralization requirements (Credit Suisse’s derivativesbusiness is primarily conducted in Credit Suisse International, a wholly-ownedsubsidiary of CSG);

·       back-up liquidity linesprovided to asset-backed commercial paper conduits (back-up liquidity lines areprovided by Credit Suisse); and

·       committedundrawn credit facilities to clients (CreditSuisse’s corporate lending business is conducted in Credit Suisse).

The Bank Franchise maintains two large secondarysources of liquidity. The first is via a large portfolio of liquid fixed incomesecurities, which is segregated and managed to provide for emergency liquidityneeds only. This liquidity portfolio is maintained at a level well beyondregulatory requirements and could provide a significant source of liquidity foran extended period in the event of stressed market conditions. In addition tothese assets held directly in Credit Suisse, the Bank Franchise maintainsanother large source of secondary liquidity through Credit Suisse’s principalbroker-dealers and other regulated operating entities. The Bank Franchisehas historically been able to access significant liquidity through the securedfunding markets (securities sold under agreements to repurchase, securitiesloaned and other collateralized financing arrangements), even in periods ofmarket stress. We continually monitor overall liquidity by tracking the extentto which unencumbered marketable assets and alternative unsecured fundingsources exceed both contractual obligations and anticipated contingentcommitments.

As of March 31, 2006, we estimate that theNon-Bank Franchise held cash, other liquidity reserves and marginable assets,net of haircuts, of approximately $9.4 billion versus estimated maturingobligations and commitments out to one year of $6.1 billion. Also, as of March 31,2006, we estimate that the Bank Franchise held cash, other liquidity reservesand marginable assets, net of haircuts, of approximately $114.6 billion versusestimated maturing obligations, commitments and contingent funding requirementsout to 120 days of $110.2 billion.

Our liquidityplanning and management focuses on maintaining a liquidity cushion so that wemay continue to conduct business for an extended period in the event of acrisis. Our liquidity contingency plan focuses on the specific actions that wewould take in the event of a crisis, including a detailed communication planfor creditors, investors and customers. The plan, which is regularly updated,sets out a three-stage process of the specific actions we would take:

·       StageI—Market disruption

·       StageII—Unsecured markets partially inaccessible

·       StageIII—Unsecured markets fully inaccessible

In the event of aliquidity crisis, a meeting of the Liquidity Crisis Committee would be convenedby Global Treasury to activate the contingency plan. The Liquidity CrisisCommittee’s membership includes senior business line, Global Treasury andfinance department management. This committee would meet frequently throughoutthe crisis to ensure our plans are executed.

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**Cash Capital**

We measure cash capital (long-term funding sources)against long-term unsecured funding requirements on an ongoing basis, and seekto maintain a surplus at all times. Sources of cash capital include thenon-current component of the Company’s long-term borrowings and stockholder’sequity. Uses of cash capital include illiquid assets such as related partyreceivables (except where the receivable is the short-term investment of ourexcess cash with Credit Suisse), property, goodwill and intangibles, deferredtax assets, private equity and other long-term investments.

Our cash capital as of March 31,2006 totaled $45.2 billion compared with $42.2 billion as of December 31,2005. The increase in cash capital of $3.0 billion was primarily due to anincrease in long-term debt. As of March 31, 2006, cash capital wassubstantially in excess of our cash capital requirements.

**ContractualObligations and Commitments**

Thefollowing table sets forth future cash payments on our contractual obligationspursuant to long-term borrowings, operating leases and purchase obligations asof March 31, 2006:

| ** **                     | ** ** | **Contractual Obligations  Expiration Per Period** | ** ** |
|--------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                     | ** ** | **Less than  1 year**                                   | ** ** | **1-3  years** | ** ** | **4-5  years** | ** ** | **Over  5 years** | ** ** | **Total** | ** ** |
| ** **                     | ** ** | **(In millions)**                                            | ** ** |
| Long-term  borrowings          |       |                                                              | $          | 3,971 |   |   | $ | 11,730 |   | $ | 7,027 |   | $ | 13,821 |   | $ | 36,549 |   |
| Operating leases               |       |                                                              | 155        |   |   | 289 |   | 273 |   | 950 |   | 1,667 |   |
| Purchase  obligations(1)       |       |                                                              | 43         |   |   | 53 |   | 38 |   | 13 |   | 147 |   |
| Total contractual  obligations |       |                                                              | $          | 4,169 |   |   | $ | 12,072 |   | $ | 7,338 |   | $ | 14,784 |   | $ | 38,363 |   |

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(1)                Purchaseobligations for goods and services include payments for, among other things,benefits consulting, corporate services outsourcing and computer andtelecommunications maintenance agreements. Purchase obligations reflect theminimum contractual obligation under legally enforceable contracts through thetermination dates specified in the respective agreements, even if the contractis renewable. Purchase obligations do not reflect termination fees payable uponthe Company’s termination of the respective contracts.

Our long-term borrowings are unsecured. As of March 31,2006, the weighted average maturity of our long-term borrowings wasapproximately 4.9 years. Our lease obligations are primarily for our principaloffices in New York City and other locations. The operating lease obligationsin the table above do not reflect $298 million in sublease revenue and$545 million of executory costs such as insurance, maintenance and taxes.We had no material capital lease obligations as of March 31, 2006.

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Wehave commitments under a variety of arrangements that are not recorded asliabilities in our condensed consolidated statements of financial condition.These commitments are in addition to guarantees and other arrangementsdiscussed in “—Off-BalanceSheet Arrangements.” Thefollowing table sets forth certain of our commitments, including the currentportion as of March 31, 2006:

| ** **                           | ** ** | **Commitment Expiration Per Period** | ** ** |
|--------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                           | ** ** | **Less than 1  year**                     | ** ** | **1-3  years** | ** ** | **4-5  years** | ** ** | **Over  5 years** | ** ** | **Total  commitments** | ** ** |
| ** **                           | ** ** | **(In millions)**                              | ** ** |
| Standby resale  agreements(1)        |       |                                                | $          | 25 |   |   | $ | 125 |   | $ | — |   |   | $ | — |   |   |   | $ | 150 |   |   |
| Private equity(2)                    |       |                                                | 88         |   |   | 22 |   | 13 |   |   | 268 |   |   |   | 391 |   |   |
| Forward  agreements(3)               |       |                                                | 9,274      |   |   | — |   | — |   |   | — |   |   |   | 9,274 |   |   |
| Unfunded lending  commitments(4)     |       |                                                | 590        |   |   | 227 |   | 114 |   |   | 276 |   |   |   | 1,207 |   |   |
| Unfunded  warehousing commitments(5) |       |                                                | 1,991      |   |   | — |   | — |   |   | — |   |   |   | 1,991 |   |   |
| Total commitments                    |       |                                                | $11,968    |   |   | $ | 374 |   | $ | 127 |   |   | $ | 544 |   |   |   | $ | 13,013 |   |   |

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(1)                In the ordinarycourse of business, we maintain certain standby resale agreement facilitiesthat commit us to enter into securities purchased under agreements to resellwith customers at current market rates.

(2)                As of March 31,2006 we had commitments to invest up to an additional $391 million innon-consolidated private equity funds and $1.1 billion in consolidatedprivate equity funds.

(3)                Representscommitments to enter into securities purchased under agreements to resell andagreements to borrow securities.

(4)                We enter intocommitments to extend credit in connection with certain premium finance,leveraged finance and other activities.

(5)                We enter intocommitments to warehouse commercial mortgage whole loans.

For information on these and other materialcommitments, see Notes 4, 6, 7 and 8 of the condensed consolidated financialstatements in Part I, Item 1. For information on commitments under ourpension arrangements, see Note 11 of the condensed consolidated financialstatements in Part I, Item 1.

Excluded from the table above are certain commitmentsto originate and purchase mortgage whole loans that qualify as derivatives.These commitments are reflected in derivatives contracts in the condensedconsolidated statements of financial condition. For more information on ourderivatives contracts, see Note 5 of the condensed consolidated financialstatements in Part I, Item 1.

Thefollowing table sets forth our commercial paper and other short-term unsecuredborrowings:

| ** **                | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|---------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                | ** ** | **(In millions)**   | ** ** |
| Bank loans                |       |                     | $          | 718                         |       |   |   | $ | 263 |   |   |
| Commercial paper          |       |                     | 1,150      |                        |       |   | 1,298 |   |   |
| Loans from  affiliates(1) |       |                     | 15,212     |                        |       |   | 12,093 |   |   |
| Total                     |       |                     | $          | 17,080                      |       |   |   | $ | 13,654 |   |   |

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(1)                Wehave significant financing transactions with Credit Suisse and certain of itssubsidiaries and affiliates. See “—RelatedParty Transactions” and Note 2 of the condensed consolidated financialstatements in Part I, Item 1.

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**Credit Facilities**

As of March 31, 2006,CS Securities maintained with third parties five 364-day committedsecured revolving credit facilities totaling $2.2 billion, with onefacility for $500 million maturing in July 2006, one facility for $200million maturing in August 2006, one facility for $500 million maturing inNovember 2006, one facility for $500 million maturing in February 2007and one facility for $500 million maturing in March 2007. We expect torenew these facilities as they mature. These facilities require CS Securitiesto pledge unencumbered marketable securities to secure any borrowings. Borrowingsunder each facility would bear interest at short-term rates related to eitherthe Federal Funds rate or LIBOR and can be used for general corporate purposes.The facilities contain customary covenants that we believe will not impair ourability to obtain funding. As of March 31, 2006, no borrowings wereoutstanding under any of the facilities. We may from time to time enter intoadditional secured revolving credit facilities as part of our liquiditymanagement.

**Long-term Funding**

We issue long-term debt through U.S. and Euromarketmedium-term note programs, as well as syndicated and privately placed offeringsaround the world.

Our currently effective automatic shelf registrationstatement on file with the SEC, which was established in February 2006,allows us to issue from time to time senior and subordinated debt securitiesand warrants to purchase such securities.

Under our $5.0 billion Euro medium-term noteprogram, which was established in July 2001 and allows us to issue notesfrom time to time, we had as of May 10, 2006 $1.2 billion availablefor issuance.

For the three months endedMarch 31, 2006, we issued $3.0 billion in senior notes and$40 million in structured notes and we repaid approximately$90 million of medium-term notes and $13 million of structured notes.

**Credit Ratings**

Our access to the debt capital markets and our borrowingcosts depend significantly on our credit ratings. Credit ratings are importantto us when competing in certain markets and when seeking to engage inlonger-term transactions, including OTC derivatives. Rating agencies take manyfactors into consideration in determining a company’s rating and may raise,lower or withdraw their ratings or publicly announce an intention to raise orlower their ratings at any time. Such factors include earnings performance,business mix, market position, financial strategy, level of capital, riskmanagement policies and practices and management team, and our affiliation withCredit Suisse and CSG, in addition to the broader outlook for the financialservices industry.

A reduction in our credit ratings could limit ouraccess to capital markets, increase our borrowing costs, require us to provideadditional collateral in connection with OTC derivatives contracts, and allowcounterparties to terminate transactions under certain of our trading andcollateralized financing contracts. This, in turn, could reduce our liquidityand negatively impact our operating results and financial position. Ourliquidity planning takes into consideration those contingent events associatedwith a reduction in our credit ratings.

Because a significant portion of our OTC derivativesarrangements are with affiliates, the amount of collateral that we would havebeen required to post pursuant to such contracts in the event of a one-notchdowngrade of our senior long-term debt credit rating was not material as of March 31,2006.

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As of May 10,2006, our ratings and ratings outlooks were as follows:

| ** **                       | ** ** | **Long-Term Debt** | ** ** | **Commercial Paper** | ** ** | **Outlook** | ** ** |
|----------------------------------|------------|-------------------------|------------|---------------------------|------------|-------------|------------|
| Fitch Ratings                    |       |                    | AA-        |                      |       |        | F-1        | + |   | Stable |   |
| Moody’s Investors  Service  |       |                    | Aa3        |                      |       |        | P-1        |   |   | Stable |   |
| Standard &  Poor’s |       |                    | A+         |                      |       |        | A-1        |   |   | Positive |   |

 

**Capital Resources**

Certain of our businessesare capital intensive. In addition to normal operating requirements, capital isrequired to cover financing and regulatory capital charges on various assetclasses, including but not limited to, securities inventories, private equityinvestments and investments in fixed assets. Our overall capital needs areregularly reviewed to ensure that our capital base can appropriately supportthe anticipated needs of our business and the regulatory and other capitalrequirements of our subsidiaries. Based upon these analyses, we believe thatour capitalization is adequate for current operating levels.

***Regulated Subsidiaries***

Our principal wholly ownedsubsidiary, CS Securities, is a registered broker-dealer, registeredfutures commission merchant and member firm of the New York Stock Exchange. Accordingly,CS Securities is subject to the minimum net capital requirements of the SEC andthe Commodities Futures Trading Commission, or CFTC. Under the alternativemethod permitted by SEC Rule 15c3-1, the required net capital maynot be less than the greater of 2% of aggregate debit balances arising fromcustomer transactions or 4% of the funds required to be segregated pursuant tothe Commodity Exchange Act less the market value of certain commodity options,all as defined. Under CFTC Regulation 1.17, the required minimum net capitalrequirement is 8% of the total risk margin requirement (as defined) for allpositions carried in customer accounts plus 4% of the total risk marginrequirement (as defined) for all positions carried in non-customer accounts. Asof March 31, 2006, CS Securities’ net capital of approximately$5.2 billion was 64.3% of aggregate debit balances and in excess of theminimum requirement by approximately $5.0 billion.

Our OTC derivatives dealer subsidiary, CS Capital, isalso subject to the uniform net capital rule, but computes its net capitalrequirements based on value at risk pursuant to Appendix F of Rule 15c3-1.As of March 31, 2006, CS Capital’s net capital of $623 million, afterallowing for market and credit risk exposure of $43 million and$110 million, respectively, was in excess of the minimum net capitalrequirement by $603 million. CS Capital operates pursuant to the (k)(2)(ii) exemptiveprovisions of Rule 15c3-3 of the Exchange Act and accordingly, allcustomer transactions are cleared through CS Securities on a fully disclosedbasis.

As of March 31, 2006, our subsidiariescomplied with all applicable regulatory capital adequacy requirements.

**Cash Flows**

Our condensed consolidated statements of cash flowsclassify cash flows into three broad categories: cash flows from operatingactivities, investing activities and financing activities. These statementsshould be read in conjunction with “—Related Party Transactions” as well as Note 2 of thecondensed consolidated financial statements in Part I, Item 1.

Our cash flows are complexand frequently bear little relation to our net income and net assets,particularly because the Company is an indirect wholly owned subsidiary of CSG,a global financial institution that may choose to allocate cash among itssubsidiaries for reasons independent of the Company’s activities. As a result,we believe that traditional cash flow analysis is not a particularly useful 

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methodto evaluate our liquidity position as discussed above. Cash flow analysis may,however, assist in highlighting certain macro trends and strategic initiativesin our business.

***For the Three Months ended March 31, 2006***

Cash and cash equivalents increased $71 millionto $955 million as of March 31, 2006. Cash used in operatingactivities was $6.6 billion. The change in cash used in operatingactivities reflected a net increase in operating assets relative to operatingliabilities of $7.5 billion, which occurred in the normal course ofoperations as a result of changes in customer needs, market conditions andproprietary trading and other strategies.

Cash of $2.5 billion was used in investing activities.The Company provided funding to affiliates, resulting in increases inreceivables from parent and affiliates of $2.4 billion.

Cash provided by financingactivities was $9.1 billion. The changes are due to increases in netcollateralized financing arrangements of $2.8 billion, $3.0 billion inlong-term borrowings and $3.4 billion in short-term borrowings used primarilyto fund normal operating activities and provide funding to affiliates as partof the Company’s investing activities, partially offset by $103 million inmaturities of long-term borrowings.

***For the Three Months ended March 31, 2005***

Cash and cash equivalents decreased $262 millionto $465 million as of March 31, 2005. Cash used in operatingactivities was $855 million and reflected a net increase in operating assetsand operating liabilities of $1.3 billion, which occurred in the normalcourse of operations as a result of changes in customer needs, marketconditions and proprietary trading and other strategies.

Cash of $1.9 billion was provided by investingactivities. The Company provides funding to affiliates. The Company receivedcash from its affiliates related to this funding, resulting in decreases inreceivables from parent and affiliates of $1.9 billion.

Cash used in financingactivities was $1.3 billion. This was due to increases in net collateralizedfinancing arrangements of $6.2 billion and decreases of $5.9 billionin short-term borrowings, reflecting an increase in the use of securedborrowings and repayments of $1.6 billion in long-term borrowings.

**OFF-BALANCE SHEETARRANGEMENTS**

We enter into off-balance sheet arrangements in theordinary course of business. Off-balance sheet arrangements are transactions,agreements or other contractual arrangements with, or for the benefit of, anentity that is not consolidated with an issuer, and which include guaranteesand similar arrangements, retained or contingent interests in assetstransferred to an unconsolidated entity, and obligations and liabilities(including contingent obligations and liabilities) for the purpose of providingfinancing, liquidity, market risk or credit risk support.

We have not entered intoany derivatives contracts indexed or linked to the stock of CSG.

**Guarantees**

In the ordinary course of our business, we provideguarantees and indemnifications that contingently obligate us to make paymentsto the guaranteed or indemnified party based on changes in an asset, liabilityor equity security of the guaranteed or indemnified party. We may also becontingently obligated to make payments to a guaranteed party based on anotherentity’s failure to perform, or an indirect guarantee of the indebtedness ofothers. Guarantees we provide include customary indemnifications to purchasersin conjunction with the sale of assets or businesses; to investors in private equityfunds sponsored by the firm 

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regarding potentialobligations of the Company to return amounts previously paid as carriedinterest to the Company and certain other partners, most of which are currentand former employees of the Company; and to investors in our securities andother arrangements to provide “gross up” payments if there is a withholding ordeduction because of a tax assessment or other governmental charge. From timeto time, we also guarantee the obligations of subsidiaries of CSG that are notour consolidated subsidiaries, and these guarantees are included in the scopeof the disclosure requirements of FIN No. 45, “Guarantor’s Accounting andDisclosure Requirements for Guarantees, Including Indirect Guarantees ofIndebtedness of Others,” or FIN 45.

FIN 45 requires disclosureof our maximum potential payment obligations under certain guarantees to theextent that it is possible to estimate them and requires recognition of aliability at inception for the fair value of guaranteed obligations forguarantees issued or amended after December 31, 2002. The recognition ofthese liabilities did not have a material effect on our financial condition orresults of operations. For disclosure of our estimable maximum paymentobligations under certain guarantees and related information, see Note 8of the condensed consolidated financial statements in Part I, Item 1.

**Retained orContingent Interests in Assets Transferred to Unconsolidated Entities**

We originate commercial mortgages and originate andpurchase residential mortgages and purchase other debt obligations such asautomobile loans and student loans and sell these assets directly or throughaffiliates to special purpose entities that are, in most cases, qualifiedspecial purpose entities, or QSPEs. These QSPEs issue securities that arebacked by the assets transferred to the QSPEs and pay a return based on thereturns on those assets. Investors in these mortgage-backed and asset-backedsecurities typically have recourse to the assets in the QSPE. The investors andthe QSPEs have no recourse to our assets.

These QSPEs are generally sponsored by oursubsidiaries. Our principal broker-dealer subsidiary, CS Securities,underwrites and makes markets in these mortgage-backed and asset-backedsecurities. Under SFAS No. 140, “Accounting for Transfers and Servicing ofFinancial Assets and Extinguishments of Liabilities, a replacement of FASBStatement No. 125,” or SFAS 140, a QSPE is not required to be consolidatedwith the transferor if all the SFAS 140 sale criteria are met. Ourmortgage-backed and asset-backed securitization activities are generallystructured to use QSPEs, and the assets and liabilities transferred to QSPEsare not included in our financial statements except to the extent other SFAS140 criteria are not met.

As of March 31, 2006, we held encumbered mortgageloans totaling $8.1 billion related to securitization transactions that did notqualify for sale accounting treatment under paragraph 40b of SFAS 140. Priorto securitization, such encumbered loans were accounted for in financialinstruments owned, however due to the transfer of legal title in the form of apledge in the securitization, these loans have been reclassified to Otherassets and deferred amounts in the condensed consolidated statements offinancial condition. Cash amounts received in payment upon transfer for suchloans are accounted for as secured borrowings and are recorded in Otherliabilities in the condensed consolidated statements of financial condition.

We may retain interests inthese securitized assets if CS Securities holds the assets in connection withits underwriting or market-making activities. Retained interests insecuritized financial assets are included at fair value in the condensedconsolidated statements of financial condition. Any changes in the fair valueof these retained interests are recognized in the condensed consolidatedstatements of income. We engage in these securitization activities to meet theneeds of clients as part of our fixed income activities, to earn fees and tosell financial assets. These securitization activities do not provide amaterial source of our liquidity, capital resources or credit risk or marketrisk support. See Note 3 of the condensed consolidated 

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financialstatements in Part I, Item 1, which includes quantitative information onour securitization activities and retained interests.

**Variable InterestEntities**

We are involved with various entities in the normalcourse of business that may be deemed to be variable interest entities, orVIEs, including VIEs that issue CDOs.

We purchase loans and other debt obligations from andon behalf of clients primarily for the purpose of securitization. The loans andother debt obligations are sold by us to affiliates for warehousing prior tobeing transferred by affiliates, to VIEs that issue CDOs. CDOs are securitiesbacked by the assets transferred to the VIE and pay a return based on the returnson those assets. Investors typically have recourse to the assets in the CDO VIE.The investors and the CDO VIE have no recourse to the Company’s assets. CSSecurities structures, underwrites and makes a market in these CDOs, and we mayhave retained interests in these CDOs in connection with CS Securities’underwriting and market-making activities. We engage in these CDOtransactions to meet the needs of clients, to earn fees and to sell financialassets. These CDO transactions do not provide a material source of ourliquidity, capital resources or credit risk or market risk support.

Financial Accounting Standards Board Interpretation,or FIN, No. 46, “Consolidation of Variable Interest Entities,” or FIN 46,requires us to consolidate all VIEs for which we are the primary beneficiarywhich is defined as the entity that will absorb a majority of expected losses,receive a majority of the expected residual returns, or both. In December 2003,the FASB modified FIN 46, through the issuance of FIN 46R, to address variousimplementation issues that had arisen since the issuance of FIN 46 and toprovide companies the option to defer the adoption of FIN 46 for certain VIEsto periods ending after March 15, 2004. As of March 31, 2006 and December 31,2005, we consolidated CDO VIEs for which we are the primary beneficiary. Wealso have interests in CDO VIEs that are not required to be consolidatedbecause we are not the primary beneficiary.

We consolidate certainprivate equity funds that are managed by us. See Notes 1 and 3 of thecondensed consolidated financial statements in Part I, Item 1.

**RELATED PARTYTRANSACTIONS**

CSG, through Credit Suisse Holdings (USA), Inc.,or CS Holdings, owns all of our outstanding voting common stock. We areinvolved in significant financing and other transactions, and have significantrelated party balances, with Credit Suisse and certain affiliates. We generallyenter into these transactions in the ordinary course of business and believethat these transactions are on market terms that could be obtained fromunrelated third parties. See “—Derivatives” and Notes 2 and 5 of the condensedconsolidated financial statements in Part I, Item 1 for more information.

Certain of our directors,officers and employees and those of our affiliates and their subsidiariesmaintain margin accounts with CS Securities and other affiliated broker-dealersin the ordinary course of business. In addition, certain of such directors,officers and employees have investments or commitments to invest in various privateequity funds. We make loans to directors and executive officers on the sameterms as are generally available to third parties or otherwise pursuant towidely available employee benefit plans. CS Securities and other affiliatedbroker-dealers, from time to time and in the ordinary course of business,enter into, as principal, transactions involving the purchase or sale ofsecurities from or to such directors, officers and employees and members oftheir immediate families.

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**LESS LIQUID ASSETS**

Certain of our assets,including private equity and other long-term investments, distressedsecurities, high-yield debt, mortgage whole loans and other non-investment-gradedebt, are not highly liquid or trade in markets that have periods of volatilityand illiquidity. The values of most of the more illiquid assets are reported atfair value, and the determination of fair value is based on management’s bestestimate and depends on varying factors. See “—Critical Accounting Policies andEstimates—Fair Value” for further information on the determination of fairvalue of these less liquid assets.

**Private EquityActivities**

Our private equity andother long-term investment activities include direct investments andinvestments in partnerships that make private equity and related investments invarious portfolio companies and funds. These investments are primarily inunlisted or illiquid equity or equity-related securities and are carriedat fair value based on a number of factors. As of March 31, 2006 and December 31,2005, we had investments in private equity and other long-term investments of$10.3 billion and $3.6 billion, respectively. As of March 31,2006, we had commitments to invest up to an additional $391 million innon-consolidated private equity funds and $1.1 billion in consolidated privateequity funds. The increase in private equity and other long-term investmentsreflects our consolidation of certain private equity funds. See “—CriticalAccounting Policies and Estimates—Fair Value” and Notes 1 and 4 of the condensedconsolidated financial statements in Part I, Item 1 for more information.

**Corporate Debt,Mortgage Whole Loans and Other Non-Investment-Grade Financial Instruments**

Weunderwrite, trade and hold non-investment-grade financial instruments, whichinclude corporate debt, commercial and residential mortgage whole loans, loanparticipations, derivatives contracts and certain separately managed distressedfinancial instruments. Corporate debt includes high-yield debt, distresseddebt, commercial and residential mortgage-backed securities, other asset-backedsecurities and CDOs. Due to credit considerations, liquidity of secondarytrading markets and vulnerability to general economic conditions, thesefinancial instruments and loans generally involve greater risk thaninvestment-grade financial instruments. We record corporate debt, derivativescontracts and certain separately managed distressed financial instruments atfair value. We record commercial mortgage whole loans, certain residentialmortgage whole loans and loan participations that are held for sale at thelower of cost or fair value. Timing of the securitization of our mortgage wholeloan inventory will affect the size of our positions at any given time. Thefollowing table sets forth our positions in these instruments as of March 31, 2006 and December 31,2005:

| ** **                        | ** ** | **March 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|-----------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                        | ** ** | **Assets**                   | ** ** | **Liabilities**                 | ** ** | **Assets** | ** ** | **Liabilities** | ** ** |
| ** **                        | ** ** | **(In millions)**       | ** ** |
| Corporate debt                    |       | $                            | 3,999      |                            |       | $ | 897 |   |   | $ | 3,286 |   |   | $ | 917 |   |   |
| Mortgage whole  loans             |       | 19,516                       |       |                            | —     |   |   | 17,817 |   |   | — |   |   |
| Loan  participations              |       | 20                           |       |                            | —     |   |   | 9 |   |   | — |   |   |
| Derivatives  contracts            |       | 297                          |       |                            | —     |   |   | 321 |   |   | — |   |   |
| Distressed  financial instruments |       | 90                           |       |                            | —     |   |   | 113 |   |   | — |   |   |
| Total                             |       | $                            | 23,922     |                            |       | $ | 897 |   |   | $ | 21,546 |   |   | $ | 917 |   |   |

 

**DERIVATIVES**

We enter into varioustransactions involving derivatives. We use derivatives contracts for bothtrading and hedging purposes and to provide products for our clients. Thesederivatives include options, forwards, futures and swaps. In general,derivatives are contractual agreements that derive their values from theperformance of underlying assets, interest or currency exchange rates or avariety of indices. Most of our 

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derivativestransactions are considered trading positions. See Note 5 of the condensedconsolidated financial statements in Part I, Item 1 for more information.

**Sources andMaturities of OTC Derivatives**

Thefollowing table sets forth the distributions, by maturity, of our exposure withrespect to OTC derivatives as of March 31, 2006. Fair values weredetermined on the basis of pricing models and other valuation methods. See “—CriticalAccounting Policies and Estimates—Fair Value” in Part I, Item 2 and Notes5 and 8 of the condensed consolidated financial statements in Part I, Item1 for more information.

| ** **                            | ** ** | **Assets  Maturity Distribution as of March 31, 2006** | ** ** |
|---------------------------------------|------------|--------------------------------------------------------------------------------------|------------|
| ** **                            | ** ** | **Less than  1 year**                                                      | ** ** | **1-3 years** | ** ** | **4-5 years** | ** ** | **Over 5 years** | ** ** | **Total fair  value** | ** ** |
| ** **                            | ** ** | **(In millions)**                                                               | ** ** |
| Interest rate and  credit spread risk |       |                                                                                 | $          | 2,067 |   |   |   | $ | 1,968 |   |   |   | $ | 245 |   |   |   | $ | 1,067 |   |   |   | $ | 5,347 |   |   |
| Foreign exchange  risk                |       |                                                                                 | 29         |   |   |   | 11 |   |   |   | — |   |   |   | — |   |   |   | 40 |   |   |
| Equity price risk                     |       |                                                                                 | 149        |   |   |   | 206 |   |   |   | 5 |   |   |   | 96 |   |   |   | 456 |   |   |
| Commodity risk                        |       |                                                                                 | 366        |   |   |   | 344 |   |   |   | 19 |   |   |   | — |   |   |   | 729 |   |   |
| Total                                 |       |                                                                                 | $          | 2,611 |   |   |   | $ | 2,529 |   |   |   | $ | 269 |   |   |   | $ | 1,163 |   |   |   | $ | 6,572 |   |   |

 

| ** **                            | ** ** | **Liabilities **                                                        | ** ** |
|---------------------------------------|------------|------------------------------------------------------------------------------|------------|
| ** **                            | ** ** | **Maturity Distribution as of March 31, 2006** | ** ** |
| ** **                            | ** ** | **Less than  1 year**                                              | ** ** | **1-3 years** | ** ** | **4-5 years** | ** ** | **Over 5 years** | ** ** | **Total fair  value** | ** ** |
| ** **                            | ** ** | **(In millions)**                                                       | ** ** |
| Interest rate and  credit spread risk |       |                                                                         | $          | 1,953 |   |   |   | $ | 419 |   |   |   | $ | 182 |   |   |   | $ | 702 |   |   |   | $ | 3,256 |   |   |
| Foreign exchange  risk                |       |                                                                         | 7          |   |   |   | 9 |   |   |   | — |   |   |   | — |   |   |   | 16 |   |   |
| Equity price risk                     |       |                                                                         | 229        |   |   |   | 141 |   |   |   | 19 |   |   |   | 5 |   |   |   | 394 |   |   |
| Commodity risk                        |       |                                                                         | 345        |   |   |   | 347 |   |   |   | 15 |   |   |   | — |   |   |   | 707 |   |   |
| Total                                 |       |                                                                         | $          | 2,534 |   |   |   | $ | 916 |   |   |   | $ | 216 |   |   |   | $ | 707 |   |   |   | $ | 4,373 |   |   |

 

Thefollowing table sets forth as of March 31, 2006 substantially all of ourexposure with respect to OTC derivatives, by counterparty credit rating andwith affiliates.

| **Credit Rating**(1)    | ** ** | ** **             | ** ** | **March 31,  2006** | ** ** |
|------------------------------|------------|------------------------|------------|--------------------------|------------|
| ** **                   | ** ** | **(In millions)** | ** ** |
| AA+/AA                       |       |                   | $          | 146                      |       |   |
| AA-                          |       |                   | 3,803      |                     |       |
| A+/A/A-                      |       |                   | 451        |                     |       |
| BBB+/BBB/BBB-                |       |                   | 210        |                     |       |
| BB+ or lower                 |       |                   | 171        |                     |       |
| Unrated                      |       |                   | 126        |                     |       |
| Derivatives with  affiliates |       |                   | 1,665      |                     |       |
| Total                        |       |                   | $          | 6,572                    |       |   |

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(1)                Creditratings are determined by external rating agencies or by our credit riskmanagement department.

**Derivatives WithRelated Parties**

Weenter into a substantial number of derivatives transactions with relatedparties. The following table sets forth derivatives transactions with relatedparties consisting primarily of interest rate swaps, 

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credit default swaps, foreign exchange forwardcontracts, equity forward contracts and total return swaps on equities. Thefair values of derivatives contracts outstanding with related parties as of March 31,2006 and December 31, 2005 were as follows.

| ** **                            | ** ** | **March 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|---------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                            | ** ** | **Assets**                   | ** ** | **Liabilities**                 | ** ** | **Assets** | ** ** | **Liabilities** | ** ** |
| ** **                            | ** ** | **(In millions)**       | ** ** |
| Interest rate and  credit spread risk |       | $                            | 1,543      |                            |       | $ | 1,417 |   |   |   | $ | 738 |   |   |   | $ | 443 |   |   |
| Foreign exchange  risk                |       | 29                           |       |                            | 6          |   |   |   | 20 |   |   |   | 5 |   |   |
| Equity price risk                     |       | 25                           |       |                            | 85         |   |   |   | 64 |   |   |   | 41 |   |   |
| Commodity risk                        |       | 68                           |       |                            | 2          |   |   |   | 20 |   |   |   | — |   |   |
| Total                                 |       | $                            | 1,665      |                            |       | $ | 1,510 |   |   |   | $ | 842 |   |   |   | $ | 489 |   |   |

 

See Notes 2 and 5 of thecondensed consolidated financial statements in Part I, Item 1 for moreinformation.

**FORWARD LOOKINGSTATEMENTS**

We have made in thisQuarterly Report on Form 10-Q, including, without limitation, in “LegalProceedings” in Part II, Item 1, and in “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” in Part I, Item2, and from time to time may otherwise make in our public filings and pressreleases, forward-looking statements concerning our operations, economicperformance and financial condition, as well as our future plans and strategicobjectives. Such forward-looking statements are subject to various risks anduncertainties, and we claim the protection afforded by the safe harbor forforward-looking statements contained in the Private Securities Litigation ReformAct of 1995. Actual results could differ materially from those anticipatedherein or in any such other filings, releases or statements because of a numberof factors, including without limitation, those detailed in “Risk Factors” in Part I,Item 1A of our Annual Report on Form 10-K for the year ended December 31,2005, those discussed elsewhere herein, and in other public filings and pressreleases. These forward-looking statements are not historical facts but insteadrepresent only our belief regarding future events, many of which, by theirnature, are inherently uncertain and beyond our control. Forward-lookingstatements are typically identified by the use of future or conditional verbssuch as “will,” “should,” “would” or “could,” and by words or phrases such as “believe,”“expect,” “intend,” “estimate” and similar expressions. By identifying thesestatements for you in this manner, we are alerting you to the possibility thatour actual results may differ, possibly materially, from the results indicatedin these forward-looking statements. We undertake no obligation to update orrevise any forward-looking statements except as otherwise required byapplicable law.

***Item 3:***          Quantitativeand Qualitative Disclosures About Market Risk

**RISK MANAGEMENT ANDVALUE AT RISK**

**For adescription of the Company’s risk management policies and procedures andvalue-at-risk, or VAR, model, including such model’s assumptions andlimitations, see “Quantitative and Qualitative Disclosure About Market Risk” inPart II, Item 7A of the Company’s Annual Report on Form 10-Kfor the year ended December 31, 2005.**

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**Market RiskExposure**

We measure market riskexposure by using complementary risk measurement techniques, including VAR andsensitivity analysis. VAR is used for our trading portfolio, which includesthose financial instruments treated as part of our “trading book” for Bank forInternational Settlements regulatory capital purposes. Sensitivity analysis isused for our non-trading portfolio, which primarily includes commercialmortgage loans, private equity investments, derivatives that hedge the Company’slong-term borrowings and certain commodity positions. This classification ofassets as trading and non-trading is done for purposes of analyzing our marketrisk exposure, not for financial statement purposes.

***Trading Portfolios***

The Company-wide trading portfolio VAR wasapproximately $29 million, $39 million and $40 million as of March 31,2006, December 31, 2005 and March 31, 2005, respectively. The reduction in VAR as of March 31,2006 compared to December 31, 2005 was primarily due to a decrease inmortgage exposures and the implementation of a revised VAR methodology forcertain residential mortgage products in early 2006. The effect of each ofthese was to reduce the interest rate and credit spread VAR and hence the totalVAR. The revised VAR methodologycategorizes residential mortgage positions into a series of key risktypes to improve the measurement of mortgage-relatedsensitivities. Ifthe revised methodology had been in place during 2005, the Company’s total VARwould have been approximately $37 million and $28 million as of December 31,2005 and March 31, 2005, respectively.

**Dueto the benefit of diversification, the Company-wide VAR is less than the sum ofthe individual components. The four main components of market risk, expressedin terms of theoretical fair values, had the following**VAR:

| ** **                       | ** ** | **Company’s Market Risk Exposures in Trading Portfolios** | ** ** |
|----------------------------------|------------|----------------------------------------------------------------------------------------------|------------|
| ** **                       | ** ** | **As of  March 31, 2006**                                                     | ** ** | **As of  December 31, 2005** | ** ** | **As of  March 31, 2005** | ** ** |
| ** **                       | ** ** | **(In millions)**                                                                       | ** ** |
| 99%, one-day VAR                 |       |                                                                                         |       |   |   |   |   |   |   |   |   |   |   |
| Interest rate and  credit spread |       |                                                                                         | $          | 20 |   |   |   | $ | 34 |   |   |   | $ | 34 |   |   |
| Equity                           |       |                                                                                         | 19         |   |   |   | 20 |   |   |   | 19 |   |   |
| Foreign exchange  rate           |       |                                                                                         | 1          |   |   |   | — |   |   |   | 2 |   |   |
| Commodity                        |       |                                                                                         | 4          |   |   |   | 6 |   |   |   | 1 |   |   |
| Diversification  benefit         |       |                                                                                         | (15        | ) |   |   | (21 | ) |   |   | (16 | ) |   |
| Total                            |       |                                                                                         | $          | 29 |   |   |   | $ | 39 |   |   |   | $ | 40 |   |   |

 

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The table below presentsminimum, maximum and average VAR by market risk component. Minimum, maximum andaverage VAR for the three months ended March 31, 2005 do not reflect therevised VAR methodology for certain residential mortgage products introduced inearly 2006.

| ** **                       | ** ** | **Company’s Market Risk Exposures in Trading Portfolios** | ** ** |
|----------------------------------|------------|----------------------------------------------------------------------------------------------|------------|
| ** **                       | ** ** | **Three Months Ended  March 31, 2006**                                   | ** ** | **Three Months Ended  March 31, 2005** | ** ** |
| ** **                       | ** ** | **Minimum**                                                                                  | ** ** | **Maximum** | ** ** | **Average** | ** ** | **Minimum** | ** ** | **Maximum** | ** ** | **Average** | ** ** |
| ** **                       | ** ** | **(In millions)**                                                                       | ** ** |
| 99%, one-day VAR                 |       |                                                                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate and credit  spread |       |                                                                                         | $          | 19 |   |   |   | $ | 35 |   |   |   | $ | 23 |   |   |   | $ | 33 |   |   |   | $ | 52 |   |   |   | $ | 42 |   |   |
| Equity                           |       |                                                                                         | 16         |   |   |   | 26 |   |   |   | 19 |   |   |   | 13 |   |   |   | 21 |   |   |   | 17 |   |   |
| Foreign exchange rate            |       |                                                                                         | —     |   |   |   | 1 |   |   |   | — |   |   |   | — |   |   |   | 4 |   |   |   | 1 |   |   |
| Commodity                        |       |                                                                                         | 4          |   |   |   | 11 |   |   |   | 6 |   |   |   | — |   |   |   | 3 |   |   |   | 1 |   |   |
| Diversification benefit          |       |                                                                                         | —     | (1) |   |   | — | (1) |   |   | (18 | ) |   |   | — | (1) |   |   | — | (1) |   |   | (16 | ) |   |
| Total                            |       |                                                                                         | $          | 25 |   |   |   | $ | 42 |   |   |   | $ | 30 |   |   |   | $ | 36 |   |   |   | $ | 55 |   |   |   | $ | 45 |   |   |

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(1)                 Asthe minimum and maximum occur on different days for different risk types, it isnot meaningful to calculate a portfolio diversification benefit.

For detailsof the Company’s average, maximum and minimum VAR for 2005, see “Quantitativeand Qualitative Disclosure About Market Risk” in Part II, Item 7A of theCompany’s Annual Report on Form 10-K for the year ended December 31,2005.

Theaverage, maximum and minimum daily trading revenue for the three months ended March 31,2006 and 2005 are shown below:

| ** **             | ** ** | **Three Months  Ended  March 31, 2006** | ** ** | **Three Months  Ended  March 31, 2005** | ** ** |
|------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------|------------|
| ** **             | ** ** | **(In millions)**                                 | ** ** |
| Daily trading  revenue |       |                                                   |       |                                                   |       |   |   |   |   |
| Average                |       |                                                   | $          | 20                                                     |       |   |   | $ | 15 |   |   |
| Maximum                |       |                                                   | 63         |                                                   |       |   | 64 |   |   |
| Minimum                |       |                                                   | $          | (9                                                     | )          |   |   | $ | (12 | ) |   |

 

For details of the Company’s average, maximum and minimumdaily trading revenue for 2005, see “Quantitative and Qualitative DisclosureAbout Market Risk” in Part II, Item 7A of the Company’s Annual Report on Form 10-Kfor the year ended December 31, 2005.

***Non-trading Portfolios***

The equity risk on non-trading positions, which isprimarily comprised of private equity investments, is measured usingsensitivity analysis that estimates the potential change in the recorded valueof the investments resulting from a 10% decline in the equity markets ofdeveloped nations and a 20% decline in the equity markets of emerging marketnations. The estimatedimpact of equity risk on our non-trading financial instruments portfolio wouldbe a decrease in the value of the non-trading portfolio of approximately $118million and $108 million as of March 31, 2006 and December 31, 2005,respectively. The estimated impact of equity risk is net of the minorityinterests in certain consolidated private equity funds.

The interest rate risk on non-trading positions, whichis primarily comprised of commercial mortgage loans and derivatives that hedgethe Company’s long-term borrowings, is measured using sensitivity analysis thatestimates the potential change in the value of the non-trading portfolioresulting from a 

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50 basis pointdecline in the interest rates of developed nations and a 200 basis pointdecline in the interest rates of emerging market nations. The estimated impactof interest rate risk on the value of the non-trading portfolio would be adecrease of approximately $41 million and $21 million as of March 31,2006 and December 31, 2005, respectively. The losses under this interestrate scenario arise primarily from the Company’s long-term borrowings and relatedhedges.

We do not have materialforeign exchange risk or commodity price risk in our non-trading portfolio.

***Item 4:***          Controlsand Procedures

Pursuant to Rule 13a-15(b) under theSecurities Exchange Act of 1934, or Exchange Act, as of the end of the periodcovered by this report, an evaluation was carried out under the supervision andwith the participation of our management, including our Chief Executive Officerand Chief Financial and Accounting Officer, of the effectiveness of the designand operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) underthe Exchange Act). There are inherent limitations to the effectiveness of anysystem of disclosure controls and procedures, including the possibility ofhuman error and the circumvention or overriding of the controls and procedures.Accordingly, even effective disclosure controls and procedures can only providereasonable assurance of achieving their control objectives. Based upon and asof the date of the evaluation, our Chief Executive Officer and Chief Financialand Accounting Officer concluded that the design and operation of thesedisclosure controls and procedures were effective in all material respects toprovide reasonable assurance that information required to be disclosed in thereports we file and submit under the Exchange Act is recorded, processed,summarized and reported as and when required. There were no changes in ourinternal control over financial reporting (as defined in Rule 13a-15(f) underthe Exchange Act) that occurred during the quarter ended March 31, 2006that materially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

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**PART II**

**OTHER INFORMATION**

***Item 1:***          LegalProceedings

Certain significant legalproceedings and matters have been previously disclosed in the Company’s AnnualReport on Form 10-K for the year ended December 31, 2005. Thefollowing is an update of such proceedings.

**In re IssuerPlaintiff Initial Public Offering Fee Antitrust Litigation**

In a decision, dated April 18,2006, the U.S. District Court for the Southern District of New York denied themotion for class certification brought by the plaintiff in the *In re Issuer Plaintiff Initial Public Offering Fee Antitrust Litigation*.

**Litigation Relatingto IPO Allocation**

On March 8, 2006, CSSecurities and the other defendants in the *Inre Initial Public Offering Antitrust*Litigation filed a petition forwrit of certiorari to the United States Supreme Court seeking review of thedecision by the U.S. Court of Appeals for the Second Circuit, dated September 28,2005, that vacated the district court’s dismissal of the matter and remandedthe case to the district court for further proceedings.

**AdelphiaCommunications Corporation Litigation**

On March 15, 2006,the U.S. District Court for the Southern District of New York certified aninterlocutory appeal of the district court’s August 30 and September 1,2005 decisions denying motions to dismiss in two of the actions byinstitutional investors on the ground that the plaintiffs in those cases lackedstanding. On April 6, 2006, the defendants filed a petition with the U.S.Court of Appeals for the Second Circuit asking the appellate court to acceptthe interlocutory appeal.

**Enron-relatedLitigation and Inquiries**

On or about April 21, 2006, CS Securities andcertain affiliates entered into a settlement covered by existing reserves inthe matter brought by The Variable Annuity Life Insurance Company and others inthe U.S. District Court for the Southern District of Texas.

On May 9, 2006, CreditSuisse announced that it entered into an agreement in principle with thebankruptcy estate of Enron Corporation and its affiliates to resolve claimsasserted by Enron against all named Credit Suisse entities in the “megaclaim”litigation pending in the U.S. Bankruptcy Court for the Southern District ofNew York. Under the settlement, Credit Suisse entities will pay $90 million andEnron will allow $92 million in bankruptcy claims that Credit Suisse no longerholds. The remainder of Credit Suisse’s claims in the Enron bankruptcy will beequitably subordinated. The settlement payment is covered by existing reservesand is subject to execution of definitive documentation and court approval. Thesettlement does not cover separate litigation by Enron in U.S. Bankruptcy Courtto recover certain payments in connection with equity forward and swaptransactions or other Enron-related litigation.

**Other**

The Company has provided reserves for litigation,claims and proceedings involving the Company in accordance with SFAS No. 5,“Accounting for Contingencies.” The Company recorded in the second quarter of2005 a $750 million litigation charge to increase the reserve for privatelitigation involving Enron, certain IPO allocation practices, research analystindependence and other related litigation. This charge, coupled with the chargerecorded in 2002, brings the Company’s reserves for these private litigation mattersto $1.1 billion after the application of settlements entered into through March 31,2006.

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We are involved in a number of judicial, regulatoryand arbitration proceedings (including those described above) concerningmatters arising in connection with the conduct of our businesses. Some of theseactions have been brought on behalf of various classes of claimants and seekdamages of material and/or indeterminate amounts. We believe, based oncurrently available information and advice of counsel, that the results of suchproceedings, in the aggregate, will not have a material adverse effect on ourfinancial condition but might be material to operating results for anyparticular period, depending, in part, upon the operating results for suchperiod. The Company intends to defend itself vigorously in these matters,litigating or settling when determined by management to be in the bestinterests of the Company.

It is inherently difficultto predict the outcome of many of these matters. In presenting the condensedconsolidated financial statements, management makes estimates regarding theoutcome of these matters and records a reserve and takes a charge to incomewhen losses with respect to such matters are probable and can be reasonablyestimated. Estimates, by their nature, are based on judgment and currentlyavailable information and involve a variety of factors, including, but notlimited to, the type and nature of the litigation, claim or proceeding, theprogress of the matter, the advice of legal counsel, the Company’s defenses andits experience in similar cases or proceedings as well as its assessment ofmatters, including settlements, involving other defendants in similar orrelated cases or proceedings. Further litigation charges or releases of litigationreserves may be necessary in the future as developments in such cases orproceedings warrant.

***Item 1A:   RiskFactors***

There are no materialchanges from the risk factors set forth in Part I, Item 1A, in the Company’sAnnual Report on Form 10-K for the year ended December 31,2005.

***Items 2, 3 and 4:***

Pursuant to GeneralInstruction H of Form 10-Q, the information required by Items 2, 3and 4 is omitted.

***Item 6:***          Exhibits

(a)  Exhibits
| 12   |   | Statement re computation of ratio of earnings to  fixed charges                   |
|------|--------|-----------------------------------------------------------------------------------|
| 15   |   | Letter re unaudited interim financial information                                 |
| 31.1 |   | Rule 13a-14(a) certification of  Chief Executive Officer                |
| 31.2 |   | Rule 13a-14(a) certification of  Chief Financial and Accounting Officer |
| 32   |   | Section 1350 certifications                                                  |

 

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**SIGNATURE**

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.
|                   | CREDIT SUISSE  (USA), INC. |
|-------------------|---------------------------------|
| May 11, 2006 | By:                             | /s/ DAVID C. FISHER |
|              | * *                        | *Chief Financial and Accounting Officer*(On behalf of the Registrant and as Principal Financial  Officer) |

 

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**INDEXTO EXHIBITS**
| Exhibit  Number | ** ** | ** **                                                                        | ** ** | **Description** |
|-----------------|------------|-----------------------------------------------------------------------------------|------------|-----------------|
| 12              |       | Computation of ratio of  earnings to fixed charges                                |
| 15              |       | Letter re unaudited  interim financial information                                |
| 31.1            |       | Rule 13a-14(a) certification  of Chief Executive Officer                |
| 31.2            |       | Rule 13a-14(a) certification  of Chief Financial and Accounting Officer |
| 32              |       | Section 1350 certifications                                                  |

 

 

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